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
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
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
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.
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 -
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
EXHIBIT A
ASSET PURCHASE AGREEMENT
AMONG
WHEREHOUSE ENTERTAINMENT, INC.
AND
WEI HOLDINGS, INC.
(COLLECTIVELY, "SELLER"),
AND
____________________
("PURCHASER")
____________ __, 1996
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
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
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.
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:
-------------------------------
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: _______________________________
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: _______________________________
ANNEX A
TRADEMARKS
REGISTRATION REGISTRATION JURISDICTION
DESCRIPTION SERIAL NO. NO. DATE
- ----------- ---------- ----------- ------------ -------------
EXHIBIT C
PATENT ASSIGNMENT
For good and valuable consideration, the receipt of
which is hereby acknowledged, pursuant to that certain Asset
Purchase Agreement dated as of __________, 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: _____________________________
ANNEX A
PATENTS
REGISTRATION REGISTRATION JURISDICTION
DESCRIPTION SERIAL NO. NO. DATE
- ----------- ---------- ----------- ------------ -------------
EXHIBIT D
FORM OF WARRANT AGREEMENT
[to come]
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.
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
---------------------------------
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
---------------------------------
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.
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
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
------------------------------
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