SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 7, 1997
Wherehouse Entertainment, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 1-8281 95-2647555
(State or other (Commission IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
</TABLE>
19701 Hamilton Avenue
Torrance, California 90502-1334
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (310) 538-2314
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
The registrant and its parent company, WEI Holdings,
Inc. ("Holdings"; and, together with the registrant, the
"Debtors") are debtors and debtors-in-possession (collectively,
the "Debtors"), 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"). On January 7,
1997, the Bankruptcy Court entered an order entitled "Findings of
Fact, Conclusions of Law and Order Confirming Debtors' First
Amended Chapter 11 Plan Under Chapter 11 of the Bankruptcy Code"
(the "Confirmation Order") confirming the Debtors' plan of
reorganization entitled "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 "Plan"). The Confirmation Order is incorporated by
reference to Exhibit 3.1. The Plan is incorporated by reference
to Exhibits A, B and C of Exhibit 3.1.
The material features of the Plan are as follows:
IMPLEMENTATION OF THE PLAN
The Plan contemplates that substantially all of the
assets of the Debtors and certain liabilities will be transferred
to a new company ("Reorganized Wherehouse"), which has been
organized under the laws of the State of Delaware. The new
certificate of incorporation for Reorganized Wherehouse
authorizes the issuance of 24,000,000 shares of common stock, par
value $0.01 per share (the "New Common Stock"). Up to 10,000,000
shares of New Common Stock are authorized to be issued under the
Plan. Reorganized Wherehouse will be the issuer of all New
Common Stock and warrants to be distributed under the Plan and
will distribute all cash and other consideration provided for in
the Plan. The Debtors will assign all of their executory
contracts and unexpired leases assumed during the Bankruptcy Case
and not otherwise assigned to Reorganized Wherehouse. After the
Plan becomes effective, the Debtors' bankruptcy estates will be
liquidated by Reorganized Wherehouse.
DISTRIBUTIONS UNDER THE PLAN
The Plan classifies the following classes of claims and
interests: Class 1 (Senior Lender Secured Claims), Class 2 (DC-2
Secured Claim), Class 3 (Miscellaneous Secured Claims), Class 4
(Miscellaneous Priority Claims), Class 5 (General Unsecured
Claims), Class 6 (Senior Lender Deficiency Claims), Class 7
(Senior Subordinated Note Claims), Class 8 (Convertible
Subordinated Debenture Claims), and Class 9 (Interests).
The Holders of senior lender claims (the "Senior
Lenders") are holders of the Debtors' prepetition bank debt and
have claims that are partially collateralized by assets of the
Debtors. The holders of General Unsecured Claims fall into two
general categories: trade creditors and other general unsecured
creditors. The Debtors' other major creditors are the holders of
the Senior Subordinated Notes of the registrant.
A portion of the Senior Lenders' total claims is a
secured claim. The Plan allows the Senior Lenders' secured
claims in the amount of $35,000,000.
The balance of the Senior Lenders' claims equals
$59,568,179.37 and are allowed in the Plan as unsecured
deficiency claims. These unsecured deficiency claims are of
equal legal rank with the claims of trade creditors and other
general unsecured creditors. Unlike trade creditors and other
general unsecured creditors, however, the Senior Lenders are the
beneficiaries of certain subordination provisions contained in
the indenture under which the Senior Subordinated Notes were
issued.
Accordingly, distributions under the Plan are as
follows:
In accordance with Bankruptcy Code Section 1123(a)(1)
under the Plan, allowed administrative expenses will be paid in
full on the latest of the effective date of the Plan (the
"Effective Date"), the date such claims become allowed, or
another date agreed by the parties.
Each holder of an allowed Senior Lender Secured Claim
will receive on account of such claim its pro rata share of (i)
the greater of $11,610,000 or the aggregate amount payable under
the Plan to eligible suppliers that exercise the Exchange Option
described below (the "Secured Claim Cash Distribution") and (ii)
117.6229653 shares of New Common Stock for each $1,000 in allowed
amount of Senior Lender Secured Claims after deducting the
Secured Claim Cash Distribution. New Common Stock distributed on
account of the Senior Lender Secured Claims should equal
approximately 2,436,560 shares of the New Common Stock assuming
an $11,610,000 Secured Claim Cash Distribution. Accordingly, of
the 10,000,000 authorized shares of New Common Stock to be issued
under the Plan, approximately 24.37% will be distributed to the
Senior Lenders on account of their secured claims.
After this distribution on account of the Senior
Lenders' secured claims, there will be a total of approximately
$236,920,000 in remaining unsecured claims including the
deficiency portion of the Senior Lenders' claims. The Plan
provides that the remaining 75.37% of Reorganized Wherehouse's
equity will be distributed in accordance with each class' pro
rata percentage representation of the total remaining unsecured
claims by allocating 31.92430893 shares of New Common Stock for
every $1,000 in allowed amount of unsecured claim. From that
amount, the Senior Lenders will receive 1,901,673 shares of New
Common Stock on account of their deficiency claims and 3,741,201
shares that would otherwise have been distributed to the holders
of Senior Subordinated Note Claims.
Trade creditors who are identified by Reorganized
Wherehouse as continuing suppliers and commit to provide normal
trade credit to Reorganized Wherehouse and exercise the exchange
of shares of New Common Stock for cash described below (the
"Exchange Option"), will receive cash equal to approximately 27%
of their allowed claims. This cash otherwise would be
distributed to the Senior Lenders on account of their secured
claims and the New Common Stock that otherwise would go to the
electing trade creditors will be distributed to the Senior
Lenders. Based on the Debtors' estimated trade claims of
$43,000,000, $11,610,000 of cash will be distributed to trade
creditors and the 1,372,745 shares of New Common Stock that would
have been distributed on account of their claims will be
distributed to the Senior Lenders.
Assuming that the allowed claims are consistent with
the Debtors' estimates and that all the trade creditors exercise
the Exchange Option, a total of 9,452,179 shares of New Common
Stock will be distributed to the Senior Lenders and 547,821
shares will be distributed to general unsecured creditors under
the Plan.
Holders of the Senior Subordinated Note Claims will
receive 576,000 Tranche A Warrants permitting the purchase of an
equal number of shares of New Common Stock with an exercise price
of $2.38 per share and a five year maturity, (b) 100,000 Tranche
B Warrants permitting the purchase of an equal number of shares
of New Common Stock with an exercise price of $9.00 per share and
a seven year maturity, (c) 100,000 Tranche C Warrants permitting
the purchase of an equal number of shares of New Common Stock
with an exercise price of $11.00 per share and a seven year
maturity and (d) $3,900,000 in cash.
Holders of Convertible Subordinated Debenture Claims
and common stock of WEI will receive no distributions under the
Plan.
PLAN RELEASES AND SETTLEMENTS
The Plan contains numerous compromises and settlements
including, without limitation, releases by the Debtors of all
bankruptcy and other causes of action (with certain limited
exceptions). One of the settlements is with Adler & Shakin
in the amount of $1,550,000, the proceeds of which will be
included in the $3,900,000 in cash to be distributed to the
holders of the Senior Subordinated Note Claims.
The above summary of the material features of the Plan
does not purport to be a complete description of the Plan and is
qualified in its entirety be reference to the Plan attached
hereto as Exhibits A, B & C to Exhibit 3.1
The number of shares of the registrant's common stock,
par value $0.01 per share, issued and outstanding is 10. The
number of shares of the common stock, par value $0.10, of the
registrant's parent, WEI Holdings, Inc., issued and outstanding
is 2,360,729.
As described above, no shares of the registrant will be
issued in respect of claims and interests filed and allowed under
the Plan. Instead, shares of the New Common Stock will be issued
as described above in respect of claims and interests filed and
allowed under the Plan.
The assets and liabilities of the Debtors for the
period ended October 31, 1996 are incorporated by reference to
the registrant's Form 10-Q for the period ended October 31, 1996
which were filed with the Securities Exchange Commission on
December 20, 1996.
ITEM 7. EXHIBITS.
Attached as Exhibit 3.1 hereto is the Confirmation
Order (Findings of Fact, Conclusions of Law and Order Confirming
Debtors' First Amended Chapter 11 Plan Under Chapter 11 of the
Bankruptcy Code), together with the following exhibits thereto:
Exhibit A: Debtors' First Amended Chapter 11 Plan, as
Revised for Technical Corrections on October
4, 1996, together with the following exhibits
thereto:
Exhibit A: Form of Asset Purchase
Agreement and exhibits
thereto;
Exhibit B: Bylaws of Reorganized
Wherehouse
Exhibit C: Certificate of Incorporation
of Reorganized Wherehouse
Exhibit D: Form of Open Credit Terms
Commitment and Option Exercise
Notice
Exhibit B: Supplemental Amendments to Debtors' First
Amended Chapter 11 Plan dated December 2,
1996;
Exhibit C: Supplemental Amendments to Debtors' First
Amended Chapter 11 Plan, dated December 13,
1996, together with the following exhibits
thereto:
Exhibit E: Form of Tranche A Warrant
Agreement
Exhibit F: Form of Tranche B Warrant
Agreement
Exhibit G: Form of Tranche C Warrant
Agreement
Exhibit H: Tag-Along Rights Agreement
The Plan is attached as Exhibits A, B and C to Exhibit
3.1 attached hereto as described above.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to the
signed on its behalf by the undersigned hereunto duly authorized.
WHEREHOUSE ENTERTAINMENT INC
(Registrant)
Date January 22, 1997 By /s/ Henry Del Castillo
-----------------------------
Name: Henry Del Castillo,
Chief Financial Officer
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: ) Chapter 11
)
WHEREHOUSE ENTERTAINMENT, INC., ) Case No. 95-911(HSB)
and WEI HOLDINGS, INC., )
) Jointly Administered
Debtors. )
FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
CONFIRMING DEBTORS' FIRST AMENDED CHAPTER 11
PLAN UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
---------------------------------------------
Wherehouse Entertainment, Inc. ("Wherehouse") and WEI
Holdings, Inc. ("Holdings" and together with Wherehouse, the
"Debtors") having filed their First Amended Chapter 11 Plan, as
revised for technical corrections on October 4, 1996 and
supplemental amendments on December 2, 1996 and December 13, 1996
(as amended, the "Plan" attached hereto as Exhibit A, together
with the amendments attached hereto as Exhibits B and C)(1); and
_______
(1) All capitalized terms used herein and not otherwise defined
shall have the respective meanings assigned to them in the Plan.
the Debtors having filed their Disclosure Statement with respect
to the Plan on October 4, 1996; and a hearing (the "Disclosure
Statement Hearing") to consider the adequacy of the Disclosure
Statement having been scheduled for and taken place on
November 4, 1996; and the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court") having approved the
Disclosure Statement as amended prior to the Disclosure Statement
Hearing and modified at the Disclosure Statement Hearing (the
"Disclosure Statement"), by order dated November 4, 1996
("Disclosure Statement Order"); and the Disclosure Statement
Order having, inter alia, (1) established procedures for the
solicitation and the tabulation of votes with respect to the
Plan, (2) approved the form of ballot for the acceptance or
rejection of the Plan; (3) fixed December 3, 1996 at 4:00 p.m.,
Eastern Standard Time, as the date and time for filing objections
to the Plan; (4) fixed December 9, 1996 at 5:00 p.m. Pacific
Standard Time as the date and time by which all ballots accepting
or rejecting the Plan must be received in order to be counted;
and (5) fixed December 13, 1996 at 10:00 a.m., Eastern Standard
Time, as the date and the time for commencement of the hearing
pursuant to Section 1129 of the Bankruptcy Code to consider
confirmation of the Plan ("Confirmation Hearing"); and the Plan,
the Disclosure Statement, the Disclosure Statement Order and
various related materials having been transmitted to holders of
Claims and Interests and other parties in interest in these
Chapter 11 cases as provided for in the Disclosure Statement
Order, along with a ballot to the holders of Claims and Interests
entitled to vote on the Plan; and the solicitation of acceptances
from holders of Claims and Interests entitled to vote on the Plan
having been made within the time and in the manner required by
the Disclosure Statement Order; and the Debtors having filed with
the Court and served upon all required persons their Schedule of
Certain Real Property Leases and Executory Contracts to be
Assumed dated December 3, 1996 (the "Schedule of Assumed
Contracts") as contemplated by Article 7.02 of the Plan; and the
ballots having been received and tabulated by Poorman-Douglas
Corporation, designated balloting agent for the Debtors; and
affidavits of service reflecting that service has occurred in
accordance with the procedures established by the Disclosure
Statement Order having been filed with the Court; and objections
(the "Objections") to the confirmation of the Plan having been
filed by: (i) the Official Committee of Unsecured Creditors,
which objection was withdrawn at the Confirmation Hearing subject
to the Second Amendment described below, (ii) United States Trust
Company of New York, as indenture trustee for holders of Senior
Subordinated Notes ("U.S. Trust"), which objection was withdrawn
at the Confirmation Hearing subject to the Second Amendment
described below, (iii) the State of Nevada, Department of
Taxation, which objection was subsequently withdrawn pursuant to
the Stipulation re: Settlement of Claim filed on December 11,
1996, (iv) the Iowa Department of Revenue and Finance, which
objection was subsequently withdrawn prior to the Confirmation
Hearing by agreement, (v) the Internal Revenue Service, which
objection was withdrawn prior to the Confirmation Hearing by
agreement, (vi) Rouse Company Affiliates, the Equitable Life
Assurance Society of the United States, Macerich Property
Management Company, Urban Retail Properties Company, Plaza
Properties, Hahn Company, Irvine Company and Haagan (the "Rouse
Objection"), (vii) The George Sorich Company, which objection was
withdrawn prior to the Confirmation Hearing, (viii) George
Killian, D/B/A Killian Pacific, which objection was withdrawn
prior to the Confirmation Hearing, (ix) Equitable Life Assurance
Society of America, Yarmouth Capital Partners and U.S. Prime
Properties, Inc., which objection was withdrawn prior to the
Confirmation Hearing, (x) Burnham Pacific Properties, which
objection was withdrawn prior to the Confirmation Hearing,
(xi) Encino Valley Shopping Center Ltd., which objection was
withdrawn prior to the Confirmation Hearing, (xii) Allen Family
Trust, which objection was withdrawn prior to the Confirmation
Hearing and (xiii) Mellon USL Leasing, which objection was
withdrawn prior to the Confirmation Hearing; and the Confirmation
Hearing having been held on December 13, 1996; and the Court
having considered all of the Objections to the confirmation of
the Plan, the entire record of these Chapter 11 cases, the record
taken before the Court at the Confirmation Hearing, all of the
evidence adduced at the Confirmation Hearing (including testimony
and exhibits admitted into evidence), the Debtors' and the Senior
Lenders' Memoranda in Support of Confirmation of the Plan, the
submissions, including offers of proof, at the Confirmation
Hearing, the arguments and representations of counsel and all
pleadings and proceedings herein, the Court makes the following
Findings Fact and Conclusions of Law setting forth the reasons
for the Court's issuance of this Order confirming the Plan,
overruling the outstanding Objection, and granting the other
relief provided for herein:
<PAGE>
THE COURT HEREBY MAKES THE FOLLOWING FINDINGS:(2)
(2) This Order constitutes the Bankruptcy Court's findings
of fact and conclusions of law under Rule 52 of the
Federal Rules of Civil Procedure, as made applicable by
Rules 7052 and 9014 of the Federal Rules of Bankruptcy
Procedure (the "Bankruptcy Rules"). Each of the above
findings constitutes a finding of fact if it constitutes
a finding of fact and a conclusion of law if it constitutes
a conclusion of law.
1. This is a core proceeding within the meaning of 28
U.S.C. Section 157.
2. The Debtors filed voluntary petitions for relief under
Chapter 11 of the Bankruptcy Code on August 2, 1995 (the
"Petition Date"). An order for joint administration pursuant to
Bankruptcy Rule 1015(b) has been entered in the Chapter 11 cases.
3. Since the Petition Date, the Debtors have been
operating their businesses and managing their affairs as debtors
and debtors in possession pursuant to sections 1107 and 1108 of
the Bankruptcy Code. No trustee or examiner has been appointed
in either of the Chapter 11 cases.
4. On August 14, 1995, the United States Trustee for the
District of Delaware appointed the Official Committee of
Unsecured Creditors of the Debtors (the "Official Committee")
which currently consists of: (i) PolyGram Group Distribution,
Inc., (ii) United States Trust Company of New York, (iii) Romulus
Holdings, Inc., (iv) Warner/Elektra/Atlantic Corporation,
(v) Northeast Investors Trust, (vi) BMG Distribution and
(vii) Dabney/Resnick Asset Management Inc.
5. On November 4, 1996, the Court approved the Disclosure
Statement, including certain matters referred to on the record at
the Disclosure Statement Hearing, which matters were then
reflected in the Disclosure Statement as subsequently filed with
the Court and distributed in accordance with the Disclosure
Statement Order. The procedures by which the ballots for
acceptance or rejection of the Plan were distributed and
tabulated were properly conducted and in accordance with the
Disclosure Statement Order.
6. Notice of the time for filing objections to
confirmation of the Plan and the Confirmation Hearing was given
in accordance with Bankruptcy Rule 2002(b)(2); the form and scope
of the notice were appropriate under the circumstances; and all
parties in interest had an opportunity to appear and be heard at
the Confirmation Hearing.
7. As of the date of the Confirmation Hearing, the Plan
was accepted by all Classes entitled to vote to accept or reject
the Plan both as to number and amount, with the exception of
Class 2 (which did not vote on the Plan) and Class 7, in
accordance with section 1126 of the Bankruptcy Code, and a
certification to that effect (the "Ballot Certification") has
been filed with this Court. The Ballot Certification is hereby
approved and found to accurately reflect the result of the
balloting as of the date of the Confirmation Hearing.
8. On December 3, 1996, the Debtors, the Official
Committee, the Trade Committee, U.S. Trust and the Bank Agent
executed the Stipulation to Amend Plan of Reorganization (the
"Plan Stipulation") and the Debtors filed and served on the
required parties the Supplemental Amendments to the Debtors'
First Amended Chapter 11 Plan dated December 2, 1996 (the "First
Amendment," attached hereto as Exhibit B).
9. The First Amendment complies with Section 1127 of the
Bankruptcy Code and Bankruptcy Rule 3019, does not adversely
change the treatment of any Claim or Interest other than the
Senior Lenders, who consented to the amendment, and the form and
scope of notice of the First Amendment were appropriate under the
circumstances.
10. At the Confirmation Hearing, an agreement was reached
by certain parties in this case regarding certain modifications
to the Plan and certain settlements, which agreement was read
into the record at the Confirmation Hearing and is reflected in
the Second Amendment to the Plan dated December 13, 1996 (the
"Second Amendment to the Plan," attached hereto as Exhibit C) and
as further set forth herein.
11. The Second Amendment complies with Section 1127 of the
Bankruptcy Code and Bankruptcy Rule 3019, does not materially
adversely change the treatment of any Claim or Interest and the
form and scope of notice of the Second Amendment was appropriate
under the circumstances.
12. The Official Committee and U.S. Trust withdrew their
objections to the Plan upon the parties reaching agreement
regarding the Second Amendment at the Confirmation Hearing.
13. To the extent any Holder of a Senior Subordinated Note
Claim submits an affidavit requesting to change its vote
rejecting the Plan to a vote accepting the Plan (a "Vote Change
Affidavit"), good cause exists to grant such request and such
request otherwise satisfies Bankruptcy Rule 3018.
14. Article 4 of the Plan designates eight Classes of
Claims and one Class of Interests. Article 6 of the Plan
specifies that Claims in Class 3 and 4 are not Impaired and that
Claims in Classes 1, 2, 5, 6, 7 and 8 and Interests in Class 9
are Impaired.
15. Article 5 of the Plan specifies the treatment of all
Classes of Claims and Interests under the Plan.
16. The Plan provides the same treatment for each Claim or
Interest of a particular Class.
17. The classification of Claims and Interests under the
Plan is consistent with Section 1122 of the Bankruptcy Code, is
reasonable and not discriminatory.
18. Article 9 of the Plan specifies that the Plan shall be
implemented by the substantive consolidation of the Estates,
transferring the property of the Estates to Reorganized
Wherehouse on the Effective Date pursuant to the Asset Purchase
Agreement and the liquidation of the Estates. Article 10 of the
Plan provides for the distribution of property by Reorganized
Wherehouse in accordance with the Plan. The Plan provides
adequate means for the execution and implementation of the Plan
and otherwise complies with Section 1123(a)(5) of the Bankruptcy
Code.
19. Section 14.03 of the Plan and the Certificate of
Incorporation of Reorganized Wherehouse filed as an Exhibit to
the Plan include provisions prohibiting the issuance of nonvoting
equity securities and otherwise comply with Section 1123(a)(6) of
the Bankruptcy Code.
20. Section 8.02 of the Plan provides for the selection of
directors of Reorganized Wherehouse, which directors were
designated in a Schedule of Initial Members of the Board of
Directors for Reorganized Wherehouse filed by the Senior Lenders
on December 6, 1996 and served on parties requesting notice, and
the selection of the directors of Reorganized Wherehouse complies
with Bankruptcy Code section 1123(a)(7).
21. The Plan complies with the applicable provisions of the
Bankruptcy Code as required by section 1129(a)(1) thereof, and
the Debtors, as proponents of the Plan, have complied with the
applicable provisions of the Bankruptcy Code as required by
Section 1129(a)(2) thereof.
22. The Plan has been proposed in good faith and not by any
means forbidden by law as required by Section 1129(a)(3).
23. All payments made or promised by the Debtors for
professional services or for costs and expenses in or in
connection with the Plan and incident to these Chapter 11 cases
have been disclosed to the Court and any such payments made by
the Debtors before confirmation has been approved by the Court as
reasonable or, if such payments are to be fixed after
confirmation of the Plan, such payments are subject to the
approval of this Court as reasonable.
24. In accordance with Section 1129(a)(5) of the Bankruptcy
Code, the identity and affiliations of the individuals proposed
to serve, after confirmation of the Plan, as directors and
officers of Reorganized Wherehouse has been disclosed; and the
continuance in or appointment of such office of such individuals
is consistent with the interests of creditors and equity interest
holders in these Chapter 11 cases and with public policy; and the
identity of any insider presently known that will be employed or
retained by Reorganized Wherehouse and the nature of any
compensation to such insider has been disclosed.
25. There are no governmental regulatory commissions with
jurisdiction over the rates of the Debtors, and therefore,
Section 1129(a)(6) of the Bankruptcy Code is inapplicable.
26. No holder of an Impaired Claim or Interest will receive
or retain under the Plan on account of such Claim or Interest
property of a value, as of the Effective Date, that is not less
than the amount that such holder would so receive or retain if
the Debtors were liquidated under Chapter 7, and the Plan
complies with Section 1129(a)(7) of the Bankruptcy Code.
27. With respect to Classes 1, 5, and 6 of the Plan, the
Plan has been accepted by at least two-thirds in amount and more
than one half in number of the holders of Claims in such Classes.
Classes 8 and 9 receive no distribution of property under the
Plan and are deemed to have rejected the Plan. Classes 3 and 4
are not Impaired and therefore are not entitled to vote on the
Plan. As of the Confirmation Date, Class 7 voted to reject the
Plan. The sole Holder of a Claim in Class 2 did not vote in the
Plan, but that Claim was satisfied in full prior to the
Confirmation Hearing as set forth in Finding 35 below.
28. The treatment of Claims under the Plan of the type
specified in Sections 507(a)(1), 507(a)(2), 507(a)(3), 507(a)(4),
507(a)(5), 507(a)(6), 507(a)(7) and 507(a)(8) of the Bankruptcy
Code complies with the provisions of Section 1129(a)(9) of the
Bankruptcy Code.
29. Classes 1, 5 and 6 of the Plan have accepted the Plan,
as determined without including any acceptance of the Plan by any
insider holding a Claim in such Class, and the Plan complies with
Section 1129(a)(10) of the Bankruptcy Code.
30. The Plan is feasible and the Debtors have demonstrated
that there is a reasonable prospect of their being able to meet
their financial obligations under the Plan and their businesses
in the ordinary course; confirmation of the Plan is not likely to
be followed by the liquidation or need for further financial
reorganization of the Debtors, and the Plan otherwise complies
with Section 1129(a)(11) of the Bankruptcy Code.
31. All fees due and owing under Section 1930 of the
Judicial Code; 28 U.S.C. Section 1930, have been paid or will be
paid on or before the Effective Date, and the Plan otherwise
complies with Section 1129(a)(12) of the Bankruptcy Code.
32. Section 14.05 of the Plan provides for the continuation
after the Effective Date of all retiree benefits consistent with
Section 1129(a)(13) of the Bankruptcy Code.
33. Section 5.01(f) of the Plan provides that the Holders
of Allowed Senior Lender Secured Claims shall purchase from
Eligible Suppliers that have timely executed the Exchange Option
the New Common Stock received by such Eligible Supplier for cash
in the amount of 27% of such Eligible Supplier's Allowed General
Unsecured Claim (net of Reclamation Claims and returns under
Section 546(g)* of the Bankruptcy Code as provided in the Plan).
34. The Exchange Option set forth in the Plan is provided
by the Senior Lenders, the cash distributed to Eligible Suppliers
is property of the Senior Lenders and the Exchange Option does
not constitute treatment by the Debtors under the Plan. The
Exchange Option does not violate Section 1123(a)(4) of the
Bankruptcy Code and the Plan otherwise complies with Section
1123(a)(4) of the Bankruptcy Code.
35. The Class 2 DC-2 Secured Claim was paid in full by the
Debtors prior to the Confirmation Hearing from the proceeds of
the sale of the property securing such Claim in accordance with
the Order Approving (A) Sale of DC-2 Property, (B) Assumption and
Assignment of Unexpired Lease thereof and (C) Postpetition
Payment of Debt Secured Thereby dated November 4, 1996.
36. All other requirements of Section 1129(a) and (b) of
the Bankruptcy Code have been satisfied or otherwise are
inapplicable to the Debtors and the Plan.
37. The settlement of the amount of the Senior Lender
Secured Claims set forth in the Plan is fair and reasonable, is
entered into in good faith and is in the best interests of the
Debtors and the Estates, and otherwise satisfies the requirements
of Bankruptcy Rule 9019.
38. The releases by the Debtors and Debtors in Possession
contained in Section 12.04 of the Plan are fair and reasonable,
are entered into in good faith, are in the best interests of the
Debtors and the Estates and otherwise satisfy the requirements of
Bankruptcy Rule 9019.
39. The releases by the Release Obligors contained in
Section 12.05 of the Plan are fair and reasonable, are entered
into in good faith, are in the best interests of the Debtors and
the Estates and otherwise satisfy the requirements of Bankruptcy
Rule 9019.
40. The settlement of the Acquisition Related Causes of
Action set forth in Section 12.09 of the Plan is fair and
reasonable, is entered into in good faith and is in the best
interests of the Debtors and the Estates, otherwise satisfies the
requirements of Bankruptcy Rule 9019, and constitutes a good
faith compromise and settlement of the Acquisition Related Causes
of Action pursuant to Bankruptcy Rule 9019 and all applicable
state laws, including the States of Delaware, California and New
York, given and made after due notice and opportunity for
hearing.
41. The Deferred Purchase Price Settlement set forth in
Section 12.10 of the Plan is fair and reasonable, is entered into
in good faith, is in the best interests of the Debtors and the
Estates, otherwise satisfies the requirements of Bankruptcy Rule
9019 and constitutes a good faith compromise and settlement of
the Causes of Action settled therein pursuant to Bankruptcy Rule
9019 and all applicable state laws, including the States of
Delaware, California and New York, given and made after due
notice and opportunity for hearing.
42. The McMahan Settlement set forth in Section 12.10 of
the Plan is fair and reasonable, is entered into in good faith,
is in the best interests of the Debtors and the Estates,
otherwise satisfies the requirements of Bankruptcy Rule 9019 and
constitutes a good faith compromise and settlement of the Actions
(as defined in the McMahan Settlement) settled therein pursuant
to Bankruptcy Rule 9019 and all applicable state laws, including
the States of Delaware, California and New York.
43. The terms and conditions of the Asset Purchase
Agreement were negotiated by the parties at arms length and in
good faith, the terms of the Asset Purchase Agreement are fair
and reasonable, entering into the Asset Purchase Agreement is in
the best interests of the Debtors and the Estates and is
necessary for the implementation of the Plan, and the
transactions contemplated thereunder shall be deemed to have been
entered into in good faith and for good and valuable
consideration. The execution of the Asset Purchase Agreement by
the Debtors complies with Section 363 of the Bankruptcy Code, and
Reorganized Wherehouse is a good faith purchaser within the
meaning of, and subject to the protections and benefits of
Section 363(m) of the Bankruptcy Code.
44. It appears that the Debtors will satisfy each and every
condition precedent to the effectiveness of the Plan as set forth
in Article 13 of the Plan.
45. The Debtors have reviewed their executory contracts and
unexpired leases, and it is a reasonable exercise of the Debtors'
business judgment for them to assume and assign to Reorganized
Wherehouse the leases and contracts listed on the Schedule of
Assumed Contracts and to reject all such executory contracts and
unexpired leases other than those listed on the Schedule of
Assumed Contracts, previously assumed or rejected by the Debtors
or that are the subject of the Debtors' Motion for Entry of Order
Approving Assumption of Unexpired Real Property Leases and
Executory Contracts Conditioned on Confirmation and Effectiveness
of the Debtors' First Amended Chapter 11 Plan and Rejecting
Remaining Unexpired Real Property Leases filed on December 13,
1996 (the "Pending Assumption Motion"). The assumption and
rejection of leases and executory contracts pursuant to Article 7
of the Plan is the result of the sound business judgment by the
Debtors, and is in the best interests of the Debtors and the
Estates. The assumption and rejection of executory contracts and
unexpired leases under the Plan complies with Section 365 of the
Bankruptcy Code. This Court's finding that the Plan complies
with Section 1129(a)(11) of the Bankruptcy Code constitutes a
finding that adequate assurance of future performance shall be
provided to any party to a contract or assumed by the Debtors and
assigned to Reorganized Wherehouse under the Plan or otherwise.
46. The Debtors served their Motion for Order Authorizing
Payment of Deposit Fee Necessary to Obtain Post-Confirmation
Financing on November 15, 1996 (as amended, the "Post-
Confirmation Financing Motion"), which motion, as amended
pursuant to a stipulation dated as of November 25, 1996, was
approved by the Court. The terms of the financing between
Reorganized Wherehouse and Congress Financial Corporation
(Western) ("Congress"), set forth in the Post-Confirmation
Financing Motion, provides for a revolving credit facility in the
amount of $30 million (the "Working Capital Facility") and such
other instruments, documents, certificates, opinions and
assurances as Congress may request in connection with the Working
Capital Facility (collectively, the "Working Capital Facility
Documents"). The negotiation by the parties of the Working
Capital Facility and the Working Capital Facility Documents on
substantially the terms set forth in the Post-Confirmation
Financing Motion has been in good faith and at arms-length and
without intent to hinder, to delay or to defraud the Debtors, any
creditor of the Debtors or Reorganized Wherehouse. Entering into
the Working Capital Facility Documents is in the best interests
of the Debtors, the creditors of the Debtors, Reorganized
Wherehouse and their respective estates and is necessary for the
implementation of the Plan, and the transactions contemplated
under the Working Capital Facility Documents shall be deemed to
have been entered into in good faith and for good and valuable
consideration. The execution of the Working Capital Facility
Documents by Reorganized Wherehouse complies with Section 364 of
the Bankruptcy Code, and Congress is a good faith lender within
the meaning of and subject to the protections and benefits of
Section 364(e) of the Bankruptcy Code.
47. The Debtors, Reorganized Wherehouse, Congress and all
other parties in interest (including, but not limited to A&S and
the A&S Released Parties) will be acting in good faith if they
proceed to consummate the Plan and the agreements, settlements,
transactions and transfer contemplated thereby and to take the
action authorized by this action, notwithstanding an appeal of
this Order, so long as no stay was issued pending appeal, even if
they act with knowledge of the pendency of that appeal.
48. The primary purpose of the Plan is not the avoidance of
taxes or the avoidance of the application of Section 5 of the
Securities Act of 1933.
49. Based on the Debtors' relative financial positions,
historic manner of operation, treatment of the Debtors by their
creditors and for the other reasons set forth in the Disclosure
Statement, substantive consolidation of the Debtors is
appropriate, fair and equitable and non-discriminatory to all
Holders of Claims and Interests.
50. Reorganized Wherehouse constitutes a "successor to the
debtor" for purposes of Sections 1123, 1129 and 1145 of the
Bankruptcy Code.
<PAGE>
Now, upon the motion of the Debtors and after due
deliberation, the Court hereby ORDERED, ADJUDGES AND DECREES
THAT:
1. The findings of facts and the conclusions of law
set forth above are hereby incorporated and shall be, and hereby
are, an order of this Court.
2. The Plan is hereby (a) incorporated herein by
reference as if fully set forth at length and (b) confirmed in
all respects; to the extent there is any conflict between the
Plan and this Order, the terms of the Plan shall control.
3. The Rouse Objection is overruled. All withdrawn
Objections are hereby deemed withdrawn with prejudice. All
Objections that have not been withdrawn, determined to be moot,
or otherwise disposed of, are overruled.
4. The record of the Confirmation hearing is hereby
closed, except to the extent Vote Change Affidavits are submitted
by Holders of Senior Subordinated Note Claims.
5. Any and all Vote Change Affidavits are hereby
approved pursuant to Bankruptcy Rule 3018, and such votes are
changed to acceptances of the Plan.
6. The Debtors and Reorganized Wherehouse (and their
respective officers) and all parties in interest herein are
hereby authorized, empowered and directed to take, or cause to be
taken, any and all actions, and to execute all documents, which
may be required, necessary or appropriate to enable them to
consummate this Order, implement effectively the provisions of
the Plan and all transactions related thereto, including, without
limitation, those acts specifically authorized herein.
7. Reorganized Wherehouse is authorized and directed
to execute the New Certificate of Incorporation, substantially in
the form of Exhibit C to the Plan, and to file the New
Certificate of Incorporation with the Secretary of State of
Delaware, and the New Certificate of Incorporation is approved in
all respects.
8. Reorganized Wherehouse is authorized and directed
to adopt the New Bylaws substantially in the form of Exhibit B to
the Plan, and the New Bylaws are approved in all respects.
9. The Warrant Agreements, as set forth in
Exhibits E, F and G to the Plan are approved in all respects.
10. Reorganized Wherehouse is authorized and directed
to execute the Warrant Agreements, and upon execution and
delivery of the Warrant Agreements in accordance with the Plan,
the Warrant Agreements shall be the legal, valid and binding
obligations of Reorganized Wherehouse, enforceable against
Reorganized Wherehouse in accordance with their terms, and the
Warrants shall be the legal, valid and binding obligations of
Reorganized Wherehouse, enforceable against Reorganized
Wherehouse in accordance with the terms of the Warrant
Agreements.
11. Reorganized Wherehouse is authorized to issue the
Warrants.
12. Reorganized Wherehouse is authorized to issue the
shares of New Common Stock provided for in the New Certificate of
Incorporation, including, without limitation, the number of
shares to be issued pursuant to the Plan, the number of shares
issuable upon exercise of the Warrants and the number of shares
issuable upon exercise of any management options.
13. In accordance with the Plan, on the Effective
Date: (i) the Chapter 11 Case and Estate of Holdings shall be,
and hereby are, substantively consolidated with and into the
Chapter 11 Case and Estate of Wherehouse, (ii) any and all Claims
against Holdings shall be, and hereby are, deemed to be Claims
against Wherehouse, and (iii) any and all Claims against Holdings
and Wherehouse shall be, and hereby are, satisfied in accordance
with the terms of the Plan.
14. On the Effective Date and pursuant to the
substantive consolidation effected by the Plan, (i) any and all
Claims between the Debtors shall be, and hereby are,
extinguished, (ii) any and all Interests in Wherehouse of which
Holdings is the Holder shall be, and hereby are, cancelled, and
(iii) any Claim against one of the Debtors which the other Debtor
has guaranteed or as to which the other Debtor is liable, jointly
or otherwise, shall be, and hereby are, disallowed and
extinguished as necessary to avoid duplication and so as to
result in one Claim against the consolidated Debtors.
15. On the Effective Date, all of the property of the
Estates remaining after giving effect to the substantive
consolidation pursuant to Sections 9.01, 9.02 and 9.03 of the
Plan shall be, and hereby is, deemed transferred to Reorganized
Wherehouse (except (i) the New Common Stock and Warrants and all
other consideration delivered to the Estates by Reorganized
Wherehouse pursuant to the Asset Purchase Agreement and (ii) any
property of the Estates that is transferred to any other Entity
on or prior to the Effective Date or that is abandoned or Causes
of Action that are being released pursuant to the Plan), and
title to all property so transferred to Reorganized Wherehouse
shall pass to Reorganized Wherehouse on the Effective Date on the
terms and conditions set forth in the Asset Purchase Agreement,
free and clear of all Claims, all liens securing Claims and all
Interests, except any lien preserved under Section 5.03(a) of the
Plan. Reorganized Wherehouse shall not be liable or responsible
for any Claim against the Debtors or the Estates or any
obligation of the Debtors or the Estates except as expressly
assumed by Reorganized Wherehouse in the Asset Purchase Agreement
or pursuant to the Plan. Reorganized Wherehouse shall be, and
hereby is, deemed the successor to the Debtors for the purposes
of Sections 1123, 1129 and 1145 of the Bankruptcy Code.
16. The transfer of assets pursuant to the Asset
Purchase Agreement and the Plan is hereby approved in all
respects.
17. The Debtors and Reorganized Wherehouse are
authorized and directed to execute and deliver the Asset Purchase
Agreement, substantially in the form of Exhibit A to the Plan,
and upon execution and delivery, the Asset Purchase Agreement
shall be the legal, valid and binding obligation of the Debtors
and Reorganized Wherehouse enforceable against the Debtors and
Reorganized Wherehouse in accordance with its terms. Reorganized
Wherehouse is a good faith purchaser within the meaning of, and
subject to the protections and benefits of Section 363(m) of the
Bankruptcy Code.
18. After the Plan becomes effective, the Estates
shall be liquidated in accordance with the Plan and applicable
law. Subject to any further order of the Bankruptcy Court,
Reorganized Wherehouse shall act as liquidating agent of and for
the Estates from and after the Effective Date and as such is
hereby both authorized and obligated, as agent for and on behalf
of the Estates, to admit, object to or contest any and all
Claims, to defend, protect and enforce any and all rights and
interests, to make any and all distributions required or
permitted to be made under the Plan, to file any and all reports,
requests for relief or opposition thereto, and to take any and
all other actions necessary or appropriate to implement the Plan
or to wind up the Estates in accordance with applicable law and
hereby is authorized 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 therewith or as a result thereof,
including all fees and expenses of its professionals accruing
from and after the Confirmation Date without any application to
the Bankruptcy Court. Reorganized Wherehouse is not entitled to
receive any compensation or indemnification whatsoever from the
Estates for its services as such liquidating agent or in respect
of any such claims, liabilities, losses, damages, costs or
expenses.
19. A&S and each A&S Holder shall be, and hereby is
deemed to be, reciprocally bound by the provisions of Section
12.05 of the Plan and shall constitute a Release Obligor for the
purposes of Section 12.05 of the Plan.
20. The settlements of claims and defenses comprising
and included in the Plan, including the settlement of the amount
of the Senior Lender Secured Claims, the releases set forth in
Section 12.04 of the Plan, the releases of the Release Obligors
set forth in Section 12.05 of the Plan, the settlement of the
Acquisition Related Causes of Action pursuant to Section 12.09 of
the Plan and the Deferred Purchase Price Settlement set forth in
Section 12.10 of the Plan, are hereby approved pursuant to
Bankruptcy Rule 9019(a) as just, equitable, reasonable, non-
discriminatory and good faith compromises of the controversies
and Claims resolved by such settlements, and such settlements are
binding on all entities affected thereby.
21. (i) The McMahan Settlement described in Section
12.10 of the Plan is hereby approved, (ii) A&S is authorized to
make the payments to settle such action pursuant to a draw on the
1992 Merger Agreement Letter of Credit, under the terms and
conditions set forth in Section 12.10 of the Plan and the McMahan
Settlement, and the Effective Date of the Plan shall constitute
an Event of Default under Section 8.3(a)(v)(A) of the 1992 Merger
Agreement for the sole purposes of (x) authorizing A&S to draw
immediately on the 1992 Merger Agreement Letter of Credit to make
the Settlement Payment and to consummate the McMahan Settlement,
notwithstanding, among other things, the "Stipulation Granting
Relief from the Automatic Stay to Permit Certain Litigation
Related to the 1988 Merger to Proceed to Judgment but Excluding
any Enforcement Thereof," entered on July 30, 1996, (y)
authorizing A&S to draw immediately on the 1992 Merger Agreement
Letter of Credit and collect and retain the entire amount
remaining after making the Settlement Payment and the payments
required under the McMahan Settlement and (z) authorizing A&S to
receive and retain all proceeds from the "Escrow Funds" (as that
term is defined in the Escrow Agreement dated as of June 11, 1992
by and among A&S, Holdings and Chase Manhattan Bank, N.A.), if
any (the proceeds described in clauses (y) and (z) constituting
the "Letter of Credit Proceeds"), (iii) A&S is authorized to pay
all litigation costs and expenses (including, without limitation,
fees and expenses for attorneys and witnesses) related to the
Actions (as defined in the McMahan Settlement) and to distribute
immediately all Letter of Credit Proceeds to the A&S Holders
without further application to or order of the Court, (iv) the
Debtors are directed (after presentation by A&S of the 1992
Merger Agreement Letter of Credit for cancellation, which shall
occur after receipt by A&S of all Letter of Credit Proceeds) to
deliver to Bankers Trust Company, as the issuing bank of the 1992
Merger Agreement Letter of Credit, a certificate in the form
attached as Annex B to the 1992 Letter of Credit Agreement
designating A&S as the person to which any positive balance in
the Notional Funding Account-Principal and the Notional Funding
Account-Interest (in each case as defined in the 1992 Letter of
Credit Agreement) and net of any Letter of Credit Charges (as
defined in the 1992 Letter of Credit Agreement) shall be refunded
upon final reconciliation of such accounts, (v) Bankers Trust
Company, as the issuing bank of the 1992 Merger Agreement Letter
of Credit, is directed to honor any properly presented drawing
certificate (in the form of Exhibit "A" to the 1992 Merger
Agreement Letter of Credit) under the 1992 Merger Agreement
Letter of Credit, and not to reduce or withhold any (or otherwise
interfere in any way with A&S's right to receive) the Letter of
Credit Proceeds, other than deducting any Letter of Credit
Charges from the refunds as provided by clause (iv) above, and
(vi) upon and subsequent to the entry of this Order (x) neither
the Debtors nor Reorganized Wherehouse shall submit a Decrease
Certificate (as defined in the 1992 Letter of Credit Agreement),
(y) A&S shall be responsible for all fees and costs of Litigation
Counsel (as defined in the 1992 Merger Agreement) not previously
paid by the Debtors (including, without limitation, any holdbacks
from the interim statements previously submitted to the Debtors),
and (z) neither the Debtors nor Reorganized Wherehouse shall pay
any additional fees or costs of Litigation Counsel (as defined in
the 1992 Merger Agreement).
22. The Debtors and Reorganized Wherehouse are
authorized to take such action as reasonably requested by A&S to
assist in obtaining (i) the Letter of Credit Proceeds and (ii) an
order of the United States District Court approving the McMahan
Settlement; provided that the Debtors shall not be required to
take any action that would result in any Claim against the
Estates or any other liability to the Debtors, the Estates or
Reorganized Wherehouse.
23. The BT Adversary Proceeding shall be, and hereby
is, deemed dismissed with prejudice on the Effective Date, with
each party to bear its own costs.
24. The Adversary Proceeding captioned United States
Trust Company of New York and the Official Committee of Unsecured
Creditors v. Cerberus Partners, L.P., et al, Adversary Proceeding
No. A-96-182, shall be, and hereby is, deemed dismissed with
prejudice on the Effective Date, with each party to bear its own
costs.
25. The terms and the conditions of the Working
Capital Facility and the Working Capital Facility Documents on
substantially the terms set forth in the Post-Confirmation
Financing Motion are hereby approved in all respects.
Reorganized Wherehouse is authorized, without further approval by
the Court, its board of directors or its shareholders but subject
to the approval of the Trade Committee with respect to the
intercreditor agreement to be entered into by Congress and
certain suppliers of Reorganized Wherehouse and the covenants of
the Working Capital Facility Documents, to execute and to deliver
all definitive documentation relating to the Working Capital
Facility, including without limitation, the Working Capital
Facility Documents, and upon the execution thereof by Reorganized
Wherehouse, the Working Capital Facility Documents shall
constitute the legal, valid and binding obligations of
Reorganized Wherehouse, enforceable against Reorganized
Wherehouse in accordance with their respective terms and are
entered into for good and valuable consideration, including the
benefits of the Plan. Upon the entry of this Order, the Debtors
are authorized to pay immediately to Congress $75,000 as a non-
refundable commitment fee to be applied to the $150,000 closing
fee to be paid in connection with the Working Capital Facility.
The remainder of any fees and/or deposits shall be paid pursuant
to the terms and conditions of the Working Capital Facility
Documents. Nothing contained in this Order or the Plan shall
release, adversely modify or impair the enforceability or
priority of any obligation or lien entered into or created in
connection with the Working Capital Facility Documents. Congress
is a good faith lender within the meaning of and subject to the
protections and benefits of Section 364(e) of the Bankruptcy Code.
26. The liens and the security interests to be granted
by Reorganized Wherehouse in favor of Congress under the Working
Capital Facility Documents shall be, and hereby are, deemed
perfected, first priority liens on the Effective Date, and shall
be senior to any and all liens granted by Reorganized Wherehouse,
except as otherwise permitted in the Working Capital Facility
Documents.
27. If the Confirmation Order is reversed or modified
and the Debtors resume operations as debtors in possession,
subject to a Chapter 11 trustee, or if following such reversal or
modification the case is converted to Chapter 7, then the Debtors
shall be obligated for their debt to Congress, including that
debt evidenced by the Working Capital Facility Documents, and
Congress shall, and hereby does, have a first and superpriority
lien, security interest and administrative claim pursuant to
Sections 503(b), 507(b) and 364(c) and (d) of the Bankruptcy Code
in all of the Debtors' present and future inventory and all
proceeds (including accounts) therefrom, all general intangibles
and all of the Debtors' and the Estates' unencumbered assets and
the proceeds therefrom.
28. If the Confirmation Order is reversed or the Plan
is later modified in a manner that affects the rights, liens or
priorities of Congress, the Holders of the Senior Lender Claims
shall deliver to Congress subordination agreements in form and
substance satisfactory to Congress.
29. The liens, security interest and administrative
priorities granted to Congress shall be, and hereby are,
irrevocably in full force and effect without subsequent
modification.
30. Notwithstanding any other provision of this Order
or the Plan, Reorganized Wherehouse shall repay in full in cash,
not later than the Effective Date, all loans made and any other
amounts owed under the Debtor-In-Possession Credit Agreement,
dated as of September 25, 1995, as amended, by and among the
Debtors, certain lenders and Bankers Trust Company, individually
and as Agent for such lenders.
31. Pursuant to Article 7.02 of the Plan, and in
accordance with Sections 365 and 1123(b)(2) of the Bankruptcy
Code, the Debtors are hereby authorized to assume and to assign
to Reorganized Wherehouse those unexpired leases and executory
contracts set forth on the Schedule of Assumed Contracts (except
the lease of store No. 506 with Encino Valley Shopping Center,
which is the subject of a pending motion to assume).
32. Any unexpired lease or executory contract assumed
by the Debtors at any time during the pendency of the Chapter 11
Cases (and not otherwise assigned) shall be assigned to and
assumed by Reorganized Wherehouse, unless prior to the Effective
Date the Debtors, with the Bank Agent's approval, elect that such
lease or contract shall be assigned to and assumed by another
Entity. Any assignment of such leases or contracts is hereby
approved pursuant to Section 365 of the Bankruptcy Code.
33. Any unexpired lease or executory contract that has
not been expressly rejected or assumed by the Debtors with the
Bankruptcy Court's approval on or prior to the Effective Date
shall be deemed to have been rejected by the Debtors as of the
Effective Date unless there is then pending before the Bankruptcy
Court a motion to assume such unexpired lease or executory
contract (any contracts so rejected, the "Rejected Contracts").
The rejection of the Rejected Contracts is hereby approved
pursuant to Section 365 of the Bankruptcy Code.
34. As to any leases or executory contracts assumed
hereunder, unless a statement as to the amount of a party's claim
under Section 365(b) of the Bankruptcy Code (the "Cure Amount")
is filed with the Court on or before December 31, 1996, the Cure
Amounts for such leases and contracts shall be, and hereby are,
deemed to have been satisfied in full upon the payment by the
Debtors on the Effective Date of any Cure Amount set forth in the
Notice of Section 365(b) Payment mailed to such party on or about
December 17, 1996, or any amendment thereof. If a party timely
files with the Court a statement as to the amount of such party's
Cure Amount and such Cure Amount is disputed by the Debtors, the
requirements of Section 365(b) of the Bankruptcy Code shall be,
and hereby are, deemed to have been satisfied in full upon the
payment by the Debtors of the Allowed amount of such party's Cure
Amount promptly after the Court's determining the Allowed amount
of such Cure Amount. All other requirements of Section 365 with
respect to the assumption of such leases and contracts shall be,
and hereby are, deemed to have been satisfied upon entry of this
Order.
35. Claims, if any, arising from the rejection of the
Rejected Contracts shall be filed within thirty (30) days after
the entry of this Order or be forever barred from enforcement or
assertion in the Court or any other court. The Debtors shall
forthwith provide notice of rejection to the non-debtor parties
to the Rejected Contracts and of their requirement to file a
proof of claim pursuant to this paragraph.
36. On the Effective Date, the Prepetition Loan
Documents, including all notes and other instruments outstanding
thereunder or issued pursuant thereto and all obligations of the
Debtors or the Estates thereunder or in respect thereof, the
Senior Subordinated Notes and the Senior Subordinated Note
Indenture and all obligations of the Debtors or the Estates
thereunder or in respect thereof, the Convertible Subordinated
Debentures and the Convertible Subordinated Debenture Indenture
and all obligations of the Debtors or the Estates thereunder or
in respect thereof, and all Interests shall be, and hereby are,
cancelled and discharged and fully satisfied by confirmation of
the Plan and the distributions to be made pursuant to the Plan;
provided, however, that the 1992 Merger Agreement Letter of
Credit shall not be cancelled and the rights of the Debtors under
1992 Merger Agreement Letter of Credit (if any) and the 1992
Letter of Credit Agreement shall be governed by Section 12.10 of
the Plan.
37. Except as otherwise provided in the Plan,
distributions in respect of Claims that, on the Effective Date,
are Allowed Claims shall be made by Reorganized Wherehouse (or
its designee) on or as promptly as practicable after the
Effective Date. Distributions in respect or as a result of
Claims Allowed after the Effective Date shall be made as soon as
practicable after such Claim becomes Allowed.
38. Any party in interest may object to an Impaired
Claim, except a Claim that is Allowed as set forth in the Plan.
Any such objection must be filed and served no later than the
later of (a) the 60th day following the Effective Date, (b) 30
days after the filing of the proof of claim of such Claim, or (c)
any later day set by order of the Bankruptcy Court, which the
Debtors or Reorganized Wherehouse may request on an ex parte
basis. Only Reorganized Wherehouse may object to Claims that are
not Impaired. Objections to Claims, except Claims that are
Allowed pursuant to the Plan, may be filed and served by
Reorganized Wherehouse at any time on or prior to the applicable
dates set forth above. Unless otherwise ordered by the
Bankruptcy Court, the Debtors or Reorganized Wherehouse shall
litigate the merits of each Disputed Claim until it is abandoned
by the Holder, determined by Final Order or compromised and
settled by the Debtors or Reorganized Wherehouse, subject to any
required approval of the Bankruptcy Court. No payments or
distributions shall be made in respect of any Disputed Claim.
39. Only those Holders of record of Claims as of the
close of business on the date of entry of this Order shall be
entitled to receive distributions under the Plan.
40. As of the Effective Date, the confirmation of the
Plan shall (i) discharge the Debtors, the Estates and Reorganized
Wherehouse from any debt that arose before the Confirmation Date,
any debt of the kind specified in Sections 502(g), 502(h) or
502(i) of the Bankruptcy Code, all Claims treated in the Plan,
all contingent and unliquidated liability of every type and
description to the fullest extent discharge of such liabilities
is permitted under the Bankruptcy Code, and all other Claims
against either or both of the Debtors or the Estates that were
outstanding, accrued or existing, or might reasonably have been
asserted, on the Confirmation Date, in each instance whether or
not a proof of such Claim is filed or deemed filed, whether or
not such Claim is Allowed, and whether or not the holder of such
Claim has voted on the Plan, and (ii) terminate all rights and
interests of the Holders of all Interests.
41. On the Effective Date, the distributions and
rights provided under the Plan shall be in complete satisfaction,
discharge and release, effective as of the Confirmation Date, of
all Claims against and Interests in the Debtors and the Estates
and of all liens upon any property of the Estates or Reorganized
Wherehouse.
42. This Order shall constitute an injunction
restraining any Entity from commencing or continuing any action,
suit or proceeding, or employing any process, or otherwise
acting, to collect, offset or recover any Claim discharged under
the Plan to the fullest extent authorized or provided by the
Bankruptcy Code, including Sections 524 and 1141 thereof. This
Order shall constitute an injunction enjoining any Entity from
enforcing or attempting to enforce any Cause of Action against
any present or former shareholder, director, officer, employee,
attorney or agent of either or both of the Debtors or Reorganized
Wherehouse based on, arising from or relating to any failure to
pay, or make provision for payment of, any amount payable in
respect of any Priority Tax Claim on which the payments due under
Section 3.01 of the Plan have been made or are not yet due under
Section 3.01.
43. The Debtors' discharge provided in the Plan shall
not diminish or impair the enforceability of any insurance
policies that may cover claims against the Debtors or any other
person or Entity.
44. The release of Causes of Action pursuant to the
Plan shall, pursuant to Section 105 of the Bankruptcy Code, also
act as an injunction against any Entity commencing or continuing
any action, or acting to collect, offset, or recover any Cause of
Action released under the Plan to the fullest extent authorized
under the Bankruptcy Code, and the Bankruptcy Court shall retain
exclusive jurisdiction over any contested or litigated matters to
enforce this injunction.
45. This Court hereby retains jurisdiction of these
proceedings pursuant to and for the purposes of Sections 105(a)
and 1127 of the Bankruptcy Code to the fullest extent permitted
by law, and shall have such jurisdiction exclusively to the
fullest extent permitted by law, including for the purpose of
hearing requests for relief and determining disputes related to
the issues specified in Section 14.01 of the Plan.
46. When the Plan becomes effective as set forth in
Section 13.02 of the Plan, the Official Committee shall cease to
exist and its members and employees or agents (including
attorneys, investment bankers, financial advisors, accountants
and other professionals) shall be, and hereby are, released and
discharged from all further authority, duties, responsibilities
and obligations relating to, arising from or in connection with
the Chapter 11 Cases.
47. To the fullest extent permitted under Section 1145
of the Bankruptcy Code, the offer and sale of the New Common
Stock and the Warrants (and any shares of New Common Stock issued
upon exercise of the Warrants) and transactions in such
securities shall be and hereby are exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as
amended, and any state or local law requiring registration for
offer or sale of a security or registration or licensing of an
issuer of, underwriter of, or broker or deal in, such New Common
Stock or Warrants, and such securities may be resold subject to
the limitations contemplated by Section 1145 of the Bankruptcy
Code. The offer and sale of the New Common Stock and the
Warrants under the Plan is deemed to be a public offering of the
New Common Stock and the Warrants.
48. To the fullest extent permitted under Section
1146(c) of the Bankruptcy Code, the issuance, transfer or
exchange of any security under the Plan, or the execution,
delivery or recording of an instrument of transfer pursuant to,
in implementation of or as contemplated by the Plan, or the
revesting, transfer or sale of any real property of the Debtors
pursuant to, in implementation of or as contemplated by the Plan
shall not be taxed under any state or local law imposing a stamp
tax, transfer tax or similar tax or fee. Consistent with the
foregoing, each recorder of deeds or similar official for any
county, city or governmental unit in which any instrument
hereunder is to be recorded shall be, and hereby are, ordered and
directed to accept such instrument, without requiring the payment
of any documentary stamp tax, deed stamps, stamp tax, transfer
tax, intangible tax or similar tax.
49. Claims for Administrative Expenses shall become
Allowed only as provided in Section 2.01 of the Plan as follows:
(a) an Ordinary Course Administrative Expense or Approved Chapter
11 Liability that is not disputed by Reorganized Wherehouse by
written notice given to the claimant prior to the 60th day after
the Effective Date shall become Allowed on such day; (b) a
Reclamation Claim shall become Allowed only to the extent either
(i) Reorganized Wherehouse and the Holder of the Reclamation
Claim agree upon the amount thereof in a stipulation approved by
the Bankruptcy Court or (ii) the Holder files with the Bankruptcy
Court and serves on Reorganized Wherehouse a motion requesting
payment of such Reclamation Claim within 60 days after the
Effective Date and a Final Order is entered granting such motion;
(c) a Fee Claim shall become Allowed if allowed or approved by
the Bankruptcy Court upon an application filed no later than 60
days after the Effective Date and (d) all other claims for an
Administrative Expenses (including Ordinary Course Administrative
Expenses and Approved Chapter 11 Liabilities that are disputed by
Reorganized Wherehouse as set forth in Section 2.01(a) of the
Plan) shall become Allowed only if the Holder of such Claim files
with the Bankruptcy Court and serves on Reorganized Wherehouse,
within 60 days after the Effective Date, a motion requesting
payment of such Administrative Expense and only if and to the
extent such Claim is allowed by the Bankruptcy Court pursuant to
a Final Order. Any objections to an application or motion for
allowance of an Administrative Expense must be filed and served
on Reorganized Wherehouse and the moving party within 30 days
after the last date for filing such application or motion. If
the Holder of an Administrative Expense fails to file an
application or motion within the time required under Section 2.01
of the Plan, such Administrative Expense shall be barred and
discharged.
50. Upon the occurrence of the Effective Date in
accordance with the terms of the Plan and this Order, the Debtors
shall promptly mail to all creditors and parties in interest with
and publish in a newspaper of general circulation in Southern
California a notice of entry of this Order and occurrence of the
Effective Date, which notice shall set forth, among other things,
the date of the Effective Date and the dates for filing
applications and motions for the allowance of Administrative
Expenses and objections thereto.
51. The failure to reference or discuss any particular
provision of the Plan in this Order shall have no effect on the
validity, binding effect and enforceability of such provision and
such provision shall have the same validity, binding effect and
enforceability as every other provision of the Plan.
Dated: Wilmington, Delaware
January 7, 1997
/s/ Helen S. Balick
-----------------------------
Honorable Helen S. Balick
United States Bankruptcy Judge
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: ) Chapter 11
)
WHEREHOUSE ENTERTAINMENT, ) Case No. 95-911 (HSB)
INC., and WEI HOLDINGS, INC., )
) Jointly Administered
)
Debtors. )
)
DEBTORS' FIRST AMENDED CHAPTER 11 PLAN
As Revised for Technical Corrections on October 4, 1996
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attn: Hendrik de Jong
Peter M. Gilhuly
(213) 485-1234
and
Young, Conaway Stargatt & Taylor
11th Floor - Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899
Attn: Laura Davis Jones
(302) 571-6600
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 - DEFINITIONS AND RULES OF INTERPRETATION . . . . . 1
1.01. Definitions. . . . . . . . . . . . . . . . . . . 1
1.02. Rules of Interpretation . . . . . . . . . . . . . 12
1.03. Incorporation of Exhibit . . . . . . . . . . . . 12
ARTICLE 2 - PROVISIONS FOR TREATMENT OF ADMINISTRATIVE
EXPENSES . . . . . . . . . . . . . . . . . . . . . 12
2.01. Allowance of Administrative Expenses . . . . . . 12
2.02. Payment of Administrative Expenses . . . . . . . 13
ARTICLE 3 - PROVISIONS FOR TREATMENT OF PRIORITY TAX CLAIMS. . 14
3.01. Priority Tax Claims. . . . . . . . . . . . . . . . 14
ARTICLE 4 - CLASSIFICATION OF CLAIMS AND INTERESTS . . . . . . 14
4.01. Secured Claims . . . . . . . . . . . . . . . . . . 14
4.02. Priority Claims. . . . . . . . . . . . . . . . . . 14
4.03. Unsecured Claims.. . . . . . . . . . . . . . . . . 15
4.04. Interests. . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 5 - PROVISIONS FOR TREATMENT OF CLAIMS AND INTERESTS . 15
5.01. Senior Lender Secured Claims (Class 1) . . . . . . 15
5.02. DC-2 Secured Claim (Class 2).. . . . . . . . . . . 17
5.03. Miscellaneous Secured Claims (Class 3).. . . . . . 18
5.04. Miscellaneous Priority Claims (Class 4). . . . . . 18
5.05. General Unsecured Claims (Class 5).. . . . . . . . 18
5.06. Senior Lender Deficiency Claims (Class 6). . . . . 19
5.07. Senior Subordinated Note Claims (Class 7). . . . . 20
5.08. Convertible Subordinated Debenture Claims
(Class 8). . . . . . . . . . . . . . . . . . . . . 21
5.09. Interests (Class 9). . . . . . . . . . . . . . . . 22
ARTICLE 6 - IDENTIFICATION OF CLASSES OF CLAIMS AND
INTERESTS IMPAIRED AND NOT IMPAIRED BY
THIS PLAN; ACCEPTANCE OR REJECTION OF THIS
PLAN . . . . . . . . . . . . . . . . . . . . . . 22
6.01. Acceptance by an Impaired Class of Creditors . . .22
6.02. Voting Classes . . . . . . . . . . . . . . . . . .22
6.03. Classes Receiving No Property Deemed to
Reject this Plan . . . . . . . . . . . . . . . . 22
6.04. Unimpaired Classes Conclusively Presumed to
Accept this Plan .. . . . . . . . . . . . . . . . 22
6.05. Confirmation Pursuant to Section 1129(b). . . .. 23
ARTICLE 7 - UNEXPIRED LEASES AND EXECUTORY CONTRACTS . . . .. 23
7.01. Assumption and Rejection . . . . . . . . . . . .. 23
7.02. Assumption and Assignment of Leases. . . . . . . 23
7.03. Assigned Leases. . . . . . . . . . . . . . . . . 23
7.04. Assignments of Contracts and Leases. . . . . . . 23
ARTICLE 8 - OPERATION AND MANAGEMENT OF REORGANIZED
WHEREHOUSE AND THE DEBTORS. . . . . . . . . . . . 24
8.01. Board of Directors . . . . . . . . . . . . . . . 24
8.02. Appointment of Directors . . . . . . . . . . . .. 24
8.03. Effect of Appointment. . . . . . . . . . . . . .. 24
ARTICLE 9 - IMPLEMENTATION OF THIS PLAN. . . . . . . . . . . 24
9.01. Substantive Consolidation. . . . . . . . . . . . 24
9.02. Extinguishment of Inter-Debtor and
Co-Debtor Claims and Interests. . . . . . . . . . 25
9.03. Reservation of Rights. . . . . . . . . . . . . . 25
9.04. Transfer of Property . . . . . . . . . . . . . . 25
9.05. Liquidation of Estates . . . . . . . . . . . . .. 25
9.06. Cancellation of Securities . . . . . . . . . . . 26
9.07. Surrender of Cancelled Securities. . . . . . . . 26
9.08. Allowance of Claims Subject of Section 502(d) . 27
9.09. Right of Setoff. . . . . . . . . . . . . . . . . 27
ARTICLE 10 - PROVISIONS COVERING DISTRIBUTIONS . . . . . .. . 27
10.01. Time of Distributions Under this Plan . . . . . . 27
10.02. Fractional Shares . . . . . . . . . . . . . . . . 28
10.03. Warrants for Issuance of Fractional Shares. . . . 28
10.04. Compliance With Tax Requirements. . . . . . . . . 28
10.05. Persons Deemed Holders of Registered Securities . 29
10.06. Distribution of Unclaimed Property. . . . . . . . 29
ARTICLE 11 - RESOLUTION OF DISPUTED CLAIMS . . . . . . . . . 29
11.01. Objections to Claims. . . . . . . . . . . . . . 29
11.02. Procedure . . . . . . . . . . . . . . . . . . . .30
11.03. No Distributions on Disputed Claims . . . . . . 30
11.04. Estimation; Partial Allowance . . . . . . . . . .30
ARTICLE 12 - DISCHARGE, RELEASE AND PRESERVATION OF CLAIMS . 30
12.01. Discharge and Termination.. . . . . . . . . . . 30
12.02. Distributions in Complete Satisfaction. . . . . 31
12.03. Injunction. . . . . . . . . . . . . . . . . . . 31
12.04. Release by Debtors and Debtors in Possession. . 31
12.05. Release by Holders of Claims and Interests. . . 32
12.06. Exculpation . . . . . . . . . . . . . . . . . . .33
12.07. Indemnification Obligations . . . . . . . . . . 33
12.08. Preservation of Insurance . . . . . . . . . . . 34
12.09. Good Faith Settlement of Acquisition Related
Causes of Action. . . . . . . . . . . . . . . . 34
12.10. Merger Consideration Recovery Claims not
Released . . . . . . . . . . . . . . . . . . . . 35
12.11. Subordination . . . . . . . . . . . . . . . . . 36
ARTICLE 13 - CONDITIONS TO CONSUMMATION OF THE PLAN. . . . .. 36
13.01. Conditions. . . . . . . . . . . . . . . . . . . 36
13.02. Consummation. . . . . . . . . . . . . . . . . . 37
ARTICLE 14 - MISCELLANEOUS PROVISIONS. . . . . . . . . . . . 37
14.01. Bankruptcy Court to Retain Jurisdiction . . . . 37
14.02. Binding Effect of this Plan.. . . . . . . . . . 38
14.03. Nonvoting Stock.. . . . . . . . . . . . . . . .. 38
14.04. Authorization of Corporate Action.. . . . . . . 38
14.05. Retiree Benefits. . . . . . . . . . . . . . . . 38
14.06. Withdrawal of this Plan.. . . . . . . . . . . . 38
14.07. Final Order.. . . . . . . . . . . . . . . . . . 39
14.08. Notice. . . . . . . . . . . . . . . . . . . . . 39
14.09. Dissolution of Committees.. . . . . . . . . . . 40
14.10. Continued Confidentiality Obligations.. . . . . 40
14.11. Amendments and Modifications. . . . . . . . . . .40
14.12. Time. . . . . . . . . . . . . . . . . . . . . . 40
14.13. Section 1145 Exemption . . . . . . . . . . . . 40
14.14. Section 1146 Exemption . . . . . . . . . . . . 40
<PAGE>
EXHIBITS
A - Asset Purchase Agreement
B - Bylaws of Reorganized Wherehouse
C - Certificate of Incorporation of Reorganized Wherehouse
D - Open Credit Terms Commitment and Option Exercise
Notice
<PAGE>
DEBTORS' FIRST AMENDED CHAPTER 11 PLAN
In amendment of their Chapter 11 Plan dated April 29, 1996
and the Debtors' First Amended Chapter 11 Plan dated September
26, 1996, WHEREHOUSE ENTERTAINMENT, INC. and WEI HOLDINGS, INC.,
the Debtors and Debtors in Possession in the above-captioned
cases, propose the following chapter 11 plan pursuant to Section
1121(a) of the Bankruptcy Code:
ARTICLE 1
DEFINITIONS AND RULES OF INTERPRETATION
1.01. DEFINITIONS. As used herein:
ACQUISITION RELATED CAUSES OF ACTION has the meaning
assigned to that term in Section 12.09.
ADEQUATE PROTECTION PAYMENTS means any and all payments made
on account of Senior Lender Claims after the Filing Date and
prior to the Effective Date, including all payments made at any
time prior to the Effective Date pursuant to the Bankruptcy
Court's interim and final orders for use of cash collateral, as
such orders from time to time have been or may be amended or
supplemented, or pursuant to any other order of the Bankruptcy
Court, except the payment described in Section 5.01(g).
ADMINISTRATIVE EXPENSE means a cost or expense of
administration of either or both of the Chapter 11 Cases
allowable under Section 503(b) of the Bankruptcy Code, including
(i) Fee Claims, (ii) any fees assessed against the Debtors'
estates under 28 U.S.C. Section 1930, (iii) Ordinary Course
Administrative Expenses, (iv) Approved Chapter 11 Liabilities,
and (v) Reclamation Claims.
ALLOWED means with respect to a Claim (other than an
Administrative Expense) that the Claim:
A. Either (i) is set forth in a proof of claim that was
timely filed or by order of the Bankruptcy Court is not and
will not be required to be filed, or (ii) has been or
hereafter is listed in the Schedules as liquidated in amount
and not disputed or contingent and the claimant has not filed
a proof of claim in an amount different than that listed in
the Schedules, or (iii) is to be allowed pursuant to this
Plan in an amount set forth herein, and
B. Either (i) no objection to the allowance thereof has
been interposed within the applicable period of time fixed by
this Plan, the Bankruptcy Code, the Bankruptcy Rules or the
Bankruptcy Court, or (ii) such an objection is so interposed
and such Claim has been allowed by a Final Order,
and means, with respect to an Administrative Expense, an
Administrative Expense that becomes "Allowed" as set forth in
Section 2.01.
APPROVED CHAPTER 11 LIABILITIES means any and all
liabilities that have, with the approval of the Bankruptcy Court,
been assumed by or otherwise become binding upon either or both
of the Debtors in the Chapter 11 Cases at any time through the
Effective Date and includes, so long as approved by the
Bankruptcy Court, (i) all agreements relating to any indebtedness
incurred or credit extended to either or both of the Debtors at
any such time, (ii) all contracts and other obligations
undertaken by or imposed upon the Debtors at any such time, and
(iii) all unexpired leases and executory contracts entered into
prior to the Filing Date and assumed by either or both of the
Debtors at any such time.
ASSET PURCHASE AGREEMENT means an agreement between the
Debtors and Reorganized Wherehouse (substantially in the form of
Exhibit A to this Plan) to be executed, delivered and consummated
on the Effective Date, pursuant to which all of the property of
the Estates, after giving effect to substantive consolidation
pursuant to Section 9.01, will be transferred to Reorganized
Wherehouse 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, in
exchange for which:
A. Reorganized Wherehouse will issue and deliver to
the Estates (i) New Common Stock in a number of shares
sufficient to make any and all distributions of New Common
Stock at any time to be made pursuant to this Plan, (ii)
Warrants for a number of shares sufficient to make any and
all distributions of Warrants at any time to be made pursuant
to this Plan, and (iii) 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 this Plan,
B. Reorganized Wherehouse will represent and warrant
that, as of the Effective Date, (i) such shares of New Common
Stock 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 the Warrants and
stock or options provided for in any Employee Stock Incentive
Program, and (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 the Asset Purchase Agreement,
the Warrant Agreement, any Employee Stock Incentive Program
and the agreement governing the revolving credit facility
described in Section 13.01(c),
C. Reorganized Wherehouse will assume and agree to
satisfy (i) all Allowed Administrative Expenses, (ii) all
Allowed Priority Tax Claims, (iii) all Allowed Miscellaneous
Priority Claims, (iv) all Allowed Miscellaneous Secured
Claims, (v) the Secured Claim Cash Distribution, (vi) all
indemnities, liabilities and obligations of the Debtors or
Reorganized Wherehouse under this Plan, and (vii) 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
Estates to Reorganized Wherehouse, 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,
D. Reorganized Wherehouse assumes and agrees to
perform and observe each and all of the provisions of this
Plan applicable to it and each and all of the obligations and
undertakings of either or both the Debtors under this Plan,
including the releases in Section 12.04 and Section 12.09, as
fully as either or both of the Debtors are bound thereby, and
E. Reorganized Wherehouse will not assume or be liable
for any Claim or for any obligation of the Debtors except as
expressly provided in the Asset Purchase Agreement or in this
Plan.
BANK AGENT means Cerberus Partners, L.P., as Agent under the
Prepetition Credit Agreement.
BANKRUPTCY CODE means Title 11 of the United States Code, as
amended from time to time.
BANKRUPTCY COURT means the United States Bankruptcy Court
for the District of Delaware.
BANKRUPTCY RULES means the Federal Rules of Bankruptcy
Procedure and the Local Rules of the Bankruptcy Court, as amended
and supplemented from time to time.
BT ADVERSARY PROCEEDING means the adversary proceeding
captioned Wherehouse Entertainment, Inc. and WEI Holdings, Inc.
v. Bankers Trust Company, Adv. Pro. No. A-95-105, pending in the
Chapter 11 Cases.
BUSINESS DAY means any day other than a Saturday, Sunday or
"legal holiday" as defined in Bankruptcy Rule 9006(a).
CANCELLED SECURITY means any note, bond, debenture, stock
certificate or other instrument or investment security evidencing
an Impaired Claim or Impaired Interest outstanding immediately
prior to the Effective Date.
CAUSE OF ACTION means any action, cause of action, suit,
account, controversy, agreement, promise, right to legal remedy,
right to an equitable remedy, right to payment and claim, whether
known or unknown, reduced to judgment, not reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, secured, unsecured and whether asserted or
assertable directly or derivatively, in law, equity or otherwise.
CHAPTER 11 CASES means the cases under chapter 11 of the
Bankruptcy Code voluntarily commenced by the Debtors on the
Filing Date.
CLAIM means any "claim," as that term is defined in Section
101(5) of the Bankruptcy Code, against either or both of the
Debtors or either or both of the Estates.
CLASS means a group of Claims or Interests as classified
under this Plan.
CONFIRMATION DATE means the date and time on which the
Confirmation Order is entered on the docket maintained by the
Clerk of the Bankruptcy Court.
CONFIRMATION HEARING means the hearing on the confirmation
of the Plan.
CONFIRMATION ORDER means an order entered by the Bankruptcy
Court confirming the Plan.
CONVERTIBLE SUBORDINATED DEBENTURES means the 61/4%
Convertible Subordinated Debentures Due 2006 outstanding under
the Convertible Subordinated Debenture Indenture.
CONVERTIBLE SUBORDINATED DEBENTURE CLAIMS means any and all
Claims against either or both of the Debtors arising under or in
respect of the Convertible Subordinated Debenture Indenture or
the Convertible Subordinated Debentures or the indebtedness
evidenced thereby or any conversion thereof or any right of
conversion with respect thereto or any right to receive
consideration on account of the conversion thereof or the
Convertible Subordinated Debenture Indenture or any instrument,
agreement, breach, tort, wrongful conduct, act, omission or event
in any respect and in any manner arising therefrom or related
thereto, except any Trustee's Prepetition Claim, and specifically
includes all Claims asserted in or arising out of the
consolidated class action litigation cases entitled McMahan &
Company, et al. v. Wherehouse Entertainment, Inc., et al., 88
Civ. 0321 (S.D.N.Y.) (MJL), and Don Thompson v. Wherehouse
Entertainment, Inc. et al., 88 Civ. 9040 (S.D.N.Y.) (MJL).
CONVERTIBLE SUBORDINATED DEBENTURE INDENTURE means the
Indenture dated as of June 15, 1986 between Wherehouse and Bank
of America National Trust and Savings Association, as amended.
DC-2 PROPERTY means the parcel of real property and all
buildings and fixtures and other property appurtenant thereto or
situated thereon located at 1639 Rosecrans Avenue in Gardena,
California.
DC-2 SECURED CLAIM means the Claim secured by the DC-2
Property of Principal Mutual Life Insurance Company against
Wherehouse arising under or in respect of the Secured Promissory
Note dated November 26, 1986 between Wherehouse and Principal
Mutual Life Insurance Company and the Deed of Trust, Security
Agreement and Assignment of Rents dated November 26, 1986 between
Wherehouse and Principal Mutual Life Insurance Company.
DEBTORS means Wherehouse and Holdings.
DEBTORS IN POSSESSION means the Debtors as debtors in
possession in the Chapter 11 Cases.
DGCL means the Delaware General Corporation Law, as amended.
DISCLOSURE STATEMENT means the disclosure statement
concerning this Plan distributed to Holders of Claims entitled to
vote for the purpose of acceptance or rejection of this Plan in
accordance with Section 1126(b) of the Bankruptcy Code and
Bankruptcy Rule 3018.
DISPUTED means, in respect of any Claim, that such Claim has
been asserted or filed but has not been Allowed, whether or not
such Claim is then being prosecuted or opposed.
EFFECTIVE DATE means the first Business Day after the
conditions set forth in Section 13.01 have been satisfied, but
not earlier than the eleventh day after the Confirmation Order is
entered.
ELIGIBLE SUPPLIER means a supplier of copyrighted music,
film or other entertainment products, personal electronic
products, or blank tapes or discs purchased by Wherehouse for its
sale or rental inventory that (i) is the Holder of a General
Unsecured Claim and (ii) is identified by Wherehouse, with the
approval of the Bank Agent, as a continuing supplier of such
products to Reorganized Wherehouse in a schedule filed by
Wherehouse at least 10 days prior to the Confirmation Hearing.
EMPLOYEE STOCK INCENTIVE PROGRAM means any program or
transaction approved by the directors of Reorganized Wherehouse
appointed pursuant to Section 8.02, or their successors, for the
issuance of New Common Stock, or options or warrants to acquire
New Common Stock, to one or more officers and employees of
Reorganized Wherehouse.
ENTITY means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company,
estate, entity, trust, trustee, United States trustee,
unincorporated organization, government, governmental unit (as
defined in the Bankruptcy Code), agency or political subdivision
thereof.
ESTATES means the bankruptcy estates created by the
commencement of the Chapter 11 Cases.
EXCHANGE OPTION means the right of an Eligible Supplier
pursuant to Section 5.05(d), at its option exercisable by timely
delivery of an Open Credit Terms Commitment and Option Exercise
Notice, to exchange (i) all (but not less than all) of the New
Common Stock that such Eligible Supplier is entitled to receive
on account of its General Unsecured Claim under this Plan for
(ii) a portion of the Secured Claim Cash Distribution equal to
27% of the Allowed amount of such General Unsecured Claim.
FEE CLAIM means a Claim under Section 330(a), Section 331
or Section 503 of the Bankruptcy Code for compensation for
professional services rendered and reimbursement of expenses in
the Chapter 11 Cases.
FILING DATE means August 2, 1995.
FINAL ORDER means an order or judgment entered on the docket
by the Clerk of the Bankruptcy Court or any other court
exercising jurisdiction over the subject matter and the parties
(i) that has not been reversed, stayed, modified or amended, (ii)
as to which no appeal, certiorari proceeding, reargument or other
review or rehearing has been requested or is still pending, and
(iii) as to which the time for filing a notice of appeal or
petition for certiorari or request for reargument or further
review or rehearing has expired.
GENERAL UNSECURED CLAIMS means all Claims other than
Administrative Expenses, Priority Tax Claims, Miscellaneous
Priority Claims, Senior Lender Claims, the DC-2 Secured Claim,
Miscellaneous Secured Claims, Senior Subordinated Note Claims and
Convertible Subordinated Debenture Claims and includes all Claims
of the type specified in Section 502(g), Section 502(h) and
Section 502(i) of the Bankruptcy Code and all Trustee's
Prepetition Claims.
HOLDER means, in respect of any Claim or any Interest, the
holder or owner of, or person otherwise entitled to enforce, such
Claim or Interest.
HOLDINGS means WEI Holdings, Inc., a Delaware corporation.
IMPAIRED means any Claim or Interest that is impaired within
the meaning of Section 1124 of the Bankruptcy Code.
INTERESTS means any and all equity or ownership interests in
Wherehouse or Holdings and all stock certificates and other
investment securities, whether or not certificated, representing
any such equity or ownership interest and any and all options,
warrants, subscription agreements and contractual rights to
acquire any such equity or ownership interest.
MISCELLANEOUS PRIORITY CLAIMS mean any and all Claims
entitled to priority in payment under Section 507(a) of the
Bankruptcy Code, except Administrative Expenses and Priority Tax
Claims.
MISCELLANEOUS SECURED CLAIMS means any and all Secured
Claims other than the Senior Lender Secured Claims and the DC-2
Secured Claim.
NEW BYLAWS means the bylaws of Reorganized Wherehouse,
substantially in the form of Exhibit B to this Plan.
NEW CERTIFICATE OF INCORPORATION means the certificate of
incorporation of Reorganized Wherehouse, substantially in the
form of Exhibit C to this Plan.
NEW COMMON STOCK means the common stock of Reorganized
Wherehouse ($0.01 par value), having one vote per share, without
preemptive rights or cumulative voting rights.
1992 MERGER AGREEMENT means the Agreement and Plan of Merger
dated as May 5, 1992, by and among Holdings, Wherehouse, Grammy
Corp., a Delaware corporation, and Adler & Shaykin, a New York
general partnership.
1992 MERGER AGREEMENT LETTER OF CREDIT means the Irrevocable
Standby Letter of Credit dated June 11, 1992, as amended, in the
initial amount of $18,750,639, issued by Bankers Trust Company
for the account of Wherehouse and for the benefit of the
Representative (as defined in the 1992 Merger Agreement).
1992 MERGER CONSIDERATION means any and all amounts paid or
payable to any shareholder of Holdings or to any other Entity
receiving consideration as if it were a shareholder, or any heir,
representative, successors or assigns of any such shareholder or
person, pursuant to the 1992 Merger Agreement or the 1992 Merger
Agreement Letter of Credit.
1992 MERGER CONSIDERATION RECIPIENT means any Entity that
has received or is entitled to receive payment or distribution of
any 1992 Merger Consideration.
1992 MERGER CONSIDERATION RECOVERY CLAIMS means any and all
Causes of Action held by the Estates against any 1992 Merger
Consideration Recipient under any state or federal fraudulent
conveyance or fraudulent transfer law seeking to set aside,
avoid, rescind or recover payment of any 1992 Merger
Consideration.
OFFICIAL COMMITTEE means the Official Committee of Unsecured
Creditors of the Debtors appointed by the United States Trustee
pursuant to Section 1102(a) of the Bankruptcy Code.
OPEN CREDIT TERMS COMMITMENT AND OPTION EXERCISE NOTICE
means an agreement (substantially in the form of Exhibit D to
this Plan) duly executed by an Eligible Supplier and delivered to
Wherehouse and the Bank Agent at least two Business Days prior to
the Effective Date, pursuant to which such Eligible Supplier (i)
commits to sell goods to Reorganized Wherehouse on open credit
terms substantially comparable to those from time to time offered
by such Eligible Supplier to other similarly situated customers
and (ii) transfers to the Holders of Allowed Senior Lender
Secured Claims all shares of New Common Stock that such Eligible
Supplier is entitled to receive under this Plan, in exchange for
the right to receive 27% of the Allowed amount of such Eligible
Supplier's General Unsecured Claim in cash.
ORDINARY COURSE ADMINISTRATIVE EXPENSES means the actual,
necessary costs and expenses of preserving the Estates and
operating the business of the Debtors, incurred and payable in
the ordinary course of business by the Debtors after the Filing
Date.
PLAN means this Chapter 11 Plan, as amended or modified from
time to time by the Debtors.
PREPETITION CREDIT AGREEMENT means the Credit Agreement
dated June 11, 1992 by and among the Debtors, the lenders party
thereto, Bankers Trust Company, as agent, and Heller Financial,
Inc., as co-agent, as amended, modified or supplemented from time
to time.
PREPETITION LOAN DOCUMENTS means the Prepetition Credit
Agreement and all other "Loan Documents," as that term is defined
therein, and further includes all agreements enforceable against
either or both of the Debtors by Bankers Trust Company relating
in any respect to the 1992 Merger Agreement Letter of Credit.
PRIORITY TAX CLAIMS means any and all Claims entitled to
priority in payment under Section 507(a)(8) of the Bankruptcy
Code.
RATABLE SHARE means, with reference to any distribution on
account of any Allowed Claim in any Class, a distribution equal
in amount to the ratio (expressed as a percentage) that the
amount of such Allowed Claim bears to the aggregate amount of all
Allowed Claims in that Class.
RECLAMATION CLAIMS means any and all rights of reclamation
converted to an Administrative Expense pursuant to any order of
the Bankruptcy Court under Section 546(c) of the Bankruptcy
Code.
RELEASE OBLIGOR has the meaning assigned to that term in
Section 12.05.
RELEASED ENTITY has the meaning assigned to that term in
Section 12.09.
REORGANIZED WHEREHOUSE means the newly-formed Delaware
corporation that is the purchaser under the Asset Purchase
Agreement.
SCHEDULES means the Schedules of Assets and Liabilities and
the Statement of Affairs for Debtor Engaged in Business that were
filed by the Debtors on or about September 26, 1995, as such
schedules have been and from time to time may be amended or
supplemented by either or both of the Debtors at any time prior
to the Effective Date.
SECURED CLAIM means a Claim that is secured by a lien on
property in which either or both of the Estates have an interest
or that is subject to setoff under Section 553 of the Bankruptcy
Code, to the extent of the value of the Holder's interest in the
Estate's interest in such property or to the extent of the amount
subject to setoff, as applicable, as determined pursuant to
Section 506(a) of the Bankruptcy Code.
SECURED CLAIM CASH DISTRIBUTION means the greater of (i)
$11,610,000 or (ii) the aggregate amount payable under this Plan
to all Eligible Suppliers that exercise the Exchange Option.
SENIOR LENDER CLAIMS means any and all Claims against either
or both of the Debtors arising under or in respect of the
Prepetition Loan Documents or any promissory note issued
thereunder or the indebtedness evidenced thereby or any other
instrument, agreement, breach, tort, wrongful conduct, act,
omission or event in any respect and in any manner arising
therefrom or related thereto.
SENIOR LENDER DEFICIENCY CLAIMS means the difference between
(i) the aggregate amount of the Senior Lender Claims, as Allowed
pursuant to Section 5.06(a), less (ii) the amount of the Senior
Lender Secured Claims, as Allowed pursuant to Section 5.01(a).
SENIOR LENDER SECURED CLAIMS means the amount of the Senior
Lender Claims that is a secured claim pursuant to Section 506(a)
of the Bankruptcy Code, as Allowed pursuant to Section 5.01(a).
SENIOR SUBORDINATED NOTES means the 13% Senior Subordinated
Notes Due 2002, Series A and Series B, outstanding under the
Senior Subordinated Note Indenture.
SENIOR SUBORDINATED NOTE CLAIMS means any and all Claims
against either or both of the Debtors arising under or in respect
of the Senior Subordinated Notes or the indebtedness evidenced
thereby or the Senior Subordinated Note Indenture or any
instrument, agreement, breach, tort, wrongful conduct, act,
omission or event in any respect and in any manner arising
therefrom or related thereto, except any Trustee's Prepetition
Claim.
SENIOR SUBORDINATED NOTE INDENTURE means the Indenture dated
as of June 1, 1992 between Wherehouse, Grammy Corp., as Guarantor
and the United States Trust Company of New York, N.A., as
amended, modified, restated or supplemented from time to time.
SUBORDINATION PROVISIONS means the provisions of Article 13
of the Senior Subordinated Note Indenture.
TRADE COMMITTEE means the Unofficial Committee of Trade
Creditors, consisting of BMG Distribution, Sony Music
Entertainment, Inc., UNI Distribution Corporation, Paramount
Pictures, Warner/Electra/Atlantic Corp., PolyGram Group
Distribution, EMI Music Distribution, Baker & Taylor, and
Alliance Entertainment Corp.
TRUSTEE'S PREPETITION CLAIM means a Claim for fees, expense
reimbursements and other amounts owed to a trustee under the
Senior Subordinated Note Indenture or the Convertible
Subordinated Debenture Indenture, in its capacity as such, to the
extent such amounts were accrued and unpaid on the Filing Date.
UNSECURED CLAIM STOCK DISTRIBUTION RATIO means, where this
Plan provides that the Holder of any Claim, other than a Senior
Lender Secured Claim, is entitled to receive New Common Stock on
account of such Claim, that such Holder shall be entitled to
receive 28.14767183 shares of New Common Stock for each $1,000 in
Allowed amount of such Claim.
WARRANT AGREEMENT means an agreement (substantially in the
form of Exhibit E to this Plan) under which Reorganized
Wherehouse delivers warrants for the issuance of 576,873 shares
of its common stock for an exercise price of $2.75 per share,
exercisable at any time until the fifth anniversary of the
Effective Date.
WARRANTS means the warrants issued under the Warrant
Agreement.
WHEREHOUSE means Wherehouse Entertainment, Inc., a Delaware
corporation.
1.02. RULES OF INTERPRETATION. References herein to a
"Section," when not qualified by a reference to another document,
are references to the sections of this Plan. Whenever from the
context it appears appropriate, each term stated in either the
singular or the plural shall include the singular and the plural,
and pronouns stated in the masculine, feminine or neuter gender
shall include the masculine, the feminine and the neuter. The
words "herein," "hereof," "hereto," "hereunder" and others of
similar import, refer to this Plan as a whole and not to the part
in which such words appear. The words "includes" and "including"
are not limiting and mean that the things specifically identified
are set forth for purposes of illustration, clarity or
specificity and do not in any respect qualify, characterize or
limit the generality of the class within such things are
included. Captions and headings to articles, sections and
exhibits are inserted for convenience of reference only, are not
a part of this Plan, and shall not be used to interpret this
Plan. The rules of construction set forth in Section 102 of the
Bankruptcy Code shall apply. In computing any period of time
prescribed or allowed by this Plan, the provisions of Bankruptcy
Rule 9006(a) and Section 14.12 shall apply, but Bankruptcy Rule
9006(a) shall govern.
1.03. INCORPORATION OF EXHIBITS. All Exhibits to this
Plan are part of this Plan and incorporated herein as fully as if
set forth at length herein. The Exhibits to this Plan must be
satisfactory to and approved by the Debtors and the Bank Agent
and will be filed with the Bankruptcy Court at least 10 days
prior to the Confirmation Hearing.
ARTICLE 2
PROVISIONS FOR TREATMENT OF ADMINISTRATIVE EXPENSES
2.01. ALLOWANCE OF ADMINISTRATIVE EXPENSES. Claims for
Administrative Expenses shall become Allowed as follows:
(A) ORDINARY COURSE ADMINISTRATIVE EXPENSES AND APPROVED
CHAPTER 11 LIABILITIES. An Ordinary Course Administrative
Expense or Approved Chapter 11 Liability that is not disputed
by Reorganized Wherehouse by written notice given to the
claimant prior to the 60th day after the Effective Date shall
become Allowed on such day.
(B) RECLAMATION CLAIMS. A Reclamation Claim shall
become Allowed only to the extent either (i) Reorganized
Wherehouse and the Holder of the Reclamation Claim agree upon
the amount thereof in a stipulation approved by the
Bankruptcy Court or (ii) the Holder files with the Bankruptcy
Court and serves on Reorganized Wherehouse a motion
requesting payment of such Reclamation Claim within 60 days
after the Effective Date and a Final Order is entered
granting such motion.
(C) FEE CLAIMS. A Fee Claim shall become Allowed if
allowed or approved by the Bankruptcy Court upon an
application filed no later than 90 days after the Effective
Date.
(D) ALL ADMINISTRATIVE EXPENSES. All other Claims for
an Administrative Expenses (including Ordinary Course
Administrative Expenses and Approved Chapter 11 Liabilities
that are disputed by Reorganized Wherehouse as set forth in
Section 2.01(a)) shall become Allowed only if the Holder of
such Claim files with the Bankruptcy Court and serves on
Reorganized Wherehouse, within 90 days after the Effective
Date, a motion requesting payment of such Administrative
Expense and only if and to the extent such Claim is allowed
by the Bankruptcy Court pursuant to a Final Order.
2.02. PAYMENT OF ADMINISTRATIVE EXPENSES. Reorganized
Wherehouse shall assume and pay each Allowed Administrative
Expense, other than Ordinary Course Administrative Expenses and
Approved Chapter 11 Liabilities, in full and in cash on the
latest of (i) the Effective Date, (ii) the date on which such
Administrative Expense becomes Allowed, and (iii) a date agreed
by Reorganized Wherehouse or the Debtors, as the case may be, and
such Holder. Reorganized Wherehouse shall assume and pay each
Allowed Ordinary Course Administrative Expense and each Allowed
Approved Chapter 11 Liability on the date on which payment is due
or would otherwise be permitted to be made in accordance with the
terms and conditions of the particular transaction and any
agreements relating thereto.
ARTICLE 3
PROVISIONS FOR TREATMENT OF PRIORITY TAX CLAIMS
3.01. PRIORITY TAX CLAIMS. The Holder of an Allowed
Priority Tax Claim shall receive, on account of such Allowed
Priority Tax Claim, a cash payment in the amount of such Priority
Tax Claim six years after the assessment of the tax on which such
Claim is based, plus simple interest annually in arrears on such
amount from the Effective Date through such day at the interest
rate publicly quoted on the Effective Date for full faith and
credit obligations of the United States of America maturing in 90
days. At the option of Reorganized Wherehouse, any Allowed
Priority Tax Claim may be (i) paid on such alternative terms as
may be agreed by Reorganized Wherehouse and the Holder of such
Allowed Priority Tax Claim or (ii) prepaid in whole or in part,
without premium or penalty, at any time.
ARTICLE 4
CLASSIFICATION OF CLAIMS AND INTERESTS
Pursuant to Section 1122 of the Bankruptcy Code, set forth
below is a designation of classes of Claims and Interests, except
that Administrative Expenses and Priority Tax Claims have not
been classified and are excluded from the following classes in
accordance with Section 1123(a)(1) of the Bankruptcy Code.
4.01. SECURED CLAIMS.
CLASS 1. Class 1 consists of all Senior Lender Secured
Claims.
CLASS 2. Class 2 consists of the DC-2 Secured Claim.
CLASS 3. Class 3 consists of all Miscellaneous Secured
Claims.
4.02. PRIORITY CLAIMS.
CLASS 4. Class 4 consists of all Miscellaneous
Priority Claims.
4.03. UNSECURED CLAIMS.
CLASS 5. Class 5 consists of all General Unsecured
Claims.
CLASS 6. Class 6 consists of all Senior Lender
Deficiency Claims.
CLASS 7. Class 7 consists of all Senior Subordinated
Note Claims.
CLASS 8. Class 8 consists of all Convertible
Subordinated Debenture Claims.
4.04. INTERESTS.
CLASS 9. Class 9 consists of all Interests.
ARTICLE 5
PROVISIONS FOR TREATMENT OF
CLAIMS AND INTERESTS
5.01. SENIOR LENDER SECURED CLAIMS (CLASS 1).
(A) ALLOWANCE OF CLAIMS. The Senior Lender
Secured Claims shall be Allowed in the amount of
$45,000,000, less all Adequate Protection Payments.(1)
_________
(1) The Debtors offer the proposed $45,000,000 Allowed amount of
the Senior Lender Secured Claims on the condition that this
Plan is accepted by the Holders of the Senior Lender Claims
and solely as a proposed compromise and settlement of certain
matters in controversy between the Debtors and such Holders
in the Chapter 11 Cases. The Debtors' offer herein is in all
respects to Rule 408 of the Federal Rules of Evidence and
shall not be used against them, as an admission or otherwise,
in the adjudication of any such matters. The Senior Lenders'
acceptance of this Plan shall be subject to the same
conditions and shall, in all respects, be subject to Rule 408
of the Federal Rules of Evidence.
(B) TREATMENT. Each Holder of an Allowed Senior
Lender Secured Claim shall receive, on account of such
Claim, its Ratable Share of (i) the Secured Claim Cash
Distribution and (ii) 117.6229653 shares of New Common Stock
for each $1,000 in Allowed amount of the Senior Lender
Secured Claims that remains after deduction for the Secured
Claim Cash Distribution.
(C) ADJUSTMENT FOR DILUTION. The distributions
provisions for New Common Stock in this Plan are predicated
on the assumption that (i) 3,612,789 shares of New Common
Stock will be distributed under this Plan on account of
Senior Lender Secured Claims (the "Secured Claim Stock
Distribution"), (ii) 6,387,211 shares of New Common Stock
will be distributed under this Plan on account of Allowed
General Unsecured Claims, Allowed Senior Lender Deficiency
Claims and Allowed Senior Subordinated Note Claims
(collectively, "Unsecured Claim Distributions"), and,
accordingly, (iii) the New Common Stock distributed on
account of Senior Lender Secured Claims will be equal to
36.128% (the "Secured Claim Share Percentage") of all New
Common Stock distributed under this Plan, not counting the
Warrants ("Stock Distributions"). If and whenever shares of
New Common Stock are issued in any Unsecured Claim
Distribution such that the aggregate number of shares of New
Common Stock issued in all prior Secured Claim Stock
Distributions is less than the Secured Claim Share
Percentage of all Stock Distributions at any time made under
this Plan, then each Holder of an Allowed Senior Lender
Secured Claim shall receive, on account of such Claim, its
Ratable Share of a number of additional shares of New Common
Stock as necessary to ensure that the aggregate number of
shares of New Common Stock issued under this Plan in Secured
Claim Stock Distributions is equal to the Secured Claim
Share Percentage of all Stock Distributions at any time made
under this Plan.
(D) SATISFACTION OF SECTION 507(b) RIGHTS. The
distribution pursuant to Section 5.01(b) shall be in full
satisfaction of any and all rights of the Holders of Senior
Lender Secured Claims under Section 507(b) of the
Bankruptcy Code.
(E) DISMISSAL OF BT ADVERSARY PROCEEDING. On the
Effective Date, the BT Adversary Proceeding shall be
dismissed with prejudice, with each party to bear its own
costs.
(F) EXCHANGE OPTION. Each Holder of an Allowed
Senior Lender Secured Claim shall be bound by the Exchange
Option, whether or not such Holder individually accepted or
rejected the Plan. Reorganized Wherehouse shall administer
the Exchange Option and shall (i) determine the amount by
which the Secured Claim Cash Distribution otherwise to be
distributed under this Plan to the Holders of Allowed Senior
Lender Secured Claims must be reduced to give effect to the
Exchange Option as to all General Unsecured Claims asserted
by Eligible Suppliers that have timely exercised the
Exchange Option, whether or not such Claims are then
Disputed or Allowed, and withhold such cash amount from such
distribution, (ii) withhold all shares of New Common Stock
otherwise to be distributed under this Plan to such Eligible
Supplier on account of its General Unsecured Claim, (iii) as
and when any such Eligible Supplier's General Unsecured
Claim becomes Allowed, (x) pay out the to such Eligible
Supplier, from such withheld cash amount, the sum payable to
such Eligible Supplier under the Exchange Option, and (y)
distribute the withheld shares of New Common Stock exchanged
by such Eligible Supplier to the Holders of Allowed Senior
Lender Secured Claims, based on their Ratable Shares, and
(iv) if and to the extent any Disputed General Unsecured
Claim of any such Eligible Supplier at any time is
disallowed or consensually reduced, distribute to the
Holders of Allowed Senior Lender Secured Claims, based on
their Ratable Shares, any withheld cash not required to be
paid to such Eligible Supplier.
(G) ALLOWED AMOUNT NET OF UTAH STORE SALE PAYMENT.
The Allowed amount of the Senior Lender Claims set forth in
Section 5.06(a) and the Allowed amount of the Senior Lender
Secured Claims set forth in Section 5.01(a) reflect a
deduction for, and are net of, a post-petition payment in
the amount of $158,852.02 made on account of the Senior
Lender Claims in connection with the sale of inventory and
other assets located in certain Utah stores, and such
Allowed amounts shall not be further reduced on account of
such post-petition payment.
(H) IMPAIRMENT. Class 1 is Impaired.
5.02. DC-2 SECURED CLAIM (CLASS 2).
(A) TREATMENT. On the Effective Date, at the
option of Reorganized Wherehouse, either (i) the Holder of
the Allowed DC-2 Secured Claim shall receive payment of the
Allowed DC-2 Secured Claim, in full and in cash, or (ii)
Reorganized Wherehouse will abandon the DC-2 Property to the
Holder of the Allowed DC-2 Secured Claim.
(B) DEFICIENCY. If the DC-2 Property is
abandoned to the Holder of the Allowed DC-2 Secured Claim,
any Claim for a deficiency shall be treated as a General
Unsecured Claim.
(C) IMPAIRMENT. Class 2 is Impaired.
5.03. MISCELLANEOUS SECURED CLAIMS (CLASS 3).
(A) TREATMENT. On the Effective Date, at
Reorganized Wherehouse's option, either (i) Reorganized
Wherehouse shall assume an Allowed Miscellaneous Secured
Claim and the legal, equitable and contractual rights to
which an Allowed Miscellaneous Secured Claim entitles the
Holder of such Claim shall not be altered by this Plan, or
(ii) Reorganized Wherehouse shall provide such other
treatment in respect of such Claim as will cause such Claim
not to be Impaired. The Debtors' failure to object to any
such Claim during the pendency of the Chapter 11 Cases shall
be not prejudice, diminish, affect or impair Reorganized
Wherehouse's right to contest or defend against such Claim
in any lawful manner or forum when and if such Claim is
sought to be enforced by the Holder thereof. Each
Miscellaneous Secured Claim and all liens lawfully granted
or existing on any property of the Estates on the Filing
Date as security for a Miscellaneous Secured Claim shall (x)
survive the confirmation and consummation of this Plan, the
Debtors' discharge under Section 1141(d) of the Bankruptcy
Code and Section 12.01, and the transfer of the property of
the Estates to Reorganized Wherehouse, (y) remain
enforceable against Reorganized Wherehouse in accordance
with the contractual terms of any lawful agreements
enforceable by the Holder of such Claim on the Filing Date
until the Allowed amount of such Claim is paid in full, and
(z) remain subject to avoidance by Reorganized Wherehouse
under the Bankruptcy Code as set forth in Section 12.04(a).
(B) IMPAIRMENT. Class 3 is not Impaired.
5.04. MISCELLANEOUS PRIORITY CLAIMS (CLASS 4).
(A) TREATMENT. Each Holder of an Allowed
Miscellaneous Priority Claim shall receive, on account of
such Claim, payment of the Allowed amount of such Claim in
full and in cash.
(B) IMPAIRMENT. Class 4 is not Impaired.
5.05. GENERAL UNSECURED CLAIMS (CLASS 5).
(A) TREATMENT. Each Holder of an Allowed General
Unsecured Claim shall receive, on account of such Claim,
shares of New Common Stock based on the Unsecured Claim
Stock Distribution Ratio.
(B) EFFECT OF RETURNS UNDER SECTION 546(g)*. If
any Holder of a General Unsecured Claim, or its predecessor
in interest, received goods returned by Wherehouse after the
Filing Date for credit to the Claim of such Holder pursuant
to Section 546(g)* of the Bankruptcy Code, then when such
Claim is Allowed the amount of such Claim that would
otherwise be Allowed shall be reduced by the invoice price
charged to Wherehouse for such goods, less any discounts
actually credited at the time of purchase without any
deduction for merchandise return charges. The right of such
a Holder to receive any distribution to be made under this
Plan on account of such Claim shall not otherwise be
increased, reduced, impaired or affected by any such return
of goods.
(C) EFFECT OF ALLOWANCE OF RECLAMATION CLAIMS.
If any Holder of a General Unsecured Claim holds or asserts
a Reclamation Claim, such General Unsecured Claim shall not
be Allowed until such Reclamation Claim is Allowed,
disallowed or otherwise resolved, and when Allowed such
General Unsecured Claim shall be reduced by the Allowed
amount of the Reclamation Claim.
(D) ELIGIBLE SUPPLIER OPTION TO EXCHANGE FOR CASH.
Each Holder of a General Unsecured Claim that is an
Eligible Supplier shall have the right, exercisable at its
sole option by timely delivery of an Open Credit Terms
Commitment and Option Exercise Notice, to transfer all (but
not less than all) of the New Common Stock that such Holder
is entitled to receive under Section 5.05(a) to the Holders
of the Senior Lender Secured Claims, in exchange for cash
from the Secured Claim Cash Distribution equal to 27% of the
Allowed amount of such General Unsecured Claim. To exercise
such option, such Eligible Supplier must deliver to
Wherehouse and the Bank Agent at least two Business Days
prior to the Effective Date (time being of the essence) an
Open Credit Terms Commitment and Option Exercise Notice duly
executed by such Eligible Supplier.
(E) IMPAIRMENT. Class 5 is Impaired.
5.06. SENIOR LENDER DEFICIENCY CLAIMS (CLASS 6).
(A) ALLOWANCE OF CLAIMS. The Senior Lender
Claims shall be Allowed in the amount of $94,568,179.37 and
the Senior Lender Deficiency Claims shall be Allowed in the
amount of $49,568,179.37.
(B) TREATMENT. Each Holder of an Allowed Senior
Lender Deficiency Claim shall receive, on account of such
Claim, its Ratable Share of:
(1) DISTRIBUTION ON ACCOUNT OF DEFICIENCY
CLAIMS.
1,395,229 shares of New Common Stock (the number of
shares determined under the Unsecured Claim Stock
Distribution Ratio as to the Allowed amount of the
Senior Lender Deficiency Claims); and
(2) DISTRIBUTION UNDER SUBORDINATION
PROVISIONS.
3,298,618 shares of New Common Stock (the number of
shares determined under the Unsecured Claim Stock
Distribution Ratio as to the Allowed amount of the
Senior Subordinated Note Claims), which shares shall be
issued to the Holders of the Senior Lender Deficiency
Claims in enforcement of the Subordination Provisions.
(C) IMPAIRMENT. Class 6 is Impaired.
5.07. SENIOR SUBORDINATED NOTE CLAIMS (CLASS 7).
(A) ALLOWANCE OF CLAIMS. The Senior Subordinated
Note Claims shall be Allowed in the amount of
$117,189,722.22.
(B) ENFORCEMENT OF SUBORDINATION. Subject only
to Section 5.07(c), in accordance with and in enforcement of
the Subordination Provisions, all distributions which the
Holders of Senior Subordinated Note Claims would otherwise
be entitled to receive under this Plan shall be delivered to
the Holders of the Allowed Senior Lender Deficiency Claims
and provision therefor is made in Section 5.06(b)(2).
(C) WARRANTS IF PLAN IS ACCEPTED. If this Plan
is accepted by Class 7, then:
(1) WARRANTS. Each Holder of a Senior
Subordinated Note Claim shall receive, free from the
Subordination Provisions, its Ratable Share of the
Warrants,
(2) RELEASE AS TO WARRANTS. Each Holder of a
Senior Lender Claim (whether or not such Holder
individually accepted or rejected this Plan) hereby
absolutely, unconditionally and forever remises, remits
and releases any claim to or interest in the Warrants
pursuant to the Subordination Provisions, and
(3) RELEASE AS TO SHARES TURNED OVER. Each
Holder of a Senior Subordinated Note Claim (whether or
not such Holder individually accepted or rejected the
Plan) hereby absolutely, unconditionally and forever
remises, remits and releases any claim to or interest
in the shares of New Common Stock distributed to the
Holders of Senior Lender Deficiency Claims pursuant to
Section 5.06(b) and all other property that they
otherwise are or may be entitled to receive on account
of Senior Subordinated Note Claims.
No Warrants shall be distributed under this Plan if this
Plan is not accepted by Class 7.
(D) NO DISTRIBUTION IF PLAN IS NOT ACCEPTED. If
this Plan is not accepted by Class 7, then the Holders of
Senior Subordinated Note Claims shall receive no distribution
under this Plan.
(E) SUBORDINATION ENFORCEMENT AS ESSENTIAL
ELEMENT. Whether or not Class 7 or any individual Holder
of a Senior Subordinated Note Claim has accepted this Plan,
the Subordination Provisions shall be enforced without
exception, through the consummation of this Plan and as an
essential element hereof, as to all New Common Stock and any
and all other property, except the Warrants, that the
Holders of Allowed Senior Subordinated Note Claims are,
would or might otherwise be entitled to receive from the
Debtors or the Estates or in the Cases on account of Senior
Subordinated Note Claims and all such New Common Stock and
other property, except the Warrants, shall be delivered by
the Debtors and Reorganized Wherehouse directly to the
Holders of Senior Lender Deficiency Claims pursuant to the
Subordination Provisions.
(F) IMPAIRMENT. Class 7 is Impaired.
5.08. CONVERTIBLE SUBORDINATED DEBENTURE CLAIMS (CLASS 8).
(A) NO DISTRIBUTION. The Holders of Convertible
Subordinated Debenture Claims shall receive no distribution
under this Plan.
(B) IMPAIRMENT. Class 8 is Impaired.
5.09. INTERESTS (CLASS 9).
(A) NO DISTRIBUTION. The Holders of Interests
shall receive no distribution under this Plan.
(B) IMPAIRMENT. Class 9 is Impaired.
ARTICLE 6
IDENTIFICATION OF CLASSES OF CLAIMS
AND INTERESTS IMPAIRED AND NOT IMPAIRED BY THIS PLAN;
ACCEPTANCE OR REJECTION OF THIS PLAN
6.01. ACCEPTANCE BY AN IMPAIRED CLASS OF CREDITORS.
Consistent with Section 1126(c) of the Bankruptcy Code and
except as provided in Section 1126(e) of the Bankruptcy Code, an
Impaired Class of Claims shall have accepted this Plan if this
Plan is accepted by the holders of at least two-thirds in dollar
amount and more than one-half in number of the Allowed Claims of
such Class that have timely and properly voted to accept or
reject this Plan.
6.02. VOTING CLASSES. Senior Lender Secured Claims (Class
1), the DC-2 Secured Claim (Class 2), General Unsecured Claims
(Class 5), Senior Lender Deficiency Claims (Class 6), and Senior
Subordinated Note Claims (Class 7) are Impaired by this Plan, and
only the Holders of Allowed Claims in such Classes at the time
the vote on this Plan is solicited are entitled to vote to accept
or reject this Plan.
6.03. CLASSES RECEIVING NO PROPERTY DEEMED TO REJECT THIS
PLAN. Convertible Subordinated Debenture Claims (Class 8) and
Interests (Class 9) are Impaired by this Plan and do not receive
or retain any property under this Plan. Under Section 1126(g)
of the Bankruptcy Code, the Holders of Claims and Interests in
such Classes are deemed to reject this Plan and the votes of
Holders in such classes will not be solicited.
6.04. UNIMPAIRED CLASSES CONCLUSIVELY PRESUMED TO ACCEPT
THIS PLAN. Miscellaneous Secured Claims (Class 3) and
Miscellaneous Priority Claims (Class 4) are not Impaired by this
Plan. Under Section 1126(f) of the Bankruptcy Code, such
classes of Claims are conclusively presumed to accept this Plan,
and the votes of Holders in such Classes will not be solicited.
6.05. CONFIRMATION PURSUANT TO SECTION 1129(b). The
Debtors may seek confirmation of the Plan under Section 1129(b)
of the Bankruptcy Code with respect to any Class, except Class 1
and Class 6, to the extent a Class rejects or is deemed to have
rejected this Plan.
ARTICLE 7
UNEXPIRED LEASES AND EXECUTORY CONTRACTS
7.01. ASSUMPTION AND REJECTION. Any unexpired lease or
executory contract that has not been expressly rejected or
assumed by the Debtors with the Bankruptcy Court's approval on or
prior to the Effective Date shall be deemed to have been rejected
by the Debtors as of the Effective Date unless there is then
pending before the Bankruptcy Court a motion to assume such
unexpired lease or executory contract. Any unexpired lease or
executory contract assumed by the Debtors at any time during the
pendency of the Chapter 11 Cases (and not otherwise assigned)
shall be assigned to and assumed by Reorganized Wherehouse,
unless prior to the Effective Date the Debtors, with the Bank
Agent's approval, elect that such lease or contract shall be
assigned to and assumed by another Entity.
7.02. ASSUMPTION AND ASSIGNMENT OF LEASES AND CONTRACTS.
At the Confirmation Hearing, subject to the approval of the Bank
Agent, the Debtors will request the Bankruptcy Court to approve
assumption of certain of its real property leases and executory
contracts and assignment of such leases and contracts to
Reorganized Wherehouse or another Entity in accordance with
Section 7.01. The Debtors will file a schedule of such leases
and contracts with the Bankruptcy Court at least ten days prior
to the Confirmation Hearing.
7.03. ASSIGNED LEASES. Any lease of nonresidential real
property that was assigned by a Debtor prior to the Filing Date
shall be treated as being neither executory nor unexpired and
shall be deemed neither assumed nor rejected pursuant to this
Plan.
7.04. ASSIGNMENTS OF CONTRACTS AND LEASES. The Debtors
reserve all rights accorded to them under Section 365 of the
Bankruptcy Code, including all rights under Section 365(f) of
the Bankruptcy Code with respect to the assignment of any or all
of their executory contracts and unexpired leases.
ARTICLE 8
OPERATION AND MANAGEMENT
OF REORGANIZED WHEREHOUSE AND THE DEBTORS
8.01. BOARD OF DIRECTORS. From and after the Effective
Date, Reorganized Wherehouse shall be managed under the direction
of its board of directors in accordance with the applicable
provisions of the DGCL, the New Certificate of Incorporation and
the New Bylaws.
8.02. APPOINTMENT OF DIRECTORS. On or prior to the
Effective Date, the Bank Agent, subject to the consent of the
Debtors and upon consultation with the Trade Committee, shall
appoint five directors of Reorganized Wherehouse. At least five
Business Days prior to the Confirmation Hearing, the Debtors and
the Bank Agent will file with the Bankruptcy Court a schedule
setting forth the names of the persons to be appointed as the
directors of Reorganized Wherehouse pursuant to this Section
8.02.
8.03. EFFECT OF APPOINTMENT. Upon the Effective Date,
subject to appointment of the persons named in such schedule as
directors of Reorganized Wherehouse and acceptance of such
appointment by such persons, (i) all rights of the Debtors' and
the Trade Committee with respect to appointment of directors
shall be extinguished and the directors of Reorganized Wherehouse
shall thereafter be appointed or elected in accordance with the
DGCL, the New Certificate of Incorporation and the New Bylaws, as
they may from time to time be amended and (ii) the authority,
power and incumbency of the persons then acting as directors of
the Debtors shall be terminated and such directors shall be
deemed to have resigned.
ARTICLE 9
IMPLEMENTATION OF THIS PLAN
9.01. SUBSTANTIVE CONSOLIDATION. This Plan shall
constitute a motion pursuant to Section 105 of the Bankruptcy
Code to substantively consolidate the bankruptcy estates of
Wherehouse and Holdings. On the Effective Date, (i) the
Chapter 11 Case and Estate of Holdings shall be substantively
consolidated with and into the Chapter 11 Case and Estate of
Wherehouse, (ii) any and all Claims against Holdings shall be
deemed to be Claims against Wherehouse, and (iii) any and all
Claims against Holdings and Wherehouse shall be satisfied in
accordance with the terms of this Plan.
9.02. EXTINGUISHMENT OF INTER-DEBTOR AND CO-DEBTOR CLAIMS
AND INTERESTS. On the Effective Date and pursuant to the
substantive consolidation effected by this Plan, (i) any and all
Claims between the Debtors shall be extinguished, (ii) any and
all Interests in Wherehouse of which Holdings is the Holder shall
be cancelled, and (iii) any Claim against one of the Debtors that
the other Debtor has guaranteed or as to which the other Debtor
is liable, jointly or otherwise, shall be disallowed and
extinguished as necessary to avoid duplication and so as to
result in one Claim against the consolidated Debtors.
9.03. RESERVATION OF RIGHTS. The substantive
consolidation contained herein is and shall be accomplished only
as part of this Plan. If this Plan is not confirmed for any
reason, the Debtors shall not be substantively consolidated,
unless such relief is requested by the Debtors. If this Plan is
not confirmed for any reason, each Debtor reserves the right to
contest any motion or request for substantive consolidation
affecting either of the Debtors. No provision in this Plan and
no statement in the Disclosure Statement may or shall be used as
an admission that substantive consolidation is warranted or in
the best interests of creditors or other parties in interest or a
waiver of either Debtor's right to contest any such motion or
request.
9.04. TRANSFER OF PROPERTY. If this Plan becomes
effective as set forth in Section 13.02, the confirmation of this
Plan shall transfer to Reorganized Wherehouse all property of the
Estates remaining after giving effect to substantive
consolidation pursuant to Sections 9.01, 9.02 and 9.03 (except
(i) the New Common Stock and Warrants and all other consideration
delivered to the Estates by Reorganized Wherehouse pursuant to
the Asset Purchase Agreement and (ii) any property of the Estates
that is transferred to any other Entity on or prior to the
Effective Date or that is abandoned pursuant to this Plan), and
title to all property so to be transferred to Reorganized
Wherehouse shall pass to Reorganized Wherehouse on the Effective
Date on the terms and conditions set forth in the Asset Purchase
Agreement, free and clear of all Claims, all liens securing
Claims and all Interests, except any lien preserved under Section
5.03(a). Reorganized Wherehouse shall not be liable or
responsible for any Claim against the Debtors or the Estates or
any obligation of the Debtors or the Estates except as expressly
assumed by Reorganized Wherehouse in the Asset Purchase Agreement
or pursuant to this Plan. Reorganized Wherehouse shall be the
successor to the Debtors for the purposes of Section 1123,
Section 1129 and Section 1145 of the Bankruptcy Code.
9.05. LIQUIDATION OF ESTATES. After this Plan becomes
effective, the Estates shall be liquidated in accordance with
this Plan and applicable law. Subject to any further order of
the Bankruptcy Court, Reorganized Wherehouse shall act as
liquidating agent of and for the Estates from and after the
Effective Date and as such shall be both authorized and
obligated, as agent for and on behalf of the Estates, to admit,
object to or contest any and all Claims, to defend, protect and
enforce any and all rights and interests, to make any and all
distributions required or permitted to be made under this Plan,
to file any and all reports, requests for relief or opposition
thereto, and to take any and all other actions necessary or
appropriate to implement this Plan or to wind up the Estates in
accordance with applicable law and shall be authorized 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 therewith or as a result thereof, including all fees
and expenses of its professionals accruing from and after the
Confirmation Date without any application to the Bankruptcy
Court. Reorganized Wherehouse shall not be entitled to receive
any compensation or indemnification whatsoever from the Estates
for its services as such liquidating agent or in respect of any
such claims, liabilities, losses, damages, costs or expenses.
9.06. CANCELLATION OF SECURITIES. On the Effective Date,
the Prepetition Loan Documents, including all notes and other
instruments outstanding thereunder or issued pursuant thereto and
all obligations of the Debtors or the Estates thereunder or in
respect thereof, the Senior Subordinated Notes and the Senior
Subordinated Note Indenture and all obligations of the Debtors or
the Estates thereunder or in respect thereof, the Convertible
Subordinated Debentures and the Convertible Subordinated
Debenture Indenture and all obligations of the Debtors or the
Estates thereunder or in respect thereof, and all Interests shall
be cancelled and discharged and fully satisfied by confirmation
of this Plan and the distributions to be made pursuant to this
Plan; PROVIDED, HOWEVER, that the 1992 Merger Agreement Letter of
Credit shall not be cancelled and all rights of the Estates under
any agreement related thereto and any interest of the Estates
therein shall be transferred to Reorganized Wherehouse pursuant
to the Asset Purchase Agreement.
9.07. SURRENDER OF CANCELLED SECURITIES. On the Effective
Date, each of the respective transfer books maintained for the
Cancelled Securities shall be closed. Except for the right to
receive the distributions, if any, to be made pursuant to this
Plan, the Holder of a Cancelled Security shall have no rights
arising from or relating to such Cancelled Security after the
Effective Date, including rights of subordination or subrogation
that may be construed to be inherent in or ancillary or related
to such Cancelled Security. Each holder of a Cancelled Security
evidencing any Allowed Claim shall surrender such Cancelled
Security to Reorganized Wherehouse (or its designee), and
Reorganized Wherehouse (or its designee) shall distribute to such
Holder or to such Holder's agent, trustee or representative the
appropriate consideration therefor in accordance with this Plan
as promptly as is reasonably practicable. No distribution under
this Plan shall be made to or for account of any Holder of an
Allowed Claim evidenced by a Cancelled Security unless and until
such Cancelled Security is received by Reorganized Wherehouse (or
its designee). If a Cancelled Security is lost or destroyed, the
Holder of such Cancelled Security must deliver an affidavit of
loss or destruction to the Debtors or Reorganized Wherehouse (or
their designee), as well as an agreement to indemnify the Debtors
and Reorganized Wherehouse (and post a bond if so requested by
the Debtors or Reorganized Wherehouse), in form and substance
reasonably acceptable to Reorganized Wherehouse, before such
Holder may receive any distribution that it would otherwise be
entitled to receive under this Plan in respect of such lost or
destroyed Cancelled Security. Any Holder of an Allowed Claim
that fails to surrender a Cancelled Security related thereto or
to deliver an affidavit and an indemnity agreement before the
later to occur of (i) two years from the Effective Date, and (ii)
six months following the date such Holder's Claim becomes an
Allowed Claim shall be deemed to have no further Claim and no
distributions shall be made under this Plan in respect of such
Claim. The Debtors or Reorganized Wherehouse may waive the
requirements of this Section 9.07.
9.08. ALLOWANCE OF CLAIMS SUBJECT OF SECTION 502(d).
Allowance of Claims shall be in all respects subject to the
provisions of Section 502(d) of the Bankruptcy Code, except that
no Claim that is Allowed in an amount set forth in this Plan
shall be disallowed under Section 502(d) of the Bankruptcy Code.
9.09. RIGHT OF SETOFF. Reorganized Wherehouse shall have
the right to set off against any Claim and the distributions to
be made pursuant to this Plan in respect of such Claim, any and
all debts, liabilities and claims of every type and nature
whatsoever which (after giving effect to the releases set forth
in Section 12.04) the Estates or Reorganized Wherehouse may have
against the Holder of such Claim, and neither any prior failure
to do so nor the Allowance of such Claim, whether pursuant to
this Plan or otherwise, shall constitute a waiver or release of
any such right of setoff.
ARTICLE 10
PROVISIONS COVERING DISTRIBUTIONS
10.01. TIME OF DISTRIBUTIONS UNDER THIS PLAN. Except as
otherwise provided in this Plan, distributions in respect of
Claims that, on the Effective Date, are Allowed Claims shall be
made by Reorganized Wherehouse (or its designee) on or as
promptly as practicable after the Effective Date. Distributions
in respect or as a result of Claims Allowed after the Effective
Date shall be made as soon as practicable after such Claim
becomes Allowed.
10.02. FRACTIONAL SHARES. Fractional shares of New Common
Stock shall not be issued under this Plan. Instead, on the date
of final distribution of New Common Stock to the persons entitled
thereto, the aggregate of all fractional shares that would
otherwise be issued to such persons shall be pooled in a
fractional securities pool and each Holder of an Allowed Claim
entitled to any such fractional interest shall be placed on a
distribution list in descending order according to the size of
the fractional interest to which such Holder is entitled. If two
or more Holders are entitled to the same fractional interest
(rounded to six decimal places), their relative ranking on the
distribution list shall be determined by lot. A whole share of
New Common Stock shall be distributed, in the descending order
set forth in the distribution list, to Holders named on the list
until all of the whole shares of the New Common Stock in the
fractional securities pool have been distributed. No other
distribution shall be due or made on any fractional shares.
10.03. WARRANTS FOR ISSUANCE OF FRACTIONAL SHARES.
Warrants for fractional shares of New Common Stock shall not be
issued under this Plan. Instead, on the date of final
distribution of Warrants to the persons entitled thereto, the
aggregate of all Warrants for issuance of fractional shares that
would otherwise be issued to such persons shall be pooled in a
Warrants for issuance of fractional securities pool and each
Holder of an Allowed Claim entitled to any such Warrants for
issuance of fractional interests shall be placed on a
distribution list in descending order according to the size of
the fractional interest to which such Holder is entitled. If two
or more Holders are entitled to the same fractional interest
(rounded to six decimal places), their relative ranking on the
distribution list shall be determined by lot. A Warrant for a
whole share of New Common Stock shall be distributed, in the
descending order set forth in the distribution list, to Holders
named on the list until all of the Warrants for issuance of whole
shares of the New Common Stock in the fractional securities pool
have been distributed. No other distribution shall be due or
made on any Warrants for issuance of fractional shares.
10.04. COMPLIANCE WITH TAX REQUIREMENTS. In connection
with each distribution with respect to which the filing of an
information return (such as an Internal Revenue Service Form 1099
or 1042) or withholding is required, Reorganized Wherehouse shall
file such information return with the Internal Revenue Service
and provide any required statements in connection therewith to
the recipients of such distribution or effect any such
withholding and deposit all moneys so withheld as required by
law. With respect to any Entity from whom a tax identification
number, certified tax identification number or other tax
information required by law to avoid withholding has not been
received by Reorganized Wherehouse (or its distribution agent),
Reorganized Wherehouse may, at its option, withhold the amount
required and distribute the balance to such Entity or decline to
make such distribution until the information is received. In any
event, however, Reorganized Wherehouse shall not be obligated to
liquidate New Common Stock to honor any withholding obligation.
10.05. PERSONS DEEMED HOLDERS OF REGISTERED SECURITIES.
Except as otherwise provided herein, Reorganized Wherehouse and
each transfer or distribution agent shall be entitled to treat
the record holder of a registered security as the sole Holder of
the Claim or Interest in respect thereof for purposes of all
notices, payments or other distributions under this Plan. No
notice of any transfer of any such security shall be binding on
Reorganized Wherehouse or any transfer or distribution agent,
unless such transfer has been properly registered in accordance
with the provisions of the governing indenture or agreement at
least ten Business Days prior to the day on which any such notice
is given or any such payment or other distribution is made. If
there is any dispute regarding the identity the person entitled
to any payment or distribution in respect of any Claim under this
Plan, no payment or distribution need be made in respect of such
Claim until the Bankruptcy Court resolves the dispute pursuant to
a Final Order.
10.06. DISTRIBUTION OF UNCLAIMED PROPERTY. Any
distribution of property under this Plan that is unclaimed after
two years following the Effective Date shall irrevocably revert
to Reorganized Wherehouse, without regard to state escheatment
laws.
ARTICLE 11
RESOLUTION OF DISPUTED CLAIMS
11.01. OBJECTIONS TO CLAIMS. Any party in interest may
object to an Impaired Claim, except a Claim that is Allowed as
set forth in this Plan. Any such objection must be filed and
served no later than the later of (a) the 60th day following the
Effective Date, (b) 30 days after the filing of the proof of
claim of such Claim, or (c) any later day set by order of the
Bankruptcy Court, which the Debtors or Reorganized Wherehouse may
request on an ex parte basis. Only Reorganized Wherehouse may
object to Claims that are not Impaired. Objections to Claims,
except Claims that are Allowed pursuant to this Plan, may be
filed and served by Reorganized Wherehouse at any time.
11.02. PROCEDURE. Unless otherwise ordered by the
Bankruptcy Court, the Debtors or Reorganized Wherehouse shall
litigate the merits of each Disputed Claim until it is abandoned
by the Holder, determined by Final Order or compromised and
settled by the Debtors or Reorganized Wherehouse, subject to any
required approval of the Bankruptcy Court.
11.03. NO DISTRIBUTIONS ON DISPUTED CLAIMS. No payments
or distributions shall be made in respect of any Disputed Claim.
11.04. ESTIMATION; PARTIAL ALLOWANCE. In order to
effectuate distributions pursuant to the Plan and avoid undue
delay in the administration of the Estates, the Debtors (prior to
the Effective Date) and Reorganized Wherehouse (after the
Effective Date) shall have the right to seek an order of the
Bankruptcy Court, after notice and a hearing (which notice may be
limited to the holder of such Disputed Claim and which hearing
may be held on an expedited basis), estimating a Disputed Claim
pursuant to Section 502(c) of the Bankruptcy Code or providing
that a Disputed Claim shall be Allowed in part, with the rest to
remain Disputed.
ARTICLE 12
DISCHARGE, RELEASE AND PRESERVATION OF CLAIMS
12.01. DISCHARGE AND TERMINATION. If this Plan becomes
effective as set forth in Section 13.02, the confirmation of this
Plan shall (i) discharge the Debtors, the Estates and Reorganized
Wherehouse from any debt that arose before the Confirmation Date,
any debt of the kind specified in Section 502(g), Section
502(h) or Section 502(i) of the Bankruptcy Code, all Claims
treated in this Plan, all contingent and unliquidated liabilities
of every type and description to the fullest extent discharge of
such liabilities is permitted under the Bankruptcy Code, and all
other Claims against either or both of the Debtors or the Estates
that were outstanding, accrued or existing, or might reasonably
have been asserted, on the Confirmation Date, in each instance
whether or not a proof of such Claim is filed or deemed filed,
whether or not such Claim is Allowed, and whether or not the
holder of such Claim has voted on this Plan, and (ii) terminate
all rights and interests of the Holders of all Interests.
12.02. DISTRIBUTIONS IN COMPLETE SATISFACTION. If this
Plan becomes effective as set forth in Section 13.02, the
distributions and rights provided under this Plan shall be in
complete satisfaction, discharge and release, effective as of the
Confirmation Date, of all Claims against and Interests in the
Debtors and the Estates and all liens upon any property of the
Estates or Reorganized Wherehouse.
12.03. INJUNCTION. The discharge provided in Section
12.01 shall also operate as an injunction restraining any Entity
from commencing or continuing any action, suit or proceeding, or
employing any process, or otherwise acting, to collect, offset or
recover any Claim discharged under this Plan to the fullest
extent authorized or provided by the Bankruptcy Code, including
Section 524 and Section 1141 thereof. The Confirmation Order
shall constitute an injunction enjoining any Entity from
enforcing or attempting to enforce any Cause of Action against
any present or former shareholder, director, officer, employee,
attorney or agent of either or both of the Debtors based on,
arising from or relating to any failure to pay, or make provision
for payment of, any amount payable in respect of any Priority Tax
Claim on which the payments due under Section 3.01 have been made
or are not yet due under Section 3.01.
12.04. RELEASE BY DEBTORS AND DEBTORS IN POSSESSION.
Pursuant to Section 1123(b)(3) of the Bankruptcy Code, if this
Plan becomes effective as set forth in Section 13.02, the
Debtors, in their individual capacity and as Debtors in
Possession, for and on behalf of the Estates, hereby release and
discharge, absolutely, unconditionally, irrevocably and forever:
(A) CERTAIN BANKRUPTCY CAUSES OF ACTION. Any and
all Causes of Action that may be enforceable by either or
both of the Debtors or either or both of the Debtors in
Possession under Section 510, Section 542, Section 544,
Section 545, Section 546, Section 547, Section 548,
Section 549, Section 550 and Section 553 of the
Bankruptcy Code or under similar state laws, including
fraudulent conveyance and fraudulent transfer laws, except
only that the following Causes of Action shall be reserved
and preserved: (i) any and all 1992 Merger Consideration
Recovery Claims, and (ii) any and all Causes of Action
against any Holder of a Miscellaneous Secured Claim based on
or arising from or relating to such Miscellaneous Secured
Claim or any act, omission, wrongful conduct, occurrence or
event related thereto; and
(B) CAUSES OF ACTION RELATED TO CLAIMS, INTERESTS
OR THE CASES. Any and all Causes of Action against any
person or Entity (including all present and former
directors, officers, attorneys, advisors, investment
bankers, consultant and agents acting for the Debtors or the
Estates, all Holders of Claims or Interests treated herein,
and all present and former members of the Official
Committee, the Trade Committee and the Senior Lenders and
their attorneys and advisors) in any manner arising from,
based on or relating to the subject matter of, or the
transaction or event giving rise to, any Claim or Interest
that is treated in this Plan or the restructuring of such
Claims and Interests prior to or in the Chapter 11 Cases or
any act, omission, occurrence or event in any matter related
to any such transaction, event or restructuring, except
Causes of Action (i) based on or arising from a promissory
note or other instrument or a contract or quasi-contract,
(ii) based on or arising from intentional fraud or
defalcation, willful misconduct, wrongful trade practices or
willful violation of law, (iii) asserted in proceedings
pending on the Confirmation Date, (iv) against any Holder of
a Miscellaneous Secured Claim based on, arising from or
relating to such Miscellaneous Secured Claim or any act,
omission, wrongful conduct, occurrence or event related
thereto, or (v) that are 1992 Merger Consideration Recovery
Claims.
Reorganized Wherehouse (x) shall not succeed to any Cause of
Action released and discharged pursuant to this Section 12.04,
(y) shall be bound, to the same extent the Debtors are bound, by
each and all of the releases set forth herein, and (z) pursuant
to the transfer of property of the Estates to be made to it on
the Effective Date, shall succeed to and be entitled to enforce
each of the Causes of Action that are reserved and preserved
pursuant to the express provisions of this Section 12.04.
12.05. RELEASE BY HOLDERS OF CLAIMS AND INTERESTS. Each
Entity that accepts any distribution on its Claim made pursuant
to this Plan (a "Release Obligor") shall be presumed conclusively
to have released and discharged the Debtors, the Estates,
Reorganized Wherehouse and each other Entity that accepts any
distribution under this Plan and any other Holder of a Claim or
Interest that expressly agrees in writing to be reciprocally
bound by the provisions of this Section 12.05, and their
respective present and former affiliates, shareholders,
directors, officers, attorneys, advisors, financial advisors,
investment bankers and agents, and all of their respective heirs,
representatives, successors and assigns, and any Entity that may
be liable derivatively through any of the foregoing, absolutely,
unconditionally, irrevocably and forever, from any Cause of
Action arising from, based on or relating to the subject matter
of, or the transaction or event giving rise to, the Claim on
which the Release Obligor received such distribution or any act,
omission, occurrence or event in any manner related to such
subject matter, transaction or event, except any Causes of Action
(i) based on or arising from a promissory note or other
instrument or a contract or quasi-contract, (ii) based on or
arising from intentional fraud or defalcation, willful
misconduct, wrongful trade practices or willful violation of law,
or (iii) asserted in proceedings pending on the Confirmation
Date. The release and discharge described in the preceding
sentence shall further extend to the matters set forth in Section
5.07(c), if the conditions set forth therein are met, and shall
be enforceable as a matter of contract against (i) any Entity
that accepts any distribution pursuant to this Plan, and (ii) any
Holder of any Claim or Interest that expressly agrees in writing
to be reciprocally bound by the provisions of this Section 12.05.
12.06. EXCULPATION. Neither the Debtors, nor the Estates,
nor Reorganized Wherehouse, nor the Bank Agent or its
predecessors or successors, nor any past, present or future
member of the Senior Lenders, Official Committee or the Trade
Committee, nor any Holder of any Claim or Interest treated in
this Plan, nor any officer, director, shareholder, employee,
agent, attorney, accountant or advisor to any of them, shall be
obligated in any manner under this Plan or in respect of or by
reason of the filing, negotiation, prosecution, confirmation,
consummation or implementation of this Plan or any action taken
or not taken in connection therewith, or shall have or incur any
liability to any Holder of any Claim or Interest or any other
Entity in respect of any such matters or any information provided
or statement made in the Disclosure Statement or omitted
therefrom, except that (i) the Debtors and Reorganized Wherehouse
shall fulfill the obligations expressly set forth in this Plan
and (ii) each Entity shall remain liable, to the extent provided
by law, for its own willful misconduct or recklessness as
determined pursuant to a Final Order. Each such person and
Entity shall be entitled to rely upon the advice of counsel with
respect to its duties and responsibilities under the Plan and
shall be fully protected in acting or in refraining from acting
in accordance with such advice or in any manner approved or
ratified by the Bankruptcy Court.
12.07. INDEMNIFICATION OBLIGATIONS.
(A) TERMINATION OF INDEMNIFICATION OBLIGATIONS.
Except as set forth in Section 12.07(b), all obligations of the
Debtors or the Estates 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 this Plan, 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
proceedings shall be discharged under this Plan and all
undertakings and agreements for or relating to any such
indemnification, contribution or reimbursement are hereby
rejected and terminated.
(B) LIMITED CONTINUING INDEMNIFICATION. No
obligation of either or both of the Debtors, 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 the Debtors 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 this
Plan, (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. Pursuant to the Asset Purchase
Agreement, Reorganized Wherehouse shall assume and agree 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 Reorganized Wherehouse to pay any Claim or other
liability or to perform any obligation binding on it pursuant to
this Plan or the Asset Purchase 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 this Plan or any such indemnification obligation is
preserved pursuant to this Section 12.07(b); 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 12.07(b).
12.08. PRESERVATION OF INSURANCE. The Debtors' discharge
provided in this Plan shall not diminish or impair the
enforceability of any insurance policies that may cover claims
against the Debtors or any other person or Entity.
12.09. GOOD FAITH SETTLEMENT OF ACQUISITION RELATED CAUSES
OF ACTION. Except as provided in Section 12.10, on the
Effective Date the Debtors (whether as Debtors, debtors in
possession or on behalf of creditors) and all persons or Entities
asserting claims or who may in the future assets claims
derivatively or otherwise through or on behalf of any of the
Debtors and all present and former directors, officers, agents,
attorneys, advisors, financial advisors, investment bankers,
employees and shareholders of the Debtors, in their respective
capacities as such (collectively, the "Wherehouse Releasors")
shall be deemed, for good and valuable consideration, to have
released and discharged all Causes of Action against any and all
Entities (the "Released Entities") that any or all of the
Wherehouse Releasors ever had, now have or hereafter can, shall
or may have against any Entity by reason of, arising in
connection with, or related in any way to the 1992 Acquisition
(such Causes of Action being referred to herein as the
"Acquisition Related Causes of Action"), including (i) the offer,
sale, purchase or resale of any securities of Wherehouse or
Holdings, or any registration statement, preliminary prospectus,
prospectus, disclosure or omission related thereto, (ii) any
extension, supplementation or restructuring of any indebtedness
of any of the Debtors, including any breach of duty owed to any
of the Debtors arising from any extension, supplementation or
restructuring of that indebtedness, (iii) any engagement or role
of, or services rendered by, any or all of the Released Entities
in connection with the foregoing, and (iv) any and all actions
taken or not taken by the Released Entities in connection with
the Debtors' prepetition indebtedness.
Pursuant to Bankruptcy Rule 9019 and any applicable state
law and as consideration for the compromises, satisfaction of
Claims, distributions and other benefits provided under this
Plan, but (except as provided in Section 12.10) the provisions of
this Plan and the treatment of the Claims and Interests set forth
herein shall constitute a good faith compromise and settlement of
the Acquisition Related Causes of Action and any claims for
indemnity or contribution (or similar claims) that could be
brought (or could have been brought) by the Wherehouse Releasors
against or involving Released Entities, which compromise and
settlement is in the best interest of creditors and is fair,
equitable and reasonable. Confirmation of this Plan constitutes
approval by the Bankruptcy Court of this settlement as a good
faith settlement of all Acquisition Related Causes of Action that
the Wherehouse Releasors may hold against the Released Entities.
The Bankruptcy Court's approval of this settlement pursuant to
Bankruptcy Rule 9019 and its finding that this is a good faith
settlement pursuant to any applicable state laws, including the
States of Delaware, California and New York, given and made after
due notice and opportunity for hearing, shall bar any claim
against the Released Entities for indemnity or contribution (or
similar claim) by any Entity that is claimed to be a joint tort
feasor or otherwise jointly liable in respect of such Acquisition
Related Causes of Action with such Released Entities.
12.10. MERGER CONSIDERATION RECOVERY CLAIMS NOT RELEASED.
Notwithstanding Section 12.09 or any of the other provisions of
this Plan, this Plan shall not release any 1992 Merger
Consideration Recipient from any 1992 Merger Consideration
Recovery Claim.
12.11. SUBORDINATION. Except as otherwise provided in
Section 5.07(c), distributions under this Plan take into account
the relative priorities of the Claims and Interests in each Class
in connection with any and all contractual, legal or equitable
subordination provisions or rights relating thereto.
Accordingly, subject to Section 5.07(c), (i) any distributions
under this Plan shall be received and retained free of and from
any obligations to hold or transfer the same to any other
creditor and shall not be subject to levy, garnishment,
attachment or other legal process by any Holder by reason of
claimed contractual subordination rights and (ii) the
Confirmation Order shall constitute an injunction enjoining any
Entity from enforcing or attempting to enforce any contractual,
legal or equitable subordination rights to property distributed
under this Plan.
ARTICLE 13
CONDITIONS TO CONSUMMATION OF THE PLAN
13.01. CONDITIONS. This Plan shall not become effective,
and no obligations and rights set forth in this Plan as of the
Effective Date or thereafter shall come into existence, unless
each of the following conditions is met on the Effective Date:
(A) CONFIRMATION ORDER. The Confirmation Order
shall have been entered and shall not be in any respect stayed.
(B) REORGANIZED WHEREHOUSE. Reorganized Wherehouse
shall have been duly incorporated. The New Certificate of
Incorporation and the New Bylaws shall be its sole governing
documents. Reorganized Wherehouse shall have duly authorized,
executed and delivered the Asset Purchase Agreement, the Warrant
Agreement, and all New Common Stock and Warrants to be
distributed pursuant to this Plan. Each of the representations
and warranties of Reorganized Wherehouse set forth in the Asset
Purchase Agreement and in the Warrant Agreement shall be true and
correct. Reorganized Wherehouse shall have fully satisfied all
conditions therein and shall have duly and punctually have
performed or tendered performance of all its obligations binding
thereunder, and such satisfaction, performance and tender of
performance shall not be in any respect restrained by order of
any court of competent jurisdiction.
(C) FUNDING UNDER WORKING CAPITAL FACILITY.
Reorganized Wherehouse and a lender shall have entered into a
definitive written agreement offering Reorganized Wherehouse a
revolving credit facility in an amount and on terms, conditions
and collateral security satisfactory to and approved by the
Debtors and the Trade Committee, and all conditions of closing
set forth in such agreement shall have been satisfied or waived,
subject to the actions to be taken under this Plan on the
Effective Date.
(D) DELIVERY OF DOCUMENTS. All documents
required to be delivered under this Plan or under the Asset
Purchase Agreement or the Warrant Agreement on or prior to the
Effective Date shall have been executed and delivered by the
parties thereto.
13.02. CONSUMMATION. This Plan shall become effective
when the conditions set forth in Section 13.01 are met.
Reorganized Wherehouse shall thereupon perform the obligations
required under this Plan to be performed by it on the Effective
Date. The filing with the Bankruptcy Court of a certificate of a
responsible officer of Reorganized Wherehouse to the effect that
the conditions in Section 13.01 have been met and that
Reorganized Wherehouse has substantially performed the
obligations required under this Plan to be performed by it on the
Effective Date shall establish conclusively that this Plan has
been substantially consummated.
ARTICLE 14
MISCELLANEOUS PROVISIONS
14.01. BANKRUPTCY COURT TO RETAIN JURISDICTION. The
property of the Estates and affairs of the Debtors shall remain
subject to the jurisdiction of the Bankruptcy Court until this
Plan becomes effective as set forth in Section 13.02. After this
Plan becomes effective, the Bankruptcy Court shall retain
jurisdiction over the Debtors and Reorganized Wherehouse, as
liquidating agent for the Debtors and the Estates, and the
consolidated Chapter 11 Cases to the fullest extent permitted by
law, and shall have such jurisdiction exclusively to the fullest
extent permitted by law, including for the purpose of hearing all
requests for relief and determining all disputes relating to (i)
this Plan and the implementation, interpretation and enforcement
hereof, (ii) the allowance, amount and classification of Claims
and Interests treated in this Plan, (iii) the rights and
obligations of any Holder of any such Claim or Interest, whether
as against the Debtors or Reorganized Wherehouse or as against
any other Holder, (iv) compensation of professional persons, (v)
any and all applications, motions, adversary proceedings and
contested or litigated matters pending on the Effective Date and
arising under Chapter 11 or arising in or related to the Chapter
11 Cases or this Plan, (vi) the interpretation or enforcement of
the Confirmation Order or any proceedings or matters set forth or
contemplated therein, and (vii) any other matter within the
continuing jurisdiction of the Bankruptcy Court.
14.02. BINDING EFFECT OF THIS PLAN. The provisions of
this Plan shall be binding upon and inure to the benefit of the
Debtors, the Estates, Reorganized Wherehouse, any Holder of any
Claim or Interest treated herein, and each of their respective
predecessors, successors, assigns, agents, officers and directors
and, to the fullest extent permitted under Section 1141(a) of
the Bankruptcy Code and other applicable law, each other Entity
affected by this Plan.
14.03. NONVOTING STOCK. In accordance with Section
1123(a)(6) of the Bankruptcy Code, the certificate of
incorporation of Reorganized Wherehouse shall contain a provision
prohibiting the issuance of nonvoting equity securities by
Reorganized Wherehouse.
14.04. AUTHORIZATION OF CORPORATE ACTION. The entry of
the Confirmation Order shall constitute authorization for the
Debtors and Reorganized Wherehouse to take or cause to be taken
all corporate actions necessary or appropriate to consummate and
implement the provisions of this Plan prior to, on and after the
Effective Date, and all such actions taken or caused to be taken
shall be deemed to have been authorized and approved by the
Bankruptcy Court. All such actions shall be deemed to have
occurred and shall be in effect pursuant to Section 303 of the
DGCL and the Bankruptcy Code, without any requirement of further
action by the stockholders or directors of the Debtors or
Reorganized Wherehouse. On the Effective Date, the appropriate
officers of Reorganized Wherehouse and members of its board of
directors are authorized and directed to execute and deliver the
agreements, documents and instruments contemplated by this Plan
in the name of and on behalf of Reorganized Wherehouse.
14.05. RETIREE BENEFITS. On and after the Effective Date,
Reorganized Wherehouse shall continue to pay all retiree
benefits, as that term is defined in Section 1114 of the
Bankruptcy Code, to the extent required by Section 1129(a)(13)
of the Bankruptcy Code, without prejudice to Reorganized
Wherehouse's rights under applicable non-bankruptcy law to
modify, amend or terminate the foregoing arrangements.
14.06. WITHDRAWAL OF THIS PLAN. The Debtors reserve the
right, at any time prior to the entry of the Confirmation Order,
to revoke or withdraw this Plan. If they do so, this Plan shall
be null and void.
14.07. FINAL ORDER. Except as otherwise expressly
provided in this Plan, any requirement in this Plan for a Final
Order may be waived by the Debtors or, after the Effective Date,
Reorganized Wherehouse upon written notice to the Bankruptcy
Court. No such waiver shall prejudice the right of any party in
interest to seek a stay pending appeal of any order that is not a
Final Order.
14.08. NOTICE. All notices required to be given under
this Plan, if any, shall be in writing and shall be sent by first
class mail, postage prepaid, or by overnight courier:
If to the Debtors to:
Wherehouse Entertainment, Inc.
19701 Hamilton Ave.
Torrance, CA 90502-1334
Attn: Jerry E. Goldress
(310) 538-2314
with copies to:
Latham & Watkins
633 West 5th Street, Suite 4000
Los Angeles, CA 90071-2007
Attn: Hendrik de Jong
Peter M. Gilhuly
(213) 485-1234
and
Young, Conaway Stargatt & Taylor
11th Floor - Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899-0391
Attn: Laura Davis Jones
(302) 571-6600
Any of the above may, from time to time, change its address for
future notices and other communications hereunder by filing a
notice of the change of address with the Bankruptcy Court. Any
and all notices given under this Plan shall be effective when
received.
14.09. DISSOLUTION OF COMMITTEES. When this Plan becomes
effective as set forth in Section 13.02, the Official Committee
and the Trade Committee shall cease to exist and their members
and employees or agents (including attorneys, investment bankers,
financial advisors, accountants and other professionals) shall be
released and discharged from all further authority, duties,
responsibilities and obligations relating to, arising from or in
connection with the Chapter 11 Cases.
14.10. CONTINUED CONFIDENTIALITY OBLIGATIONS. All members
of and advisors to the Official Committee or the Trade Committee
and each other person bound by a confidentiality agreement with
Wherehouse or Holdings shall continue to be obligated and bound
by the terms of such confidentiality agreement.
14.11. AMENDMENTS AND MODIFICATIONS. To the fullest
extent permitted under Section 1127 of the Bankruptcy Code, this
Plan may be altered, amended or modified by the Debtors at any
time prior to the Effective Date and by Reorganized Wherehouse
anytime thereafter.
14.12. TIME. Unless otherwise specified herein, in
computing any period of time prescribed or allowed by the Plan,
the day of the act or event from which the designated period
begins to run shall not be included. The last day of the period
so computed shall be included, unless it is not a Business Day,
in which event the period runs until the end of the next
succeeding day that is a Business Day.
14.13. SECTION 1145 EXEMPTION. To the fullest extent
permitted under Section 1145 of the Bankruptcy Code, the offer
and sale of the New Common Stock and the Warrants and
transactions in such securities shall be and are exempt from the
registration requirements of Section 5 of the Securities Act of
1933, as amended, and any state or local law requiring
registration for offer or sale of a security or registration or
licensing of an issuer of, underwriter of, or broker or dealer
in, such New Common Stock or Warrants. The offer and sale of the
New Common Stock and the Warrants under this Plan is deemed to be
a public offering of the New Common Stock and the Warrants.
14.14. SECTION 1146 EXEMPTION. To the fullest extent
permitted under Section 1146(c) of the Bankruptcy Code, the
issuance, transfer or exchange of any security under the Plan, or
the execution, delivery or recording of an instrument of transfer
pursuant to, in implementation of or as contemplated by the Plan,
or the revesting, transfer or sale of any real property of the
Debtors pursuant to, in implementation of or as contemplated by
the Plan shall not be taxed under any state or local law imposing
a stamp tax, transfer tax or similar tax or fee. Consistent with
the foregoing, each recorder of deeds or similar official for any
county, city or governmental unit in which any instrument
hereunder is to be recorded shall, pursuant to the Confirmation
Order, be ordered and directed to accept such instrument, without
requiring the payment of any documentary stamp tax, deed stamps,
stamp tax, transfer tax, intangible tax or similar tax.
<PAGE>
Wilmington, Delaware
October 4, 1996
Respectfully submitted,
WHEREHOUSE ENTERTAINMENT, INC.
By: /s/ Jerry E. Goldress
------------------------------
Jerry E. Goldress
Chairman
WEI HOLDINGS, INC.
By: /s/ Jerry E. Goldress
--------------------------------
Jerry E. Goldress
Chairman
LATHAM & WATKINS
Co-counsel for Debtors and
Debtors in Possession
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
(213) 485-1234
Hendrik de Jong
Peter M. Gilhuly
- and -
<PAGE>
YOUNG, CONAWAY, STARGATT
& TAYLOR
Co-counsel for Debtors and
Debtors in Possession
11th Fl.-Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899-0391
(302) 571-6642
Laura Davis Jones (#2436)
A Member of the Firm
<PAGE>
EXHIBIT A
ASSET PURCHASE AGREEMENT
AMONG
WHEREHOUSE ENTERTAINMENT, INC.
AND
WEI HOLDINGS, INC.
(COLLECTIVELY, "SELLER"),
AND
____________________
("PURCHASER")
____________ __, 1996
<PAGE>
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. . . . . . . . . . . . . . . . 3
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 . . . . 5
3.1 Due Incorporation. . . . . . . . . . . . . . . . . . . 5
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. . . 6
4.1 Actions or Proceedings . . . . . . . . . . . . . . . . 6
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. . . . . . . . . . . . . . 7
4.8 Appointment of Directors . . . . . . . . . . . . . . . 7
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 . . . . . . . . . . . 8
6.1 Employment . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VII
CLOSING . . . . . . . . . . . . . 8
7.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . 8
7.2 Deliveries by Seller . . . . . . . . . . . . . . . . . 9
7.3 Deliveries by Purchaser. . . . . . . . . . . . . . . . 9
ARTICLE VIII
MISCELLANEOUS. . . . . . . . . . . . 9
8.1 Amendment; Waiver. . . . . . . . . . . . . . . . . . . 9
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. . . . . . . . . . . . . . . 11
8.8 Tax Matters. . . . . . . . . . . . . . . . . . . . . . 11
8.9 Other Instruments. . . . . . . . . . . . . . . . . . . 12
8.10 Entire Understanding . . . . . . . . . . . . . . . . . 12
8.11 Waiver of Jury Trial . . . . . . . . . . . . . . . . . 12
8.12 Indemnification Obligations. . . . . . . . . . . . . . 12
8.13 Conflict with Plan of Reorganization or
Disclosure Statement . . . . . . . . . . . . . . . . . 13
ARTICLE IX
DEFINITIONS . . . . . . . . . . . . 13
<PAGE>
EXHIBITS
Exhibit A Form of Bill of Sale
Exhibit B Form of Trademarks Assignment
Exhibit C Form of Patents Assignment
Exhibit D Form of Warrant Agreement
Exhibit E Form of Liquidation Agent Agreement
Exhibit F Form of Assumption Agreement
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of
________________ __, 1996, 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
___________________, 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 the Plan of
Reorganization 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 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 at
the Closing 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 Agreement 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 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 Alvarez & 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 Alvarez & 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 Hart-Scott-Rodino 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
_______________________________________________, or such other
place as may be agreed upon, at 8:00 A.M. (Los Angeles time) on
_________ __, 199_ 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) Possession of all of the Acquired Assets;
(b) A Bill of Sale in the form set forth in Exhibit A;
(c) A Trademarks Assignment in the form set forth in
Exhibit B;
(d) A Patents Assignment in the form set forth in
Exhibit C;
(e) 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;
(f) All certificates of title to any vehicles included
in the Acquired Assets;
(g) A Liquidation Agent Agreement in the form set
forth in Exhibit E; and
(h) 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) The Shares required to be issued and delivered
pursuant to Section 2.1(a);
(b) The Warrant Agreement required to be issued and
delivered pursuant to Section 2.1(a), if Warrants are to be
issued pursuant to the Plan of Reorganization;
(c) A Liquidation Agent Agreement in the form set
forth on Exhibit E; and
(d) An Assumption Agreement in the form set forth on
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: ____________________________
Telecopy: ____________________________
with a copy to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, CA 90071
Attention: Hendrik de Jong
Telecopy: (213) 891-8763
and
(b) If to Purchaser, addressed as follows:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
Attention:
Telecopy:
with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attention: C. James Levin, Esq.
Ben H. Logan, Esq.
Telecopy: (213) 669-6407
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 __________ __, 1996
between Alvarez & Marsal and Purchaser.
"A&M OPTION AGREEMENT" shall mean the Option Agreement dated
as of __________ __, 1996 between Alvarez & 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 __________ __, 1996 between
Purchaser and Alvarez & 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 Credit Agreement
dated as of _______, 1996 among the Purchaser and
____________________, 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.
"HART-SCOTT-RODINO ACT" shall mean the Hart-Scott-Rodino
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, 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 AGREEMENT" shall mean the Warrant Agreement,
substantially in the form attached hereto as Exhibit D,
representing the Warrants to be issued as part of the Total
Purchase Price, if Warrants are to be issued pursuant to the Plan
of Reorganization.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered on the date first written
above.
WHEREHOUSE ENTERTAINMENT, INC.
By:
------------------------------
Name:
Title:
WEI HOLDINGS, INC.
By:
------------------------------
Name:
Title:
____________________
By:
-------------------------------
Its:
-------------------------------
<PAGE>
EXHIBIT A
BILL OF SALE
For good and valuable consideration, receipt of which
is hereby acknowledged, pursuant to the Asset Purchase Agreement,
dated as of __________, 1996 (the "AGREEMENT"), among Wherehouse
Entertainment, Inc. and WEI Holdings, Inc., each a Delaware
corporation (collectively "SELLER") and
_________________________, 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 Bill 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 Bill of
Sale to be executed this _____ day of __________, 1996.
WHEREHOUSE ENTERTAINMENT, INC.
By:
-------------------------------
Name:
Title:
WEI HOLDINGS, INC.,
By:
---------------------------------
Name:
Title:
ACCEPTED AND AGREED:
____________________
By: _______________________________
Its: _______________________________
<PAGE>
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 __________, 1996 (the
"AGREEMENT"), by and between Wherehouse Entertainment, Inc. and
WEI Holdings, Inc., each a Delaware corporation (collectively
"SELLER"), and ____________________, 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 ____ day of __________, 1996.
WHEREHOUSE ENTERTAINMENT, INC.
By:
-----------------------------
Name:
Title:
WEI HOLDINGS, INC.
By:
------------------------------
Name:
Title:
ACCEPTED AND AGREED:
____________________
By: _______________________________
Its: _______________________________
<PAGE>
ANNEX A
TRADEMARKS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
REGISTRATION REGISTRATION JURISDICTION
DESCRIPTION SERIAL NO. NO. DATE
- ----------- ---------- ----------- ------------ -------------
</TABLE>
<PAGE>
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 __________, 1996 (the
"AGREEMENT"), by and between Wherehouse Entertainment, Inc. and
WEI Holdings, Inc., each a Delaware corporation (collectively
"SELLER"), and ____________________, 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 ____ day of __________, 1996.
WHEREHOUSE ENTERTAINMENT, INC.
By:
----------------------------
Name:
Title:
WEI HOLDINGS, INC.
By:
-----------------------------
Name:
Title:
ACCEPTED AND AGREED:
____________________
By: _______________________________
Its: _____________________________
<PAGE>
ANNEX A
PATENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
REGISTRATION REGISTRATION JURISDICTION
DESCRIPTION SERIAL NO. NO. DATE
- ----------- ---------- ----------- ------------ -------------
</TABLE>
<PAGE>
EXHIBIT D
FORM OF WARRANT AGREEMENT
[to come]
<PAGE>
EXHIBIT E
FORM OF LIQUIDATION AGENT AGREEMENT
LIQUIDATION AGENT AGREEMENT
This Liquidation Agent Agreement (this "AGREEMENT") is
entered into as of __________ __, 199_, by and among Wherehouse
Entertainment, Inc., and its parent, WEI Holdings, Inc., each a
Delaware corporation (collectively, the "DEBTORS"), and
[_______________________], 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
_____________, 199_ (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 No. 95-911 (HSB)
(Jointly 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, sue 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.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the first date written above.
[_______________________________]
By:
-------------------------------
Its
-------------------------------
[WEI ACQUISITION CO.]
By:
--------------------------------
Its
---------------------------------
WEI HOLDINGS, INC.
By:
--------------------------------
Its
---------------------------------
<PAGE>
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 __________, 1996 (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 ____ day of
__________, 1996.
[REORGANIZED WHEREHOUSE]
By:
--------------------------------
Its
---------------------------------
<PAGE>
EXHIBIT B
BYLAWS
OF
_______________________
(A DELAWARE CORPORATION)
________________________________________
ARTICLE I
OFFICES
Section 1. Principal Executive Office. The principal
executive office for the transaction of the business of the
Corporation shall be located at such place within or without the
State of Delaware as shall be fixed from time to time by the
board of directors, and if no place is fixed by the board of
directors, such place as shall be fixed by the president.
Section 2. Other Offices. Branch offices may at any
time be established by the board of directors at any place or
places where the Corporation is qualified to do business.
ARTICLE II
NUMBER OF DIRECTORS
The authorized number of directors of the Corporation
shall be not less than as stated in the Certificate of
Incorporation. The initial number of directors shall be one. In
connection with the acquisition by the Corporation of the assets
of WEI Holdings, Inc. and Wherehouse Entertainment, Inc. (the
"Acquisition"), the initial director shall appoint other members
to the board of directors and the board shall consist of five
directors, until changed by an amendment to the By-Laws duly
adopted by the board of directors amending this Article II in
accordance herewith. Directors need not be stockholders of the
Corporation. As used in these Bylaws, the term "authorized
number of directors" means the total number of directors which
the Corporation would have if there were no vacancies.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All annual meetings of
stockholders and all other meetings of stockholders shall be held
at any place within or without the State of Delaware which may be
designated by the board of directors, or by the written consent
of all persons entitled to vote thereat, given either before or
after the meeting and filed with the secretary of the
Corporation. Absent such designation or written consent,
meetings shall be held at the principal executive office of the
Corporation.
Section 2. Annual Meetings. The annual meeting of
stockholders of the Corporation shall be held in each year on
such date and at such time as may be designated from time to time
by the board of directors. Directors shall be elected at the
annual meeting, and any other business may be transacted which is
within the power of the stockholders and allowed by law.
Section 3. Special Meetings. Special meetings of the
stockholders, for any purpose whatsoever, may be called by the
board of directors or by the holders of a majority of shares then
entitled to vote at an election of directors.
Section 4. Notice of Meetings, Annual or Special.
Except as otherwise required by law, written notice of each
annual or special meeting of stockholders shall be given not less
than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder entitled to vote thereat. Such
notice shall state the place, date and hour of the meeting and,
in the case of a special meeting, shall also state the purpose or
purposes for which the meeting is called. Except as otherwise
expressly required by law, notice of any adjourned meeting of the
stockholders need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken.
Notice of a stockholders' meeting shall be given either
personally or by mail or by other means of written communication,
addressed to the stockholder at the address of such stockholder
appearing on the books of the Corporation or given by the
stockholder to the Corporation for the purpose of notice. Notice
by mail shall be deemed to have been given at the time a written
notice is deposited in the United States mail, postage prepaid.
Any other written notice shall be deemed to have been given at
the time it is personally delivered to the recipient or is
delivered to a common carrier for transmission, or actually
transmitted by the person giving the notice by electronic means,
to the recipient.
Section 5. Persons Entitled to Vote. If no record
date is fixed by the board of directors pursuant to Section 6 of
this Article III, the record date for the determination of
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof shall be at the close of
business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held; the
record date for determining stockholders for any other purpose
shall be at the close of business on the date on which the board
of directors adopts the resolution relating thereto.
Section 6. Record Date. The board of directors may
fix, in advance, a record date for the determination of the
stockholders entitled to notice of any meeting or to vote at such
meeting, entitled to vote by written consent on matters approved
by the board of directors or entitled to receive payment of any
dividend or other distribution, or any allotment of rights, or to
exercise rights in respect of any other lawful actions. The
record date so fixed shall be not more than sixty (60) days nor
less than ten (10) days prior to the date of the meeting, not
prior to nor more than ten (10) days after the date of the
resolution fixing the record date for votes by written consent
and not more than sixty (60) days prior to any other action,
respectively.
Section 7. Presiding Officer. Unless the board of
directors shall otherwise provide in advance of any meeting of
stockholders, at each meeting of the stockholders, the chairman
of the board shall preside, or if none, or if absent or unable to
act, the president shall preside, or in the case of the absence
or inability to act of the chairman of the board and of the
president, a vice president shall preside, or in the case of the
absence of inability to act of the chairman of the board,
president and a vice president, a director or stockholder,
appointed by the stockholders at the meeting, shall preside.
Section 8. Quorum. The presence at a meeting in
person or by proxy of the persons entitled to vote a majority of
the voting shares constitutes a quorum for the transaction of
business. The stockholders present at a duly called or held
meeting at which a quorum is present may continue to do business
until adjournment of such meeting, notwithstanding the withdrawal
of such number of stockholders so as to leave less than a quorum,
if any action taken, other than adjournment, is approved by at
least a majority of the shares required to constitute a quorum.
Except as otherwise provided by law, or in the Certificate of
Incorporation of the Corporation, the affirmative vote of a
majority of the shares represented at a meeting at which a quorum
is present shall be the act of the stockholders.
Section 9. Adjourned Meetings and Notice Thereof. Any
annual or special meeting of the stockholders, whether or not a
quorum is present, may be adjourned from time to time by a vote
of the majority of the shares present in person or by proxy.
When a meeting is adjourned for thirty (30) days or more, or if a
new record date for the adjourned meeting is fixed by the board
of directors, notice of the adjourned meeting shall be given to
such stockholders of record entitled to vote at the adjourned
meeting as in the case of any original meeting. When a meeting
is adjourned for less than thirty (30) days, and a new record
date is not fixed by the board of directors, it shall not be
necessary to give any notice of the time and place of the
adjourned meeting or of the business to be transacted thereat
other than by announcement at the meeting at which the
adjournment is taken, provided that only business which might
have been transacted at the original meeting may be conducted at
such adjourned meeting.
Section 10. Voting. In all matters other than the
election of directors, when a quorum is present at any meeting,
the vote of the holders of a majority of the capital stock having
voting power present in person or represented by proxy shall
decide any question brought before such meeting, unless the
question is one upon which by express provision of applicable law
or of the Certificate of Incorporation, a different vote is
required in which case such express provision shall govern and
control the decision of such question. Directors shall be
elected by a plurality of the votes of the shares present in
person or represented by proxy. Such vote may be by voice vote
or by written ballot; provided, however, that the board of
directors may, in its discretion, require a written ballot for
any vote.
Unless otherwise provided in or pursuant to the
Certificate of Incorporation, each stockholder shall at every
meeting of the stockholders be entitled to one vote in person or
by proxy for each share of the capital stock having voting power
held by such stockholder.
Section 11. Action Without Meeting. Any action which,
under any provision of the General Corporation Law of the State
of Delaware, may be taken at a meeting of the stockholders may be
taken without a meeting and without prior notice and without a
vote if a consent or consents in writing, setting forth the
action so taken, (i) shall be signed by the holders of
outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at
a meeting at which all shares entitled to vote thereon were
present and voted, and (ii) shall be delivered to the Corporation
by delivery to its registered office by hand or by certified or
registered mail, return receipt requested, its principal place of
business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stock-
holders are recorded; provided, however, that if any action is
approved by written consent of less than all stockholders
entitled to vote, prompt notice shall be given (in the same
manner as notice of meetings is to be given) of such action to
all stockholders entitled to vote who did not consent in writing
to such action.
Section 12. Proxies. Each stockholder entitled to
vote at a meeting of stockholders or to express consent or
dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy;
provided, however, that no such proxy shall be voted or acted
upon after 3 years from its date, unless the proxy expressly
provides for a longer period. Without limiting the manner in
which a stockholder may authorize another person or persons to
act for him as a proxy pursuant to this section, the following
shall constitute a valid means by which a stockholder may grant
such authority:
(1) A stockholder may execute a writing
authorizing another person or persons to act for him as
proxy. Execution may be accomplished by the stock-
holder or his authorized officer, director, employee or
agent signing such writing or causing his or her
signature to be affixed to such writing by any
reasonable means including, but not limited to, by
facsimile signature.
(2) A stockholder may authorize another
person or persons to act for him as proxy by
transmitting or authorizing the transmission of a
telegram, cablegram, or other means of electronic
transmission to the person who will be the holder of
the proxy or to a proxy solicitation firm, proxy
support service organization or like agent duly
authorized by the person who will be the holder of the
proxy to receive such transmission, provided that any
such telegram, cablegram or other means of electronic
transmission must either set forth or be submitted with
information from which it can be determined that the
telegram, cablegram or other electronic transmission
was authorized by the stockholder. If it is determined
that such telegrams, cablegrams or other electronic
transmissions are valid, the inspectors or, if there
are no inspectors, such other persons making that
determination shall specify the information upon which
they relied.
Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to
this section may be substituted or used in lieu of the original
writing or transmission for any and all purposes for which the
original writing or transmission could be used, provided that
such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing
or transmission. A duly executed proxy shall be irrevocable if
it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of
whether the interest with which it is coupled is an interest in
the stock itself or an interest in the Corporation generally.
Section 13. List of Stockholders. It shall be the
duty of the secretary or other officer of the Corporation who
shall have charge of its stock ledger, either directly or through
another officer of the Corporation designated by him or through a
transfer agent or transfer clerk appointed by the board of
directors, to prepare, at least ten (10) days before every
meeting of the stockholders, a complete list of the stockholders
entitled to vote thereat, arranged in alphabetical order and
showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder for any purpose
germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at
the place where the meeting is to be held or at another place
within the city where the meeting is to be held if such other
place is specified in the notice of the meeting. The list shall
be produced at and for the duration of the meeting for inspection
by any stockholder who shall be present thereat. The original or
duplicate stock ledger shall be exclusive evidence of the
stockholders entitled to examine such list or the books of the
Corporation, or to vote in person or by proxy at such election.
ARTICLE IV
DIRECTORS AND MANAGEMENT
Section 1. GENERAL POWERS. The business and affairs
of the Corporation shall be managed by or under the direction of
the board of directors, which may exercise all such authority and
powers of the Corporation to do all such lawful acts and things
as are not by law, the Certificate of Incorporation of the
Corporation or these ByLaws directed or required to be exercised
or done by the stockholders. Without limiting the generality of
the foregoing, it is hereby expressly declared that the directors
shall have the power:
(a) to appoint and remove at pleasure all
officers, managers, management companies, agents and
employees of the Corporation, prescribe their duties in
addition to those prescribed in these Bylaws, supervise
them, fix their compensation and require from them security
for faithful service; such compensation may be increased or
diminished at the pleasure of the directors;
(b) to conduct, manage and control the affairs
and business of the Corporation; to make rules and
regulations not inconsistent with the Certificate of
Incorporation or Delaware law or these Bylaws; to make all
lawful orders on behalf of the Corporation and to prescribe
the manner of executing the same;
(c) to appoint by resolution passed by a majority
of the authorized number of directors an executive and other
committees, each committee to consist of 1 or more of the
directors of the Corporation. The board may designate one
or more directors as alternate members of any committee who
may replace any absent or disqualified member at any meeting
of the committee. The directors may designate by resolution
to any such committee any of the powers and authority of the
board of directors in the management of the business and
affairs of the Corporation; provided, however, that no such
committee shall have the power or authority in reference to
amending the Certificate of Incorporation of the Corporation
(except that a committee may, to the extent authorized in
the resolution or resolutions providing for the issuance of
shares of stock adopted by the board of directors in
accordance with the provisions of the General Corporation
Law of the State of Delaware fix the designations and any of
the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or
classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of
shares of any series of stock or authorize the increase or
decrease of the shares of any series), adopting an agreement
of merger or consolidation, recommending to the stockholders
the sale, lease or exchange of all or substantially all of
the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending these Bylaws; and,
unless the resolution expressly so provides, no such
committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock or to adopt a
certificate of ownership and merger pursuant to Section 253
of the General Corporation Law of the State of Delaware.
The executive committee, if any, shall be composed of two
(2) or more directors. The provisions of these Bylaws
regarding notice and meetings of directors shall apply to
all committees;
(d) to designate from time to time the person or
persons who may sign or endorse checks, drafts, or other
orders for payment of money, notes, or other evidences of
indebtedness, issued in the name of, or payable to, the
Corporation, and to prescribe the manner of collecting and
depositing funds of the Corporation, and the manner of
drawing of checks thereon;
(e) to authorize the issuance of stock of the
Corporation, from time to time, upon such terms as may be
lawful;
(f) to prepare an annual report to be sent to the
stockholders after the close of the fiscal or calendar year
of this corporation, which report shall comply with the
requirements of law. To the extent permitted by law, the
requirements that an annual report be sent to stockholders
and the time limits for sending such reports are hereby
waived, the directors, nevertheless, having the authority to
cause such report to be prepared and sent to stockholders;
(g) to adopt, make and use a corporate seal, and
to prescribe the forms of certificates of stock, and to
alter the form of such seal and such certificates from time
to time as in their judgment they may deem best; and
(h) to borrow money and incur indebtedness for
the purposes of the Corporation, and to cause to be executed
and delivered therefor, in the corporate name, promissory
notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidences of debt and
securities therefor.
Section 2. Term of Office. Each director shall hold
office until the annual meeting of the stockholders next
following his election and until his successor is elected and
qualified, or until his earlier death, or resignation or removal
in the manner hereinafter provided.
Section 3. Quorum and Manner of Acting. A majority of
the directors in office (but in no event less than one-third of
the authorized number of directors) shall constitute a quorum for
the transaction of business at any meeting, and the act of a
majority of the directors present at any meeting at which a
quorum is present shall be the act of the board of directors. A
majority of the directors present may adjourn any meeting from
time to time. Notice of any adjourned meeting shall be given in
the manner provided in Section 5 of this Article IV.
Section 4. Vacancies. A vacancy in the board of
directors exists in case of the happening of any of the following
events:
(a) The death, resignation, or removal of any
director.
(b) The authorized number of directors is
increased.
(c) At any annual, regular, or special meeting of
stockholders at which any director is elected, the
stockholders fail to elect the full authorized number of
directors to be elected at that meeting.
(d) The board of directors declares vacant the
office of a director who has been declared of unsound mind
by an order of the court or convicted of a felony, or
otherwise in a manner provided by law.
All vacancies (other than vacancies created by removal of a
director) may be filled by the majority of the remaining
directors, though less than a quorum, or by a sole remaining
director. Each director so elected shall hold office until his
successor is elected at an annual, regular, or special meeting of
the stockholders. The stockholders may, by vote or written
consent of a majority of the outstanding shares entitled to vote
in election of directors, elect a director at any time to fill
any vacancy not filled by the directors. If the board of
directors accepts the resignation of a director tendered to take
effect at a future time, the board or the stockholders may elect
a successor to take office when the resignation becomes
effective. A reduction of the authorized number of directors
does not remove any director prior to the expiration of his term
of office.
Section 5. Meetings of Directors.
(a) The board of directors may hold meetings,
both regular and special, either within or outside the State
of Delaware.
(b) All special meetings of the board of
directors shall be called by the chairman of the board (if
any), or the president, or, if both are absent or unable or
refuse to act, by any two (2) directors.
(c) Written or oral notice of the time and place
of special meetings of the board of directors shall be given
or delivered personally to each director, or sent to each
director by mail or by other form of written or telephonic
communication (including cable, telegram, telex and
telephone), at least twenty-four (24) hours before the
meeting if personal delivery is made or if the telephone,
telegraph, cable or telex is used, and at least four (4)
days before the meeting if mail is used. If the address of
a director is not shown on the records and is not readily
ascertainable, notice shall be addressed to such director at
the place and city in which the meetings of the directors
are regularly held. Proof that notice was given shall be by
affidavit of the chairman of the board, president, vice
president, secretary or two (2) directors, or of the person
acting under the direction of any of the foregoing, who
gives such notice and such proof of notice shall be made a
part of the minutes of the meeting. Notice of the time and
place of holding an adjourned meeting shall be given to
absent directors if the time fixed at the meeting which was
adjourned for the adjourned meeting is more than twenty-four
(24) hours after adjournment. Notwithstanding the fore-
going, sufficient notice of a meeting of the board of
directors to be held immediately following a stockholders
meeting at which one or more directors is elected, may be
given by announcement thereof at such stockholders' meeting.
(d) At the meeting of the board of directors next
following each annual meeting of the stockholders, the board
shall elect officers.
(e) Notice of a meeting need not be given to any
director who signs a waiver of notice or a consent to
holding the meeting or an approval of the minutes thereof,
whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director. All such
waivers, consents, or approvals shall be filed with the
corporate records or made a part of the minutes of the
meeting.
(f) Meetings of the directors may be held at any
place within or without the State of Delaware designated in
the notice of the meeting or, if not stated in the notice or
if there is no notice, designated by resolution of the
board.
(g) The members of the board of directors or of
any committee thereof may participate in a meeting of such
board of directors or committee by means of conference
telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each
other, and participation in a meeting by such means shall
constitute presence in person at such a meeting.
Section 6. Consent of Directors in Lieu of Meeting.
Any action required or permitted to be taken by the board of
directors of this corporation or of any committee thereof under
the General Corporation Law of the State of Delaware may be taken
without a meeting if all members of the board or committee, as
the case may be, individually or collectively, consent thereto in
writing and the writing or writings evidencing such consent are
filed with the minutes of proceedings of the board or committee.
Section 7. Fees and Compensation. One or more of the
directors may, by resolution of the board of directors, receive
such compensation for services as director, and may be allowed
such reimbursement of expenses as may be fixed or determined by
the board of directors. Nothing herein contained shall be
construed to preclude any director from serving the Corporation
in any capacity as an officer, agent, employee or otherwise, and
receiving compensation therefor.
Section 8. Resignations. Any director of the
Corporation may resign at any time by giving written notice to
the board of directors. The resignation of any director shall
take effect at the date of receipt of such notice or at any later
date specified therein and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make
it effective.
Section 9. Removal of Directors. Any director or the
entire board of directors may be removed, with or without cause,
by the holders of a majority of the shares of the Corporation
then entitled to vote at an election of directors.
Section 10. Rights of Inspection. Every director
shall have the absolute right at any reasonable time to inspect
and copy all the books, records and documents of every kind and
to inspect physical properties of the Corporation and also of its
subsidiary corporations, domestic or foreign. Such inspection by
a director may be made in person or by agent or attorney and
includes the right to copy and obtain extracts.
Section 11. Officers. The officers of the Corporation
shall be a president, one or more vice presidents as the board of
directors shall determine (any one or more of whom the board of
directors may designate executive vice president or senior vice
president or similar title), a secretary, and a treasurer, each
of whom shall be chosen by and hold office at the pleasure of the
board of directors. Any number of offices may be held by the
same person. The board of directors may from time to time choose
such other officers, including but not limited to a chairman of
the board, one or more vice presidents or assistant vice
presidents, a treasurer, and one or more assistant secretaries,
as may be deemed expedient, to hold office at the pleasure of the
board of directors, with such authority as may be specifically
delegated to such officers by the board of directors.
Section 12. Election of Officers; Term of Office;
Qualifications; Duties. The officers shall be chosen by the
board of directors. Each officer shall hold office until a
successor is elected or until his or her death, or until he or
she shall have resigned or shall have been removed in the manner
hereinafter provided. Officers may be, but need not necessarily
be, selected from the members of the board of directors or from
the stockholders. The officers shall each have such powers and
duties as are set forth in these Bylaws and as generally pertain
to their respective offices, and as from time to time may be
conferred upon them by the board of directors.
Section 13. Removal of Officers. Any officer may be
removed, either with or without cause, at any time, by the board
of directors. Any such removal shall be without prejudice to the
rights, if any, of any contract of employment of the officer.
Section 14. Resignation of Officers. Any officer may
resign at any time by giving written notice to the board of
directors. Any such resignation shall take effect at the date of
receipt of such notice or at any later date specified therein
and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 15. Vacancies of Officers. A vacancy in any
office because of death, resignation, removal or any other cause
shall be filled in the manner prescribed in these Bylaws for
election to such office.
Section 16. Chairman of the Board of Directors.
Should the board of directors elect a chairman of the board, he
shall, subject to the control of the board of directors, have
such supervision, direction and control of the business and other
officers of the Corporation as the board of directors may
delegate to such officer from time to time. Absent such specific
delegation, and unless provided otherwise by resolution of the
board of directors, the chairman of the board shall have the
duties and authority of a chief executive officer. The chairman
of the board shall preside at all meetings of the stockholders,
and, if a director, at all meetings of the board of directors.
Section 17. President. The president shall, subject
to the control of the board of directors, have such supervision,
direction and control of the business and officers of the
Corporation as the board of directors may delegate to such
officer from time to time. Absent such specific delegation, and
in the absence of the existence of the office of chairman of the
board, the president shall have the duties and authority of a
chief executive officer, and shall preside at all meetings of the
stockholders and, if a director, at all meetings of the board of
directors. Should the office of chairman of the board exist, the
president shall have such duties and authority as may be granted
to such officer by the board of directors or as may be delegated
to such officer by the chairman of the board.
Section 18. Secretary. The secretary shall be the
custodian of the seal of the Corporation and of the books and
records and files thereof, and shall affix the seal of the
Corporation to all certificates of stock, papers and instruments
requiring the same. The secretary shall, in the manner provided
by law, keep, or cause to be kept, at the principal executive
office, or such other place as the board of directors may order,
a minute book of all meetings of directors and stockholders. The
secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer
agent, a share register, or a duplicate share register, showing
the names of the stockholders and their addresses, the number and
classes of shares held by each, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the board of directors and of
any committees thereof required by the Bylaws or by law to be
given, shall keep the seal of the Corporation in safe custody,
and shall have such other powers and perform such other duties as
may be prescribed by the board of directors.
Section 19. Treasurer. The treasurer shall keep and
maintain, or cause to be kept and maintained, adequate and
correct accounts of the properties and business transactions of
the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, surplus and
shares. The treasurer shall render to the president or the board
of directors, whenever such officer or board so requests, an
account of the financial condition of the Corporation.
Section 20. Vice Presidents. In the absence or
disability of the president, the vice president or vice
presidents, if any, in order of their rank as fixed by the board
of directors or, if not ranked, the vice president designated by
the board of directors, shall perform all duties of the president
and, when so acting, shall have all the powers of, and be subject
to all the restrictions upon, the president. The vice president
or vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them
respectively by the board of directors.
ARTICLE V
STOCK
Section 1. Certificate of Shares. Every owner of
shares in this corporation shall be entitled to have a
certificate in such form, not inconsistent with the Certificate
of Incorporation or any law, as shall be prescribed by the board
of directors, certifying the number of shares and class or series
owned by such stockholder in the Corporation. Every certificate
for shares shall be signed by, or in the name of the Corporation
signed by, the chairman of the board, the president or a
vice-president, and by the treasurer or an assistant treasurer or
the secretary or an assistant secretary. Subject to the
restrictions provided by law, signatures may be a facsimile and
shall be effective irrespective of whether any person whose
signature appears on the certificate shall have ceased to be such
officer before the certificate is delivered by the Corporation.
Each certificate issued shall bear all statements or legends
required by law to be affixed thereto.
Section 2. Transfer of Shares. Transfer of shares of
the Corporation shall be made only on the books of the
Corporation by the registered holder thereof or by such other
person as may under law be authorized to endorse such shares for
transfer, or by such stockholder's attorney thereunto authorized
by power of attorney duly executed and filed with the secretary
or with the transfer agent or transfer clerk. Except as
otherwise provided by law, upon surrender to the Corporation or
its transfer agent or transfer clerk of a certificate for shares
duly endorsed and accompanied by all applicable taxes thereon, it
shall be the duty of the Corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate, and
record the transaction upon its books. The secretary or transfer
agent may require that all signatures shall be guaranteed.
Whenever any transfer of shares shall be made for collateral
security and not absolutely, such facts shall be so expressed in
the entry of transfer if, when the certificate or certificate
shall be presented to the Corporation for transfer, both the
transferor and transferee request the Corporation so to do.
Section 3. Lost, Stolen, Destroyed or Mutilated
Certificates. The holder of any shares of the Corporation shall
immediately notify the Corporation of any loss, theft,
destruction or mutilation of the certificate therefor. The board
of directors may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore
issued by the Corporation alleged to have been lost, stolen or
destroyed, or upon the surrender of any mutilated certificate, if
the Corporation shall not theretofore have received notice that
the certificate alleged to have been lost, destroyed or stolen
has been acquired by a bona fide purchaser thereof, and the board
of directors may, at its discretion, require the owner of the
lost, stolen, or destroyed certificate or such owner's legal
representatives to give the Corporation a bond in such sum,
limited or unlimited, in such form and with such surety or
sureties as the board of directors shall, in its uncontrolled
discretion, determine, to indemnify the Corporation against any
claim that may be made against it on account of alleged loss,
theft, or destruction of any such certificate or the issuance of
such new certificate.
Section 4. Registered Stockholders. Except as
otherwise provided by law, the Corporation shall be entitled to
recognize as the exclusive owner of shares or other securities of
the Corporation, for all purposes as regards the Corporation, the
person in whose name the shares or other securities stand
registered on its books as the owner, and such person exclusively
shall be entitled to receive dividends and to vote as such owner.
To the extent permissible under law, the Corporation shall be
entitled to hold liable for calls and assessments a person
registered on its books as the owner of the shares or other
securities, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares or other
securities on the part of any person, whether or not it shall
have express or other notice thereof.
Section 5. Regulations. The board of directors shall
have power and authority to make all such rules and regulations
not inconsistent with law or with the Certificate of
Incorporation as may be deemed expedient concerning the issue,
transfer and registration of certificates for shares of the
capital stock of the Corporation, and may appoint transfer
agents, transfer clerks and registrars thereof.
ARTICLE VI
INDEMNIFICATION
Section 1. Right to Indemnification. Each person who
was or is a party or is threatened to be made a party or is
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a
director of the Corporation, whether the basis of such proceeding
is alleged action in an official capacity or in any other
capacity while serving as a director, shall be indemnified and
held harmless by the Corporation to the fullest extent permitted
by the laws of Delaware as the same exist or may hereafter be
amended (but in the case of such amendment, only to the extent
that such amendment permits the Corporation to provide broader
indemnification rights than said laws permitted the Corporation
to provide prior to such amendment) against all costs, charges,
expenses, liabilities and losses (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement and amounts expended in seeking
indemnification granted to such person under applicable law, this
bylaw or any agreement with the Corporation) reasonably incurred
or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to
be a director and shall inure to the benefit of his or her heirs,
executors and administrators. The right to indemnification
conferred in this Section 1 shall be a contract right and shall
include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition; provided, however, that if the Delaware General
Corporation Law so requires, the payment of such expenses
incurred by a director in his or her capacity as a director (and
not in any other capacity in which service was or is rendered by
such person while a director, including, without limitation,
service to an employee benefit plan) in advance of the final
disposition of a proceeding shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such
director, to repay all amounts so advanced if it shall ultimately
be determined that such director is not entitled to be
indemnified under this Section 1 or otherwise.
Section 2. Right of Claimant to Bring Suit. If a
claim under Section 1 of this Article VI is not paid in full by
the Corporation within thirty (30) days after a written claim has
been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled to be paid also the expense
of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the claimant
has failed to meet a standard of conduct which makes it
permissible under Delaware or other applicable law for the
Corporation to indemnify the claimant for the amount claimed.
Neither the failure of the Corporation (including the board of
directors, independent legal counsel or its stockholders) to have
made a determination prior to the commencement of such action
that indemnification of the claimant is permissible in the
circumstances because he or she has met such standard of conduct,
nor an actual determination by the Corporation (including the
board of directors, independent legal counsel or its
stockholders) that the claimant has not met such standard of
conduct, shall be a defense to the action or create a presumption
that the claimant has failed to meet such standard of conduct.
Section 3. Non-Exclusivity of Rights. The right to
indemnification and the payment of expenses incurred in defending
a proceeding in advance of its final disposition conferred in
this Article VI shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise.
Section 4. Insurance. The Corporation may maintain
insurance, at its expense, to protect itself and any director of
the Corporation, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or
loss under Delaware law.
Section 5. Indemnity Agreements. The Corporation may
enter into indemnity agreements with the persons who are members
of the board of directors from time to time, such indemnity
agreements to provide in substance that the Corporation will
indemnify such persons to the fullest extent permitted.
Section 6. Effect of Amendment. Any amendment, repeal
or modification of any provision of this Article VI by the
stockholders and the directors of the Corporation shall not
adversely affect any right or protection of a director or other
officer of the Corporation existing at the time of the amendment,
repeal or modification.
ARTICLE VII
SEAL
The board of directors may adopt a corporate seal. It
shall not be necessary to the validity of any instrument executed
by any authorized officer or officers of the Corporation that the
execution of such instrument be evidenced by the corporate seal,
and all documents, instruments, contracts and writings of all
kinds signed on behalf of the Corporation by any authorized
officer or officers shall be as effectual and binding on the
Corporation without the corporate seal, as if the execution of
the same had been evidenced by affixing the corporate seal
thereto. The board of directors may give general authority to
any officer to affix the seal of the Corporation and to attest
the affixing by signature.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall be as
determined by the board of directors from time to time.
<PAGE>
THIS IS TO CERTIFY: That I am the duly elected,
qualified and acting Secretary of said corporation and that the
foregoing Bylaws were adopted as the Bylaws of said corporation
on the ____ day of _______, 199_.
-----------------------------
[Name], Secretary
<PAGE>
EXHIBIT C
CERTIFICATE OF INCORPORATION
OF
WEI ACQUISITION CO.
(A DELAWARE CORPORATION)
FIRST: The name of the corporation is WEI
Acquisition Co. (the "Corporation").
SECOND: The address of the Corporation's
registered office in the State of Delaware is 1013 Centre
Road, City of Wilmington, County of New Castle, Delaware
19805. The name of its registered agent at such address is
Corporation Service Company.
THIRD: The purpose of the Corporation is to
engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the
State of Delaware.
FOURTH: The Corporation is authorized to issue two
classes of capital stock, designated Common Stock and
Preferred Stock. The total number of shares of stock which
the Corporation shall have authority to issue is twenty-seven
million (27,000,000), consisting of twenty-four million
(24,000,000) shares of Common Stock, par value $0.01 per share
(the "Common Stock"), and three million (3,000,000) shares of
Preferred Stock, par value $0.01 per share (the "Preferred
Stock").
Shares of the Preferred Stock of the Corporation may
be issued from time to time in one or more series. The Board
of Directors is hereby authorized to issue the shares of
Preferred Stock in such series and to fix from time to time
before issuance the number of shares to be included in any
series and the designation, relative powers, preferences and
rights and qualifications, limitations or restrictions of all
shares of such series. Without limiting the generality of the
foregoing, as to each such series of Preferred Stock, the
Board of Directors is authorized to fix or alter the dividend
rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, the liquidation
preferences, rights to subscribe for or purchase any
securities of the Corporation or any other corporation, and
the number of shares constituting such series, or any or all
of them, all as shall be determined from time to time by the
Board of Directors and shall be stated in a resolution or
resolutions providing for the issuance of such Preferred Stock
(a "Preferred Stock Designation"). The Board of Directors may
increase or decrease the number of shares in any such series
after the issue of shares of that series, but not below the
number of shares of such series then outstanding. Should the
number of shares of any series be so decreased, the shares
constituting such decrease shall resume the status which they
had prior to the adoption of the resolution originally fixing
the number of shares of such series.
Each holder of Common Stock of the Corporation
entitled to vote shall have one vote for each share thereof
held.
Except as may be provided by the Board of Directors
in a Preferred Stock Designation or by law, the Common Stock
shall have the exclusive right to vote for the election of
directors and for all other purposes (which vote may be made
by voice vote or written ballot, in accordance with the Bylaws
of the Corporation), and holders of Preferred Stock shall not
be entitled to receive notice of any meeting of stockholders
at which they are not entitled to vote or consent.
The Corporation shall be entitled to treat the
person in whose name any share of its stock is registered as
the owner thereof, for all purposes, and shall not be bound to
recognize any equitable or other claim to, or interest in,
such share on the part of any other person, whether or not the
Corporation shall have notice thereof, except as expressly
provided by applicable law.
FIFTH: The name and mailing address of the
incorporator is as follows:
Name Mailing Address
Joyce J. Ono O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071-2899
SIXTH: The number of directors of the Corporation
shall, prior to the appointment of additional directors
following the Acquisition (as defined in Article II of the
Bylaws), be one, and immediately upon such appointment, shall
consist of not less than three but not more than nine
directors, or such greater number as is provided in the
following paragraph. The number of directors shall be changed
from time to time within the foregoing limits by, or in such
manner as may be provided in, the By-laws of the Corporation.
Notwithstanding the foregoing, whenever the holders
of any one or more classes or series of preferred stock issued
by the Corporation shall have the right, voting separately by
class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling
of vacancies and other features of such directorships shall be
governed by the terms of the Preferred Stock Designation
applicable thereto, and such directors so elected shall be in
addition to the number of directors provided for in the
preceding paragraph.
SEVENTH: The Board of Directors shall have the
power to adopt, amend or repeal the By-Laws, and to fill any
vacancies on the Board of Directors, except as may otherwise
be provided in the By-Laws.
EIGHTH: The personal liability of the directors of
the Corporation is hereby eliminated to the fullest extent
permitted by the General Corporation Law of the State of
Delaware, as the same may be amended or supplemented, and the
initial Bylaws adopted by the Board of Directors shall set
forth the terms and conditions under which the Corporation
shall provide indemnification to the directors of the
Corporation. Such indemnification obligations shall apply in
addition to such other rights to indemnification as may be
available to the directors under applicable law, or in equity,
pusuant to any contract or agreement or otherwise.
NINTH: All of the powers of the Corporation,
insofar as the same may be lawfully vested by this Certificate
of Incorporation in the Board of Directors, are hereby con-
ferred upon the Board of Directors of the Corporation.
TENTH: Whenever a compromise or arrangement is
proposed between the Corporation and its creditors or any
class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the
application in a summary way of the Corporation or of any
creditor or stockholder thereof or on the application of any
receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or
on the application of trustees in dissolution or of any
receiver or receivers appointed for the Corporation under the
provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner
as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class
of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to
any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrange-
ment, the said compromise or arrangement and the said reor-
ganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also
on the Corporation.
ELEVENTH: No nonvoting equity securities of the
Corporation may be issued; this provision, included in this
Certificate of Incorporation in compliance with Section 1123
of the United States Bankruptcy Code, 11 U.S.C. Section 1123,
shall have no force and effect except to the extent required
by such Section and to the extent such Section is in effect
and applicable to the Corporation.
I, the undersigned, being the sole incorporator
hereinbefore named, for the purpose of forming a corporation
in pursuance of the General Corporation Law of the State of
Delaware, do make and file this Certificate of Incorporation,
hereby declaring and certifying that the facts herein stated
are true, and accordingly have hereunto set my hand this 15th
day of November 1996.
/s/ Joyce J. Ono
------------------------------
<PAGE>
EXHIBIT D TO DEBTORS'
FIRST AMENDED CHAPTER
11 PLAN
[Form of]
OPEN CREDIT TERMS COMMITMENT AND OPTION EXERCISE NOTICE
TO: Wherehouse Entertainment, Inc.
19701 Hamilton Avenue
Torrance, CA 90502
Attn: Chief Financial Officer
We refer you to the Debtors' First Amended Chapter 11 Plan in
Bankruptcy Case No. 95-911 (HSB) in the United States Bankruptcy
Court for the District of Delaware, as it may be amended from
time to time (the "Bankruptcy Plan"). All capitalized terms used
in this letter which are defined in the Bankruptcy Plan have the
meanings therein given.
We are a supplier of copyrighted music, film or other
entertainment products, personal electronic products or blank
tapes or discs to Wherehouse Entertainment, Inc. We intend to
continue to supply such items from time to time pursuant to
purchase orders issued by Reorganized Wherehouse after the
Bankruptcy Plan becomes effective.
We are the sole Holder of a General Unsecured Claim which we
assert should be Allowed in the amount of $_________________.
Pursuant to Section 5.05(d) of the Bankruptcy Plan and subject to
the confirmation of the Bankruptcy Plan by the Bankruptcy Court:
1. OPEN CREDIT TERMS COMMITMENT. We hereby commit to
sell such items to Reorganized Wherehouse on open credit terms
substantially comparable to those from time to time offered by us
to other similarly situated customers, subject to availability
and such other terms of sale as we may from time to time
establish, and
2. OPTION EXERCISE NOTICE. We hereby transfer all of
the New Common Stock that we are entitled to receive under
Section 5.05(a) of the Bankruptcy Plan to the Holders of the
Senior Lender Secured Claims, in exchange for cash from the
Secured Claim Cash Distribution equal to 27% of the Allowed
amount of our General Unsecured Claim.
You are authorized and directed to remit such cash to us by check
payable to [insert name of holder of General Unsecured Claim] and
mailed to the following address:
We understand that the cash payment will be made by Reorganized
Wherehouse when our General Unsecured Claim is Allowed as
provided in the Bankruptcy Plan.
We reserve the right to revoke this letter if the Plan is amended
in any respect that is materially adverse to us. Such revocation
shall be effective only if written notice is received by you at
your above address at least two Business Days prior to the
Effective Date of the Plan. Subject to the foregoing, this
letter is irrevocable.
This letter shall be legally enforceable against us and our
successors and assigns by Reorganized Wherehouse, the Holders of
Senior Lender Secured Claims, and all other parties in interest
under the Bankruptcy Plan, subject to confirmation by the
Bankruptcy Court of the Bankruptcy Plan. We acknowledge
acceptance hereof and reliance hereon by each of them.
Very Truly Yours,
--------------------------
[Name of Supplier]
By:
----------------------
An Authorized Signature
<PAGE>
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re ) Chapter 11
WAREHOUSE ENTERTAINMENT, INC. )
and WEI HOLDINGS, INC., ) Case No. 95-911 (HSB)
)
Debtors. ) (Jointly Administered)
DEBTORS' FIRST AMENDED CHAPTER 11 PLAN
As Revised for Technical Corrections on October 4, 1996
and Supplemental Amendments on December 2, 1996
Latham & Watkins
633 West Sixth Street, Suite 4000
Los Angeles, CA 90071
Attn: Hendrik de Jong
Peter M. Gilhuly
(213) 485-1234
and
Young, Conaway, Stargatt & Taylor
11th Floor - Rodney Square North
P. O. Box 391
Wilmington, DE 19899
Attn: Laura Davis Jones
(302) 571-6000
<PAGE>
SUPPLEMENTAL AMENDMENTS TO
DEBTORS' FIRST AMENDED CHAPTER 11 PLAN
DECEMBER 2, 1996
In amendment of their Chapter 11 Plan dated April 29,
1996 and the Debtors' First Amended Chapter 11 Plan Dated
September 26, 1996, as Revised for Technical Corrections on
October 4, 1996, (the "Plan"), [WEI ACQUISITION CO.] and
WEI HOLDINGS, INC., the Debtors and Debtors in Possession in the
above-captioned cases (collectively the "Debtors" or
"Wherehouse"), hereby make the following amendments to the Plan:
1. The definition of the "Unsecured Claim Stock
Distribution Ratio" set forth in Plan section 1.01 is hereby
amended to strike "28.14767183" and replace it with
"31.92430893."
2. Section 5.01(a) of the Plan is hereby amended to
strike "$45,000,000" and replace it with "$35,000,000", both
where it appears in the text and in footnote 1.
3. Section 5.01(c) of the Plan is hereby amended as
follows: (i) "3,612,789" shall be stricken and replaced with
"2,436,560", (ii) "6,387,211" shall be stricken and replaced with
"7,563,440", and (iii) "36.128%" shall be stricken and replaced
with "24.366%".
4. Section 5.06(a) of the Plan is hereby amended to
strike "$49,568,179.37" and replace it with "$59,568,179.37".
5. Section 5.06(b)(1) of the Plan is hereby amended
to strike "1,395,229" and replace it with "1,901,673".
6. Section 5.06(b)(2) of the Plan is hereby amended
to strike "3,298,618" and replace it with "3,741,201".
7. Except as expressly set forth herein, no other
part of the Plan is amended.
Respectfully submitted,
[WEI ACQUISITION CO.]
By /s/ Henry Del Castillo
------------------------------
WEI HOLDINGS, INC.
By /s/ Henry Del Castillo
-------------------------------
Latham & Watkins
Hendrik de Jong
Peter M. Gilhuly
633 West Fifth Street
Suite 4000
Los Angeles, CA 90071
(213) 485-1234
and
YOUNG, CONAWAY STARGATT & TAYLOR
Laura Davis Jones (No. 2436)
Robert S. Brady (No. 2847)
Mark I. Duedall (No. 3346)
11th Floor Rodney Square North
P. O. Box 391
Wilmington, DE 19899-0391
(302) 571-6642
Co-Counsel for Debtors and
Debtors in Possession
<PAGE>
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re ) Chapter 11
)
[WEI ACQUISITION CO.] ) Case No. 95-911 (HSB)
and WEI HOLDINGS, INC., )
) (Jointly Administered)
Debtors. )
DEBTORS' FIRST AMENDED CHAPTER 11 PLAN
As Revised for Technical Corrections on October 4, 1996
and Supplemental Amendments on December 2, 1996 and
December 13, 1996
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071
Attn: Hendrik de Jong
Peter M. Gilhuly
(213) 485-1234
and
Young, Conaway, Stargatt & Taylor
11th Floor - Rodney Square North
P. O. Box 391
Wilmington, DE 19899
Attn: Laura Davis Jones
(302) 571-6600
<PAGE>
SUPPLEMENTAL AMENDMENTS TO
DEBTORS' FIRST AMENDED CHAPTER 11 PLAN
DECEMBER 13, 1996
In amendment of the Debtors' First Amended Chapter 11
Plan Dated September 26, 1996, as Revised for Technical
Corrections on October 4, 1996, and as amended pursuant to those
Supplemental Amendments dated December 2, 1996 (as amended, the
"Plan"), [WEI ACQUISITION CO.] and WEI HOLDINGS, INC.,
the Debtors and Debtors in Possession in the above-captioned
cases (collectively the "Debtors" or "Wherehouse"), hereby make
the following additional supplemental amendments to the Plan:
1. The Exhibits to the Plan are hereby amended to
replace Exhibit E "Warrant Agreement" with the "Tranche A Warrant
Agreement" and to add (i) as Exhibit F the "Tranche B Warrant
Agreement", (ii) as Exhibit G the "Tranche C Warrant Agreement,"
and (iii) as Exhibit H the "Tag-Along Rights Agreement."
2. Section 1.01 is hereby amended by adding the
following definitions:
A&S means Adler & Shaykin, as the Representative (as that
term is defined in the Representative Agreement dated as of
April 9, 1992).
A&S HOLDERS means the Holders (as that term is defined in
the Representative Agreement dated as of April 9, 1992).
A&S RELEASED PARTIES means the A&S Holders or any of their
respective past, present and future affiliates, associates,
employees, officers, directors, partners, fiduciaries,
stockholders, attorneys and successors, or any of them.
1992 LETTER OF CREDIT AGREEMENT means that certain Letter of
Credit Agreement First Amendment dated as of June 11, 1992
by and among Bankers Trust Company, Wherehouse and A&S for
the issuance of the 1992 Merger Agreement Letter of Credit.
TAG-ALONG RIGHTS AGREEMENT means the agreement (in the form
of Exhibit H to this Plan) under which Cerberus Partners,
L.P. grants the initial holders of the Warrants certain tag-
along rights.
TRANCHE A WARRANT AGREEMENT means the agreement (in the form
of Exhibit E to this Plan) under which Reorganized
Wherehouse delivers the Tranche A Warrants.
TRANCHE B WARRANT AGREEMENT means the agreement (in the form
of Exhibit F to this Plan) under which Reorganized
Wherehouse delivers the Tranche B Warrants.
TRANCHE C WARRANT AGREEMENT means the agreement (in the form
of Exhibit G to this Plan) under which Reorganized
Wherehouse delivers the Tranche C Warrants.
TRANCHE A WARRANTS means the warrants issued under the
Tranche A Warrant Agreement exercisable for 576,000 shares
of New Common Stock for an exercise price of $2.38 per
share, exercisable at any time until the fifth anniversary
of the Effective Date.
TRANCHE B WARRANTS means the warrants issued under the
Tranche B Warrant Agreement exercisable for 100,000 shares
of New Common Stock for an exercise price of $9.00 per
share, exercisable at any time until the seventh anniversary
of the Effective Date.
TRANCHE C WARRANTS means the warrants issued under the
Tranche C Warrant Agreement exercisable for 100,000 shares
of New Common Stock for an exercise price of $11.00 per
share, exercisable at any time until the seventh anniversary
of the Effective Date.
3. Section 1.01 is hereby amended by deleting the
definition of the "Warrant Agreement" in its entirety and
replacing it with:
WARRANT AGREEMENT means the Tranche A Warrant
Agreement, the Tranche B Warrant Agreement and the Tranche C
Warrant Agreement, in the forms attached to the Plan as
Exhibits E, F and G, respectively.
4. Section 1.01 is hereby amended by deleting the
definition of the "Warrants" in its entirety and replacing it
with:
WARRANTS means the Tranche A Warrants, the Tranche B
Warrants and the Tranche C Warrants.
5. Section 2.01(c) is hereby amended by deleting "90"
and replacing it with "60".
6. Section 5.07(c) is hereby amended by (a) deleting
the heading, initial clause and clause (1) and replacing them
with:
(C) TREATMENT.
(1) Each Holder of an Allowed Senior Subordinated Note
Claim shall receive, on account of such Claim, its
Ratable Share of (a) the Tranche A Warrants, (b) the
Tranche B Warrants, (c) the Tranche C Warrants, and (d)
$3,900,000 cash, of which $2,350,000 shall be paid by
Reorganized Wherehouse and $1,550,000 shall be paid by
Reorganized Wherehouse after receipt from A&S of the
Settlement Payment pursuant to Section 12.10. All such
distributions shall be made to United States Trust
Company of New York as the trustee under the Senior
Subordinated Note Indenture who shall make
distributions to the Holders of Allowed Senior
Subordinated Note Claims as of the record date set
forth in the Confirmation Order.
(b) by deleting the word "Warrants" in the heading and the text
of Section 5.07(c)(2) and replacing it (in each case) with "the
property distributed under Section 5.07(c)(1)" and (c) by
deleting the last sentence of Section 5.07(c) in its entirety.
7. Section 5.07(d) is hereby amended by deleting it
in its entirety.
8. Section 5.07(e) is hereby amended by deleting the
word "Warrants" were it occurs and replacing it with "the
property distributed under Section 5.07(c)(1)."
9. Article 8 is hereby amended by adding a new
Section 8.04 as follows:
8.04. REPORTING COMPANY. Whether or not obligated by
law, Reorganized Wherehouse and any successors and
assigns agrees to be a reporting company under the
Securities Exchange Act of 1934, 15 U.S.C. Section 78a
et. seq. until the earliest to occur of (i) the
redemption and cancellation of at least 66 2/3% of the
Warrants issued under this Plan, (ii) (1) all or at
least 80% of the assets of Reorganized Wherehouse are
sold in a single transaction, or a series of related
transactions, other than in the ordinary course of
business, or (2) there shall occur a merger,
consolidation or other form of reorganization, or a
series of related reorganizations, and after giving
effect to such transaction or transactions referred to
in (1) and (2) above, Cerberus Partners L.P. shall not
have the power to appoint (or hold sufficient voting
securities to elect) a majority of the members of the
Board of Directors of the surviving entity, or (iii)
three years from the Effective Date.
10. Section 9.04 of the Plan is hereby amended by
inserting the words "or Causes of Action that are being released"
after the word "abandoned" in the first sentence.
11. Section 9.06 of the Plan is hereby amended by
deleting the proviso at the end of that Section and replacing it
with: "that the 1992 Merger Agreement Letter of Credit shall not
be cancelled on the Effective Date and the rights and obligations
of the Debtors under the 1992 Merger Agreement Letter of Credit
(if any) and the 1992 Letter of Credit Agreement shall be
governed by Section 12.10 of the Plan."
12. Section 12.04(a) is hereby amended by deleting
"(i) any and all 1992 Merger Consideration Recovery Claims, and
(ii)".
13. Section 12.04(b) is hereby amended by inserting
"or" before "(iv)" and deleting "or (v) that are 1992 Merger
Consideration Recovery Claims."
14. Section 12.06 is hereby amended by adding "nor A&S
or the A&S Released Parties" after the words "Official Committee
or the Trade Committee".
15. Section 12.07 (b) is hereby amended by deleting
"(i)" and "(ii) no 1992 Merger Consideration Recipient shall be
indemnified as to any 1992 Merger Consideration Recovery Claim
pursuant to this Section 12.07(b)" in the proviso.
16. Section 12.09 is hereby amended by (a) deleting
the words "Except as provided in Section 12.10" at the beginning
of the first paragraph, (b) by inserting the words "including,
without limitation, A&S and the A&S Released Parties" immediately
before the definition of "Released Entities" in the first
paragraph and (c) by deleting "(except as provided in Section
12.10)" in the second paragraph.
17. Section 12.10 is hereby amended by deleting it in
its entirety and replacing it with the following:
12.10. SETTLEMENT OF DEFERRED PURCHASE PRICE.
(A) As further consideration for, and as condition to
receiving, among other things, the release of the 1992
Merger Consideration Recovery Claims under Sections 12.04
and 12.09, one business day after the Effective Date, A&S
shall pay, solely out of the Letter or Credit Proceeds (as
that term is defined below), to Reorganized Wherehouse cash
in the amount of $1,550,000 for the benefit of and
distribution to the Holders of Senior Subordinated Note
Claims under Section 5.07(c)(1) of the Plan (the "Settlement
Payment") on the terms and conditions set forth in this
Section 12.10 (the "Deferred Purchase Price Settlement").
(B) The Debtors and Reorganized Wherehouse agree to
take such action as reasonably requested by A&S to assist in
obtaining (i) the Letter of Credit Proceeds (as defined
below) and (ii) an order of the United States District Court
approving the pending proposed settlement in McMahan &
Company, et al v. Wherehouse Entertainment Inc., et al, 88
Civ. 0321 (S.D.N.Y.) (MJL) and in Don Thompson v. Wherehouse
Entertainment, Inc., et al., 88 Civ. 9040 (S.D.N.Y.) (MJL)
(the "McMahan Settlement"); provided that the Debtors shall
not be required to take any action that would result in any
Claim against the Estates or any other liability to the
Debtors, the Estates or Reorganized Wherehouse.
(C) The Confirmation Order shall (i) constitute
approval of the McMahan Settlement by the Bankruptcy Court
and authorize A&S to make the payments to settle such action
pursuant to a draw on the 1992 Merger Agreement Letter of
Credit, provided that the McMahan Settlement shall provide
for a full release of the Debtors and the Estates without
any payment by the Debtors or the Estates, (ii) provide that
the Effective Date of the Plan shall also constitute an
Event of Default under Section 8.3(a)(v)(A) of the 1992
Merger Agreement for the sole purposes of (x) authorizing
A&S to draw immediately on the 1992 Merger Agreement Letter
of Credit to make the Settlement Payment and to consummate
the McMahan Settlement, notwithstanding, among other things,
the "Stipulation Granting Relief from the Automatic Stay to
Permit Certain Litigation Related to the 1988 Merger to
Proceed to Judgment but Excluding any Enforcement Thereof,"
entered on July 30, 1996, (y) authorizing A&S to draw
immediately on the 1992 Merger Agreement Letter of Credit
and collect and retain the entire amount remaining after
making the Settlement Payment and the payments required
under the McMahan Settlement and (z) authorizing A&S to
receive and retain all proceeds from the "Escrow Funds" (as
that term is defined in the Escrow Agreement dated as of
June 11, 1992 by and among A&S, Holdings and Chase Manhattan
Bank, N.A.), if any (the proceeds described in clauses (y)
and (z) constituting the "Letter of Credit Proceeds"), (iii)
authorize A&S to pay all litigation costs and expenses
(including, without limitation, fees and expenses for
attorneys and witnesses) relating to the Actions (as defined
in the McMahan Settlement) and to distribute immediately all
Letter of Credit Proceeds to the A&S Holders without further
application to or order of the Court, (iv) direct the
Debtors (after presentation by A&S of the 1992 Merger
Agreement Letter of Credit for cancellation, which shall
occur after receipt by A&S of all Letter of Credit Proceeds)
to deliver to Bankers Trust Company, as the issuing bank of
the 1992 Merger Agreement Letter of Credit, a certificate in
the form attached as Annex B to the 1992 Letter of Credit
Agreement designating A&S as the person to which any
positive balance in the Notional Funding Account-Principal
and the Notional Funding Account-Interest (in each case as
defined in the 1992 Letter of Credit Agreement) and net of
any Letter of Credit Charges (as defined in the 1992 Letter
of Credit Agreement) shall be refunded, and (v) direct
Bankers Trust Company, as the issuing bank of the 1992
Merger Agreement Letter of Credit, to honor any properly
presented drawing certificate (in the form of Exhibit "A" to
the 1992 Merger Agreement Letter of Credit) under the 1992
Merger Agreement Letter of Credit, and not to reduce or
withhold any (or otherwise interfere in any way with A&S's
right to receive) the Letter of Credit Proceeds, other than
deducting any Letter of Credit Charges from the refunds as
provided by clause (iv) above.
(D) On the Effective Date and the effectiveness of the
Deferred Purchase Price Settlement, the Debtors (on their
behalf and on behalf of their estates and the Debtors'
predecessors, successors and assigns), Reorganized
Wherehouse, the Official Committee and Cerberus Partners
L.P. shall be deemed, for good and valuable consideration,
to have released and discharged A&S and the A&S Released
Parties from all Causes of Action they ever had, now have or
hereafter can shall or may have against them by reason of,
arising in connection with, or related in any way to the
Debtors, including, without limitation, Causes of Action
arising out or related to in any way the 1992 Merger
Agreement, the 1992 Letter of Credit Agreement, the 1992
Merger Agreement Letter of Credit, or the Escrow Funds (as
defined in the Escrow Agreement dated as of June 11, 1992)
and shall be deemed to have assigned any such Causes of
Action they may have to A&S.
(E) The 1992 Merger Agreement Letter of Credit shall be
cancelled and extinguished after receipt by A&S of all of
the Letter of Credit Proceeds pursuant to Section 12.10(c).
(F) Upon and subsequent to entry of the Confirmation
Order, (i) neither the Debtors nor Reorganized Wherehouse
shall submit a Decrease Certificate (as defined in the 1992
Letter of Credit Agreement), (ii) A&S shall be responsible
for all fees and costs of Litigation Counsel (as defined in
the 1992 Merger Agreement) not previously paid by the
Debtors (including, without limitation, any holdbacks from
the interim statements previously submitted to the Debtors),
and (iii) neither the Debtors nor Reorganized Wherehouse
shall pay any additional fees or costs of Litigation Counsel
(as defined in the 1992 Merger Agreement).
18. Section 13.01 is hereby amended by adding the
following subsection (e):
(E) TAG-ALONG RIGHTS AGREEMENT. Cerberus Partners,
L.P. and the Warrant Agent (as defined in the Warrant
Agreement) shall have entered into the Tag-Along Rights
Agreement.
19. Except as expressly set forth herein, no other
part of the Plan is amended.
Respectfully submitted,
[WEI ACQUISITION CO.]
By: /s/ Henry Del Castillo
-------------------------------
WEI HOLDINGS, INC.
By: /s/ Henry Del Castillo
--------------------------
Latham & Watkins
Hendrik de Jong
Peter M. Gilhuly
633 West Fifth Street
Suite 4000
Los Angeles, CA 90071
(213) 485-1234
and
YOUNG, CONAWAY STARGATT & TAYLOR
Laura Davis Jones (No. 2436)
Robert S. Brady (No. 2847)
Mark I. Duedall (No. 3346)
11th Floor Rodney Square North
P. O. Box 391
Wilmington, DE 19899-0391
(302) 571-6600
Co-Counsel for Debtors and
Debtors in Possession
<PAGE>
EXHIBIT E
------------------------------------------
WARRANT AGREEMENT
RELATING TO THE ISSUANCE OF THE
TRANCHE A WARRANTS
WEI ACQUISITION CO.
and
[UNITED STATES TRUST COMPANY OF NEW YORK]
Dated as of ______________ __, 1997
---------------------------------------------------------
<PAGE>
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. . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
PURCHASE FORM. . . . . . . . . . . . . . . . . . . . . . . . .A-4
ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
<PAGE>
WARRANT AGREEMENT relating to the issuance of the
Tranche A Warrants, dated as of ______________ __, 1997, between
[WEI ACQUISITION CO.], 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 (the "POR") and an Asset Purchase Agreement dated as of
____________, 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-
cates 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 ___________ __, 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 Alvarez & 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) Alvarez & 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 __________ __, 1997 between the
Company and A&M.
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., 19701
Hamilton Avenue, Torrance, California 90502-1334, Attention:
[__________________] and, if to the Warrant Agent, to [__]. 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.
<PAGE>
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:
-----------------------------
Title:
Attest:
- ----------------------------
Title:
[UNITED STATES TRUST COMPANY
OF NEW YORK]
as Warrant Agent
By:
-----------------------------
Title:
Attest:
_____________________________
Title:
<PAGE>
EXHIBIT A
TRANCHE A WARRANT TO PURCHASE COMMON STOCK VOID AFTER
5:00 P.M., NEW YORK TIME, ON JANUARY 31, 2002
[WEI ACQUISITION CO.]
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 earlier 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 set forth above. 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, [--] 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 shareholder 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.
<PAGE>
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: [WEI ACQUISITION CO.]
By:
--------------------------------
Title:
ATTEST:
-----------------------------
Title:
COUNTERSIGNED:
[UNITED STATES TRUST COMPANY
OF NEW YORK]
WARRANT AGENT
By:
--------------------------
Title:
<PAGE>
[WEI ACQUISITION CO.]
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.
<PAGE>
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.
<PAGE>
EXHIBIT F
----------------------------------------------------
WARRANT AGREEMENT
RELATING TO THE ISSUANCE OF THE
TRANCHE B WARRANTS
WEI ACQUISITION CO.
and
[UNITED STATES TRUST COMPANY OF NEW YORK]
Dated as of ______________ __, 1997
----------------------------------------------------
<PAGE>
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. . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
PURCHASE FORM. . . . . . . . . . . . . . . . . . . . . . . . . .A-4
ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
<PAGE>
WARRANT AGREEMENT relating to the issuance of the
Tranche B Warrants, dated as of ______________ __, 1997, between
[WEI ACQUISITION CO.], 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 (the "POR") and an Asset Purchase Agreement dated as of
____________, 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-
cates 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 ___________ __, 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 Alvarez & 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) Alvarez & 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 __________ __, 1997 between the
Company and A&M.
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., 19701
Hamilton Avenue, Torrance, California 90502-1334, Attention:
[__________________] and, if to the Warrant Agent, to United
States Trust Company of New York, Corporate Trust Division, 114
West 47th Street, 15th Floor, New York, NY 10036-1532;,
Attention: Louis Young]. 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.
<PAGE>
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 ___________________________
Title:
Attest:
_____________________________
Title:
[UNITED STATES TRUST COMPANY OF NEW
YORK],
as Warrant Agent
By ___________________________
Title:
Attest:
_____________________________
Title:
<PAGE>
TRANCHE B WARRANT TO PURCHASE COMMON STOCK VOID AFTER
5:00 P.M., NEW YORK TIME, ON JANUARY 31, 2004
[WEI ACQUISITION CO.]
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 earlier 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 set forth above. 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 shareholder 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.
<PAGE>
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: [WEI ACQUISITION CO.]
By:
-------------------------------
Title:
ATTEST:
----------------------------
Title:
COUNTERSIGNED:
[UNITED STATES TRUST COMPANY
OF NEW YORK]
WARRANT AGENT
By:
--------------------------
Title:
<PAGE>
[WEI ACQUISITION CO.]
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.
<PAGE>
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.
<PAGE>
EXHIBIT G
[TRANCHE C WARRANT AGREEMENT]
------------------------------------------------------------
WARRANT AGREEMENT
RELATING TO THE ISSUANCE OF THE
TRANCHE C WARRANTS
WEI ACQUISITION CO.
and
[UNITED STATES TRUST COMPANY OF NEW YORK]
Dated as of ______________ __, 1997
--------------------------------------------------------------
<PAGE>
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. . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
PURCHASE FORM. . . . . . . . . . . . . . . . . . . . . . . . .A-4
ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
<PAGE>
WARRANT AGREEMENT relating to the issuance of the
Tranche C Warrants, dated as of ______________ __, 1997, between
[WEI ACQUISITION CO.], 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 (the "POR") and an Asset Purchase Agreement dated as of
____________, 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-
cates 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 ___________ __, 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 Alvarez & 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) Alvarez & 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 __________ __, 1997 between the
Company and A&M.
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., 19701
Hamilton Avenue, Torrance, California 90502-1334, Attention:
[__________________] and, if to the Warrant Agent, to United
States Trust Company of New York, Corporate Trust Division, 114
West 47th Street, 15th Floor, New York, NY 10036-1532;,
Attention: Louis Young]. 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.
<PAGE>
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:
-----------------------------
Title:
Attest:
_____________________________
Title:
[UNITED STATES TRUST COMPANY OF NEW
YORK],
as Warrant Agent
By:
-------------------------------
Title:
Attest:
_____________________________
Title:
<PAGE>
EXHIBIT A
TRANCHE C WARRANT TO PURCHASE COMMON STOCK VOID AFTER
5:00 P.M., NEW YORK TIME, ON JANUARY 31, 2004
[WEI ACQUISITION CO.]
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 earlier 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 set forth above. 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 shareholder 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.
<PAGE>
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: [WEI ACQUISITION CO.]
By:
------------------------------
Title:
ATTEST: _________________________
Title:
COUNTERSIGNED:
[ ]
WARRANT AGENT
By:
----------------------------
Title:
<PAGE>
[WEI ACQUISITION CO.]
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.
<PAGE>
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.
<PAGE>
EXHIBIT H
TAG-ALONG RIGHTS AGREEMENT
This Tag-Along Rights Agreement (this "AGREEMENT") is
made as of ______ __, 1997 by and between Cerberus Partners,
L.P., a Delaware limited partnership ("CERBERUS") on behalf of
itself and its affiliates and the accounts referred to in clause
(B) of Section 1(b)(ii) below, [United States Trust Company of
New York], as the warrant agent (together with its successor and
assigns, the "WARRANT AGENT") under the Warrant Agreements (as
defined below) and the Initial Holders (as defined below).
RECITALS
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"; all capitalized terms used herein without
definition having the meanings given thereto in the POR), and an
Asset Purchase Agreement dated as of ____________, 1997, WEI
Acquisition Co., a Delaware corporation (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 in Case No.
95-911 (HSB) (Jointly Administered) in the United States
Bankruptcy Court for the District of Delaware;
WHEREAS, Cerberus and the other holders of the Senior
Lender Claims will acquire pursuant to the POR a majority of the
shares of common stock, par value $0.01, of the Company (the
"COMMON STOCK");
WHEREAS, the POR provides that the Company shall issue
to the holders of the Senior Subordinated Note Claims three
tranches of warrants and such warrants will be issued pursuant to
(i) that certain Warrant Agreement dated as of the date hereof
(the "TRANCHE A WARRANT AGREEMENT") by and between the Company
and the Warrant Agent relating to the Tranche A Warrants (the
"TRANCHE A WARRANTS"), (ii) that certain Warrant Agreement dated
as of the date hereof (the "TRANCHE B WARRANT AGREEMENT") by and
between the Company and the Warrant Agent relating to the Tranche
B Warrants (the "TRANCHE B WARRANTS") and (iii) that certain
Warrant Agreement dated as of the date hereof (the "TRANCHE C
WARRANT AGREEMENT"; and, together with the Tranche A Warrant
Agreement and the Tranche B Warrant Agreement, the "WARRANT
AGREEMENTS") by and between the Company and the Warrant Agent
relating to the Tranche C Warrants (the "TRANCHE C WARRANTS";
and, together with the Tranche A Warrants and the Tranche B
Warrants, the "WARRANTS");
WHEREAS, the POR provides that this Agreement shall
have been entered into by Cerberus and the Warrant Agent as a
condition to the effectiveness of the POR.
NOW, THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the parties hereto
agree as follows:
1. TAG-ALONG RIGHT; NOTICES; EXERCISED SHARES;
CUTBACKS; EXPIRATION.
(a) Tag-Along Right. Prior to the Expiration Date (as
defined in Section 1(e) below), each Holder (as defined below)
that executes and delivers a counterpart of this Agreement (each
an "INITIAL HOLDER") shall have the right (the "TAG-ALONG RIGHT")
to require Cerberus to cause any third party (the "THIRD PARTY
PURCHASER") who proposes to purchase from Cerberus (or any of its
affiliates or any accounts managed by Cerberus after which
purchase Cerberus shall cease to have the power to exercise
control of the shares of Common Stock so transferred) in one or a
series of related transactions beneficial ownership to at least
750,000 shares of Common Stock acquired by Cerberus under the POR
(as adjusted for any stock split, stock dividend, subdivision,
reissuance, reclassification or other adjustment to the Common
Stock held by Cerberus) (such sale, a "TAG-ALONG SALE") to
purchase from such Initial Holder up to the number of whole
Exercised Shares (as defined in Section 1(c) below and rounded to
avoid fractional shares) equal to the number (the
"WARRANTHOLDER'S PORTION") derived by multiplying the total
number of shares of Common Stock subject to the Warrant(s)
initially distributed to such Initial Holder exercising a Tag-
Along Right and held by such Initial Holder prior to the Tag-
Along Sale (whether through unexercised Warrants or through
Exercised Shares (as defined in Section 1(c) below)) by a
fraction, the numerator of which is the number of shares of
Common Stock proposed to be purchased by the Third Party
Purchaser in the Tag-Along Sale and the denominator of which is
the sum of (x) the total number of shares of Common Stock held by
Cerberus, (y) the total number of shares of Common Stock issuable
upon exercise of all of the unexercised Warrants and the total
number of Exercised Shares, in each case, held by all of the
Initial Holders prior to the Tag-Along Sale and (z) if Alvarez &
Marsal, Inc. or its affiliates (collectively, "A&M") have the
right to participate in the Tag-Along Sale, the total number of
shares of Common Stock issuable to A&M upon the exercise of all
stock options, rights or warrants held by A&M, in each case on a
fully diluted basis, assuming the exercise in full of all such
Warrants, options and other rights outstanding. The purchase
price for any Exercised Shares purchased from the Initial Holders
pursuant to this Section 1 shall be at the same price per share
and the sale shall also be made upon the same terms and
conditions as such proposed transfer by Cerberus (the "TRANSFER
TERMS"). As used in this Agreement, "Holder" shall mean only
those holders of Senior Subordinated Note Claims (i) that are
holders of Senior Subordinated Note Claims as of the date on
which the Confirmation Order is entered (the "Record Date") and
(ii) that have provided evidence reasonably satisfactory to the
Warrant Agent that they were holders of Senior Subordinated Note
Claims as of the Record Date. No other holders of Senior
Subordinated Note Claims or Warrants shall be entitled to any
rights under this Agreement.
(b) Notices; Election to Sell. (i) If a Tag-Along
Sale is a negotiated sale to a non-broker-dealer Third-Party
Purchaser, Cerberus shall promptly notify the Warrant Agent if
Cerberus proposes to make a Tag-Along Sale giving rise to the
Tag-Along Right, and shall furnish to the Warrant Agent the
Transfer Terms and a copy of any written offer or agreement
pertaining thereto (the "CERBERUS NOTICE"). Upon receipt of the
Cerberus Notice, the Warrant Agent shall, within three (3)
Business Days of the receipt of such notice from Cerberus,
provide written notice to the Initial Holders (the "WARRANT AGENT
NOTICE") of the proposed Tag-Along Sale setting forth the
Transfer Terms, together with a letter of transmittal in the form
set forth on Exhibit A attached hereto (the "LETTER OF
TRANSMITTAL"). The Tag-Along Right may be exercised by an
Initial Holder by delivery of a properly completed Letter of
Transmittal, together with the share certificates, to the Warrant
Agent within fifteen (15) Business Days following its receipt of
the Warrant Agent Notice. Among other matters, the Letter of
Transmittal shall state the number of Exercised Shares that the
Warrantholder proposes to include in the Tag-Along Sale (not to
exceed the Warrantholder's Portion). Any Tag-Along Rights held
by an Initial Holder to participate in a Tag-Along Sale shall
expire with respect to that Tag-Along Sale if a properly
completed Letter of Transmittal, together with the requisite
certificates and other documents required thereby, are not timely
received by the Warrant Agent.
(ii) Notwithstanding anything to the contrary in this
Agreement, Tag-Along Sales shall be deemed not to include, and
Tag-Along Rights shall not be available in connection with, any
of the following transfers: (A) transfers to affiliates of
Cerberus; (B) transfers to funds or accounts managed by Cerberus
after which Cerberus continues to have the power to exercise
control of the shares of Common Stock so transferred; and (C)
sales into the market or through customary broker transactions.
(iii)In the case of a sale of Common Stock that in the
absence of clause (C) of paragraph (ii) above would constitute a
Tag-Along Sale, Cerberus shall notify the Warrant Agent of the
number of shares sold and the cash price received in such sale
(the "CERBERUS TERMS") promptly following completion of the sale.
Upon receipt of such notice, the Warrant Agent shall promptly
provide written notice to the Initial Holders of the Cerberus
Terms, together with a letter of transmittal (a "MARKET SALE
COMMITMENT") in the form set forth in Exhibit B attached hereto.
An Initial Holder may sell to Cerberus, and Cerberus shall
purchase at the cash price specified in the Cerberus Terms (a
"TAG-ALONG MARKET SALE"), the Warrant Holder's Portion of the
Market Sale (calculated as if it were a Tag-Along Sale) if such
Initial Holder delivers a properly completed Market Sale
Commitment to the Warrant Agent within ten (10) Business Days
after receipt by such Initial Holder of notice from Cerberus of
the Cerberus Terms. Any right to cause Cerberus to purchase
shares hereunder shall expire if a properly completed Market Sale
Commitment, together with the requisite certificates and other
documents required thereby, is not timely received by the Warrant
Agent.
(c) Exercised Shares. Notwithstanding anything to the
contrary contained herein, only those Warrants that are exercised
into shares of Common Stock pursuant to the terms of the Warrant
Agreement under which they were issued (the "EXERCISED SHARES")
prior to the Tag-Along Sale or Tag-Along Market Sale, shall be
entitled to the Tag-Along Right. On or prior to the date on
which the Tag-Along Sale or Tag-Along Market Sale pursuant to
Section 1(b)(i) or (iii) above, respectively, is scheduled to
close, each Initial Holder that submitted a Letter of Transmittal
or Market Sale Commitment, as the case may be, shall exercise
that number of Warrants equal to the number of Exercised Shares
(not exceeding the Warrantholder's Portion) set forth in the
Letter of Transmittal or Market Sale Commitment, as the case may
be (the "Noticed Shares") in accordance with the terms of the
Warrant Agreement under which such Warrants were issued, such
exercise to be effective upon consummation of the sale, and any
such Warrants not so exercised shall be deemed exercised to the
extent of the Noticed Shares for all purposes on the date of the
Tag Along Sale or the Tag-Along Market Sale, as the case may be,
as reduced pursuant to Section 1(d) below, as applicable, and in
such event the Exercise Price shall be deducted from the purchase
price and delivered to the Warrant Agent.
(d) Cut-Backs. If the Third Party Purchaser purchases
a number of shares of Common Stock that is less than the number
of shares set forth in the Transfer Terms or the number of shares
that all persons entitled to participate in the Tag-Along Sale
propose to include in the Tag-Along Sale, the number of shares to
be included in the Tag-Along Sale by the Initial Holders,
Cerberus and the other parties entitled to participate in the
Tag-Along Sale shall be reduced pro-rata based on the number of
shares originally permitted to be included by such parties prior
to such reduction. Any Exercised Shares not actually sold by an
Initial Holder as a result of the application of the previous
sentence shall not be deemed exercised.
(e) Expiration. Each Initial Holder's rights under
Section 1 shall expire upon the earliest of (the "EXPIRATION
DATE") (i) three years after the issuance of the Warrants, (ii)
the completion of a public offering of the Common Stock yielding
proceeds of at least $5,000,000 pursuant to a registration
statement under the Securities Act of 1933, as amended, (iii) the
181st day after the listing of the Common Stock on the New York
Stock Exchange or the American Stock Exchange, or the
commencement of bid and ask or similar price quotations for the
Common Stock on the "National Market" system of NASDAQ, and (iv)
with respect to the Warrants and Exercised Shares so transferred,
upon the sale, disposition, grant or other transfer of a Warrant
or Exercised Share.
2. NON-TRANSFERABLE. The Tag-Along Right granted to
an Initial Holder under this Agreement shall not be transferrable
by the Initial Holder and the Warrant Agent shall not recognize
or give effect to any such transfer.
3. GENERAL.
(a) Amendment. No modification or amendment of, or
waiver under, this Agreement shall be valid unless in writing and
signed by each of the parties hereto.
(b) Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws of the
State of California without regard to conflict of law principles.
(c) Severability. If any term, provision, covenant or
restriction herein is held by a court of competent jurisdiction
to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated thereby.
(d) Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed
to have been duly given when delivered personally or sent by
overnight courier express service or two days after having been
deposited in the United States mail, registered or certified,
return receipt requested, postage prepaid, addressed as follows:
(1) If to the Warrant Agent, to:
[United States Trust Company of New York
Corporate Trust Division
114 West 47th Street, 15th Floor
New York, NY 10036-1532
Attention: Louis Young]
(2) If to the Company, to:
19701 Hamilton Avenue
Torrance, California 90502-1334
Attention: __________________
with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attention: Ben H. Logan, Esq. and
C. James Levin Esq.
and a copy to:
Cerberus Partners, L.P.
950 Third Avenue
New York, New York 10022
Attention: Robert Davenport
(3) If to the Initial Holders, to the address set
forth in the register maintained by the Warrant
Agent
or to such other address or addresses as each of the parties
hereto (except the Initial Holders) may communicate in writing to
the other. Written notice given by any other method shall be
deemed effective only when actually received by the party to whom
given.
(e) Entire Agreement. This Agreement contains the
entire understanding of the parties hereto respecting the subject
matter hereof and supersedes all prior discussions and
understandings.
(f) Assignment. This Agreement may not be assigned by
the Initial Holders.
(g) Counterparts. This Agreement may be signed in
counterparts and each such counterpart shall be deemed to be an
original and all such counterparts shall be deemed to be one and
the same instrument.
(h) Non-Signing Holders. This Agreement shall be
effective with respect to each Initial Holder irrespective of
whether there are other holders of Senior Subordinated Note
Claims who were eligible to become an Initial Holder with rights
under this Agreement, but failed to execute this Agreement or
failed to provide evidence to the Warrant Agent that they were
holders of Senior Subordinated Note Claims as of the Record Date.
Any holder of a Senior Subordinated Note Claim who fails to
execute this Agreement by the date that is two-months from the
Effective Date (the "INITIAL HOLDER DEADLINE") shall not be
entitled to any Tag-Along Rights or other rights under this
Agreement irrespective of whether such holder would otherwise
have qualified as an Initial Holder. Warrant Agent shall use its
commercially reasonable best efforts to identify the parties
entitled to become an Initial Holder hereunder prior to the
Initial Holder Deadline, but shall not have any obligation to
identify such parties after the Initial Holder Deadline.
[remainder of page intentionally left blank]
<PAGE>
IN WITNESS THEREOF, the parties have executed this
Agreement as of the day and year first above written.
CERBERUS PARTNERS, L.P.
By:___________________
Name:_________________
Its: General Partner
[UNITED STATES TRUST COMPANY
OF NEW YORK]
By:___________________
Name:_________________
Its: _________________
INITIAL HOLDERS
_____________________
_____________________
_____________________
_____________________
_____________________
_____________________
_____________________
_____________________
_____________________
_____________________
<PAGE>
Exhibit A
[Form of Letter of Transmittal for Tag-Along Sale]
[WEI Acquisition Co.]
19701 Hamilton Avenue
Torrance, CA 90502-1334
LETTER OF TRANSMITTAL
To be completed and returned to exercise your
tag-along rights under the
Tag-Along Rights Agreement
Dated as of _________ __, 1997
Among Cerberus Partners, L.P.,
[United States Trust Company of New York],
as the Warrant Agent, and the Initial Holders Party Thereto
This Letter of Transmittal should be returned to
[United States Trust Company of New York
Corporate Trust Division
114 West 47th Street, 15th Floor
New York, N.Y. 10036-1532]
________ __, 199_
[Name and address of Initial Holder]
Reference is hereby made to the Tag-Along Rights Agreement dated as
of ________ __, 1997 among Cerberus Partners, L.P. ("Cerberus"), [United
States Trust Company of New York], as the Warrant Agent (the "Warrant Agent")
and the Initial Holders party thereto (the "Tag-Along Agreement").
Capitalized terms used in this Letter of Transmittal (this "Letter") but not
herein defined have the meanings given to them in the Tag-Along Agreement.
Pursuant to the provisions of the Tag-Along Agreement, you are
entitled to sell all or a portion of your shares of Common Stock not exceeding
your Warrantholder's Portion in connection with a Tag-Along Sale. Section
1(a) of the Tag-Along Agreement defines Warrantholder's Portion to mean that
number of whole Exercised Shares (rounded to avoid fractional shares) equal to
the number derived by multiplying the total number of shares of Common Stock
subject to the Warrant(s) initially distributed to an Initial Holder
exercising a Tag-Along Right and held by such Initial Holder prior to the Tag-
Along Sale (whether through unexercised Warrants or through Exercised Shares)
by a fraction, the numerator of which is the number of shares of Common Stock
proposed to be purchased by the Third Party Purchaser in the Tag-Along Sale
and the denominator of which is the sum of (x) the total number of shares of
Common Stock held by Cerberus, (y) the total number of shares of Common Stock
issuable upon exercise of all of the unexercised Warrants and the total number
of Exercised Shares, in each case, held by all of the Initial Holders prior to
the Tag-Along Sale and (z) if Alvarez & Marsal, Inc. or its affiliates
(collectively, "A&M") have the right to participate in the Tag-Along Sale, the
total number of shares of Common Stock issuable to A&M upon the exercise of
all stock options, rights or warrants held by A&M, in each case on a fully
diluted basis, assuming the exercise in full of all such Warrants, options and
other rights outstanding. A&M does [not] have the right to participate in the
Tag-Along Sale.
Please indicate below your Warrantholder's Portion and the number of
Exercised Shares (not exceeding your Warrantholder's Portion) you wish to sell
in the Tag-Along Sale.
1. The total number of fully diluted shares of Common Stock
subject to the Warrants initially distributed to the Initial Holder and
currently held by the Initial Holder is:___________.
2. The number of shares of Common Stock proposed to be purchased
by the Third Party Purchaser is: _______________.
3. The total number of fully diluted shares of Common Stock held
by Cerberus is _________________.
4. The total number of fully diluted shares of Common Stock
issuable upon exercise of all of the unexercised Warrants and the total number
of Exercised Shares, in each case, currently held by all of the Initial
Holders is:__________________.
[5. The number of fully diluted shares of Common Stock issuable to
A&M upon the exercise of all stock options, rights or warrants held by A&M is
____________.]
6. The Warrantholder's Portion of the Initial Holder (1
multiplied by quotient of 2 divided by the sum of 3+4+[5]), rounded to avoid
fractional shares is: _________________.
7. The number of Exercised Shares Initial Holder proposes to
include in the Tag-Along Sale (not exceeding the Warrantholder's Portion)
is:______________________.
Only shares received upon exercise of Warrants prior to the Tag-
Along Sale may be sold in the Tag-Along Sale. You will not have the right to
participate in the Tag-Along Sale, however, unless and until you have
completed this Letter of Transmittal, including the Substitute W-9, and
returned it to the Warrant Agent. The Warrant Agent is [United States Trust
Company of New York], and its address is set forth on the first page of this
Letter of Transmittal.
In order to participate in the Tag-Along Sale, you must supply the
information requested in this Letter and return the completed Letter, with any
other documents that may be required and return all Warrant certificates
and/or share certificates, to the Warrant Agent by 5:00 p.m. New York time on
_____________, 199__.
DESCRIPTION OF SHARES TO BE SOLD
<TABLE>
<CAPTION>
Name(s) and Address(es) of Registered Holder(s) Certificate(s)
Tendered
(Please fill in exactly as name(s) appear(s) on (Attach signed
list if
certificate(s)) necessary)
<S> <C> <C>
<C>
Number of Shares
Number of
Certificate Represented by
Shares To
(Number(s)) Certificate(s)
Be Sold<F1>
__Warrants__
__Shares__
Total Shares To Be Sold
Indicate in this box the order (by certificate number) in which Shares are to
be purchased in the event of proration.<F2> (Attach additional signed list if
necessary.) See Instruction 1.
1st: ; 2nd: ; 3rd: ; 4th: ; 5th:
<FN>
<F1> If you desire to sell fewer than all Exercised Shares evidenced by any
certificates listed above, please indicate in this column the number of
Exercised Shares you wish to sell. Otherwise, all Exercised Shares
evidenced by such certificates will be deemed to have been requested
to be included in the Tag-Along Sale. See Instruction 2.
<F2> If you do not designate an order, then in the event less than all
Shares tendered are purchased due to proration, Shares will be
selected for purchase by the Warrant Agent.
</FN>
The Instructions regarding the completion of this Letter of
Transmittal, printed below, must be followed in their entirety. Questions or
requests for assistance or for additional copies of this Letter of Transmittal
may
be directed to the Warrant Agent at [insert phone number].
If you intend to exercise your Warrants into Exercised Shares for
inclusion in the Tag-Along Sale, you must include with this Letter the
documents required to exercise your Warrants pursuant to the Warrant Agreement
under which your Warrants were issued. The exercise price of the Warrants
which are exercised into Exercised Shares and sold in the Tag-Along Sale will
be deducted from the proceeds of the Tag-Along Sale attributable to such
Exercised Shares. Warrants will only be deemed exercised to the extent that
Exercised Shares are actually sold in the Tag-Along Sale.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL IS AT
YOUR
ELECTION AND YOUR SOLE RISK. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
THIS LETTER OF
TRANSMITTAL SHOULD NOT BE SENT TO ANYONE OTHER THAN THE
WARRANT AGENT.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS
CAREFULLY
BEFORE COMPLETING THE BOXES BELOW
The undersigned hereby acknowledges that the undersigned has
received and reviewed, among other things, the Tag-Along Agreement, the
Warrant Agreement under which the undersigned's Warrants were issued and this
Letter of Transmittal, which together constitute the terms and conditions of
the rights of the Initial Holders to participate in any Tag-Along Sale.
The undersigned hereby tenders to Cerberus for inclusion in the Tag-
Along Sale to _______________ (the "Purchaser"), the above-described Warrants
and/or shares of the Company's Common Stock, par value $0.01 per share (the
"Shares"), at the price per Share indicated in the Transfer Terms (the
"Purchase Price"), upon the terms and subject to the conditions set forth in
the Tag-Along Agreement, and in this Letter of Transmittal.
The undersigned hereby irrevocably sells, assigns and transfers to
or upon the order of the Cerberus for inclusion in the Tag-Along Sale to the
Purchaser all right, title and interest in and to all Shares and irrevocably
constitutes and appoints the Warrant Agent as the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares, with full
power of substitution (such power of attorney being an irrevocable power
coupled with an interest), to:
(a) deliver certificates for Shares or transfer ownership of
such Shares on the account books maintained by [WEI Acquisition Co.] (the
"Company"), together in either such case with all accompanying evidences of
transfer and authenticity, to or upon the order of Cerberus for inclusion in
the Tag-Along Sale to the Purchaser, upon receipt by the Warrant Agent, as the
undersigned's agent, of the Purchase Price with respect to such Shares;
(b) present certificates for such Shares for cancellation and
transfer on the books of the Company; and
(c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, all in accordance with the terms of the
Tag-Along Sale.
The undersigned hereby represents and warrants to the Company,
Cerberus and the Purchaser that:
(a) the undersigned understands that sales of Shares pursuant to
the procedures described in Section 1 of the Tag-Along Agreement and in the
Instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Tag-Along Sale;
(b) when and to the extent the Purchaser accepts the Shares for
purchase, the Purchaser will acquire good, marketable and unencumbered title
to them, free and clear of all security interests, liens, charges,
encumbrances, conditional sales agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any
additional documents the Warrant Agent, Cerberus or the Purchaser deems
necessary or desirable to complete the assignment, transfer and purchase of
the Shares tendered hereby; and
(d) the undersigned has read, understands and agrees with, all
of the terms of the Tag Along Sale.
The undersigned understands that acceptance of Shares by the
Purchaser for payment will constitute a binding agreement between the
undersigned, Cerberus and the Purchaser upon the terms and subject to the
conditions of the Tag Along Agreement and this Letter of Transmittal.
Subject to the Instructions, the check for the aggregate Purchase
Price less the exercise price of the Warrants for such of the tendered Shares
as are purchased will be issued to the order of the undersigned and mailed to
the address indicated above.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligations of the undersigned under this Letter of Transmittal shall be
binding upon the heirs, personal representatives, successors and assigns of
the undersigned.
<PAGE>
IMPORTANT: ALL INITIAL HOLDERS MUST COMPLETE
INITIAL HOLDER SHOULD SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9 BELOW
...............................................
............................
Signature(s) of Owner(s)
Tax Identification or Social Security Number ....................
Dated: ...................................................., 199__
[Must be signed by the Holder(s)
exactly as name(s) appear(s) on this Letter.]
If signature is by trustees, executors, administrators, attorneys-in-fact,
agents, officers of corporations or others acting in a fiduciary capacity,
please provide the following information; otherwise, leave blank. See
instruction 3.
Name(s) ........................................................
.................................................................
(Please Type or Print)
Capacity (Full Title) ...........................................
Address .........................................................
.................................................................
(Include Zip Code)
Area Code and Tel. No............................................
Tax Identification or Social Security Number ....................
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
ALL INITIAL HOLDERS MUST COMPLETE THIS
SUBSTITUTE FORM W-9 BELOW:
NO DISTRIBUTIONS WILL BE MADE TO INITIAL HOLDERS
WHO DO NOT COMPLETE THIS BOX.
SEE INSTRUCTION 6.
PAYOR'S NAME: _____[Insert Name]___________________
<S> <C> <C>
SUBSTITUTE Part 1-PLEASE PROVIDE YOUR TIN IN THE Social Security
Number
BOX AT RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW OR_________________
Employer
Identification Number
</TABLE>
<TABLE>
<S> <C>
FORM W-9
Department of the Treasury Part 2-Check the box if you are NOT subject to
backup
Internal Revenue Service withholding under the provisions of Section
3406(a)(1)(C) of the Internal Revenue Code
because
(1) you have not been notified that you are
subject
to backup withholding as a result of failure
to report
all interest or dividends or (2) the Internal
Revenue
Service has notified you that you are no
longer
subject to backup withholding.
</TABLE>
<TABLE>
[ ]
<S> <C>
<C>
Payor's Request for Taxpayer CERTIFICATION-UNDER THE PENALTIES OF
PERJURY, Part 3-
Identification Number ("TIN") I CERTIFY THAT THE INFORMATION PROVIDED
ON THIS
FORM IS TRUE, CORRECT AND COMPLETE.
SIGNATURE______________ Date________________,
199__
Awaiting
TIN
</TABLE>
[ ]
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN
BACKUP WITHHOLDING OF 20 PERCENT OF ANY PAYMENTS MADE
TO YOU PURSUANT TO THE TAG-ALONG AGREEMENT. PLEASE
REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification
Number has not been issued to me, and either (a) I have mailed or
delivered an application to receive a Taxpayer Identification Number
to the appropriate Internal Revenue Service Center or Social Security
Administration Office, or (b) I intend to mail or deliver an application
in the near future. I understand that if I do not provide a Taxpayer
Identification Number within sixty (60) days, 20 percent of all
payments made to me thereafter will be withheld until I provide a number.
Signature________________________________ Date____________________,199_
<PAGE>
INSTRUCTIONS FOR COMPLETING THIS LETTER:
1. Inadequate Space. If the space provided in the box
captioned "Description of Shares To Be Sold" is inadequate, the
certificate numbers and/or number of Shares or Warrants should
be listed on a separate signed schedule and attached to this
Letter of Transmittal.
2. Partial Tenders, Cut-Backs and Unpurchased Shares. If fewer than
all of the Shares evidenced by any certificate for Warrants or Shares are to
be sold, fill in the number of Shares which are to be sold in the column
entitled "Number of Shares To Be Sold" in the box captioned "Description of
Shares To Be Sold." In such case, and if less than all shares of Common Stock
proposed to be sold in the Tag-Along Sale by an Initial Holder are sold
pursuant to Section 1(d) of the Tag-Along Agreement, if any Shares to be sold
are purchased, a new Warrant or Share certificate, as applicable, for the
remainder of the Shares (including any Shares not purchased) evidenced by the
old certificate(s) will be issued and sent to the Initial Holders, as soon as
practicable after the Tag-Along Sale. Unless otherwise indicated, all Shares
represented by the certificates listed and delivered to the Warrant Agent (up
to the Warrantholder's Portion) will be deemed to have been requested to be
included in the Tag-Along Sale.
3. Completion and Delivery of Letter of Transmittal, including
Substitute Form W-9. This Letter of Transmittal must be completed and signed
in accordance with Instruction 4 below. Substitute Form W-9, which is
included within this Letter, must be completed and signed in accordance with
Instruction 6 below. This Letter of Transmittal, including the Substitute
Form W-9, must be delivered to the Warrant Agent, not to the Company or
Cerberus. The method of delivery of the Letter of Transmittal is at your
election and your sole risk, and delivery will be deemed made only when
actually received by the Warrant Agent. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. In all
cases, sufficient time should be allowed to ensure timely delivery. This
letter should be sent only to the Warrant Agent named above.
4. Signatures on Letter of Transmittal. This Letter of Transmittal
should be signed by the Initial Holder to whom it is addressed.
If this Letter of Transmittal or other required documents are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or other persons acting in a fiduciary or representative
capacity, such persons should so indicate when signing, should supply the
required additional information in the signature box, and should submit proper
evidence satisfactory to Cerberus and the Warrant Agent of such persons'
authority so to act together with this Letter of Transmittal.
5. Irregularities. All questions as to the validity, form,
eligibility and acceptance of any delivery will be determined by Cerberus in
its sole discretion, and Cerberus' determination will be final and binding.
Cerberus reserves the absolute right to reject any or all deliveries (i)
determined by Cerberus not to be in appropriate form or (ii) the acceptance of
which, may, in the opinion of counsel, be unlawful. Cerberus reserves the
absolute right to waive any defect or irregularity in deliveries with regard
to any particular holder(s). Unless waived, any defects or irregularities in
connection with deliveries must be cured prior to any distribution by the
Warrant Agent. Neither Cerberus nor any other person shall be under any duty
to give notice of any defects or irregularities in deliveries, nor shall
Cerberus or any person incur any liability for failure to give any such
notice. Deliveries will not be deemed to have been made until all defects and
irregularities have been cured or waived.
6. Substitute Form W-9 and Backup Withholding Tax. You must supply
your Taxpayer Identification Number ("TIN") on Substitute Form W-9 and sign
and date such form before you may participate in any Tag-Along Sale pursuant
to the Tag-Along Agreement. YOUR TIN IS EITHER YOUR SOCIAL SECURITY
NUMBER
(FOR AN INDIVIDUAL) OR YOUR EMPLOYER IDENTIFICATION NUMBER (FOR
ALL OTHER
ENTITIES, E.G., CORPORATIONS). In the alternative, you may establish a basis
for exemption from federal income tax backup withholding. If the Warrant
Agent is not provided with the correct TIN or an adequate basis for exemption,
you will not be entitled to participate in the Tag-Along Sale under the Tag-
Along Agreement.
In completing Substitute Form W-9, you must either (i) complete the
Substitute Form W-9 below, certifying that the TIN provided on the Substitute
Form W-9 is correct (or that you are awaiting a TIN) and that either (a) you
have not been notified by the IRS that you are subject to backup withholding
as a result of failure to report all interest or dividends, or (b) the IRS has
notified you that you are no longer subject to backup withholding; or in the
alternative (ii) you must provide an adequate basis for exemption.
The TIN that must be reported in this Substitute Form W-9 is either
the Social Security Number or the Employer Identification Number of the record
Initial Holder. If the Series [A][B][C] Warrants are in more than one name or
are not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9, below
on page G-1, for additional guidance on which number to report.
7. Requests for Assistance or Additional Copies. Requests for
assistance or for additional copies of the Tag-Along Agreement, the Series
[A][B][C] Warrant Agreement or this Letter of Transmittal may be directed to
the Warrant Agent at [insert phone number].
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
Social Security Numbers have nine digits separated by two hyphens, i.e.
000-00-000. Employer Identification Numbers have nine digits separated by
only one hyphen, i.e. 00-0000000. The table below will help determine the
number to give the payor:
<TABLE>
<S> <C>
For this type of Holder Give the name and SOCIAL SECURITY
number of
1. IndividualThe individual
2. Two or more individuals The actual owner of the account or,
(joint account) if combined funds, the first
individual on the account<F1>
3. Custodian account of a minor The minor<F2>
(Uniform Gift to Minor Act)
4. a. The visual revocable savings The grantor trustee<F1>
trust (grantor is also trustee)
b. The so-called trust account The actual owner<F1>
that is not a legal or valid
trust under state law
5. Sole proprietorship The owner<F3>
For this type of account Give the name and
EMPLOYER IDENTIFICATION
number of
6. A valid trust, estate or
pension trust The legal entity (do not furnish
the identification number of
the personal representative or
trustee unless the legal entity
itself is not designated in the
account title)<F4>
7. Corporation The corporation
8. Association, club, religious, The organization
charitable, educational or
other tax-exempt organization
9. PartnershipThe partnership
10. A broker or registered nominee The broker or nominee
11. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state
or local government, school
district, or prison) that receives
agricultural program payments
<FN>
<F1> List first and circle the name of the person whose number you furnish.
<F2> Circle the minor's name and furnish the minor's Social Security Number.
<F3> Show the name of the owner.
<F4> List first and circle the name of the legal trust, estate or pension
trust.
</FN>
</TABLE>
Note:
If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
Exhibit B
[Form of Letter of Transmittal for Tag-Along Market Sale]
[WEI Acquisition Co.]
19701 Hamilton Avenue
Torrance, CA 90502-1334
LETTER OF TRANSMITTAL
To be completed and returned to exercise your
market sale tag-along rights under the
Tag-Along Rights Agreement
Dated as of _________ __, 1997
Among Cerberus Partners, L.P.,
[United States Trust Company of New York],
as the Warrant Agent, and the Initial Holders Party Thereto
This Letter of Transmittal should be returned to
[United States Trust Company of New York
Corporate Trust Division
114 West 47th Street, 15th Floor
New York, N.Y. 10036-1532]
________ __, 199_
[Name and address of Initial Holder]
Reference is hereby made to the Tag-Along Rights Agreement dated as
of ________ __, 1997 among Cerberus Partners, L.P. ("Cerberus"), [United
States Trust Company of New York], as the Warrant Agent (the "Warrant Agent")
and the Initial Holders party thereto (the "Tag-Along Agreement").
Capitalized terms used in this Letter of Transmittal (this "Letter") but not
herein defined have the meanings given to them in the Tag-Along Agreement.
Pursuant to the provisions of the Tag-Along Agreement, you are
entitled to sell to Cerberus all or a portion of your shares of Common Stock
not exceeding your Warrantholder's Portion in connection with a Tag-Along
Market Sale. Section 1(a) of the Tag-Along Agreement defines Warrantholder's
Portion to mean that number of whole Exercised Shares (rounded to avoid
fractional shares) equal to the number derived by multiplying the total number
of shares of Common Stock subject to the Warrant(s) initially distributed to
an Initial Holder exercising a Tag-Along Right and held by such Initial Holder
prior to the Tag-Along Market Sale (whether through unexercised Warrants or
through Exercised Shares) by a fraction, the numerator of which is the number
of shares of Common Stock purchased by the Third Party Purchaser and the
denominator of which is the sum of (x) the total number of shares of Common
Stock held by Cerberus, (y) the total number of shares of Common Stock
issuable upon exercise of all of the unexercised Warrants and the total number
of Exercised Shares, in each case, held by all of the Initial Holders prior to
the Tag-Along Market Sale and (z) if Alvarez & Marsal, Inc. or its affiliates
(collectively, "A&M") have the right to participate in the Tag-Along Market
Sale, the total number of shares of Common Stock issuable to A&M upon the
exercise of all stock options, rights or warrants held by A&M, in each case on
a fully diluted basis, assuming the exercise in full of all such Warrants,
options and other rights outstanding. A&M does [not] have the right to
participate in the Tag-Along Market Sale.
Please indicate below your Warrantholder's Portion and the number of
Exercised Shares (not exceeding your Warrantholder's Portion) you wish to sell
in the Tag-Along Market Sale.
1. The total number of fully diluted shares of Common Stock
subject to the Warrants initially distributed to the Initial Holder and
currently held by the Initial Holder is:___________.
2. The number of shares of Common Stock purchased by the Third
Party Purchaser is: _______________.
3. The total number of fully diluted shares of Common Stock held
by Cerberus is _________________.
4. The total number of fully diluted shares of Common Stock
issuable upon exercise of all of the unexercised Warrants and the total number
of Exercised Shares, in each case, currently held by all of the Initial
Holders is:________________.
[5. The number of fully diluted shares of Common Stock issuable to
A&M upon the exercise of all stock options, rights or warrants held by A&M is
____________.]
6. The Warrantholder's Portion of the Initial Holder (1
multiplied by quotient of 2 divided by the sum of 3+4+[5]), rounded to avoid
fractional shares is:_________________.
7. The number of Exercised Shares Initial Holder proposes to
include in the Tag-Along Market Sale (not exceeding the Warrantholder's
Portion) is:______________________.
Only shares received upon exercise of Warrants prior to the Tag-
Along Market Sale may be sold in the Tag-Along Market Sale. You will not have
the right to participate in the Tag-Along Market Sale, however, unless and
until you have completed this Letter of Transmittal, including the Substitute
W-9, and returned it to the Warrant Agent. The Warrant Agent is [United
States Trust Company of New York], and its address is set forth on the first
page of this Letter of Transmittal.
In order to participate in the Tag-Along Market Sale, you must
supply the information requested in this Letter and return the completed
Letter, with any other documents that may be required and return all Warrant
certificates and/or share certificates, to the Warrant Agent by 5:00 p.m. New
York time on _____________, 199__.
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TO BE SOLD
Name(s) and Address(es) of Registered Certificate(s)
Tendered
Holder(s) (Please fill in exactly as name(s) (Attach signed list if
necessary)
appear(s) on certificate(s))
<S> <C> <C>
<C>
Certificate Number of Shares
Number of
(Number(s)) Represented by
Shares To
Certificate(s)
Be Sold<F1>
__Warrants__
__Shares__
Total Shares To Be Sold
<FN>
<F1> If you desire to sell fewer than all Exercised Shares
evidenced by any certificates listed above, please indicate
in this column the number of Exercised Shares you wish to sell.
Otherwise, all Exercised Shares evidenced by such certificates
will be deemed to have been requested to be included in the
Tag-Along Market Sale. See Instruction 2.
</FN>
</TABLE>
The Instructions regarding the completion of this Letter of
Transmittal, printed below, must be followed in their entirety. Questions or
requests for assistance or for additional copies of this Letter of Transmittal
may be directed to the Warrant Agent at [insert phone number].
If you intend to exercise your Warrants into Exercised Shares for
inclusion in the Tag-Along Market Sale, you must include with this Letter the
documents required to exercise your Warrants pursuant to the Warrant Agreement
under which your Warrants were issued. The exercise price of the Warrants
which are exercised into Exercised Shares and sold in the Tag-Along Market
Sale will be deducted from the proceeds of the Tag-Along Market Sale
attributable to such Exercised Shares. Warrants will only be deemed exercised
to the extent that Exercised Shares are actually sold in the Tag-Along Market
Sale.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL IS AT
YOUR
ELECTION AND YOUR SOLE RISK. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
THIS LETTER OF
TRANSMITTAL SHOULD NOT BE SENT TO ANYONE OTHER THAN THE
WARRANT AGENT.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BEFORE COMPLETING THE BOXES BELOW
The undersigned hereby acknowledges that the undersigned has
received and reviewed, among other things, the Tag-Along Agreement, the
Warrant Agreement under which the undersigned's Warrants were issued and this
Letter of Transmittal, which together constitute the terms and conditions of
the rights of the Initial Holders to participate in any Tag-Along Market Sale.
The undersigned hereby tenders to Cerberus, the above-described
Warrants and/or shares of the Company's Common Stock, par value $0.01 per
share (the "Shares"), at the price per Share indicated in the Transfer Terms
(the "Purchase Price"), upon the terms and subject to the conditions set forth
in the Tag-Along Agreement, and in this Letter of Transmittal.
The undersigned hereby irrevocably sells, assigns and transfers to
or upon the order of the Cerberus all right, title and interest in and to all
Shares and irrevocably constitutes and appoints the Warrant Agent as the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares, with full power of substitution (such power of attorney being an
irrevocable power coupled with an interest), to:
(a) deliver certificates for Shares or transfer ownership of
such Shares on the account books maintained by [WEI Acquisition Co.] (the
"Company"), together in either such case with all accompanying evidences of
transfer and authenticity, to or upon the order of Cerberus, upon receipt by
the Warrant Agent, as the undersigned's agent, of the Purchase Price with
respect to such Shares;
(b) present certificates for such Shares for cancellation and
transfer on the books of the Company; and
(c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, all in accordance with the terms of the
Tag-Along Market Sale.
The undersigned hereby represents and warrants to the Company and
Cerberus that:
(a) the undersigned understands that sales of Shares pursuant to
the procedures described in Section 1 of the Tag-Along Agreement and in the
Instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Tag-Along Market Sale;
(b) when and to the extent Cerberus accepts the Shares for
purchase, Cerberus will acquire good, marketable and unencumbered title to
them, free and clear of all security interests, liens, charges, encumbrances,
conditional sales agreements or other obligations relating to their sale or
transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any
additional documents the Warrant Agent or Cerberus deems necessary or
desirable to complete the assignment, transfer and purchase of the Shares
tendered hereby; and
(d) the undersigned has read, understands and agrees with, all
of the terms of the Tag Along Market Sale.
The undersigned understands that acceptance of Shares by Cerberus
for payment will constitute a binding agreement between the undersigned and
Cerberus upon the terms and subject to the conditions of the Tag Along
Agreement and this Letter of Transmittal.
Subject to the Instructions, the check for the aggregate Purchase
Price less the exercise price of the Warrants for such of the tendered Shares
as are purchased will be issued to the order of the undersigned and mailed to
the address indicated above.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligations of the undersigned under this Letter of Transmittal shall be
binding upon the heirs, personal representatives, successors and assigns of
the undersigned.
<PAGE>
IMPORTANT: ALL INITIAL HOLDERS MUST COMPLETE
INITIAL HOLDER SHOULD SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9 BELOW
..........................................................
..........................................................
Signature(s) of Owner(s)
Tax Identification or Social Security Number..............
Dated: ............................................, 199__
[Must be signed by the Holder(s) exactly
as name(s) appear(s) on this Letter.]
If signature is by trustees, executors, administrators, attorneys-in-fact,
agents, officers of corporations or others acting in a fiduciary capacity,
please provide the following information; otherwise, leave blank. See
instruction 3.
Name(s) ....................................................
............................................................
(Please Type or Print)
Capacity (Full Title) ......................................
Address ....................................................
............................................................
(Include Zip Code)
Area Code and Tel. No.......................................
Tax Identification or Social Security Number................
<PAGE>
ALL INITIAL HOLDERS MUST COMPLETE THIS
SUBSTITUTE FORM W-9 BELOW:
NO DISTRIBUTIONS WILL BE MADE TO INITIAL HOLDERS WHO DO NOT
COMPLETE THIS BOX.
SEE INSTRUCTION 6.
PAYOR'S NAME: _____[Insert Name]___________________
<TABLE>
<S> <C> <C>
SUBSTITUTE Part 1-PLEASE PROVIDE YOUR TIN IN Social Security Number
THE BOX AT RIGHT AND CERTIFY BY OR_________________
SIGNING AND DATING BELOW Employer Identification
Number
</TABLE>
<TABLE>
<S> <C>
FORM W-9 Part 2-Check the box if you are NOT subject to
backup
withholding
Department of the Treasury under the provisions of Section 3406(a)(1)(C)
of the
Internal
Internal Revenue Service Revenue Code because (1) you have not been
notified that
you are
subject to backup withholding as a result of
failure to report all
interest or dividends or (2) the Internal
Revenue Service has
notified you that you are no longer subject to
backup withholding.
[ ]
</TABLE>
<TABLE>
<S> <C>
<C>
Payor's Request for Taxpayer CERTIFICATION-UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE Part 3-
Identification Number ("TIN") INFORMATION PROVIDED ON THIS FORM IS TRUE,
CORRECT AND COMPLETE.
SIGNATURE______________________
Date_____________________, Awaiting
199_
TIN
[ ]
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN
BACKUP
WITHHOLDING OF 20 PERCENT OF ANY PAYMENTS MADE TO YOU
PURSUANT
TO THE TAG-ALONG AGREEMENT. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE
BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number within
sixty (60) days, 20 percent of all payments made to me thereafter will be
withheld until I provide a number.
Signature_____________________________ Date____________________,199_
<PAGE>
INSTRUCTIONS FOR COMPLETING THIS LETTER:
1. Inadequate Space. If the space provided in the box captioned
"Description of Shares To Be Sold" is inadequate, the certificate numbers
and/or number of Shares or Warrants should be listed on a separate signed
schedule and attached to this Letter of Transmittal.
2. Partial Tenders and Unpurchased Shares. If fewer than all of the
Shares evidenced by any certificate for Warrants or Shares are to be sold,
fill in the number of Shares which are to be sold in the column entitled
"Number of Shares To Be Sold" in the box captioned "Description of Shares To
Be Sold." In such case, if any Shares to be sold are purchased, a new Warrant
or Share certificate, as applicable, for the remainder of the Shares
(including any Shares not purchased) evidenced by the old certificate(s) will
be issued and sent to the Initial Holders, as soon as practicable after the
Tag-Along Market Sale. Unless otherwise indicated, all Shares represented by
the certificates listed and delivered to the Warrant Agent (up to the
Warrantholder's Portion) will be deemed to have been requested to be included
in the Tag-Along Market Sale.
3. Completion and Delivery of Letter of Transmittal, including
Substitute Form W-9. This Letter of Transmittal must be completed and signed
in accordance with Instruction 4 below. Substitute Form W-9, which is
included within this Letter, must be completed and signed in accordance with
Instruction 6 below. This Letter of Transmittal, including the Substitute
Form W-9, must be delivered to the Warrant Agent, not to the Company or
Cerberus. The method of delivery of the Letter of Transmittal is at your
election and your sole risk, and delivery will be deemed made only when
actually received by the Warrant Agent. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. In all
cases, sufficient time should be allowed to ensure timely delivery. This
letter should be sent only to the Warrant Agent named above.
4. Signatures on Letter of Transmittal. This Letter of Transmittal
should be signed by the Initial Holder to whom it is addressed.
If this Letter of Transmittal or other required documents are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or other persons acting in a fiduciary or representative
capacity, such persons should so indicate when signing, should supply the
required additional information in the signature box, and should submit proper
evidence satisfactory to Cerberus and the Warrant Agent of such persons'
authority so to act together with this Letter of Transmittal.
5. Irregularities. All questions as to the validity, form,
eligibility and acceptance of any delivery will be determined by Cerberus in
its sole discretion, and Cerberus' determination will be final and binding.
Cerberus reserves the absolute right to reject any or all deliveries (i)
determined by Cerberus not to be in appropriate form or (ii) the acceptance of
which, may, in the opinion of counsel, be unlawful. Cerberus reserves the
absolute right to waive any defect or irregularity in deliveries with regard
to any particular holder(s). Unless waived, any defects or irregularities in
connection with deliveries must be cured prior to any distribution by the
Warrant Agent. Neither Cerberus nor any other person shall be under any duty
to give notice of any defects or irregularities in deliveries, nor shall
Cerberus or any person incur any liability for failure to give any such
notice. Deliveries will not be deemed to have been made until all defects and
irregularities have been cured or waived.
6. Substitute Form W-9 and Backup Withholding Tax. You must supply
your Taxpayer Identification Number ("TIN") on Substitute Form W-9 and sign
and date such form before you may participate in any Tag-Along Market Sale
pursuant to the Tag-Along Agreement. YOUR TIN IS EITHER YOUR SOCIAL
SECURITY NUMBER (FOR AN INDIVIDUAL) OR YOUR EMPLOYER
IDENTIFICATION NUMBER (FOR ALL OTHER ENTITIES, E.G., CORPORATIONS).
In the alternative, you may establish a basis for exemption
from federal income tax backup withholding. If the
Warrant Agent is not provided with the correct TIN or an adequate basis for
exemption, you will not be entitled to participate in the Tag-Along Market
Sale under the Tag-Along Agreement.
In completing Substitute Form W-9, you must either (i) complete the
Substitute Form W-9 below, certifying that the TIN provided on the Substitute
Form W-9 is correct (or that you are awaiting a TIN) and that either (a) you
have not been notified by the IRS that you are subject to backup withholding
as a result of failure to report all interest or dividends, or (b) the IRS has
notified you that you are no longer subject to backup withholding; or in the
alternative (ii) you must provide an adequate basis for exemption.
The TIN that must be reported in this Substitute Form W-9 is either
the Social Security Number or the Employer Identification Number of the record
Initial Holder. If the Series [A][B][C] Warrants are in more than one name or
are not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9, below
on page G-1, for additional guidance on which number to report.
7. Requests for Assistance or Additional Copies. Requests for
assistance or for additional copies of the Tag-Along Agreement, the Series
[A][B][C] Warrant Agreement or this Letter of Transmittal may be directed to
the Warrant Agent at [insert phone number].
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
Social Security Numbers have nine digits separated by two hyphens, i.e.
000-00-000. Employer Identification Numbers have nine digits separated by
only one hyphen, i.e. 00-0000000. The table below will help determine the
number to give the payor:
<TABLE>
<S> <C>
For this type of Holder Give the name and SOCIAL SECURITY
number of
1. IndividualThe individual
2. Two or more individuals The actual owner of the account or,
(joint account) if combined funds, the first
individual on the account<F1>
3. Custodian account of a minor The minor<F2>
(Uniform Gift to Minor Act)
4. a. The visual revocable savings The grantor trustee<F1>
trust (grantor is also trustee)
b. The so-called trust account The actual owner<F1>
that is not a legal or valid
trust under state law
5. Sole proprietorship The owner<F3>
For this type of account Give the name and
EMPLOYER IDENTIFICATION
number of
6. A valid trust, estate or
pension trust The legal entity (do not furnish
the identification number of
the personal representative or
trustee unless the legal entity
itself is not designated in the
account title)<F4>
7. Corporation The corporation
8. Association, club, religious, The organization
charitable, educational or
other tax-exempt organization
9. PartnershipThe partnership
10. A broker or registered nominee The broker or nominee
11. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state
or local government, school
district, or prison) that receives
agricultural program payments
<FN>
<F1> List first and circle the name of the person whose number you furnish.
<F2> Circle the minor's name and furnish the minor's Social Security Number.
<F3> Show the name of the owner.
<F4> List first and circle the name of the legal trust, estate or pension
trust.
</FN>
</TABLE>
Note:
If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
