ASSET PURCHASE AGREEMENT
AMONG
WHEREHOUSE ENTERTAINMENT, INC.
AND
WEI HOLDINGS, INC.
(COLLECTIVELY, "SELLER"),
AND
WEI ACQUISITION CO.
("PURCHASER")
January 31, 1997
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES . . 1
1.1 Acquired Assets. . . . . . . . . . . . . . . . . . . . 1
1.2 Assignment of Contracts, Leases and Other Assets . . . 2
1.3 Other Assets and Rights. . . . . . . . . . . . . . . . 4
1.4 Excluded Assets. . . . . . . . . . . . . . . . . . . . 4
1.5 Liabilities Not Assumed. . . . . . . . . . . . . . . . 4
1.6 Assumed Obligations. . . . . . . . . . . . . . . . . . 4
ARTICLE II
PURCHASE PRICE AND PAYMENT. . . . . . . . . 5
2.1 (a) Total Purchase Price. . . . . . . . . . . . . . 5
(b) Allocation of Purchase Price. . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . 6
3.1 Due Incorporation. . . . . . . . . . . . . . . . . . . 6
3.2 Due Authorization. . . . . . . . . . . . . . . . . . . 6
3.3 Capital Stock. . . . . . . . . . . . . . . . . . . . . 6
3.4 Purchaser Acknowledgment . . . . . . . . . . . . . . . 6
ARTICLE IV
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER TO CLOSE. . . 7
4.1 Actions or Proceedings . . . . . . . . . . . . . . . . 7
4.2 Licenses, Permits, Authorizations. . . . . . . . . . . 7
4.3 Bankruptcy Court Approval. . . . . . . . . . . . . . . 7
4.4 Changes in Law . . . . . . . . . . . . . . . . . . . . 7
4.5 Credit Agreement . . . . . . . . . . . . . . . . . . . 7
4.6 Disclosure Statement . . . . . . . . . . . . . . . . . 7
4.7 Liquidation Agent Agreement. . . . . . . . . . . . . . 8
4.8 Appointment of Directors . . . . . . . . . . . . . . . 8
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER TO CLOSE. . 8
5.1 Accuracy of Representations and Warranties . . . . . . 8
5.2 Entry of Approval Order; Consents. . . . . . . . . . . 8
5.3 Actions or Proceedings . . . . . . . . . . . . . . . . 8
5.4 Effectiveness of Plan of Reorganization. . . . . . . . 8
5.5 Liquidation Agent Agreement and Assumption
Agreement. . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VI
EMPLOYEE MATTERS . . . . . . . . . . . 9
6.1 Employment . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VII
CLOSING . . . . . . . . . . . . . 9
7.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . 9
7.2 Deliveries by Seller . . . . . . . . . . . . . . . . . 9
7.3 Deliveries by Purchaser. . . . . . . . . . . . . . . . 9
ARTICLE VIII
MISCELLANEOUS. . . . . . . . . . . . 10
8.1 Amendment; Waiver. . . . . . . . . . . . . . . . . . . 10
8.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . 10
8.3 Counterparts . . . . . . . . . . . . . . . . . . . . . 11
8.4 Headings . . . . . . . . . . . . . . . . . . . . . . . 11
8.5 Applicable Law . . . . . . . . . . . . . . . . . . . . 11
8.6 Assignment . . . . . . . . . . . . . . . . . . . . . . 11
8.7 Third Party Beneficiaries. . . . . . . . . . . . . . . 12
8.8 Tax Matters. . . . . . . . . . . . . . . . . . . . . . 12
8.9 Other Instruments. . . . . . . . . . . . . . . . . . . 12
8.10 Entire Understanding . . . . . . . . . . . . . . . . . 12
8.11 Waiver of Jury Trial . . . . . . . . . . . . . . . . . 13
8.12 Indemnification Obligations. . . . . . . . . . . . . . 13
8.13 Conflict with Plan of Reorganization or
Disclosure Statement . . . . . . . . . . . . . . . . . 14
ARTICLE IX
DEFINITIONS . . . . . . . . . . . . 14
EXHIBITS
Exhibit A Form of ▇▇▇▇ of Sale
Exhibit B Form of Trademarks Assignment
Exhibit C Form of Patents Assignment
Exhibit D-1 Form of Tranche A Warrant Agreement
Exhibit D-2 Form of Tranche B Warrant Agreement
Exhibit D-3 Form of Tranche C Warrant Agreement
Exhibit E Form of Liquidation Agent Agreement
Exhibit F Form of Assumption Agreement
Exhibit G Form of Employee Benefit Plans Assignment
and Assumption Agreement
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of
January 31, 1997, between Wherehouse Entertainment, Inc., a
Delaware corporation ("WHEREHOUSE") and WEI Holdings, Inc., a
Delaware Corporation ("HOLDINGS," and, together with Wherehouse,
"SELLER"), in their capacity as debtors and debtors-in-possession
in Case No. 95-911 (HSB) (Jointly Administered) (the "BANKRUPTCY
CASE") in the United States Bankruptcy Court for the District of
Delaware (the "BANKRUPTCY COURT"), and WEI Acquisition Co., a
Delaware corporation ("PURCHASER"). Unless otherwise indicated,
capitalized terms used herein have the meanings given thereto in
Article IX, or, if not defined in Article IX, in the Section
where used, and if not defined in this Agreement, shall have the
meanings given thereto in the Plan of Reorganization.
In consideration of the mutual covenants,
agreements and warranties herein contained, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES
1.1 ACQUIRED ASSETS. Subject to the terms and conditions
set forth in this Agreement (including Section 1.4), at the
Closing, Seller shall sell, assign, transfer and deliver to
Purchaser, and Purchaser shall purchase, acquire and take
assignment and delivery from Seller, all of the assets then owned
by Seller (wherever located) except for the Excluded Assets, and
such assets sold, assigned, transferred and delivered to
Purchaser hereunder are referred to collectively herein as the
"ACQUIRED ASSETS." The Acquired Assets include all property of
the Estates immediately prior the Closing, including (but not
limited to) the following:
(a) EQUIPMENT. All of the machinery, equipment,
installations, furniture, tools, spare parts, supplies,
maintenance equipment and supplies, materials and other
items of personal property of every kind and description
(other than the personal property described in Sections
1.1(b) and 1.1(c) and personal property subject to leases as
described in Section 1.2(b));
(b) INVENTORIES. All of the inventories of the
Business, including, without limitation, all inventories
held for sale or rental, wherever located;
(c) VEHICLES. All of the leased or owned trucks,
tractors, trailers, automobiles and other vehicles;
(d) INFORMATION AND RECORDS. All product files,
software, confidential information, price lists, marketing
information, sales records, customer lists and files
(including customer credit and collection information), tax,
historical and financial records and files, and other
information which are related to, or were or are used by
Seller, together with the following papers and records in
Seller's care, custody or control: all blueprints, building
specifications and "as built" plans, all personnel and labor
relations records, all employee benefits and compensation
plans and records, all environmental control, monitoring and
test records, all facility cost records, all maintenance and
production records, all plats and surveys of the Real
Property and all plans and designs of buildings, structures,
fixtures and equipment;
(e) INTELLECTUAL PROPERTY. All United States and
foreign patents, patent applications, patent licenses, trade
name, trademark and servicemark registrations (and
applications therefor) (including without limitation, all
rights to the name and trade usage of "The Wherehouse,"
"Wherehouse Entertainment," "Wherehouse Entertainment,
Inc.," and "WEI Holdings, Inc."), copyrights and copyright
registrations (and applications therefor), other trade
names, other trademarks, trade secrets, inventions,
processes, designs, know-how and formula, export licenses,
product qualifications, computer software, technology,
confidential and proprietary information, in each case
whether or not subject to statutory registrations, together
with the goodwill appurtenant to each of the foregoing;
(f) ACCOUNTS RECEIVABLE. Any and all accounts
receivable, trade receivables, notes receivable and other
receivables;
(g) REAL PROPERTY. (i) All Real Property owned by
Seller and (ii) all fixtures and improvements attached to
the Real Property owned by Seller or to any Real Property in
which Seller has a leasehold interest;
(h) CASH. All cash on hand held by or for the account
of Seller;
(i) PREPAID EXPENSES. Seller's prepaid expenses; and
(j) FIXTURES. To the extent not included in Section
1.1(g) above, all plant and store fixtures, shelving and
business fixtures and all storage and office facilities.
1.2 ASSIGNMENT OF CONTRACTS, LEASES AND OTHER ASSETS.
Subject to the terms and conditions set forth in this Agreement
(including Section 1.4) and in Section 7.01 of the Plan of
Reorganization, Seller, at the Closing, will assign and transfer
to Purchaser, effective as of the Closing Date, all of Seller's
right, title and interest in and to, and Purchaser will take
assignment of, the following, and all of the following shall be
deemed included in the term "Acquired Assets" as used herein:
(a) REAL PROPERTY LEASES. All of the leases of real
property assumed by Seller during the pendency of the
Bankruptcy Case in accordance with the Plan of
Reorganization;
(b) EQUIPMENT AND OTHER PERSONAL PROPERTY LEASES. All
of Seller's right, title and interest in and to the leases
of equipment, machinery, installations, vehicles and other
personal property assumed by Seller in accordance with the
Plan of Reorganization;
(c) PERMITS. All of the licenses, permits, variances,
interim permits, permit applications, approvals, consents,
certifications, qualifications and other authorizations
under any law, statute, rule, regulation, order or ordinance
applicable to the Business or otherwise required by any
Governmental Authority in connection with the business or
operations of the Business;
(d) PATENT AND COPYRIGHT LICENSES. All of Seller's
right, title and interest in and to any patent, trademark,
tradename, copyright or similar licenses used in connection
with the Business and the license agreements entered into in
connection therewith assumed by Seller in accordance with
the Plan of Reorganization, including without limitation,
any such licenses pursuant to which Seller has the right to
sell or rent pre-recorded music and computer software and
games;
(e) NAMES USED IN THE BUSINESS. All of the right,
title and interest of Seller in and to the names "THE
WHEREHOUSE", "WHEREHOUSE ENTERTAINMENT" and any derivation
thereof, all other names and derivations thereof under which
the Business (or portions thereof) are conducted, all of the
right, title and interest of Seller in any logos relating to
such names, and the goodwill appurtenant to each of the
foregoing, and all rights of Seller to prevent the use of
such names by others;
(f) CONFIDENTIALITY AGREEMENTS. All rights under all
Confidentiality Agreements entered into by Seller with any
person or entity in connection with the proposed sale of the
Business;
(g) CONTRACTS. All rights of Seller under all of the
other contracts and agreements, guarantees and warranties
from third parties assumed by Seller in accordance with the
Plan of Reorganization and listed on Schedule 1.2(i);
(h) RIGHTS UNDER PLAN OF REORGANIZATION. All rights
of Seller under the Plan of Reorganization, except for such
rights as are expressly retained by Seller after the Closing
pursuant to the Plan of Reorganization;
(i) INSURANCE POLICIES. All rights, and claims and
choses in action of Seller under any insurance policies;
(j) CHOSES IN ACTION. Subject to Sections 12.04 and
12.09 of the Plan of Reorganization, all other choses in
action of Seller of any kind against third parties; and
(k) 1992 MERGER AGREEMENT LETTER OF CREDIT. All
rights of Seller under the 1992 Merger Agreement Letter of
Credit , as set forth in Section 9.06 of the Plan of
Reorganization.
1.3 OTHER ASSETS AND RIGHTS. All other rights,
entitlements, assets or other interests that either the Plan of
Reorganization or the Employee Benefit Plan Assignment and
Assumption Agreement attached to this Agreement as Exhibit G
provides shall be transferred to or acquired by Purchaser.
1.4 EXCLUDED ASSETS. The following rights of Seller shall
be retained by Seller and are not being sold or assigned to
Purchaser hereunder (the "EXCLUDED ASSETS");
(a) Seller's rights under this Agreement;
(b) any executory contracts, leases or other
agreements that (i) are not assumed by Seller in the
Bankruptcy Case or (ii) have been assumed by Seller in the
Bankruptcy Case but were assigned to a person or entity
other than Purchaser pursuant to Section 7.01 of the Plan of
Reorganization.
1.5 LIABILITIES NOT ASSUMED. Except for the liabilities
and obligations specifically assumed pursuant to and identified
in Section 1.6 below, Purchaser shall not assume, shall not take
subject to and shall not be liable for, any liabilities or
obligations of any kind or nature, whether absolute, contingent,
accrued, known or unknown, of Seller (the "EXCLUDED
LIABILITIES").
1.6 ASSUMED OBLIGATIONS. Notwithstanding Section 1.5, on
the Closing Date Purchaser shall assume and satisfy the following
liabilities or obligations (the "ASSUMED OBLIGATIONS"):
(i) the obligations under the Plan of Reorganization
to pay all Allowed Administrative Expenses;
(ii) the obligations under the Plan of
Reorganization to pay all Allowed Priority Tax Claims;
(iii) the obligations under the Plan of
Reorganization to pay all Allowed Miscellaneous Priority
Claims;
(iv) the obligations under the Plan of
Reorganization to pay all Allowed Miscellaneous Secured
Claims;
(v) the obligations under the Plan of Reorganization
to pay the Secured Claim Cash Distribution;
(vi) the obligations of Purchaser set forth in
Sections 2.02, 5.01(f), 5.03, 10.01, 10.04, 10.05, 12.07 and
14.05 of the Plan of Reorganization;
(vii) all indemnities, liabilities, and obligations
of Seller and Purchaser under the Plan of Reorganization;
(viii) all sales and use taxes, documentary and
other stamp taxes, deed taxes, transfer taxes, intangible
taxes and other similar taxes imposed upon or in connection
with, or required to be paid as a result of, the sale and
transfer of the assets of the Seller to Purchaser, to the
extent any such taxes are required to be paid after giving
effect to the provisions of Section 1146(c) of the
Bankruptcy Code; and
(ix) Purchaser further shall assume and agree to
perform and observe each and all of the provisions of the
Plan of Reorganization and the Employee Benefit Plans
Assignment and Assumption Agreement attached hereto as
Exhibit G applicable to Purchaser and each and all of the
obligations and undertakings of Seller under the Plan of
Reorganization, including the releases in Section 12.04 and
Section 12.09 thereof, as fully as Seller is bound thereby.
Purchaser shall not assume or be obligated to pay,
perform, fulfill or discharge any Claim or any other liability or
obligation of Seller not expressly assumed by Purchaser pursuant
to this Section 1.6.
ARTICLE II
PURCHASE PRICE AND PAYMENT
2.1 (a) TOTAL PURCHASE PRICE. The total purchase price
(the "TOTAL PURCHASE PRICE") to be paid to Seller by Purchaser
for the Acquired Assets shall be (i) the assumption of the
Assumed Obligations, (ii) the issuance by Purchaser of a number
of shares (the "SHARES") of the common stock of Purchaser, $0.01
par value (the "COMMON STOCK") sufficient to make the
distributions of Common Stock required under the Plan of
Reorganization, (iii) if Warrants are to be issued pursuant to
the Plan of Reorganization, the issuance by Purchaser pursuant to
the Warrant Agreements of Warrants required to be issued under
the Plan of Reorganization, and (iv) cash sufficient to fund
payment of all Administrative Expenses, all Miscellaneous
Priority Claims, the Secured Claim Cash Distribution and all
other cash distributions provided for in the Plan of
Reorganization (the sum of clauses (i), (ii), (iii) and (iv)
above being the "TOTAL PURCHASE PRICE"). On the Closing Date,
pursuant to the Plan of Reorganization, Purchaser shall, upon
delivery of the Acquired Assets, assume the Assumed Obligations
and, promptly following Closing or at such other time as required
by the Plan of Reorganization, shall issue the Shares and the
Warrants and make the cash payments in satisfaction of the Total
Purchase Price to such persons and entities required by the Plan
of Reorganization.
(b) ALLOCATION OF PURCHASE PRICE. Purchaser shall
have the right to allocate the Total Purchase Price, including
amounts attributable to the Assumed Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
3.1 DUE INCORPORATION. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware.
3.2 DUE AUTHORIZATION.
Purchaser has full power and authority to enter into
this Agreement, to perform its obligations under this Agreement
and to conduct the Business after the Closing Date. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Purchaser. This
Agreement has been duly executed and delivered by Purchaser, and,
assuming due authorization, execution and delivery of this
Agreement by Seller and approval of the Bankruptcy Court,
constitutes the valid and binding obligation of Purchaser,
enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws from time
to time in effect that affect the enforcement of creditors'
rights generally, and by legal and equitable limitations on the
availability of specific remedies.
3.3 CAPITAL STOCK. As of the Closing Date, (i) the Shares
and the shares of Common Stock sold to ▇▇▇▇▇▇▇ & Marsal, Inc. or
its affiliate pursuant to the A&M Management Service Agreement
and the A&M Stock Subscription Agreement represent all of its
outstanding capital stock and no options, warrants or other
rights to acquire any of its capital stock are outstanding,
except for (a) the Warrants represented by the Warrant Agreement,
if Warrants are to be issued pursuant to the Plan of
Reorganization and (b) the options to purchase shares of Common
Stock granted to ▇▇▇▇▇▇▇ & Marsal, Inc. pursuant to the A&M
Option Agreement, (ii) it has no outstanding indebtedness,
liabilities or other obligations (whether due or not due, fixed
or contingent, liquidated or unliquidated, primary or secondary)
of any type or nature, and has not engaged in any business and is
not bound by any indenture, instrument or agreement whatsoever,
except this Agreement, the Warrant Agreement, the A&M Management
Services Agreement, the A&M Option Agreement, the Credit
Agreement and its obligations to pay the fees of its attorneys
and other professional consultants and agents incurred in
connection with any of the foregoing and the Bankruptcy Case.
3.4 PURCHASER ACKNOWLEDGMENT. Subject to Section 4.9,
Purchaser acknowledges that Purchaser is taking the Acquired
Assets on an "AS IS" basis and on a quitclaim basis, without
recourse and without any representation or warranty whatsoever as
to title, merchantability, condition or any other matter.
ARTICLE IV
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER TO CLOSE
The obligations of Purchaser to close the transactions
contemplated by this Agreement are subject to satisfaction by
Seller or waiver by Purchaser in writing on the Closing Date of
the following conditions precedent on or before the Closing Date:
4.1 ACTIONS OR PROCEEDINGS. No court order shall have been
entered and remain in effect in any action or proceeding which
enjoins or prohibits the consummation of the transactions
contemplated by this Agreement.
4.2 LICENSES, PERMITS, AUTHORIZATIONS. Purchaser shall
have received all material licenses, permits, agreements,
consents and authorizations from third parties or Governmental
Authorities required to consummate the transactions set forth in
this Agreement, and the Plan of Reorganization, and any
applicable waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall
have expired or been terminated. The consents and authorizations
from third parties required under this section shall include any
and all consents and authorizations required to make an effective
assignment of any leases or contracts included in the Acquired
Assets, and such consents and authorizations shall have been
obtained without any material adverse change in the rights of
Seller or Purchaser under such leases or agreements.
4.3 BANKRUPTCY COURT APPROVAL. The Bankruptcy Court
before which the Bankruptcy Case is pending shall have entered
the Approval Order acceptable in form and substance to Purchaser,
together with such changes as are acceptable to Purchaser, and
such order shall, among other things, be binding on any trustee
which might be appointed in the Bankruptcy Case pursuant to
Chapter 11 or Chapter 7 of the Bankruptcy Code and, unless
otherwise agreed to by Purchaser, shall be an order which is
operable and has not been stayed by a court of competent
jurisdiction.
4.4 CHANGES IN LAW. No law, regulation or order shall
have been enacted, entered, issued, promulgated or enforced by
any Governmental Authority, nor shall any action, investigation,
suit or other proceeding have been instituted and remain pending
or have been threatened and remain so by any Governmental
Authority at what would otherwise be the Closing Date that would
not permit the Business as presently conducted to be continued by
Purchaser unimpaired following the Closing Date.
4.5 CREDIT AGREEMENT. All of the conditions to the
closing of the Credit Agreement shall have been satisfied or
waived, subject only to the actions to be taken under the Plan of
Reorganization on the Effective Date.
4.6 DISCLOSURE STATEMENT. None of the information
supplied by Seller for inclusion or incorporation by reference in
the Disclosure Statement shall contain, at the time the
Disclosure Statement is approved by the Bankruptcy Court and at
the Closing Date, any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make any statement therein not misleading.
4.7 LIQUIDATION AGENT AGREEMENT. Seller shall have
executed and delivered to Purchaser a counterpart to the
Liquidation Agent Agreement.
4.8 APPOINTMENT OF DIRECTORS. The members of the
Purchaser's Board of Directors shall have been validly appointed
pursuant to Article 8 of the Plan of Reorganization.
4.9 NO LIENS OR ENCUMBRANCES. Purchaser shall be
satisfied that title to all of the Acquired Assets shall pass to
Purchaser in accordance with Section 9.04 of the Plan of
Reorganization.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER TO CLOSE
The obligations of Seller to close the transactions
contemplated in this Agreement are subject to the satisfaction by
Purchaser or waiver by Seller in writing of the following
conditions precedent on or before the Closing Date:
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Purchaser contained herein
shall be true and correct in all material respects on and as of
the Closing Date.
5.2 ENTRY OF APPROVAL ORDER; CONSENTS. The Bankruptcy
Court before which the Bankruptcy Case is pending shall have
entered the Approval Order, together with such changes as are
acceptable to Seller, and each such order shall, among other
things, be binding on any trustee which might be appointed in the
Bankruptcy Case pursuant to Chapter 11 or Chapter 7 of the
Bankruptcy Code and, unless otherwise agreed to by Seller, shall
be an order which is operable and has not been stayed by a court
of competent jurisdiction.
5.3 ACTIONS OR PROCEEDINGS. No court order shall have
been entered and remain in effect in any action or proceeding
which enjoins or prohibits the reasonable consummation of the
transactions contemplated by this Agreement.
5.4 EFFECTIVENESS OF PLAN OF REORGANIZATION. The Plan of
Reorganization shall have become effective in accordance with the
provisions of Article XIII thereof.
5.5 LIQUIDATION AGENT AGREEMENT AND ASSUMPTION AGREEMENT.
Purchaser shall have executed and delivered a counterpart of the
Liquidation Agent Agreement and the Assumption Agreement.
ARTICLE VI
EMPLOYEE MATTERS
6.1 EMPLOYMENT. Subject to Section 1.6, Purchaser shall
have the option (but not the obligation) to offer employment to
any of Seller's employees on terms and conditions satisfactory to
Purchaser and the employee to whom employment is offered.
ARTICLE VII
CLOSING
7.1 CLOSING. Subject to the terms and conditions set
forth herein, the Closing shall take place at the offices of
O'Melveny & ▇▇▇▇▇ LLP, or such other place as may be agreed upon,
at 8:00 A.M. (Los Angeles time) on January 31, 1997 or such other
date as may be agreed to among the parties, which date shall not
be earlier than the eleventh day after entry of the Approval
Order (the "CLOSING DATE").
7.2 DELIVERIES BY SELLER. At or prior to the Closing,
Seller shall deliver to Purchaser the following:
(a) An executed Employee Benefit Plans Assignment and
Assumption Agreement in the form set forth in Exhibit G;
(b) Possession of all of the Acquired Assets;
(c) A ▇▇▇▇ of Sale in the form set forth in Exhibit A;
(d) A Trademarks Assignment in the form set forth in
Exhibit B;
(e) A Patents Assignment in the form set forth in
Exhibit C;
(f) A copy of the Approval Order of the Bankruptcy
Court approving the transactions, confirming the Plan of
Reorganization and otherwise acceptable to Seller and
Purchaser;
(g) All certificates of title to any vehicles included
in the Acquired Assets;
(h) A Liquidation Agent Agreement in the form set
forth in Exhibit E; and
(i) Such other documents, certificates, agreements or
items as may be reasonably requested by Purchaser in order
to consummate the transactions contemplated herein.
7.3 DELIVERIES BY PURCHASER. At the Closing, or at such
other time as required by the Plan of Reorganization, Purchaser
will deliver to such parties as ordered by the Bankruptcy Court
the following:
(a) An executed Employee Benefit Plans Assignment and
Assumption Agreement in the form set forth in Exhibit G;
(b) The Shares required to be issued and delivered
pursuant to Section 2.1(a);
(c) The Warrant Agreements required to be issued and
delivered pursuant to Section 2.1(a), if Warrants are to be
issued pursuant to the Plan of Reorganization;
(d) A Liquidation Agent Agreement in the form set
forth in Exhibit E; and
(e) An Assumption Agreement in the form set forth in
Exhibit F.
ARTICLE VIII
MISCELLANEOUS
8.1 AMENDMENT; WAIVER. This Agreement may be amended,
modified or supplemented but only in writing signed by all of the
parties hereto. The failure of a party hereto at any time or
times to require performance of any provision hereof shall in no
manner affect its right at a later time to enforce the same. No
waiver by a party of any condition or of any breach of any term,
covenant, representation or warranty contained in this Agreement
shall be effective unless in writing, and no waiver in any one or
more instances shall be deemed to be a further or continuing
waiver of any such condition or breach in other instances or a
waiver of any other condition or breach of any other term,
covenant, representation or warranty.
8.2 NOTICES. Any notice, request, instruction or other
document to be given hereunder by a party hereto shall be in
writing and shall be deemed to have been given, (i) when received
if delivered by hand, (ii) on the date of transmission (subject
to confirmation of receipt) if sent by telex, telecopy or other
wire transmission or (iii) three days after being deposited in
the U.S. mail, certified or registered mail, postage prepaid:
(a) If to Seller, addressed as follows:
WHEREHOUSE ENTERTAINMENT, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ Del ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and
(b) If to Purchaser, addressed as follows:
WEI Acquisition Co.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
O'Melveny & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: C. ▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other individual or address as a party hereto may
designate for itself by notice given as herein provided.
8.3 COUNTERPARTS. This Agreement may be executed
simultaneously in counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the
same instrument.
8.4 HEADINGS. The headings preceding the text of Articles
and Sections of this Agreement and the Schedules hereto are for
convenience only and shall not be deemed part of this Agreement.
8.5 APPLICABLE LAW. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws
of the State of California applicable to agreements between
parties resident therein.
8.6 ASSIGNMENT. This Agreement may not be assigned by any
party hereto without the prior written consent of the other party
hereto, except that the Purchaser may, upon the Closing, grant a
security interest in its rights under this Agreement to a lender
financing the transactions contemplated hereby.
8.7 THIRD PARTY BENEFICIARIES. This Agreement is solely
for the benefit of the parties hereto and, other than as
specified herein, no provision of this Agreement shall be deemed
to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement.
8.8 TAX MATTERS.
(a) Purchaser and Seller shall make available to each
other, (i) such records as either party may require for the
preparation of any Tax Returns required to be filed by
Seller or Purchaser and (ii) such records as Seller or
Purchaser may require for the defense of any audit,
examination, assessment, administrative appeal, or
litigation of any such Tax Return in which Seller or
Purchaser was included;
(b) Purchaser and Seller shall be bound by the
standard procedure described in Section 4 of Internal
Revenue Service Rev. Proc. 84-77 for reporting wages and
other compensation to the Internal Revenue Service, to the
various states and to the employees.
8.9 OTHER INSTRUMENTS. Upon the reasonable request of
Purchaser, Seller shall, on and after the Closing Date, execute
and deliver to Purchaser such other documents, releases,
assignments and other instruments and take such other steps as
may be reasonably required to effectuate the transfer and
assignment to Purchaser of, and to vest fully in Purchaser title
to, each of the Acquired Assets and the Assumed Obligations and
to permit and assist Purchaser to perform the Assumed
Obligations. In furtherance of the foregoing, Seller shall,
promptly after the Closing, file or cause to be filed with the
Delaware Secretary of State amendments to Seller's Certificates
of Incorporation changing the name of Seller, and Seller shall
take all such actions as may be reasonably requested by Purchaser
such that Purchaser may change its corporate name to that of
Seller.
8.10 ENTIRE UNDERSTANDING. This Agreement, the Plan of
Reorganization and the Disclosure Statement set forth the entire
agreement and understanding of the parties hereto in respect to
the transactions contemplated hereby and supersedes all prior
agreements, arrangements and understandings relating to the
subject matter hereof and is not intended to confer upon any
other person or entity any rights or remedies hereunder, other
than as expressly provided herein. The representations and
warranties contained in this Agreement, the Plan of
Reorganization and the Disclosure Statement are the sole
representations and warranties made by the parties hereto with
respect to the transactions contemplated hereby or thereby and
supersede any and all prior disclosures or other information,
oral or written, provided in connection with the negotiation of
this Agreement, the Plan of Reorganization and the Disclosure
Statement or otherwise. There have been no representations or
statements, oral or written, that have been relied on by any
party hereto, except those expressly set forth in this Agreement,
the Plan of Reorganization and the Disclosure Statement.
8.11 WAIVER OF JURY TRIAL. Each of Seller and Purchaser
irrevocably waives trial by jury in any action or proceeding with
respect to this Agreement.
8.12 INDEMNIFICATION OBLIGATIONS.
(a) TERMINATION OF INDEMNIFICATION OBLIGATIONS. The
parties acknowledge that pursuant to Section 12.07(a) of the Plan
of Reorganization, except as set forth in Section 8.12(b), all
obligations of Seller to indemnify, or to pay contribution or
reimbursement to, any of its present or former directors,
officers, agents, employees and representatives or any Holder of
a Claim or Interest treated in the Plan of Reorganization, or any
trustee or agent acting for any such Holder, or any person in any
manner engaged, employed or indemnified in connection with the
issuance or sale of any Cancelled Securities or any agent,
attorney, advisor, financial advisor, investment banker, employee
or representative or any heirs, representatives, successors or
assigns of any indemnified person that may be outstanding,
accrued or existing, or might reasonably have been asserted, on
the Confirmation Date (whether pursuant to a certificate of
incorporation, bylaws, contractual obligations or any applicable
law or otherwise) in respect of any past, present or future
action, suit or proceeds shall be discharged under the Plan of
Reorganization and all undertakings and agreements for or
relating to any such indemnification, contribution or
reimbursement shall be rejected and terminated.
(b) LIMITED CONTINUING INDEMNIFICATION. The parties
further acknowledge that pursuant to Section 12.07(b) of the Plan
of Reorganization, no obligation of Seller, whether arising
pursuant to law or its certificate of incorporation or bylaws or
by contract or otherwise, to indemnify, or to pay contribution or
reimbursement to, any individual who served as a director or
officer of Seller at any time during the period that commenced
three years prior to the Filing Date and ends on the Effective
Date shall be (i) discharged or impaired under the Plan of
Reorganization, (ii) subordinated under Section 510 of the
Bankruptcy Code or otherwise, or (iii) disallowed under Section
502(e) of the Bankruptcy Code. Any such obligation that, under
the Bankruptcy Code, has the priority of an expense of
administration shall be entitled to such priority. No proof of
claim shall be required to preserve any such obligation.
Purchaser agrees that it shall assume and agrees to pay all such
obligations and, further, shall defend, indemnify and hold
harmless each such individual from and against all claims,
damages, losses, liabilities, costs and expenses (including the
reasonable fees and disbursements of legal counsel selected and
employed by such indemnified person, whether or not suit is
brought) based on, arising from or in any manner related to (i)
any failure by Purchaser to pay any Claim or other liability or
to perform any obligation binding on it pursuant to the Plan of
Reorganization or other liability or to perform any obligation
binding on it pursuant to the Plan of Reorganization or this
Agreement or (ii) any act, omission, wrongful conduct,
circumstance or event as to which either any Cause of Action is
released as against any Person pursuant to the Plan of
Reorganization or any such indemnification obligation is
preserved pursuant to Section 12.07(b) of the Plan of
Reorganization; PROVIDED, HOWEVER, that (i) no individual shall
be indemnified in respect of any claim, damages, liability, loss,
cost or expense that is finally determined by a court of
competent jurisdiction to have been caused by such individual's
own willful misconduct or gross negligence and (ii) no 1992
Merger Consideration Recipient shall be indemnified as to any
1992 Merger Consideration Recovery Claim pursuant to this Section
8.12(b) or Section 12.07(b) of the Plan of Reorganization.
8.13 CONFLICT WITH PLAN OF REORGANIZATION OR DISCLOSURE
STATEMENT. In case of any conflict between any provision of this
Agreement and any provision of the Plan of Reorganization or the
Disclosure Statement, the provisions of this Agreement shall
govern.
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings set forth herein
for the purposes of the transactions described in this Agreement;
"A&M MANAGEMENT SERVICES AGREEMENT" shall mean the
Management Services Agreement dated as of January 31, 1997
between ▇▇▇▇▇▇▇ & Marsal and Purchaser.
"A&M OPTION AGREEMENT" shall mean the Non-Transferrable
Stock Option Agreement dated as of January 31, 1997 between
▇▇▇▇▇▇▇ & Marsal and Purchaser, entered into pursuant to the A&M
Management Services Agreement.
"A&M STOCK SUBSCRIPTION AGREEMENT" shall mean the Stock
Subscription Agreement dated as of January 31, 1997 between
Purchaser and ▇▇▇▇▇▇▇ & Marsal, Inc. or its affiliate.
"ACQUIRED ASSETS" shall have the meaning given to it in
Section 1.1.
"AGREEMENT" shall mean this Asset Purchase Agreement,
including all Exhibits hereto, as it may be amended, supplemented
or otherwise modified from time to time in accordance with its
terms.
"APPROVAL ORDER" shall mean an order confirming the Plan of
Reorganization, including approval the acquisition of the
Business by the Purchaser in accordance with the terms agreed to
by the parties hereto.
"ASSUMED OBLIGATIONS" shall have the meaning given to it in
Section 1.6.
"ASSUMPTION AGREEMENT" shall mean the Assumption Agreement
dated as of the Closing Date between Seller and Purchaser,
substantially in the form attached hereto as Exhibit F.
"BANKRUPTCY CASE" shall have the meaning given to it in the
preamble to this Agreement.
"BANKRUPTCY CODE" shall mean Title 11 of the United States
Code.
"BANKRUPTCY COURT" shall have the meaning given to it in the
preamble of this Agreement.
"BUSINESS" shall mean the retail pre-recorded and blank
record, compact disc, cassette, video, video cassette and other
music and video consumer entertainment products business of
Seller.
"CLOSING" shall mean the consummation of the transactions
contemplated herein, subject to the terms and conditions set
forth herein.
"CLOSING DATE" shall have the meaning given to it in Section
7.1.
"CODE" shall mean the United States Internal Revenue Code of
1986, as amended.
"COMMON STOCK" shall have the meaning given thereto in
Section 2.1(a).
"CREDIT AGREEMENT" shall mean that certain Loan and Security
Agreement dated as of January 31, 1997 among the Purchaser and
Congress Financial Corporation (Western) containing terms and
provisions satisfactory to Seller and the Trade Committee.
"DISCLOSURE STATEMENT" shall mean the Disclosure Statement
describing this Agreement and the Plan of Reorganization filed
with the Bankruptcy Court in connection with the Bankruptcy Case.
"ENCUMBRANCE" means any lien, mortgage, pledge, assignment,
security interest, charge or encumbrance of any kind (including
any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any
security interest) and any option, trust or other preferential
arrangement having the practical effect of any of the foregoing.
"EXCLUDED ASSETS" shall have the meaning given to it in
Section 1.4.
"EXCLUDED LIABILITIES" shall have the meaning given to it in
Section 1.5.
"GOVERNMENTAL AUTHORITY" shall mean the government of the
United States or any state or political subdivision thereof and
any United States or any state entity or any entity of a
political subdivision thereof, including any court, exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"LIQUIDATION AGENT AGREEMENT" shall mean the Liquidation
Agent Agreement dated as of the Closing Date between Seller and
Purchaser, substantially in the form attached hereto as Exhibit
E.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, and the related
regulations and published interpretations.
"PETITION DATE" shall mean August 2, 1995, the date on which
the Bankruptcy Case was commenced.
"PLAN OF REORGANIZATION" shall mean 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, providing, inter alia, for the
transactions contemplated in this Agreement.
"REAL PROPERTY" shall mean all real property, appurtenances
thereto, rights in connection therewith, and any interest
therein, including without limitation leasehold estates owned by
Seller.
"SHARES" shall have the meaning given to it in Section
2.1(a).
"TAX" or "TAXES" shall mean all federal, state, local or
foreign income, gross receipts, windfall profits, severance,
property, production, sales, use, license, excise, franchise,
employment, withholding, transfer, payroll, goods and services,
value-added or minimum tax, or any other tax, custom, duty,
governmental fee, or other like assessment or charge of any kind
whatsoever, together with any interest or any penalty, addition
to tax or additional amount imposed by any Governmental
Authority.
"TAX RETURN" shall mean any return, report or similar
statement required to be filed with respect to any Taxes
including any attached schedules, statements or worksheets),
including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
"TOTAL PURCHASE PRICE" shall have the meaning given to it in
Section 2.1(a).
"WARRANTS" shall mean warrants to purchase shares of Common
Stock.
"WARRANT AGREEMENTS" shall mean the Warrant Agreements,
substantially in the form attached hereto as Exhibits ▇-▇, ▇-▇
and D-3, representing the Tranche A, Tranche B and Tranche C
Warrants, respectively, to be issued as part of the Total
Purchase Price, if Warrants are to be issued pursuant to the Plan
of Reorganization.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered on the date first written
above.
WHEREHOUSE ENTERTAINMENT, INC.
/s/ ▇▇▇▇▇ Del ▇▇▇▇▇▇▇▇
By: ______________________________
Name: ▇▇▇▇▇ Del ▇▇▇▇▇▇▇▇
Title: CFO
WEI HOLDINGS, INC.
/s/ ▇▇▇▇▇ Del ▇▇▇▇▇▇▇▇
By: ______________________________
Name: ▇▇▇▇▇ Del ▇▇▇▇▇▇▇▇
Title: CFO
WEI ACQUISITION CO.
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
By: ______________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Financial
Officer and Secretary
EXHIBIT A
▇▇▇▇ OF SALE
For good and valuable consideration, receipt of which
is hereby acknowledged, pursuant to the Asset Purchase Agreement,
dated as of January 31, 1997 (the "AGREEMENT"), among Wherehouse
Entertainment, Inc. and WEI Holdings, Inc., each a Delaware
corporation (collectively "SELLER") and WEI Holdings, Inc., a
Delaware corporation ("BUYER"), and subject to the terms and
conditions set forth therein, including, without limitation the
acknowledgement set forth in Section 3.4 thereof, and intending
to be legally bound hereby, Seller does hereby unconditionally
and irrevocably sell, convey, grant, assign and transfer to
Buyer, its successors and assigns, all of Seller's legal,
beneficial and other right, title and interest in and to the
Acquired Assets (as defined in the Agreement).
Capitalized terms used herein and not defined have the
meanings assigned to them in the Agreement. Nothing herein is
intended to limit or supersede in any way the representations and
warranties of Seller set forth in the Agreement.
Notwithstanding anything to the contrary contained in
this ▇▇▇▇ of Sale, the "Acquired Assets" do not include, and
Seller does not hereby sell, convey, assign or transfer to Buyer
any of Seller's right, title or interest in or to, the Excluded
Assets.
IN WITNESS WHEREOF, Seller has caused this ▇▇▇▇ of
Sale to be executed this 31st day of January, 1997.
WHEREHOUSE ENTERTAINMENT, INC.
By: ____________________________
Name:
Title:__________________________
WEI HOLDINGS, INC.,
By: ______________________________
Name:
Title:____________________________
ACCEPTED AND AGREED:
WEI ACQUISITION CO.
By: _______________________________
Name:
Title: ____________________________
EXHIBIT B
TRADEMARK ASSIGNMENT
For good and valuable consideration, the receipt of
which is hereby acknowledged, pursuant to that certain Asset
Purchase Agreement dated as of January 31, 1997 (the
"AGREEMENT"), by and between Wherehouse Entertainment, Inc. and
WEI Holdings, Inc., each a Delaware corporation (collectively
"SELLER"), and WEI Acquisition Co., a Delaware corporation
("BUYER"), and subject to the terms and conditions set forth
therein including, without limitation the acknowledgement set
forth in Section 3.4 thereof, and intending to be legally bound,
Seller hereby assigns and transfers to Buyer, all of Seller's
rights to all trademarks, trade names, service marks and other
proprietary intangibles used in or related to the Business (as
defined in the Agreement), including, without limitation, those
set forth on Annex A hereto.
IN WITNESS WHEREOF, Seller has executed and delivered
this Trademark Assignment as of the 31st day of January, 1997.
WHEREHOUSE ENTERTAINMENT, INC.
By: ______________________________
Name:
Title: ___________________________
WEI HOLDINGS, INC.
By: ______________________________
Name:
Title: ___________________________
ACCEPTED AND AGREED:
WEI ACQUISITION CO.
By: _______________________________
Name:
Title: ____________________________
ANNEX A
TRADEMARKS
REGISTRATION REGISTRATION JURISDICTION
DESCRIPTION SERIAL NO. NO. DATE
----------- ---------- ----------- ------------ -------------
EXHIBIT C
PATENT ASSIGNMENT
For good and valuable consideration, the receipt of
which is hereby acknowledged, pursuant to that certain Asset
Purchase Agreement dated as of January 31, 1997 (the
"AGREEMENT"), by and between Wherehouse Entertainment, Inc. and
WEI Holdings, Inc., each a Delaware corporation (collectively
"SELLER"), and WEI Acquisition Co., a Delaware corporation
("BUYER"), and subject to the terms and conditions set forth
therein including, without limitation the acknowledgement set
forth in Section 3.4 thereof, and intending to be legally bound
hereby, Seller hereby assigns and transfers to Buyer, all of
Seller's rights to all patents, patent applications and patent
licenses used in or related to the Business (as defined in the
Agreement), including, without limitation, those set forth on
Annex A hereto.
IN WITNESS WHEREOF, Seller has executed and delivered
this Trademark Assignment as of the 31st day of January, 1997.
WHEREHOUSE ENTERTAINMENT, INC.
By: _____________________________
Name:
Title:___________________________
WEI HOLDINGS, INC.
By: _____________________________
Name:
Title:____________________________
ACCEPTED AND AGREED:
WEI ACQUISITION CO.
By: ____________________________
Name:
Title: _________________________
ANNEX A
PATENTS
REGISTRATION REGISTRATION JURISDICTION
DESCRIPTION SERIAL NO. NO. DATE
----------- ---------- ----------- ------------ -------------
EXHIBIT D-1
TRANCHE A WARRANT AGREEMENT
------------------------------------------------------------
WARRANT AGREEMENT
RELATING TO THE ISSUANCE OF THE
TRANCHE A 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
-------------------------------------------------------------
TABLE OF CONTENTS
Sections Page(s)
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
(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
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
WARRANT AGREEMENT relating to the issuance of the
Tranche A 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 576,000 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 certifi-
▇▇▇▇▇ 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.
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.
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, 2002 (the fifth 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 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 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 $2.38, subject to adjustment pursuant to Section 11
hereof.
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 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 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 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 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 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 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.
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.
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.
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 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 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.
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 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.
SECTION 29. PLAN OF REORGANIZATION.
The Company will comply for the benefit of the Holders
with Section 8.04 of the POR.
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 ___________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF NEW
YORK
as Warrant Agent
By ___________________________
Name:
Title:
TRANCHE A WARRANT TO PURCHASE COMMON STOCK VOID AFTER
5:00 P.M., NEW YORK TIME, ON JANUARY 31, 2002
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, 2002, 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 $2.38 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 576,000 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.
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: _____________________________
Title:
ATTEST: _________________________
Name:
Title:
COUNTERSIGNED:
UNITED STATES TRUST COMPANY OF NEW YORK
WARRANT AGENT
By: ___________________________
Name:
Title:
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: _______________________________________________________
Address: _______________________________________________________
_________________________________________________________________
Social Security or Taxpayer's
Identification Number: ________________________________________
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: ___________________________________
Address: ___________________________________
Social Security or Taxpayer's
Identification Number: ___________________________________
Signature: ___________________
Dated: ____________________
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.
ASSIGNMENT
(To be signed only upon
assignment of Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto ______________________________
(Name of Assignee)
__________________________________________________________
__________________________________________________________
__________________________________________________________
(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.
DATED: _____________________
______________________________
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.
EXHIBIT D-2
TRANCHE B WARRANT AGREEMENT
------------------------------------------------------------
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
-------------------------------------------------------------
TABLE OF CONTENTS
Sections Page(s)
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
(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
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
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 certifi-
▇▇▇▇▇ 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.
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.
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 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 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.
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 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 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 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 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 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 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.
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.
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.
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 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 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.
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 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.
SECTION 29. PLAN OF REORGANIZATION.
The Company will comply for the benefit of the Holders
with Section 8.04 of the POR.
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 ___________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF NEW
YORK,
as Warrant Agent
By ___________________________
Name:
Title:
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 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.
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: _____________________________
Title:
ATTEST: _________________________
Name:
Title:
COUNTERSIGNED:
UNITED STATES TRUST COMPANY OF NEW YORK
WARRANT AGENT
By: ___________________________
Name:
Title:
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: _______________________________________________________
Address: _______________________________________________________
_________________________________________________________________
Social Security or Taxpayer's
Identification Number: ________________________________________
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: ___________________________________
Address: ___________________________________
Social Security or Taxpayer's
Identification Number: ___________________________________
Signature: ___________________
Dated: ____________________
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.
ASSIGNMENT
(To be signed only upon
assignment of Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto ______________________________
(Name of Assignee)
__________________________________________________________
__________________________________________________________
__________________________________________________________
(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.
DATED: _____________________
______________________________
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.
EXHIBIT D-3
TRANCHE C WARRANT AGREEMENT
-----------------------------------------------------------
WARRANT AGREEMENT
RELATING TO THE ISSUANCE OF THE
TRANCHE C 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
--------------------------------------------------------------
TABLE OF CONTENTS
Sections Page(s)
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
(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
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
WARRANT AGREEMENT relating to the issuance of the
Tranche C 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 certifi-
▇▇▇▇▇ 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.
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.
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 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 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 $11.00, subject to adjustment pursuant to Section 11
hereof.
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 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 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 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 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 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 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.
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.
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.
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 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 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.
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 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.
SECTION 29. PLAN OF REORGANIZATION.
The Company will comply for the benefit of the Holders
with Section 8.04 of the POR.
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 ___________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF NEW
YORK,
as Warrant Agent
By ___________________________
Name:
Title:
TRANCHE C 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 $11.00 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 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.
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: _____________________________
Title:
ATTEST: _________________________
Name:
Title:
COUNTERSIGNED:
UNITED STATES TRUST COMPANY OF NEW YORK
WARRANT AGENT
By: ___________________________
Name:
Title:
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: _______________________________________________________
Address: _______________________________________________________
_________________________________________________________________
Social Security or Taxpayer's
Identification Number: ________________________________________
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: ___________________________________
Address: ___________________________________
Social Security or Taxpayer's
Identification Number: ___________________________________
Signature: ___________________
Dated: ____________________
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.
ASSIGNMENT
(To be signed only upon
assignment of Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto ______________________________
(Name of Assignee)
__________________________________________________________
__________________________________________________________
__________________________________________________________
(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.
DATED: _____________________
______________________________
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.
EXHIBIT E
FORM OF LIQUIDATION AGENT AGREEMENT
LIQUIDATION AGENT AGREEMENT
This Liquidation Agent Agreement (this "AGREEMENT") is
entered into as of January 31, 1997, by and among Wherehouse
Entertainment, Inc., and its parent, WEI Holdings, Inc., each a
Delaware corporation (collectively, the "DEBTORS"), and WEI
Acquisition Co., a Delaware corporation (the "COMPANY").
RECITALS
WHEREAS, pursuant to the Debtors' First Amended Chapter
11 Plan, as Revised for Technical Corrections dated October 4,
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 the Debtors who
are debtors and debtors-in-possession, in Case ▇▇. ▇▇-▇▇▇ (▇▇▇)
(▇▇▇▇▇▇▇ Administered), in the Bankruptcy Court for the District
of Delaware; and
WHEREAS, Section 9.05 of the POR requires the Company
to act as the liquidation agent for the Debtors in respect of the
Estates (the "LIQUIDATION AGENT OBLIGATIONS"), and Section 4.7 of
the Asset Purchase Agreement requires the Company and the Debtors
to enter into this Agreement in order to permit the Company to
perform the Liquidation Agent Obligations.
NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS. Unless otherwise indicated, all
capitalized terms used herein without definition shall have the
meanings given thereto in the POR.
2. APPOINTMENT. The Debtors hereby irrevocably appoint
the Company, and the Company hereby accepts the appointment, as
the Debtors' liquidation agent and attorney-in-fact, with full
authority in the place and stead of the Debtors and in the name
of the Debtors, the Company or otherwise, from time to time in
the Company's discretion to take any action and to execute any
instrument necessary or advisable to perform the Liquidation
Agent Obligations, including without limitation:
(a) to admit, object to or contest any and all Claims;
(b) to defend, protect and enforce any and all rights
and interests of the Debtors and to make any and all
distributions required or permitted to be made by the Debtors
under the POR;
(c) to file any and all reports, requests for relief
or opposition thereto in respect of the Estates and the
liquidation thereof;
(d) to ask for, demand, collect, ▇▇▇ for, recover,
compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Debtors'
property;
(e) to receive, endorse and collect any drafts or
other instruments, documents and chattel paper in connection with
clauses (a), (b), (c) and (d) above;
(f) to sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in
connection with any receivables of the Debtors and other
documents relating to the Debtors' assets;
(g) generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the
Debtors' assets as fully and completely as though the Company
were the absolute owner thereof for all purposes;
(h) to take any and all other actions necessary or
appropriate to implement the POR or to wind up the Estates in
accordance with applicable law; and
(i) to pay (from its own funds and without any right
of contribution or reimbursement as against the Estates) any and
all claims, liabilities, losses, damages, costs and expenses
incurred in connection with the Liquidation Agent Obligations.
3. ACCEPTANCE OF OBLIGATIONS. The Company hereby agrees
to perform the Liquidation Agent Obligations.
4. NO COMPENSATION. The Company shall not be entitled
to receive any compensation or indemnification from the Debtors
or the Estates for the Company's services under this Agreement.
5. MISCELLANEOUS.
(a) Further Assurances. The Debtors shall cooperate
and shall promptly take all such further actions and shall
execute and deliver all such further documents as may be
requested by the Company in order to carry out the provisions and
purposes of this Agreement.
(b) Counterparts. This Agreement may be executed in
one or more counterparts, all of which taken together shall be
deemed one original.
(c) Governing Law. This Agreement shall be deemed to
be a contract under the laws of the State of California and for
all purposes shall be construed and enforced in accordance with
the internal laws of said state without regard to the principles
of conflicts of law.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the first date written above.
WEI ACQUISITION CO.
By ______________________________
Its _____________________________
WHEREHOUSE ENTERTAINMENT, INC.
By _______________________________
Its ______________________________
WEI HOLDINGS, INC.
By ________________________________
Its _______________________________
EXHIBIT F
ASSUMPTION AGREEMENT
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, pursuant to an
Asset Purchase Agreement dated as of January 31, 1997 (the
"AGREEMENT") among Wherehouse Entertainment, Inc. and WEI
Holdings, Inc., each a Delaware corporation (collectively
"SELLER"), and [Reorganized Wherehouse], a Delaware corporation
("BUYER"), and subject to the terms and conditions set forth
therein including, without limitation the acknowledgement set
forth in Section 3.4 thereof, and intending to be legally bound
hereby, Buyer hereby assumes and agrees to pay and otherwise
perform after Closing Date, the liabilities and obligations set
forth as "ASSUMED OBLIGATIONS" in Section 1.6 of the Agreement,
which is incorporated herein by this reference.
Notwithstanding anything to the contrary contained in
this Assignment and Assumption Agreement, Buyer does not hereby
assume any of the liabilities and obligations other than those
identified as Assumed Obligations under Section 1.6 of the
Agreement.
IN WITNESS WHEREOF, the paries hereto have caused this
Assumption Agreement to be executed as of this 31st day of
January, 1997.
WEI ACQUISITION CO.
By _____________________________
Its ____________________________
EXHIBIT G
EMPLOYEE BENEFIT PLANS ASSIGNMENT AND ASSUMPTION AGREEMENT
This EMPLOYEE BENEFIT PLANS ASSIGNMENT AND ASSUMPTION
AGREEMENT (the "Agreement") is entered into as of January 31,
1997 by and between Wherehouse Entertainment, Inc., a Delaware
corporation ("Assignor"), and WEI Acquisition Co., a Delaware
corporation ("Assignee").
RECITALS
WHEREAS, Assignor and Assignee have entered into an
Asset Purchase Agreement dated as of January 31, 1997 (the "Asset
Purchase Agreement") (all initially capitalized terms not
otherwise defined herein shall have the definitions given to such
terms in the Asset Purchase Agreement);
WHEREAS, pursuant to the Asset Purchase Agreement,
Assignee has agreed to assume sponsorship of the Wherehouse
Entertainment Savings and Vested Earnings 401(k) Plan (the
"401(k) Plan"), the 1993 Amended and Restated Wherehouse
Entertainment, Inc. Associates Vacation Plan (the "VEBA Plan"),
and all the Assignor's health and welfare benefits plans which
are provided through the insurance policies or contracts set
forth in EXHIBIT A hereto (together with the 401(k) Plan and the
VEBA Plan, the "Assumed Plans");
WHEREAS, Assignor currently sponsors and maintains the
Assumed Plans; and
WHEREAS, in furtherance of the Asset Purchase
Agreement, and in order to effect the transactions contemplated
thereby, it is intended that Assignee shall assume sponsorship of
the Assumed Plans from and after the date hereof and be
substituted for Assignor under the provisions of the Assumed
Plans and related documents, all in accordance with the terms of
the Asset Purchase Agreement and the terms hereof.
NOW, THEREFORE, in consideration of the mutual promises
and covenants contained herein, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Plan Assumption. Effective as of the date hereof,
Assignee hereby adopts the Assumed Plans and assumes and shall
succeed to all rights and obligations of Assignor under the
Assumed Plans and related documents. Assignee shall pay, perform
and discharge all debts, obligations and liabilities of Assignor
in respect of the Assumed Plans and related documents, provided,
however, that Assignor shall make all Matching Contributions (as
such term is defined in the 401(k) Plan) on compensation deferred
under the 401(k) Plan through January 31, 1997.
2. Plan Substitution. Effective as of the date
hereof, Assignee is hereby substituted for Assignor as the
"Company" and "Employer" and all such similar terms under the
Assumed Plans.
3. Committee. Effective as of the date hereof, the
individuals serving as the administrators or members of the
administrative committees of the Assumed Plans are reappointed to
such positions by Assignee.
4. Nontermination of Employment. The employment of
any employee of Assignor, who continues employment with the
Assignee in accordance with transactions contemplated by the
Asset Purchase Agreement and who is a participant under any
Assumed Plan as of the date hereof ("Transferred Employee"),
shall not be deemed to have been terminated or severed for any
purpose under such Assumed Plan by reason of the transactions
contemplated by this Agreement or the Asset Purchase Agreement.
5. Agreement Self-Executing. Effective as of the date
hereof, the Assumed Plans are hereby amended to reflect the
substitutions provided for in Sections 1 through 4 hereof and to
reflect any other changes necessary or appropriate to effectuate
the terms and intent of this Agreement. The assumption and
substitution of the Assumed Plans provided for in this Agreement
shall be self-executing and shall become effective on the date
hereof without any further action required by any person;
provided, however, that the parties hereto agree to take such
further action as may be necessary or appropriate to effectuate
the terms and intent of this Agreement, and provided, further,
that the officers of Assignee are hereby authorized to execute
any amendments to the Assumed Plans or related documents
(including, but not limited to, insurance contracts and trust
agreements) that may be desirable or appropriate to reflect the
assumption and substitution pursuant to this Agreement.
6. Amendment. Assignee may make any amendment
required to maintain the qualified status of the Assumed Plans
and under Sections 401(a) and 501(a) of the Internal Revenue Code
of 1986, as amended, or otherwise required by applicable law, and
any such amendment may be made effective retroactive to a date
preceding the date hereof, if so required or appropriate.
7. No Release. No provision of this Agreement shall
be interpreted or construed to release the parties to the Asset
Purchase Agreement from any of their duties, obligations or
liabilities arising under the Asset Purchase Agreement, and any
and all rights derived under the Asset Purchase Agreement shall
survive this Agreement.
8. No Implied Rights in Third Parties. Nothing
expressed or implied in this Agreement is intended to confer upon
any Transferred Employee or any other person, other than the
parties hereto (in their capacities as such), any rights or
remedies, including, without limitation, any rights to employment
or continuance thereof, or any rights under or with respect to
any Assumed Plan or any benefits thereunder.
9. Counterparts. This Agreement may be executed in
any number of counterparts, each of which when executed shall be
deemed to be one and the same instrument.
IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be executed on its behalf by its duly authorized
officer, as of the date and year first above written.
WHEREHOUSE ENTERTAINMENT, INC.
By:_________________________________
Title: _____________________________
WEI ACQUISITION CO.
By:_________________________________
Title: _____________________________
EXHIBIT A
Assumed Plans