UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re ) Chapter 11
)
[WEI ACQUISITION CO.] ) Case No. 95-911 (HSB)
and WEI HOLDINGS, INC., )
) (Jointly Administered)
Debtors. )
DEBTORS' FIRST AMENDED CHAPTER 11 PLAN
As Revised for Technical Corrections on October 4, 1996
and Supplemental Amendments on December 2, 1996 and
December 13, 1996
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071
Attn: Hendrik de Jong
Peter M. Gilhuly
(213) 485-1234
and
Young, Conaway, Stargatt & Taylor
11th Floor - Rodney Square North
P. O. Box 391
Wilmington, DE 19899
Attn: Laura Davis Jones
(302) 571-6600
SUPPLEMENTAL AMENDMENTS TO
DEBTORS' FIRST AMENDED CHAPTER 11 PLAN
DECEMBER 13, 1996
In amendment of the Debtors' First Amended Chapter 11
Plan Dated September 26, 1996, as Revised for Technical
Corrections on October 4, 1996, and as amended pursuant to those
Supplemental Amendments dated December 2, 1996 (as amended, the
"Plan"), [WEI ACQUISITION CO.] and WEI HOLDINGS, INC.,
the Debtors and Debtors in Possession in the above-captioned
cases (collectively the "Debtors" or "Wherehouse"), hereby make
the following additional supplemental amendments to the Plan:
1. The Exhibits to the Plan are hereby amended to
replace Exhibit E "Warrant Agreement" with the "Tranche A Warrant
Agreement" and to add (i) as Exhibit F the "Tranche B Warrant
Agreement", (ii) as Exhibit G the "Tranche C Warrant Agreement,"
and (iii) as Exhibit H the "Tag-Along Rights Agreement."
2. Section 1.01 is hereby amended by adding the
following definitions:
A&S means Adler & Shaykin, as the Representative (as that
term is defined in the Representative Agreement dated as of
April 9, 1992).
A&S HOLDERS means the Holders (as that term is defined in
the Representative Agreement dated as of April 9, 1992).
A&S RELEASED PARTIES means the A&S Holders or any of their
respective past, present and future affiliates, associates,
employees, officers, directors, partners, fiduciaries,
stockholders, attorneys and successors, or any of them.
1992 LETTER OF CREDIT AGREEMENT means that certain Letter of
Credit Agreement First Amendment dated as of June 11, 1992
by and among Bankers Trust Company, Wherehouse and A&S for
the issuance of the 1992 Merger Agreement Letter of Credit.
TAG-ALONG RIGHTS AGREEMENT means the agreement (in the form
of Exhibit H to this Plan) under which Cerberus Partners,
L.P. grants the initial holders of the Warrants certain tag-
along rights.
TRANCHE A WARRANT AGREEMENT means the agreement (in the form
of Exhibit E to this Plan) under which Reorganized
Wherehouse delivers the Tranche A Warrants.
TRANCHE B WARRANT AGREEMENT means the agreement (in the form
of Exhibit F to this Plan) under which Reorganized
Wherehouse delivers the Tranche B Warrants.
TRANCHE C WARRANT AGREEMENT means the agreement (in the form
of Exhibit G to this Plan) under which Reorganized
Wherehouse delivers the Tranche C Warrants.
TRANCHE A WARRANTS means the warrants issued under the
Tranche A Warrant Agreement exercisable for 576,000 shares
of New Common Stock for an exercise price of $2.38 per
share, exercisable at any time until the fifth anniversary
of the Effective Date.
TRANCHE B WARRANTS means the warrants issued under the
Tranche B Warrant Agreement exercisable for 100,000 shares
of New Common Stock for an exercise price of $9.00 per
share, exercisable at any time until the seventh anniversary
of the Effective Date.
TRANCHE C WARRANTS means the warrants issued under the
Tranche C Warrant Agreement exercisable for 100,000 shares
of New Common Stock for an exercise price of $11.00 per
share, exercisable at any time until the seventh anniversary
of the Effective Date.
3. Section 1.01 is hereby amended by deleting the
definition of the "Warrant Agreement" in its entirety and
replacing it with:
WARRANT AGREEMENT means the Tranche A Warrant
Agreement, the Tranche B Warrant Agreement and the Tranche C
Warrant Agreement, in the forms attached to the Plan as
Exhibits E, F and G, respectively.
4. Section 1.01 is hereby amended by deleting the
definition of the "Warrants" in its entirety and replacing it
with:
WARRANTS means the Tranche A Warrants, the Tranche B
Warrants and the Tranche C Warrants.
5. Section 2.01(c) is hereby amended by deleting "90"
and replacing it with "60".
6. Section 5.07(c) is hereby amended by (a) deleting
the heading, initial clause and clause (1) and replacing them
with:
(C) TREATMENT.
(1) Each Holder of an Allowed Senior Subordinated Note
Claim shall receive, on account of such Claim, its
Ratable Share of (a) the Tranche A Warrants, (b) the
Tranche B Warrants, (c) the Tranche C Warrants, and (d)
$3,900,000 cash, of which $2,350,000 shall be paid by
Reorganized Wherehouse and $1,550,000 shall be paid by
Reorganized Wherehouse after receipt from A&S of the
Settlement Payment pursuant to Section 12.10. All such
distributions shall be made to United States Trust
Company of New York as the trustee under the Senior
Subordinated Note Indenture who shall make
distributions to the Holders of Allowed Senior
Subordinated Note Claims as of the record date set
forth in the Confirmation Order.
(b) by deleting the word "Warrants" in the heading and the text
of Section 5.07(c)(2) and replacing it (in each case) with "the
property distributed under Section 5.07(c)(1)" and (c) by
deleting the last sentence of Section 5.07(c) in its entirety.
7. Section 5.07(d) is hereby amended by deleting it
in its entirety.
8. Section 5.07(e) is hereby amended by deleting the
word "Warrants" were it occurs and replacing it with "the
property distributed under Section 5.07(c)(1)."
9. Article 8 is hereby amended by adding a new
Section 8.04 as follows:
8.04. REPORTING COMPANY. Whether or not obligated by
law, Reorganized Wherehouse and any successors and
assigns agrees to be a reporting company under the
Securities Exchange Act of 1934, 15 U.S.C. Section 78a
et. seq. until the earliest to occur of (i) the
redemption and cancellation of at least 66 2/3% of the
Warrants issued under this Plan, (ii) (1) all or at
least 80% of the assets of Reorganized Wherehouse are
sold in a single transaction, or a series of related
transactions, other than in the ordinary course of
business, or (2) there shall occur a merger,
consolidation or other form of reorganization, or a
series of related reorganizations, and after giving
effect to such transaction or transactions referred to
in (1) and (2) above, Cerberus Partners L.P. shall not
have the power to appoint (or hold sufficient voting
securities to elect) a majority of the members of the
Board of Directors of the surviving entity, or (iii)
three years from the Effective Date.
10. Section 9.04 of the Plan is hereby amended by
inserting the words "or Causes of Action that are being released"
after the word "abandoned" in the first sentence.
11. Section 9.06 of the Plan is hereby amended by
deleting the proviso at the end of that Section and replacing it
with: "that the 1992 Merger Agreement Letter of Credit shall not
be cancelled on the Effective Date and the rights and obligations
of the Debtors under the 1992 Merger Agreement Letter of Credit
(if any) and the 1992 Letter of Credit Agreement shall be
governed by Section 12.10 of the Plan."
12. Section 12.04(a) is hereby amended by deleting
"(i) any and all 1992 Merger Consideration Recovery Claims, and
(ii)".
13. Section 12.04(b) is hereby amended by inserting
"or" before "(iv)" and deleting "or (v) that are 1992 Merger
Consideration Recovery Claims."
14. Section 12.06 is hereby amended by adding "nor A&S
or the A&S Released Parties" after the words "Official Committee
or the Trade Committee".
15. Section 12.07 (b) is hereby amended by deleting
"(i)" and "(ii) no 1992 Merger Consideration Recipient shall be
indemnified as to any 1992 Merger Consideration Recovery Claim
pursuant to this Section 12.07(b)" in the proviso.
16. Section 12.09 is hereby amended by (a) deleting
the words "Except as provided in Section 12.10" at the beginning
of the first paragraph, (b) by inserting the words "including,
without limitation, A&S and the A&S Released Parties" immediately
before the definition of "Released Entities" in the first
paragraph and (c) by deleting "(except as provided in Section
12.10)" in the second paragraph.
17. Section 12.10 is hereby amended by deleting it in
its entirety and replacing it with the following:
12.10. SETTLEMENT OF DEFERRED PURCHASE PRICE.
(A) As further consideration for, and as condition to
receiving, among other things, the release of the 1992
Merger Consideration Recovery Claims under Sections 12.04
and 12.09, one business day after the Effective Date, A&S
shall pay, solely out of the Letter or Credit Proceeds (as
that term is defined below), to Reorganized Wherehouse cash
in the amount of $1,550,000 for the benefit of and
distribution to the Holders of Senior Subordinated Note
Claims under Section 5.07(c)(1) of the Plan (the "Settlement
Payment") on the terms and conditions set forth in this
Section 12.10 (the "Deferred Purchase Price Settlement").
(B) The Debtors and Reorganized Wherehouse agree to
take such action as reasonably requested by A&S to assist in
obtaining (i) the Letter of Credit Proceeds (as defined
below) and (ii) an order of the United States District Court
approving the pending proposed settlement in McMahan &
Company, et al v. Wherehouse Entertainment Inc., et al, 88
Civ. 0321 (S.D.N.Y.) (MJL) and in Don Thompson v. Wherehouse
Entertainment, Inc., et al., 88 Civ. 9040 (S.D.N.Y.) (MJL)
(the "McMahan Settlement"); provided that the Debtors shall
not be required to take any action that would result in any
Claim against the Estates or any other liability to the
Debtors, the Estates or Reorganized Wherehouse.
(C) The Confirmation Order shall (i) constitute
approval of the McMahan Settlement by the Bankruptcy Court
and authorize A&S to make the payments to settle such action
pursuant to a draw on the 1992 Merger Agreement Letter of
Credit, provided that the McMahan Settlement shall provide
for a full release of the Debtors and the Estates without
any payment by the Debtors or the Estates, (ii) provide that
the Effective Date of the Plan shall also constitute an
Event of Default under Section 8.3(a)(v)(A) of the 1992
Merger Agreement for the sole purposes of (x) authorizing
A&S to draw immediately on the 1992 Merger Agreement Letter
of Credit to make the Settlement Payment and to consummate
the McMahan Settlement, notwithstanding, among other things,
the "Stipulation Granting Relief from the Automatic Stay to
Permit Certain Litigation Related to the 1988 Merger to
Proceed to Judgment but Excluding any Enforcement Thereof,"
entered on July 30, 1996, (y) authorizing A&S to draw
immediately on the 1992 Merger Agreement Letter of Credit
and collect and retain the entire amount remaining after
making the Settlement Payment and the payments required
under the McMahan Settlement and (z) authorizing A&S to
receive and retain all proceeds from the "Escrow Funds" (as
that term is defined in the Escrow Agreement dated as of
June 11, 1992 by and among A&S, Holdings and Chase Manhattan
Bank, N.A.), if any (the proceeds described in clauses (y)
and (z) constituting the "Letter of Credit Proceeds"), (iii)
authorize A&S to pay all litigation costs and expenses
(including, without limitation, fees and expenses for
attorneys and witnesses) relating to the Actions (as defined
in the McMahan Settlement) and to distribute immediately all
Letter of Credit Proceeds to the A&S Holders without further
application to or order of the Court, (iv) direct the
Debtors (after presentation by A&S of the 1992 Merger
Agreement Letter of Credit for cancellation, which shall
occur after receipt by A&S of all Letter of Credit Proceeds)
to deliver to Bankers Trust Company, as the issuing bank of
the 1992 Merger Agreement Letter of Credit, a certificate in
the form attached as Annex B to the 1992 Letter of Credit
Agreement designating A&S as the person to which any
positive balance in the Notional Funding Account-Principal
and the Notional Funding Account-Interest (in each case as
defined in the 1992 Letter of Credit Agreement) and net of
any Letter of Credit Charges (as defined in the 1992 Letter
of Credit Agreement) shall be refunded, and (v) direct
Bankers Trust Company, as the issuing bank of the 1992
Merger Agreement Letter of Credit, to honor any properly
presented drawing certificate (in the form of Exhibit "A" to
the 1992 Merger Agreement Letter of Credit) under the 1992
Merger Agreement Letter of Credit, and not to reduce or
withhold any (or otherwise interfere in any way with A&S's
right to receive) the Letter of Credit Proceeds, other than
deducting any Letter of Credit Charges from the refunds as
provided by clause (iv) above.
(D) On the Effective Date and the effectiveness of the
Deferred Purchase Price Settlement, the Debtors (on their
behalf and on behalf of their estates and the Debtors'
predecessors, successors and assigns), Reorganized
Wherehouse, the Official Committee and Cerberus Partners
L.P. shall be deemed, for good and valuable consideration,
to have released and discharged A&S and the A&S Released
Parties from all Causes of Action they ever had, now have or
hereafter can shall or may have against them by reason of,
arising in connection with, or related in any way to the
Debtors, including, without limitation, Causes of Action
arising out or related to in any way the 1992 Merger
Agreement, the 1992 Letter of Credit Agreement, the 1992
Merger Agreement Letter of Credit, or the Escrow Funds (as
defined in the Escrow Agreement dated as of June 11, 1992)
and shall be deemed to have assigned any such Causes of
Action they may have to A&S.
(E) The 1992 Merger Agreement Letter of Credit shall be
cancelled and extinguished after receipt by A&S of all of
the Letter of Credit Proceeds pursuant to Section 12.10(c).
(F) Upon and subsequent to entry of the Confirmation
Order, (i) neither the Debtors nor Reorganized Wherehouse
shall submit a Decrease Certificate (as defined in the 1992
Letter of Credit Agreement), (ii) A&S shall be responsible
for all fees and costs of Litigation Counsel (as defined in
the 1992 Merger Agreement) not previously paid by the
Debtors (including, without limitation, any holdbacks from
the interim statements previously submitted to the Debtors),
and (iii) neither the Debtors nor Reorganized Wherehouse
shall pay any additional fees or costs of Litigation Counsel
(as defined in the 1992 Merger Agreement).
18. Section 13.01 is hereby amended by adding the
following subsection (e):
(E) TAG-ALONG RIGHTS AGREEMENT. Cerberus Partners,
L.P. and the Warrant Agent (as defined in the Warrant
Agreement) shall have entered into the Tag-Along Rights
Agreement.
19. Except as expressly set forth herein, no other
part of the Plan is amended.
Respectfully submitted,
[WEI ACQUISITION CO.]
By: /s/ Henry Del Castillo
-------------------------------
WEI HOLDINGS, INC.
By: /s/ Henry Del Castillo
--------------------------
Latham & Watkins
Hendrik de Jong
Peter M. Gilhuly
633 West Fifth Street
Suite 4000
Los Angeles, CA 90071
(213) 485-1234
and
YOUNG, CONAWAY STARGATT & TAYLOR
Laura Davis Jones (No. 2436)
Robert S. Brady (No. 2847)
Mark I. Duedall (No. 3346)
11th Floor Rodney Square North
P. O. Box 391
Wilmington, DE 19899-0391
(302) 571-6600
Co-Counsel for Debtors and
Debtors in Possession
EXHIBIT E
------------------------------------------
WARRANT AGREEMENT
RELATING TO THE ISSUANCE OF THE
TRANCHE A WARRANTS
WEI ACQUISITION CO.
and
[UNITED STATES TRUST COMPANY OF NEW YORK]
Dated as of ______________ __, 1997
---------------------------------------------------------
TABLE OF CONTENTS
Sections Page(s)
SECTION 1. Appointment of Warrant Agent. . . . . . . . . . . 1
SECTION 2. Form of Warrants. . . . . . . . . . . . . . . . . 1
2.1. Form of Warrant Certificates. . . . . . . . 1
2.2. Countersignature of Warrant
Certificates . . . . . . . . . . . . . . . 2
2.3. Registration. . . . . . . . . . . . . . . . 2
SECTION 3. Transfer or Exchange of Warrants. . . . . . . . . 3
3.1. Transfer. . . . . . . . . . . . . . . . . . 3
3.2. Exchange of Warrant Certificates. . . . . . 3
SECTION 4. . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 5. Mutilated or Missing Warrants . . . . . . . . . . 3
SECTION 6. Term of Warrants; Exercise of Warrants. . . . . . 4
6.1. Term of Warrants. . . . . . . . . . . . . . 4
6.2. Exercise of Warrants. . . . . . . . . . . . 4
SECTION 7. Disposition of Proceeds on Exercise of
Warrants. . . . . . . . . . . . . . . . . . . . . 5
SECTION 8. Payment of Taxes. . . . . . . . . . . . . . . . . 5
SECTION 9. Reservation of Warrant Shares; Purchase
and Cancellation of Warrants. . . . . . . . . . . 5
9.1. Reservation of Warrant Shares . . . . . . . 5
9.2. Governmental Approvals and
Listings . . . . . . . . . . . . . . . . . 6
9.3. Purchase of Warrants by the
Company. . . . . . . . . . . . . . . . . . 6
9.4. Cancellation of Warrants. . . . . . . . . . 6
SECTION 10. Exercise Price. . . . . . . . . . . . . . . . . . 6
SECTION 11. Adjustment of Exercise Price and Number
of Warrant Shares . . . . . . . . . . . . . . . . 6
11.1. Adjustments. . . . . . . . . . . . . . . . 6
(a) Stock Dividends, Splits,
etc.. . . . . . . . . . . . . . . . . 7
(b) Distributions of Assets . . . . . . . 7
(c) Computation of Market
Price . . . . . . . . . . . . . . . . 8
(d) Minimum Adjustment. . . . . . . . . . 8
(e) Warrant Share Adjustment. . . . . . . 9
(f) Notice of Adjustment. . . . . . . . . 9
(g) Definition of Common Stock. . . . . . 9
(h) Company May Reduce Exercise
Price or Increase Number of
Warrant Shares Purchasable. . . . . . 10
(i) Subsequently Issued
Warrants. . . . . . . . . . . . . . . 10
(j) Number of Warrant Shares on
Warrant Certificates. . . . . . . . . 10
11.2. No Adjustment for Dividends. . . . . . . . 10
11.3. Preservation of Purchase Rights
and Adjustment of Exercise Price
upon Merger, Consolidation,
etc. . . . . . . . . . . . . . . . . . . . 10
SECTION 12. No Rights as Stockholders; Notices to
Warrant Holders . . . . . . . . . . . . . . . . . 12
SECTION 13. Purchase Rights . . . . . . . . . . . . . . . . . 13
SECTION 14. Fractional Shares of Common Stock . . . . . . . . 13
SECTION 15. Right of Action . . . . . . . . . . . . . . . . . 13
SECTION 16. Inspection of Warrant Agreement . . . . . . . . . 14
SECTION 17. Merger or Consolidation or Change of
Name of Warrant Agent . . . . . . . . . . . . . . 14
SECTION 18. Concerning the Warrant Agent. . . . . . . . . . . 14
18.1. Disclaimer of Representations. . . . . . . 15
18.2. No Responsibility for Failure of
Company's Covenants. . . . . . . . . . . . 15
18.3. Delegation . . . . . . . . . . . . . . . . 15
18.4. Opinion of Counsel . . . . . . . . . . . . 15
18.5. Officer's Certificate. . . . . . . . . . . 15
18.6. Compensation and Reimbursement . . . . . . 15
18.7. No Action Without Assurance of
Reimbursement. . . . . . . . . . . . . . . 16
18.8. Conflicts of Interest. . . . . . . . . . . 16
18.9. Solely as Agent. . . . . . . . . . . . . . 16
18.10. Reliance on Documents. . . . . . . . . . . 16
18.11. No Representation Regarding
Validity, Etc. . . . . . . . . . . . . . . 17
18.12. Instructions from Company. . . . . . . . . 17
SECTION 19. Change of Warrant Agent . . . . . . . . . . . . . 17
SECTION 20. Identity of Transfer Agent. . . . . . . . . . . . 18
SECTION 21. Notices . . . . . . . . . . . . . . . . . . . . . 18
SECTION 22. Supplements and Amendments. . . . . . . . . . . . 18
SECTION 23. Successors. . . . . . . . . . . . . . . . . . . . 19
SECTION 24. Merger or Consolidation of the Company. . . . . . 19
SECTION 25. Applicable Law. . . . . . . . . . . . . . . . . . 19
SECTION 26. Benefits of this Agreement. . . . . . . . . . . . 19
SECTION 27. Counterparts. . . . . . . . . . . . . . . . . . . 19
SECTION 28. Captions. . . . . . . . . . . . . . . . . . . . . 20
SECTION 29. Plan of Reorganization. . . . . . . . . . . . . . 20
EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
PURCHASE FORM. . . . . . . . . . . . . . . . . . . . . . . . .A-4
ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
WARRANT AGREEMENT relating to the issuance of the
Tranche A Warrants, dated as of ______________ __, 1997, between
[WEI ACQUISITION CO.], a Delaware corporation (the "Company"),
and [UNITED STATES TRUST COMPANY OF NEW YORK], as Warrant Agent
(the "Warrant Agent").
WITNESSETH:
WHEREAS, pursuant to the Debtors' First Amended Chapter
11 Plan, as Revised for Technical Corrections dated October 4,
1996 (the "POR") and an Asset Purchase Agreement dated as of
____________, 1997 (the "ASSET PURCHASE AGREEMENT"), the Company
will acquire substantially all of the assets of Wherehouse
Entertainment, Inc., and its parent, WEI Holdings, Inc., which
companies are debtors and debtors-in-possession (collectively,
the "DEBTORS"), in Case No. 95-911 (HSB) (Jointly Administered)
(the "BANKRUPTCY CASE") in the Bankruptcy Court for the District
of Delaware (the "BANKRUPTCY COURT");
WHEREAS, as part of the purchase price for the assets
of the Debtors to be acquired by the Company, the Company
proposes to issue up to 576,000 Common Stock Purchase Warrants
hereinafter described (the "Warrants") to purchase its Common
Stock, par value $0.01 per share (the "Common Stock"), each
Warrant entitling the registered owner thereof to purchase one
share of Common Stock (each share of Common Stock purchasable
upon the exercise of a Warrant being referred to herein as a
"WARRANT SHARE"); and
WHEREAS, the Company wishes the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to act,
in connection with the issuance, transfer, exchange and exercise
of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and
for the purpose of defining the terms and provisions of the
Warrants and the respective rights and obligations thereunder of
the Company and the registered owners of the Warrants (the
"Holders"), the Company and the Warrant Agent hereby agree as
follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT.
The Company hereby appoints the Warrant Agent to act as
agent for the Company in accordance with the terms and conditions
hereinafter set forth, and the Warrant Agent hereby accepts such
appointment.
SECTION 2. FORM OF WARRANTS.
2.1. Form of Warrant Certificates. The text of the
Warrant certificate and of the form of election to purchase
Warrant Shares shall be substantially as set forth in Exhibit A
attached hereto. The Warrant certificates shall be appropriately
printed, lithographed or engraved and may have such letters,
numbers or other marks of identification as the Company may deem
appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any rule or
regulation of any stock exchange on which the Warrants may be
listed, or to conform to usage. The price per Warrant Share and
the number of Warrant Shares issuable upon exercise of each
Warrant are subject to adjustment upon the occurrence of certain
events, all as hereinafter provided. The Warrant certificates
shall be executed on behalf of the Company by its Chairman of the
Board, its President or one of its Vice Presidents under its
corporate seal reproduced thereon and attested by its Secretary
or an Assistant Secretary. The signature of any of such officers
on the Warrant certificates may be manual or facsimile.
Warrant certificates bearing the manual or facsimile
signatures of individuals who were at any time the proper
officers of the Company shall bind the Company, notwithstanding
that such individuals or any one of them shall have ceased to
hold such offices prior to the delivery of such Warrant certifi-
cates or did not hold such office on the date of this Agreement.
Warrant certificates shall be dated as of the date of
countersignature thereof by the Warrant Agent either upon initial
issuance or upon exchange, substitution or transfer.
2.2. Countersignature of Warrant Certificates. The
Warrant certificates shall be manually countersigned by the
Warrant Agent (or any successor to the Warrant Agent then acting
as warrant agent under this Agreement) and shall not be valid for
any purpose unless so countersigned. Warrant certificates may be
countersigned by the Warrant Agent (or by its successor as
warrant agent hereunder) and may be delivered by the Warrant
Agent notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company shall
have ceased to be such officers at the time of such
countersignature, issuance or delivery. The Warrant Agent shall,
upon written instructions of the Chairman of the Board, the
President, any Vice President or the Secretary of the Company,
countersign, issue and deliver Warrant certificates entitling the
Holders thereof to purchase in the aggregate Warrant Shares
(subject to adjustment pursuant to Section 11 hereof) and shall
countersign and deliver Warrant certificates as otherwise
provided in this Agreement.
2.3. Registration. The Warrant certificates shall be
numbered and shall be registered in a register (the "Warrant
Register") as they are issued. The Company and the Warrant Agent
shall be entitled to treat the registered holder of any Warrant
as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in
such Warrant on the part of any other person, notwithstanding any
notice to the Company or the Warrant Agent to the contrary.
SECTION 3. TRANSFER OR EXCHANGE OF WARRANTS.
3.1. Transfer. The Warrants shall be transferable
only in the books of the Company maintained at the office or
agency of the Warrant Agent in the City of New York upon delivery
thereof duly endorsed by the Holder or by his or her duly
authorized attorney or legal representative, or accompanied by
proper evidence of succession, assignment or authority to
transfer, which endorsement shall be guaranteed by a bank or
trust company located in the United States or a broker or dealer
that is a member of a national securities exchange. In all cases
of transfer by an attorney, the original power of attorney, duly
approved, or an official copy thereof, duly certified, shall be
deposited and remain with the Warrant Agent. In case of transfer
by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority
shall be produced, and may be required to be deposited and remain
with the Warrant Agent in its discretion. Upon any registration
of transfer, the Warrant Agent shall countersign and deliver a
new Warrant certificate to the person entitled thereto.
3.2. Exchange of Warrant Certificates. Warrant
certificates may be exchanged for another certificate or
certificates entitling the Holder thereof to purchase a like
aggregate number of Warrant Shares as the certificate or
certificates surrendered then entitle such Holder to purchase.
Any Holder desiring to exchange a Warrant certificate shall make
such request in writing delivered to the Warrant Agent, and shall
surrender, properly endorsed in the manner described in
subsection 3.1 hereof, the Warrant certificate or certificates to
be so exchanged. Thereupon, the Warrant Agent shall countersign
and deliver to the person entitled thereto a new Warrant
certificate or certificates, as the case may be, as so requested.
SECTION 4. [SECTION 4 INTENTIONALLY LEFT BLANK].
SECTION 5. MUTILATED OR MISSING WARRANTS.
In case any of the certificates evidencing the Warrants
shall be mutilated, lost, stolen or destroyed, the Company may,
in its discretion, issue and the Warrant Agent shall countersign
and deliver in exchange and substitution for and upon
cancellation of the mutilated Warrant certificate, or in lieu of
and substitution for the Warrant certificate lost, stolen or
destroyed, a new Warrant certificate of like tenor and
representing an equivalent right or interest, but only, in case
of any such loss, theft or destruction, upon receipt of evidence
satisfactory to the Company and the Warrant Agent thereof and an
indemnity also satisfactory to them. An applicant for such
substitute Warrant certificate shall also comply with such other
reasonable regulations and pay such other reasonable charges as
the Company or the Warrant Agent may prescribe.
SECTION 6. TERM OF WARRANTS; EXERCISE OF WARRANTS.
6.1. Term of Warrants. Subject to the terms of this
Agreement, each Holder shall have the right until 5:00 P.M., New
York time, on ___________ __, 2002 (the fifth anniversary of the
Effective Date (as defined in the POR)) (the "Expiration Date"),
to purchase from the Company the number of fully paid and
nonassessable Warrant Shares which the Holder may at the time be
entitled to purchase on exercise of such Warrants.
6.2. Exercise of Warrants. Warrant Shares may be
purchased upon surrender to the Company at the office or agency
of the Warrant Agent in the City of New York, of the certificate
or certificates evidencing the Warrants to be exercised, together
with the form of election to purchase on the reverse thereof duly
filled in and signed, which signature shall, if the Warrant
Shares are to be issued in the name of a person other than the
Holder of the Warrant, be guaranteed by a bank or trust company
located in the United States or a broker or dealer that is a
member of a national securities exchange, and upon payment to the
Warrant Agent for the account of the Company of the Exercise
Price (as defined in and determined in accordance with the
provisions of Sections 10 and 11 hereof) for the number of
Warrant Shares in respect of which such Warrants are then being
exercised. Payment of the aggregate Exercise Price shall be made
by certified or cashier's check, or by any combination thereof.
Subject to Section 8 hereof, upon such surrender of
Warrants and payment of the Exercise Price as aforesaid, the
Company shall issue and cause to be delivered, with all
reasonable dispatch, to or upon the written order of the Holder
and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares
so purchased upon the exercise of such Warrants. Such
certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed
to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrants and payment of the
Exercise Price, as aforesaid; provided, however, that if such
Warrants are surrendered, and the Exercise Price is paid, on a
Saturday, Sunday or other day on which banking institutions in
the City of New York are authorized or obligated by law or
executive order to close, or on a day when the Common Stock
transfer books of the Company are closed, the certificates for
the Warrant Shares in respect of which such Warrants are then
exercised shall be issuable as of the next succeeding Monday,
Tuesday, Wednesday, Thursday or Friday on which such banking
institutions are not so authorized or obligated to close (whether
before or after the Expiration Date) and which is a day on which
the Common Stock transfer books of the Company are open. The
rights of purchase represented by the Warrants shall be
exercisable, at the election of the Holders thereof, either in
full or from time to time in part and, in the event that a
certificate evidencing Warrants is exercised in respect of less
than all of the Warrant Shares specified therein at any time
prior to the expiration of such Warrants, a new certificate
evidencing the remaining Warrant or Warrants will be issued, and
the Warrant Agent is hereby irrevocably authorized to countersign
and to deliver the required new Warrant certificates pursuant to
the provisions of this subsection and of subsection 2.2 hereof
and the Company, whenever required by the Warrant Agent, will
supply the Warrant Agent with Warrant certificates duly executed
on behalf of the Company for such purpose.
SECTION 7. DISPOSITION OF PROCEEDS ON EXERCISE OF
WARRANTS.
The Warrant Agent shall account promptly to the Company
with respect to the Warrants exercised and concurrently pay to
the Company all moneys received by the Warrant Agent for the
purchase of the Warrant Shares through the exercise of such
Warrants.
SECTION 8. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes, if
any, attributable to the issuance of any Warrant certificates or
certificates for Warrant Shares issuable upon the exercise of
Warrants; provided, however, that the Company shall not be
required to pay, and the Holder shall pay, any tax or taxes that
may be payable in respect of any transfer involved in the issue
or delivery of any Warrant certificates or certificates for
Warrant Shares in a name other than that of the registered Holder
of the Warrants that were surrendered and the Company shall not
be required to issue or deliver such Warrant certificates or
certificates for Warrant Shares unless or until the persons
requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
SECTION 9. RESERVATION OF WARRANT SHARES; PURCHASE
AND CANCELLATION OF WARRANTS.
9.1. Reservation of Warrant Shares. There have been
reserved, and the Company shall at all times keep reserved out of
its authorized Common Stock, a number of shares of Common Stock
sufficient to provide for the exercise of the right of purchase
represented by the outstanding Warrants. The Company covenants
that all Warrant Shares will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable. Before taking any
action that would cause an adjustment reducing the Exercise Price
below the then par value, if any, of the shares of Common Stock
issuable upon exercise of the Warrants, the Company shall take
any corporate action which may, in the opinion of it counsel, be
necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of such Common Stock, at such
adjusted Exercise Price. The Transfer Agent for the Common Stock
and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably authorized and
directed at all times to reserve such number of authorized shares
as shall be requisite for such purpose. The Company will keep a
copy of this Agreement on file with the Transfer Agent for the
Common Stock and with every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise
of the rights of purchase represented by the Warrants. The
Warrant Agent is hereby irrevocably authorized to requisition
from time to time from such Transfer Agent stock certificates
required to honor outstanding Warrants upon exercise thereof in
accordance with the terms of this Agreement. The Company will
supply such Transfer Agent with duly executed stock certificates
for such purpose. Promptly after the Expiration Date, the
Warrant Agent shall certify to the Company the aggregate number
of Warrants then outstanding and thereafter no shares shall be
subject to reservation in respect of such Warrants.
9.2. Governmental Approvals and Listings. The Company
will as promptly as practicable take all action which may be
necessary to obtain and keep effective (a) any and all permits,
consents and approvals of governmental agencies and authorities,
and will make any and all filings under federal and state
securities laws, necessary in connection with the issuance,
distribution and transfer of Warrant certificates, the exercise
of the Warrants, and the issuance, sale, transfer and delivery of
Warrant Shares and (b) if any of the Warrant Shares have been
listed on any securities exchange, the listing of the Warrant
Shares on any securities exchange on which the Common Stock may
be listed (it being understood that the Company has no obligation
to list any Warrant Shares with any securities exchange).
9.3. Purchase of Warrants by the Company. The Company
shall have the right, except as limited by law, other agreement
or herein, to purchase or otherwise acquire Warrants at such
times, in such manner and for such consideration as it may deem
appropriate.
9.4. Cancellation of Warrants. In the event the
Company shall purchase or otherwise acquire Warrants, the related
Warrant certificates shall thereupon be delivered to the Warrant
Agent and be cancelled by it and retired. The Warrant Agent
shall cancel any Warrant certificate surrendered for exchange,
substitution, transfer or exercise in whole or in part. Warrant
certificates cancelled by the Warrant Agent pursuant to any
provision of this Agreement shall be delivered to the Company or,
upon the request of the Warrant Agent and with the consent of the
Company, destroyed by the Warrant Agent. The Warrant Agent shall
furnish to the Company written confirmation of the destruction of
the Warrant certificates so cancelled.
SECTION 10. EXERCISE PRICE.
The price per share at which Warrant Shares shall be
purchasable upon exercise of each Warrant (the "Exercise Price")
shall be $2.38, subject to adjustment pursuant to Section 11
hereof.
SECTION 11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER
OF WARRANT SHARES.
11.1. Adjustments. The number and kind of securities
purchasable upon the exercise of each Warrant and the Exercise
Price shall be subject to adjustment as follows:
(a) Stock Dividends, Splits, etc. In case the Company
shall at any time after the date of this Agreement (w) pay a
dividend or make a distribution on its Common Stock which is
paid or made (A) in Common Stock or other shares of the
Company's capital stock or (B) in rights to purchase Common
Stock or other capital stock of the Company if such rights
are not exercisable or separable from the Common Stock
except upon the occurrence of a contingency, (x) subdivide
its outstanding Common Stock into a greater number of shares
of Common Stock, (y) combine its outstanding shares into a
smaller number of shares of Common Stock or (z) issue by
reclassification of its Common Stock other securities of the
Company, then, in any such event the number of Warrant
Shares purchasable upon exercise of each Warrant immediately
prior thereto shall be adjusted so that the Holder of each
Warrant shall be entitled to receive upon exercise of such
Warrant the kind and number of shares of the Company and
rights to purchase Common Stock or other securities of the
Company (or, in the event of the redemption of any such
rights, any cash paid in respect of such redemption) that
he, she or it would have owned or have been entitled to
receive after the happening of any of the events described
above had such Warrant been exercised immediately prior to
the happening of such event or any record date with respect
thereto. An adjustment made pursuant to this paragraph
(a) shall become effective immediately after the opening of
business on the next business day following the record date
in the case of dividends or other distributions and shall
become effective immediately after the opening of business
on the next business day following the effective date in the
case of a subdivision or combination.
(b) Distributions of Assets. In case the Company
shall at any time after the date of this Agreement
distribute to all holders of its Common Stock evidences of
indebtedness of the Company or assets of the Company
(including cash dividends or distributions out of retained
earnings other than cash dividends or distributions made on
a quarterly or other periodic basis) or warrants to
subscribe for securities of the Company (excluding those
referred to in paragraph (a) above), then in each case the
Exercise Price shall be adjusted to a price determined by
multiplying the Exercise Price in effect immediately prior
to such distribution by a fraction, of which the numerator
shall be the then current market price per share of Common
Stock (as defined in paragraph (c) below) on the record date
for determination of shareholders entitled to receive such
distribution, less the then fair value (as determined in
good faith by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed or of
such subscription rights or warrants which are applicable to
one share of Common Stock, and of which the denominator
shall be such market price per share of Common Stock;
provided, however, that if the then current market price per
share of Common Stock on the record date for determination
of shareholders entitled to receive such distribution is
less than the then fair value of the portion of the assets
or evidences of indebtedness so distributed or of such
subscription rights or warrants which are applicable to one
share of Common Stock, the foregoing adjustment of the
Exercise Price shall not be made and in lieu thereof the
Holder of each Warrant shall be entitled to receive upon
exercise of such Warrant in addition to the Common Stock the
kind and number of assets, evidences of indebtedness,
subscription rights and warrants (or, in the event of the
redemption of any such evidences of indebtedness,
subscription rights and warrants, any cash paid in respect
of such redemption) that he or she would have owned or have
been entitled to receive after the happening of such
distribution had such Warrant been exercised immediately
prior to the record date for such distribution. Such
adjustment shall be made successively whenever such a record
date is fixed, and in the event that such distribution is
not so made, the Exercise Price shall again be adjusted to
be the Exercise Price which would then be in effect if such
record date had not been fixed.
(c) Computation of Market Price. For the purpose of
any computation under this Agreement, the current market
price per share of Common Stock at any date shall be deemed
to be the average of the daily Market Price (as defined
below) per share for the 30 consecutive Trading Days (as
defined below) commencing 45 Trading Days before the date in
question. "Market Price" is defined as the closing sale
price (or, if no closing sale price is reported, the closing
bid price) for the Common Stock in the over-the-counter
market, as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or,
if the Common Stock is not quoted on NASDAQ, as reported by
the National Quotation Bureau Incorporated, or, if the
Common Stock is not so reported, as furnished by any two
members of the National Association of Securities Dealers,
Inc., selected from time to time by the Company for that
purpose. In the event that the Common Stock is hereafter
listed for trading on one or more United States national or
regional securities exchanges, Market Price shall be the
closing price on the exchange or system designated by the
Board of Directors of the Company as the principal United
States market in which the Common Stock is traded. If
Market Price cannot be established as described above,
Market Price shall be the fair market value of the Common
Stock as determined in good faith by the Board of Directors.
"Trading Day" shall mean a Monday, Tuesday, Wednesday,
Thursday or Friday on which banking institutions in the City
of Los Angeles and the State of California or New York, New
York, are not authorized or obligated by law or executive
order to close or, if the Common Stock is listed or admitted
to trading on a national securities exchange, a day on which
the principal national securities exchange on which the
Common Stock is listed or admitted to trading is open for
the transaction of business.
(d) Minimum Adjustment. No adjustment in the number
of Warrant Shares purchasable hereunder or the Exercise
Price shall be required unless such adjustment would require
an increase or decrease of at least one per cent (1%) in the
number of Warrant Shares purchasable upon the exercise of
each Warrant, or the Exercise Price, as the case may be;
provided, however, that any adjustments which by reason of
this paragraph (d) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be
made to the nearest cent or the nearest ten-thousandth of a
share, as the case may be.
(e) Warrant Share Adjustment. Upon each adjustment of
the Exercise Price as a result of the calculations made in
paragraph (a) or (b) above, each Warrant outstanding
immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted
Exercise Price, that number of shares (calculated to the
nearest ten-thousandth) obtained by (A) multiplying (x) the
number of shares covered by a Warrant immediately prior to
such adjustment of the Exercise Price by (y) the Exercise
Price in effect immediately prior to such adjustment of the
Exercise Price and (ii) dividing the product so obtained by
the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
(f) Notice of Adjustment. Whenever the number of
Warrant Shares purchasable upon the exercise of Warrants or
the Exercise Price of such Warrant Shares is adjusted, as
herein provided, the Company shall cause the Warrant Agent
promptly to mail by first class mail, postage prepaid, to
each Holder of a Warrant or Warrants notice of such
adjustment or adjustments and shall deliver to the Warrant
Agent a certificate of a firm of independent public
accountants selected by the Board of Directors of the
Company (who may be the regular accountants employed by the
Company) setting forth (A) the number of Warrant Shares
purchasable upon the exercise of each Warrant and the
Exercise Price of such Warrant Shares after such adjustment,
(B) a brief statement of the facts requiring such adjustment
and (C) the computation by which such adjustment was made.
Such certificate shall be conclusive evidence of the
correctness of such adjustment. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no
duty or responsibility with respect to any such certificate,
except to exhibit the same, from time to time, to any Holder
desiring an inspection thereof during reasonable business
hours. The Warrant Agent shall not at any time be under any
duty or responsibility to any Holders to determine whether
any facts exist that may require any adjustment of the
Exercise Price or the number of Warrant Shares or other
stock or property purchasable upon exercise thereof or with
respect to the nature or extent of any such adjustment when
made, or with respect to the method employed in making such
adjustment.
(g) Definition of Common Stock. For the purpose of
this subsection 11.1, the term "Common Stock" shall mean
(A) the class of stock designated as the Common Stock of the
Company at the date of this Agreement or (B) any other class
of stock resulting from successive changes or
reclassifications of such shares consisting solely of
changes in par value, or from par value to no par value or
from no par value to par value. In the event that at any
time, as a result of an adjustment made pursuant to
paragraph (a) above, the Holders of a Warrant or Warrants
shall become entitled to purchase any securities of the
Company other than Common Stock, thereafter the number of
such other securities so purchasable upon exercise of each
Warrant and the Exercise Price of such securities shall be
subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions
with respect to the Warrant Shares contained in this
subsection 11.1 and the provisions of Section 6 and
subsections 11.2 and 11.3, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other
securities.
(h) Company May Reduce Exercise Price or Increase
Number of Warrant Shares Purchasable. The Company may, at
its option, at any time during the term of the Warrants,
reduce the then current Exercise Price, or increase the
number of Common Shares purchasable upon exercise of each
Warrant, to any amount deemed appropriate by the Board of
Directors of the Company.
(i) Subsequently Issued Warrants. All Warrants
originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall
evidence the right to purchase, at the adjusted Exercise
Price, the number of shares of Common Stock purchasable from
time to time hereunder upon exercise of the Warrants, all
subject to further adjustment as provided herein.
(j) Number of Warrant Shares on Warrant Certificates.
Irrespective of any adjustment or change in the Exercise
Price or the number of shares of Common Stock issuable upon
the exercise of the Warrants, the Warrant certificates
theretofore and thereafter issued may continue to express
the Exercise Price per share and the number of shares which
were expressed upon the initial Warrant certificates issued
hereunder.
11.2. No Adjustment for Dividends. Except as provided
in subsection 11.1, no adjustment in respect of any dividends
made on a quarterly or other periodic basis out of retained
earnings shall be made during the term of a Warrant or upon the
exercise of a Warrant.
11.3. Preservation of Purchase Rights and Adjustment
of Exercise Price upon Merger, Consolidation, etc. In case the
Company shall consolidate or merge with or into any other
corporation (other than a consolidation or merger in which the
Company is the surviving corporation and each share of Common
Stock outstanding immediately prior to such consolidation or
merger is to remain outstanding immediately after such
consolidation or merger and no cash, securities or other property
is distributed with respect to such shares) or shall sell or
transfer all or substantially all of its assets to any
corporation, the Company or such successor or purchasing
corporation, as the case may be (collectively, the "acquiring
corporation"), shall execute with the Warrant Agent an agreement
that each Holder of a Warrant shall have the right thereafter
upon payment of the Exercise Price in effect immediately prior to
such action to purchase upon exercise of each Warrant the kind
and amount of shares and other securities, cash and other
property that he or she would have owned or have been entitled to
receive after the happening of such consolidation, merger or sale
had such Warrant been exercised immediately prior to such action
(assuming that such Holder, as a holder of Common Stock prior to
such action, would not have exercised any rights of election as a
holder of Common Stock as to the kind or amount of securities,
cash or other property receivable upon such consolidation, merger
or sale; provided, that if the kind or amount of securities, cash
or other property receivable upon such consolidation, merger or
sale is not the same for each non-electing share of Common Stock,
then the kind and amount of securities, cash or other property
receivable shall be deemed to be the kind and amount so
receivable by a plurality of the non-electing shares). The
Company shall mail by first-class mail, postage prepaid, to each
Holder, notice of the execution of any agreement with an
acquiring corporation as provided in the first sentence of this
subsection 11.3. In addition to any adjustments required by this
subsection 11.3, such agreement shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 11. The Company shall
not effect any such consolidation, merger or sale unless prior to
or simultaneously with the consummation thereof the acquiring
corporation (if other than the Company) resulting from such
consolidation or merger or the acquiring corporation purchasing
such assets or other appropriate corporation or entity shall
assume, by written instrument executed and delivered to the
Warrant Agent, the obligation to deliver to each Holder such
shares of stock, securities or assets as, in accordance with the
foregoing provisions, such Holder may be entitled to receive and
the other obligations of the Company under this Agreement. The
provisions of this subsection 11.3 shall similarly apply to
successive consolidations, mergers, sales or conveyances. The
Warrant Agent shall be under no duty or responsibility to
determine the correctness of any provisions contained in any such
agreement relating either to the kind or amount of shares of
stock or other securities, cash or property receivable upon
exercise of Warrants or with respect to the method employed and
provided therein for any adjustments.
11.4 No Adjustment for Employee Compensation and
Issuances to Alvarez & Marsal, Inc. Notwithstanding anything to
the contrary contained herein, no adjustment to the Exercise
Price or the number of shares of Common Stock purchasable upon
exercise of any Warrant shall be made in connection with the
issuance by the Company of any shares of Common Stock or options
to purchase Common Stock or other securities which may be
convertible or exercisable into shares of Common Stock to (i) any
employee of the Company as compensation for services rendered to
the Company or (ii) Alvarez & Marsal, Inc. ("A&M") or any of its
affiliates, in connection with the management services to be
provided by A&M to the Company under that certain Management
Services Agreement dated as of __________ __, 1997 between the
Company and A&M.
SECTION 12. NO RIGHTS AS STOCKHOLDERS; NOTICES TO
WARRANT HOLDERS.
(a) Nothing contained in this Agreement or in any of
the Warrants shall be construed as conferring upon the
Holders or their transferees the right to vote or to receive
dividends or to consent or to receive notice as shareholders
in respect of any meeting of shareholders for the election
of directors of the Company or any other matter, or any
rights whatsoever as shareholders of the Company. If prior
to the expiration of the Warrants:
(A) the Company shall declare a dividend or other
distribution on its Common Shares, other than (i) in cash as
described in Section 11.2, (ii) in other shares of Common
Stock, or (iii) in rights to purchase shares of Common Stock
or other securities of the Company of the character
described in paragraph (a) of subsection 11.1; or
(B) the Company shall authorize the issuance to
all holders of its Common Stock of rights or warrants
entitling them to subscribe for or purchase any Common Stock
or any other subscription rights or warrants (other than
rights of the character described in paragraph (a) of
subsection 11.1); or
(C) there shall occur a reclassification of the
capital stock of the Company (other than a subdivision or
combination of its outstanding Common Stock); or
(D) the Company shall propose to effect any
consolidation or merger into or with, or to effect any sale
or other transfer requiring an adjustment pursuant to
Section 11.3; or
(E) the Company shall take an action ("Adjustment
Action") which would cause an adjustment pursuant to Section
11 hereof of the number or kind of Common Stock (or other
securities) purchasable upon the exercise of each Warrant or
of the Exercise Price that would have the effect of reducing
the price payable for a share of the Company's capital stock
by a Holder upon exercise of a Warrant to an amount which is
less than the current value of such share; or
(F) a voluntary or involuntary dissolution,
liquidation or winding up of the Company shall be proposed;
then, in any such event, the Company shall cause to be mailed to
the Warrant Agent and the Holders in the manner provided in
Section 21 hereof, at least 20 days prior to the applicable
record or effective date hereinafter specified, a notice stating
(i) the date as of which the holders of record of Common Stock to
be entitled to such dividend, distribution, rights or warrants
are to be determined, or (ii) the date on which such
reclassification, Adjustment Action, consolidation, merger, sale,
transfer, dissolution, liquidation, or winding up is expected to
become effective, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange
their shares of securities or other property, if any, deliverable
upon such reclassification, Adjustment Action, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up.
Such notice shall also state whether such transaction will result
in any adjustment of the number or kind of Common Stock (or other
securities) purchasable upon the exercise of a Warrant or of the
Exercise Price and, if so, shall set forth the nature thereof and
the date upon which it will become effective. In the event the
Company gives notice to the holders of its Common Stock of the
declaration or distribution of rights to purchase Common Stock or
other securities of the Company of the character described in
paragraph (a) of subsection 11.1, the Company will give
concurrently a similar notice to the Holders in the manner
provided in Section 21 hereof. The failure to give the notices
required by this Section 12, or any defect therein, shall not
affect the legality or validity of any such dividend,
distribution, right, warrant, reclassification, Adjustment
Action, dissolution, liquidation or winding up or other action,
or the vote on any action authorizing the same.
SECTION 13. PURCHASE RIGHTS.
If at any time or from time to time on or after the
date of the Agreement, the Corporation shall give notice (a
"Purchase Rights Notice") pursuant to paragraph (B) of Section
12(a) of an issuance of rights or warrants, (the "Purchase
Rights") to all record holders of Common Stock, such issuance
shall not result in an adjustment of the Exercise Price or the
number of Warrants under Section 11 hereof, but each Holder shall
be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder
could have acquired if it had held the number of shares of Common
Stock acquirable upon exercise of the Warrants immediately before
the record date for the grant, issuance, or sale of such Purchase
Rights. The Purchase Rights Notice shall describe the Purchase
Rights and their availability to the Holders.
SECTION 14. FRACTIONAL SHARES OF COMMON STOCK.
The Company will not issue fractions of Warrants or
distribute Warrant certificates which evidence fractional
Warrants. In lieu of such fractional Warrants, there shall be
paid to the Holders to whom Warrant certificates representing
such fractional Warrants would otherwise be issuable an amount in
cash equal to the product of such fraction of a Warrant
multiplied by the current market price per share of Common Stock
issuable with respect to such fraction of a Warrant.
SECTION 15. RIGHT OF ACTION.
All rights of action in respect of this Agreement are
vested in the respective Holders of the Warrant certificates, and
any Holder of any Warrant certificate, without the consent of the
Warrant Agent or of the Holder of any other Warrant certificate,
may, on such Holder's own behalf and for such Holder's own
benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in
respect of, such Holder's right to exercise the Warrants
evidenced by such Warrant certificate in the manner provided in
such Warrant certificate and in this Agreement.
SECTION 16. INSPECTION OF WARRANT AGREEMENT.
The Warrant Agent shall keep copies of this Agreement
and any notices given or received hereunder available for
inspection by the Holders during normal business hours at its
office in the City of New York for that purpose. The Company
shall supply the Warrant Agent from time to time with such
numbers of copies of this Agreement as the Warrant Agent may
request.
SECTION 17. MERGER OR CONSOLIDATION OR CHANGE OF
NAME OF WARRANT AGENT.
Any corporation into which the Warrant Agent may be
merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Warrant
Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust business of the Warrant Agent,
shall be the successor to the Warrant Agent hereunder without the
execution or filing of any paper or any further act on the part
of any of the parties hereto, provided that such corporation
would be eligible for appointment as successor Warrant Agent
under the provisions of Section 19 hereof. In case at the time
such successor to the Warrant Agent shall succeed to the agency
created by this Agreement any of the Warrants shall have been
countersigned but not delivered, any such successor to the
Warrant Agent may adopt the countersignature of the original
Warrant Agent and deliver such Warrants so countersigned; and in
case at that time any of the Warrants shall not have been
countersigned, any successor to the Warrant Agent may countersign
such Warrants either in the name of the predecessor Warrant Agent
or in the name of the successor Warrant Agent, and in all such
cases such Warrants shall have the full force provided in the
Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall
be changed and at such time any of the Warrants shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignatures under its prior name and deliver Warrants so
countersigned; and in case at that time any of the Warrants shall
not have been countersigned, the Warrant Agent may countersign
such Warrants either in its prior name or in its changed name;
and in all such cases such Warrants shall have the full force
provided in the Warrants and in this Agreement.
SECTION 18. CONCERNING THE WARRANT AGENT.
The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders of
Warrants, by their acceptance thereof, shall be bound:
18.1. Disclaimer of Representations. The
statements contained herein and in the Warrants shall be
taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the
same except such as describe the Warrant Agent or action
taken by it. The Warrant Agent assumes no responsibility
with respect to the distribution of the Warrants except as
herein otherwise provided.
18.2. No Responsibility for Failure of Company's
Covenants. The Warrant Agent shall not be responsible for
any failure of the Company to comply with any of the
covenants contained in this Agreement or in the Warrants.
18.3. Delegation. The Warrant Agent may execute
and exercise any of the rights or powers hereby vested in it
or perform any duty hereunder either itself or by or through
its attorneys or agents (which shall not include its
employees), and the Warrant Agent shall not be answerable or
accountable for any act, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting
from such neglect or misconduct provided reasonable care
shall have been exercised in the selection and continued
employment thereof.
18.4. Opinion of Counsel. The Warrant Agent may
consult at any time with legal counsel satisfactory to it,
and the Warrant Agent shall incur no liability or
responsibility to the Company or to any Holder in respect of
any action taken, suffered or omitted by it hereunder in
good faith and in accordance with the opinion or the advice
of such counsel.
18.5. Officer's Certificate. Whenever in the
performance of its duties under this Agreement the Warrant
Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to
taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President,
the Treasurer or the Secretary of the Company and delivered
to the Warrant Agent; and such certificate shall be full
authorization to the Warrant Agent for any action taken or
suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
18.6. Compensation and Reimbursement. The Company
agrees to pay the Warrant Agent reasonable compensation for
all services rendered by the Warrant Agent in the
performance of its duties under this Agreement, to reimburse
the Warrant Agent for all expenses, taxes and governmental
charges and other charges of any kind and nature reasonably
incurred by the Warrant Agent in the performance of its
duties under this Agreement, and agrees to indemnify the
Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and reasonable
counsel fees, for anything done or omitted by the Warrant
Agent in the performance of its duties under this Agreement
except as a result of the Warrant Agent's gross negligence
or willful misconduct.
18.7. No Action Without Assurance of Reimbursement.
The Warrant Agent shall be under no obligation to institute
any action, suit or legal proceeding or to take any other
action likely to involve expense unless the Company or one
or more Holders shall furnish the Warrant Agent with
reasonable security and indemnity for any costs and expenses
which may be incurred; but this provision shall not affect
the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without
any such security or indemnity. All rights or action under
this Agreement or under any of the Warrants may be enforced
by the Warrant Agent without the possession of any of the
Warrants or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent, and any recovery of judgment
shall be for the ratable benefit of the Holders, as their
respective rights or interests may appear.
18.8. Conflicts of Interest. The Warrant Agent and
any stockholder, director, officer or employee of the
Warrant Agent may buy, sell or deal in any of the Warrants
or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity
for the Company or for any other legal entity.
18.9. Solely as Agent. The Warrant Agent shall act
hereunder solely as agent, and its duties shall be
determined solely by the provisions hereof. The Warrant
Agent shall not be liable for anything that it may do or
refrain from doing in connection with this Agreement except
for its own gross negligence or bad faith.
18.10. Reliance on Documents. The Warrant Agent
will not incur any liability or responsibility to the
Company or to any Holder of any Warrant for any action taken
in reliance on any notice, resolution, waiver, consent,
order, certificate, or other paper, document or instrument
reasonably believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
18.11. No Representation Regarding Validity, Etc.
The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution and delivery
hereof by the Warrant Agent) or in respect of the validity
or execution of any Warrant (except its countersignature
thereof); nor shall the Warrant Agent by any act hereunder
be deemed to make any representation or warranty as to the
authorization or reservation of any Warrant Shares (or other
stock) to be issued pursuant to this Agreement or any
Warrant, or as to whether any Warrant Shares (or other
stock) will when issued be validly issued, fully paid and
nonassessable, or as to the Exercise Price or the number or
amount of Warrant Shares or other securities or other
property issuable upon exercise of any Warrant.
18.12. Instructions from Company. The Warrant Agent
is hereby authorized and directed to accept instructions
with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company,
and to apply to such officers for advice or instructions in
connection with its duties, and shall not be liable for any
action taken or suffered to be taken by it in good faith in
accordance with instructions of any such Officers.
SECTION 19. CHANGE OF WARRANT AGENT.
The Warrant Agent may resign and be discharged from its
duties under this Agreement by giving to the Company 60 days'
notice in writing. The Warrant Agent may be removed by like
notice to the Warrant Agent from the Company. If the Warrant
Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the
Warrant Agent. If the Company shall fail to make such
appointment within a period of 50 days after such notice of
removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated
Warrant Agent or by any Holder (who shall with such notice submit
his Warrant for inspection by the Company), then the resigning,
discharged or removed Warrant Agent or any Holder may apply to
any court of competent jurisdiction for the appointment of a
successor to the Warrant Agent. Any successor warrant agent,
whether appointed by the Company or such court, shall be (a) a
bank or trust company, in good standing, incorporated under the
laws of the United States of America or any state thereof and
having at the time of its appointment as warrant agent a combined
capital and surplus of at least $100,000,000, as set forth in its
most recent published annual report of condition or (b) an
affiliate of a corporation described in clause (a) above. After
appointment, the successor warrant agent shall be vested with the
same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent hereunder without further
act or deed; but the former Warrant Agent shall deliver and
transfer to the successor warrant agent any property at the time
held by it hereunder, and shall execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose.
Failure to file any notice provided for in this Section 19,
however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Warrant Agent or
the appointment of the successor warrant agent, as the case may
be. In the event of such resignation or removal, the successor
warrant agent shall mail, by first-class mail, postage prepaid,
to each Holder, written notice of such removal or resignation and
the name and address of such successor warrant agent.
SECTION 20. IDENTITY OF TRANSFER AGENT.
Forthwith upon the appointment of any subsequent
Transfer Agent for the Company's shares of Common Stock, or any
other shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrants,
the Company will file with the Warrant Agent a statement setting
forth the name and address of such Transfer Agent.
SECTION 21. NOTICES.
Any notice pursuant to this Agreement by the Company or
by the Holder of any Warrant to the Warrant Agent, or by the
Warrant Agent or by the Holder of any Warrant to the Company,
shall be in writing and shall be deemed to have been duly given
if delivered or mailed by certified mail, return receipt
requested, (a) if to the Company, to WEI Acquisition Co., 19701
Hamilton Avenue, Torrance, California 90502-1334, Attention:
[__________________] and, if to the Warrant Agent, to [__]. Each
party hereto may from time to time change the address to which
notices to it are to be delivered or mailed hereunder by notice
in writing to the other party.
Any notice mailed pursuant to this Agreement by the
Company or the Warrant Agent to the Holders of Warrants shall be
in writing and shall be deemed to have been duly given if mailed
by first-class mail, postage prepaid, to such Holders at their
respective addresses on the Warrant Register of the Warrant
Agent.
SECTION 22. SUPPLEMENTS AND AMENDMENTS.
(a) The Company and the Warrant Agent may from time to
time supplement or amend this Agreement, without the approval of
any Holder in order to cure any ambiguity or to correct or
supplement any provision contained herein that may be defective
or inconsistent with any other provisions herein, or to make any
other provisions with regard to matters or questions arising
hereunder that the Company and the Warrant Agent may deem
necessary or desirable and that shall not adversely affect the
interests of the Holders of Warrants.
(b) In addition to the foregoing, with the consent of
Holders of Warrants entitled, upon exercise thereof, to receive
not less than two-thirds of the shares of Common Stock issuable
thereunder, the Company and the Warrant Agent may modify this
Agreement for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this
Agreement or modifying in any manner the rights of the Holders of
the Warrants; provided, however, that no modification of the
terms (including, but not limited to the adjustments described in
Section 11) upon which the Warrants are exercisable or reducing
the percentage required for consent to modification of this
Agreement, no acceleration of the Expiration Date and no increase
in the Exercise Price may, in each case, be made without the
consent of the Holder of each outstanding Warrant affected
thereby.
SECTION 23. SUCCESSORS.
All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and
assigns hereunder.
SECTION 24. MERGER OR CONSOLIDATION OF THE COMPANY.
The Company will not merge or consolidate with or into
any other corporation unless the corporation resulting from such
merger or consolidation (if not the Company) shall expressly
assume, by supplemental agreement satisfactory in form to the
Warrant Agent in the exercise of its reasonable judgment and
executed and delivered to the Warrant Agent, the due and punctual
performance and observance of each and every covenant and
condition of this Agreement to be performed and observed by the
Company.
SECTION 25. APPLICABLE LAW.
This Agreement and each Warrant issued hereunder shall
be deemed to be a contract made under the internal laws of the
State of New York (without preference to conflicts of law
principles) and for all purposes shall be construed in accordance
with the laws of said State.
SECTION 26. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to
any person or corporation other than the Company, the Warrant
Agent and the Holders of the Warrants any legal or equitable
right, remedy or claim under this Agreement; and this Agreement
shall be for the sole and exclusive benefit of the Company, the
Warrant Agent, and their respective successors and assigns
hereunder, and the holders from time to time of the Warrants.
SECTION 27. COUNTERPARTS.
This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
SECTION 28. CAPTIONS.
The captions of the Sections and subsections of this
Agreement have been inserted for convenience only and shall have
no substantive effect.
SECTION 29. PLAN OF REORGANIZATION.
The Company will comply for the benefit of the Holders
with Section 8.04 of the POR.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
WEI ACQUISITION CO.
By:
-----------------------------
Title:
Attest:
- ----------------------------
Title:
[UNITED STATES TRUST COMPANY
OF NEW YORK]
as Warrant Agent
By:
-----------------------------
Title:
Attest:
_____________________________
Title:
EXHIBIT A
TRANCHE A WARRANT TO PURCHASE COMMON STOCK VOID AFTER
5:00 P.M., NEW YORK TIME, ON JANUARY 31, 2002
[WEI ACQUISITION CO.]
This certifies that, for value received, __________
___________________ or registered assigns (the "Holder"), is
entitled to purchase from Wherehouse Entertainment, Inc., a
Delaware corporation (the "Company"), until 5:00 P.M., New York
time, on January 31, 2002, or such earlier date as may be
provided for pursuant to the Warrant Agreement referred to below
(the "Expiration Date"), at the purchase price of $2.38 per share
(the "Exercise Price"), a number of shares of Common Stock, par
value $0.01 per share, of the Company (the "Common Stock") that
is equal to the number of Warrants set forth above. The number
of shares purchasable upon exercise of this Warrant and the
Exercise Price per share are subject to adjustment from time to
time as set forth in the Warrant Agreement referred to below.
The Warrants evidenced hereby may be exercised in whole
or in part by presentation of this Warrant Certificate with the
Purchase Form on the reverse side hereof duly executed (with a
signature guarantee if required by the Warrant Agreement) and
simultaneous payment of the Exercise Price (subject to
adjustment) at the office or agency of the Company maintained for
that purpose in the City of New York. Initially, [--] will act
as Warrant Agent (the "Warrant Agent"). Payment of such price
shall be made at the option of the holder hereof by certified or
cashier's check. No fractional shares will be issued upon the
exercise of rights to purchase hereunder, but the Company shall
pay the cash value of any such fraction upon the exercise of one
or more Warrants, all as provided in the Warrant Agreement.
Upon any partial exercise of this Warrant Certificate,
there shall be countersigned and issued to the Holder hereof a
new Warrant Certificate in respect of the shares as to which this
Warrant shall not have been exercised. This Warrant Certificate
may be exchanged at the office of the Warrant Agent maintained
for that purpose in the City of New York by surrender of this
Warrant Certificate properly endorsed (with a signature guarantee
if required by the Warrant Agreement), either separately or in
combination with one or more other Warrant Certificates, for one
or more new Warrant Certificates for the same aggregate number of
shares as were evidenced by the Warrant Certificate or Warrant
Certificates exchanged.
This Warrant Certificate is transferable at the office
of the Warrant Agent maintained for that purpose in the City of
New York in the manner and subject to the limitations set forth
in the Warrant Agreement.
The Warrants evidenced hereby are part of a duly
authorized issue of Common Stock Purchase Warrants with rights to
purchase an aggregate of up to 576,000 shares of Common Stock
(subject to adjustment) and are issued under and in accordance
with a Warrant Agreement dated as of January 31, 1997, between
the Company and the Warrant Agent and are subject to the terms
and provisions contained in the Warrant Agreement, to all of
which the Holder of this Warrant Certificate by acceptance hereof
consents. Copies of the Warrant Agreement are on file at the
above mentioned office of the Warrant Agent and may be obtained
for inspection by the Holder hereof upon written request to the
Warrant Agent.
The Holder hereof may be treated by the Company, the
Warrant Agent, and all other persons dealing with this Warrant
Certificate as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby, or
to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding, and until such transfer on such
books, the Company, the Warrant Agent and all such other persons
may treat the registered holder hereof as the owner for all
purposes.
The Warrants evidenced hereby do not entitle any Holder
hereof to any of the rights of a shareholder of the Company.
This Warrant Certificate shall not be valid or
obligatory for any purpose until it shall have been countersigned
by the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be executed by its duly authorized officers and
the corporate seal hereunto affixed.
Dated: [WEI ACQUISITION CO.]
By:
--------------------------------
Title:
ATTEST:
-----------------------------
Title:
COUNTERSIGNED:
[UNITED STATES TRUST COMPANY
OF NEW YORK]
WARRANT AGENT
By:
--------------------------
Title:
[WEI ACQUISITION CO.]
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise
the right of purchase represented by the within Warrant
Certificate for, and to purchase thereunder, ______ shares of
Common Stock, provided for therein, and requests that
certificates for such shares of Common Stock be issued in the
name of:
Name: _______________________________________________________
Address: _______________________________________________________
_________________________________________________________________
Social Security or Taxpayer's
Identification Number: ________________________________________
and, if said number of shares of Common Stock shall not be all
the Common Stock purchasable thereunder, that a new Warrant
Certificate for the balance remaining of the Common Stock
purchasable under the within Warrant Certificate be registered in
the name of the undersigned Warrantholder or his or her Assignee
as below indicated and delivered to the address stated below.
Name of Warrantholder
or Assignee: ___________________________________
Address: ___________________________________
Social Security or Taxpayer's
Identification Number: ___________________________________
Signature: ___________________
Dated: ____________________
Signature Guaranteed:
NOTICE: The above signature must
correspond with the name
as written upon the face
of this Warrant
Certificate in every
particular, without
alteration or enlargement
or any change whatever,
unless this Warrant has
been assigned.
ASSIGNMENT
(To be signed only upon
assignment of Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto ______________________________
(Name of Assignee)
__________________________________________________________
__________________________________________________________
__________________________________________________________
(Social Security or other Taxpayer Identification Number of
Assignee) the within Warrants, hereby irrevocably constituting
and appointing _________________________________________________
Attorney to transfer said Warrants on the books of the Company,
with full power of substitution in the premises.
DATED: _____________________
----------------------------------
Signature of Registered Holder
Signature Guaranteed:
NOTICE: The signature of this
assignment must
correspond with the name
as it appears upon the
face of the within
Warrant Certificate in
every particular, without
alteration or enlargement
or any change whatever.
EXHIBIT F
----------------------------------------------------
WARRANT AGREEMENT
RELATING TO THE ISSUANCE OF THE
TRANCHE B WARRANTS
WEI ACQUISITION CO.
and
[UNITED STATES TRUST COMPANY OF NEW YORK]
Dated as of ______________ __, 1997
----------------------------------------------------
TABLE OF CONTENTS
Sections Page(s)
SECTION 1. Appointment of Warrant Agent. . . . . . . . . . . . 1
SECTION 2. Form of Warrants. . . . . . . . . . . . . . . . . . 1
2.1. Form of Warrant Certificates. . . . . . . . . 1
2.2. Countersignature of Warrant
Certificates. . . . . . . . . . . . . . . . 2
2.3. Registration. . . . . . . . . . . . . . . . . 2
SECTION 3. Transfer or Exchange of Warrants. . . . . . . . . . 3
3.1. Transfer. . . . . . . . . . . . . . . . . . . 3
3.2. Exchange of Warrant Certificates. . . . . . . 3
SECTION 4. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 5. Mutilated or Missing Warrants . . . . . . . . . . . 3
SECTION 6. Term of Warrants; Exercise of Warrants. . . . . . . 4
6.1. Term of Warrants. . . . . . . . . . . . . . . 4
6.2. Exercise of Warrants. . . . . . . . . . . . . 4
SECTION 7. Disposition of Proceeds on Exercise of
Warrants. . . . . . . . . . . . . . . . . . . . . . 5
SECTION 8. Payment of Taxes. . . . . . . . . . . . . . . . . . 5
SECTION 9. Reservation of Warrant Shares; Purchase
and Cancellation of Warrants. . . . . . . . . . . . 5
9.1. Reservation of Warrant Shares . . . . . . . . 5
9.2. Governmental Approvals and
Listings. . . . . . . . . . . . . . . . . . 6
9.3. Purchase of Warrants by the
Company . . . . . . . . . . . . . . . . . . 6
9.4. Cancellation of Warrants. . . . . . . . . . . 6
SECTION 10. Exercise Price. . . . . . . . . . . . . . . . . . . 6
SECTION 11. Adjustment of Exercise Price and Number
of Warrant Shares . . . . . . . . . . . . . . . . . 6
11.1. Adjustments. . . . . . . . . . . . . . . . . 6
(a) Stock Dividends, Splits,
etc. . . . . . . . . . . . . . . . . . 7
(b) Distributions of Assets. . . . . . . . 7
(c) Computation of Market
Price. . . . . . . . . . . . . . . . . 8
(d) Minimum Adjustment . . . . . . . . . . 8
(e) Warrant Share Adjustment . . . . . . . 9
(f) Notice of Adjustment . . . . . . . . . 9
(g) Definition of Common Stock . . . . . . 9
(h) Company May Reduce Exercise
Price or Increase Number of
Warrant Shares Purchasable . . . . . . 10
(i) Subsequently Issued
Warrants . . . . . . . . . . . . . . . 10
(j) Number of Warrant Shares on
Warrant Certificates . . . . . . . . . 10
11.2. No Adjustment for Dividends. . . . . . . . . 10
11.3. Preservation of Purchase Rights
and Adjustment of Exercise Price
upon Merger, Consolidation,
etc.. . . . . . . . . . . . . . . . . . . . 10
SECTION 12. No Rights as Stockholders; Notices to
Warrant Holders . . . . . . . . . . . . . . . . . . 12
SECTION 13. Purchase Rights . . . . . . . . . . . . . . . . . . 13
SECTION 14. Fractional Shares of Common Stock . . . . . . . . . 13
SECTION 15. Right of Action . . . . . . . . . . . . . . . . . . 13
SECTION 16. Inspection of Warrant Agreement . . . . . . . . . . 14
SECTION 17. Merger or Consolidation or Change of
Name of Warrant Agent . . . . . . . . . . . . . . . 14
SECTION 18. Concerning the Warrant Agent. . . . . . . . . . . . 14
18.1. Disclaimer of Representations . . . . . . . 15
18.2. No Responsibility for Failure of
Company's Covenants . . . . . . . . . . . . 15
18.3. Delegation. . . . . . . . . . . . . . . . . 15
18.4. Opinion of Counsel. . . . . . . . . . . . . 15
18.5. Officer's Certificate . . . . . . . . . . . 15
18.6. Compensation and Reimbursement. . . . . . . 15
18.7. No Action Without Assurance of
Reimbursement . . . . . . . . . . . . . . . 16
18.8. Conflicts of Interest . . . . . . . . . . . 16
18.9. Solely as Agent . . . . . . . . . . . . . . 16
18.10. Reliance on Documents . . . . . . . . . . . 16
18.11. No Representation Regarding
Validity, Etc.. . . . . . . . . . . . . . . 17
18.12. Instructions from Company . . . . . . . . . 17
SECTION 19. Change of Warrant Agent . . . . . . . . . . . . . . 17
SECTION 20. Identity of Transfer Agent. . . . . . . . . . . . . 18
SECTION 21. Notices . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 22. Supplements and Amendments. . . . . . . . . . . . . 18
SECTION 23. Successors. . . . . . . . . . . . . . . . . . . . . 19
SECTION 24. Merger or Consolidation of the Company. . . . . . . 19
SECTION 25. Applicable Law. . . . . . . . . . . . . . . . . . . 19
SECTION 26. Benefits of this Agreement. . . . . . . . . . . . . 19
SECTION 27. Counterparts. . . . . . . . . . . . . . . . . . . . 19
SECTION 28. Captions. . . . . . . . . . . . . . . . . . . . . . 20
SECTION 29. Plan of Reorganization. . . . . . . . . . . . . . . 20
EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
PURCHASE FORM. . . . . . . . . . . . . . . . . . . . . . . . . .A-4
ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
WARRANT AGREEMENT relating to the issuance of the
Tranche B Warrants, dated as of ______________ __, 1997, between
[WEI ACQUISITION CO.], a Delaware corporation (the "Company"),
and [UNITED STATES TRUST COMPANY OF NEW YORK], as Warrant Agent
(the "Warrant Agent").
WITNESSETH:
WHEREAS, pursuant to the Debtors' First Amended Chapter
11 Plan, as Revised for Technical Corrections dated October 4,
1996 (the "POR") and an Asset Purchase Agreement dated as of
____________, 1997 (the "ASSET PURCHASE AGREEMENT"), the Company
will acquire substantially all of the assets of Wherehouse
Entertainment, Inc., and its parent, WEI Holdings, Inc., which
companies are debtors and debtors-in-possession (collectively,
the "DEBTORS"), in Case No. 95-911 (HSB) (Jointly Administered)
(the "BANKRUPTCY CASE") in the Bankruptcy Court for the District
of Delaware (the "BANKRUPTCY COURT");
WHEREAS, as part of the purchase price for the assets
of the Debtors to be acquired by the Company, the Company
proposes to issue up to 100,000 Common Stock Purchase Warrants
hereinafter described (the "Warrants") to purchase its Common
Stock, par value $0.01 per share (the "Common Stock"), each
Warrant entitling the registered owner thereof to purchase one
share of Common Stock (each share of Common Stock purchasable
upon the exercise of a Warrant being referred to herein as a
"WARRANT SHARE"); and
WHEREAS, the Company wishes the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to act,
in connection with the issuance, transfer, exchange and exercise
of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and
for the purpose of defining the terms and provisions of the
Warrants and the respective rights and obligations thereunder of
the Company and the registered owners of the Warrants (the
"Holders"), the Company and the Warrant Agent hereby agree as
follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT.
The Company hereby appoints the Warrant Agent to act as
agent for the Company in accordance with the terms and conditions
hereinafter set forth, and the Warrant Agent hereby accepts such
appointment.
SECTION 2. FORM OF WARRANTS.
2.1. Form of Warrant Certificates. The text of the
Warrant certificate and of the form of election to purchase
Warrant Shares shall be substantially as set forth in Exhibit A
attached hereto. The Warrant certificates shall be appropriately
printed, lithographed or engraved and may have such letters,
numbers or other marks of identification as the Company may deem
appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any rule or
regulation of any stock exchange on which the Warrants may be
listed, or to conform to usage. The price per Warrant Share and
the number of Warrant Shares issuable upon exercise of each
Warrant are subject to adjustment upon the occurrence of certain
events, all as hereinafter provided. The Warrant certificates
shall be executed on behalf of the Company by its Chairman of the
Board, its President or one of its Vice Presidents under its
corporate seal reproduced thereon and attested by its Secretary
or an Assistant Secretary. The signature of any of such officers
on the Warrant certificates may be manual or facsimile.
Warrant certificates bearing the manual or facsimile
signatures of individuals who were at any time the proper
officers of the Company shall bind the Company, notwithstanding
that such individuals or any one of them shall have ceased to
hold such offices prior to the delivery of such Warrant certifi-
cates or did not hold such office on the date of this Agreement.
Warrant certificates shall be dated as of the date of
countersignature thereof by the Warrant Agent either upon initial
issuance or upon exchange, substitution or transfer.
2.2. Countersignature of Warrant Certificates. The
Warrant certificates shall be manually countersigned by the
Warrant Agent (or any successor to the Warrant Agent then acting
as warrant agent under this Agreement) and shall not be valid for
any purpose unless so countersigned. Warrant certificates may be
countersigned by the Warrant Agent (or by its successor as
warrant agent hereunder) and may be delivered by the Warrant
Agent notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company shall
have ceased to be such officers at the time of such
countersignature, issuance or delivery. The Warrant Agent shall,
upon written instructions of the Chairman of the Board, the
President, any Vice President or the Secretary of the Company,
countersign, issue and deliver Warrant certificates entitling the
Holders thereof to purchase in the aggregate Warrant Shares
(subject to adjustment pursuant to Section 11 hereof) and shall
countersign and deliver Warrant certificates as otherwise
provided in this Agreement.
2.3. Registration. The Warrant certificates shall be
numbered and shall be registered in a register (the "Warrant
Register") as they are issued. The Company and the Warrant Agent
shall be entitled to treat the registered holder of any Warrant
as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in
such Warrant on the part of any other person, notwithstanding any
notice to the Company or the Warrant Agent to the contrary.
SECTION 3. TRANSFER OR EXCHANGE OF WARRANTS.
3.1. Transfer. The Warrants shall be transferable
only in the books of the Company maintained at the office or
agency of the Warrant Agent in the City of New York upon delivery
thereof duly endorsed by the Holder or by his or her duly
authorized attorney or legal representative, or accompanied by
proper evidence of succession, assignment or authority to
transfer, which endorsement shall be guaranteed by a bank or
trust company located in the United States or a broker or dealer
that is a member of a national securities exchange. In all cases
of transfer by an attorney, the original power of attorney, duly
approved, or an official copy thereof, duly certified, shall be
deposited and remain with the Warrant Agent. In case of transfer
by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority
shall be produced, and may be required to be deposited and remain
with the Warrant Agent in its discretion. Upon any registration
of transfer, the Warrant Agent shall countersign and deliver a
new Warrant certificate to the person entitled thereto.
3.2. Exchange of Warrant Certificates. Warrant
certificates may be exchanged for another certificate or
certificates entitling the Holder thereof to purchase a like
aggregate number of Warrant Shares as the certificate or
certificates surrendered then entitle such Holder to purchase.
Any Holder desiring to exchange a Warrant certificate shall make
such request in writing delivered to the Warrant Agent, and shall
surrender, properly endorsed in the manner described in
subsection 3.1 hereof, the Warrant certificate or certificates to
be so exchanged. Thereupon, the Warrant Agent shall countersign
and deliver to the person entitled thereto a new Warrant
certificate or certificates, as the case may be, as so requested.
SECTION 4. [SECTION 4 INTENTIONALLY LEFT BLANK].
SECTION 5. MUTILATED OR MISSING WARRANTS.
In case any of the certificates evidencing the Warrants
shall be mutilated, lost, stolen or destroyed, the Company may,
in its discretion, issue and the Warrant Agent shall countersign
and deliver in exchange and substitution for and upon
cancellation of the mutilated Warrant certificate, or in lieu of
and substitution for the Warrant certificate lost, stolen or
destroyed, a new Warrant certificate of like tenor and
representing an equivalent right or interest, but only, in case
of any such loss, theft or destruction, upon receipt of evidence
satisfactory to the Company and the Warrant Agent thereof and an
indemnity also satisfactory to them. An applicant for such
substitute Warrant certificate shall also comply with such other
reasonable regulations and pay such other reasonable charges as
the Company or the Warrant Agent may prescribe.
SECTION 6. TERM OF WARRANTS; EXERCISE OF WARRANTS.
6.1. Term of Warrants. Subject to the terms of this
Agreement, each Holder shall have the right until 5:00 P.M., New
York time, on ___________ __, 2004 (the seventh anniversary of
the Effective Date (as defined in the POR)) (the "Expiration
Date"), to purchase from the Company the number of fully paid and
nonassessable Warrant Shares which the Holder may at the time be
entitled to purchase on exercise of such Warrants.
6.2. Exercise of Warrants. Warrant Shares may be
purchased upon surrender to the Company at the office or agency
of the Warrant Agent in the City of New York, of the certificate
or certificates evidencing the Warrants to be exercised, together
with the form of election to purchase on the reverse thereof duly
filled in and signed, which signature shall, if the Warrant
Shares are to be issued in the name of a person other than the
Holder of the Warrant, be guaranteed by a bank or trust company
located in the United States or a broker or dealer that is a
member of a national securities exchange, and upon payment to the
Warrant Agent for the account of the Company of the Exercise
Price (as defined in and determined in accordance with the
provisions of Sections 10 and 11 hereof) for the number of
Warrant Shares in respect of which such Warrants are then being
exercised. Payment of the aggregate Exercise Price shall be made
by certified or cashier's check, or by any combination thereof.
Subject to Section 8 hereof, upon such surrender of
Warrants and payment of the Exercise Price as aforesaid, the
Company shall issue and cause to be delivered, with all
reasonable dispatch, to or upon the written order of the Holder
and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares
so purchased upon the exercise of such Warrants. Such
certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed
to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrants and payment of the
Exercise Price, as aforesaid; provided, however, that if such
Warrants are surrendered, and the Exercise Price is paid, on a
Saturday, Sunday or other day on which banking institutions in
the City of New York are authorized or obligated by law or
executive order to close, or on a day when the Common Stock
transfer books of the Company are closed, the certificates for
the Warrant Shares in respect of which such Warrants are then
exercised shall be issuable as of the next succeeding Monday,
Tuesday, Wednesday, Thursday or Friday on which such banking
institutions are not so authorized or obligated to close (whether
before or after the Expiration Date) and which is a day on which
the Common Stock transfer books of the Company are open. The
rights of purchase represented by the Warrants shall be
exercisable, at the election of the Holders thereof, either in
full or from time to time in part and, in the event that a
certificate evidencing Warrants is exercised in respect of less
than all of the Warrant Shares specified therein at any time
prior to the expiration of such Warrants, a new certificate
evidencing the remaining Warrant or Warrants will be issued, and
the Warrant Agent is hereby irrevocably authorized to countersign
and to deliver the required new Warrant certificates pursuant to
the provisions of this subsection and of subsection 2.2 hereof
and the Company, whenever required by the Warrant Agent, will
supply the Warrant Agent with Warrant certificates duly executed
on behalf of the Company for such purpose.
SECTION 7. DISPOSITION OF PROCEEDS ON EXERCISE OF
WARRANTS.
The Warrant Agent shall account promptly to the Company
with respect to the Warrants exercised and concurrently pay to
the Company all moneys received by the Warrant Agent for the
purchase of the Warrant Shares through the exercise of such
Warrants.
SECTION 8. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes, if
any, attributable to the issuance of any Warrant certificates or
certificates for Warrant Shares issuable upon the exercise of
Warrants; provided, however, that the Company shall not be
required to pay, and the Holder shall pay, any tax or taxes that
may be payable in respect of any transfer involved in the issue
or delivery of any Warrant certificates or certificates for
Warrant Shares in a name other than that of the registered Holder
of the Warrants that were surrendered and the Company shall not
be required to issue or deliver such Warrant certificates or
certificates for Warrant Shares unless or until the persons
requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
SECTION 9. RESERVATION OF WARRANT SHARES; PURCHASE
AND CANCELLATION OF WARRANTS.
9.1. Reservation of Warrant Shares. There have been
reserved, and the Company shall at all times keep reserved out of
its authorized Common Stock, a number of shares of Common Stock
sufficient to provide for the exercise of the right of purchase
represented by the outstanding Warrants. The Company covenants
that all Warrant Shares will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable. Before taking any
action that would cause an adjustment reducing the Exercise Price
below the then par value, if any, of the shares of Common Stock
issuable upon exercise of the Warrants, the Company shall take
any corporate action which may, in the opinion of it counsel, be
necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of such Common Stock, at such
adjusted Exercise Price. The Transfer Agent for the Common Stock
and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably authorized and
directed at all times to reserve such number of authorized shares
as shall be requisite for such purpose. The Company will keep a
copy of this Agreement on file with the Transfer Agent for the
Common Stock and with every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise
of the rights of purchase represented by the Warrants. The
Warrant Agent is hereby irrevocably authorized to requisition
from time to time from such Transfer Agent stock certificates
required to honor outstanding Warrants upon exercise thereof in
accordance with the terms of this Agreement. The Company will
supply such Transfer Agent with duly executed stock certificates
for such purpose. Promptly after the Expiration Date, the
Warrant Agent shall certify to the Company the aggregate number
of Warrants then outstanding and thereafter no shares shall be
subject to reservation in respect of such Warrants.
9.2. Governmental Approvals and Listings. The Company
will as promptly as practicable take all action which may be
necessary to obtain and keep effective (a) any and all permits,
consents and approvals of governmental agencies and authorities,
and will make any and all filings under federal and state
securities laws, necessary in connection with the issuance,
distribution and transfer of Warrant certificates, the exercise
of the Warrants, and the issuance, sale, transfer and delivery of
Warrant Shares and (b) if any of the Warrant Shares have been
listed on any securities exchange, the listing of the Warrant
Shares on any securities exchange on which the Common Stock may
be listed (it being understood that the Company has no obligation
to list any Warrant Shares with any securities exchange).
9.3. Purchase of Warrants by the Company. The Company
shall have the right, except as limited by law, other agreement
or herein, to purchase or otherwise acquire Warrants at such
times, in such manner and for such consideration as it may deem
appropriate.
9.4. Cancellation of Warrants. In the event the
Company shall purchase or otherwise acquire Warrants, the related
Warrant certificates shall thereupon be delivered to the Warrant
Agent and be cancelled by it and retired. The Warrant Agent
shall cancel any Warrant certificate surrendered for exchange,
substitution, transfer or exercise in whole or in part. Warrant
certificates cancelled by the Warrant Agent pursuant to any
provision of this Agreement shall be delivered to the Company or,
upon the request of the Warrant Agent and with the consent of the
Company, destroyed by the Warrant Agent. The Warrant Agent shall
furnish to the Company written confirmation of the destruction of
the Warrant certificates so cancelled.
SECTION 10. EXERCISE PRICE.
The price per share at which Warrant Shares shall be
purchasable upon exercise of each Warrant (the "Exercise Price")
shall be $9.00, subject to adjustment pursuant to Section 11
hereof.
SECTION 11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER
OF WARRANT SHARES.
11.1. Adjustments. The number and kind of securities
purchasable upon the exercise of each Warrant and the Exercise
Price shall be subject to adjustment as follows:
(a) Stock Dividends, Splits, etc. In case the Company
shall at any time after the date of this Agreement (w) pay a
dividend or make a distribution on its Common Stock which is
paid or made (A) in Common Stock or other shares of the
Company's capital stock or (B) in rights to purchase Common
Stock or other capital stock of the Company if such rights
are not exercisable or separable from the Common Stock
except upon the occurrence of a contingency, (x) subdivide
its outstanding Common Stock into a greater number of shares
of Common Stock, (y) combine its outstanding shares into a
smaller number of shares of Common Stock or (z) issue by
reclassification of its Common Stock other securities of the
Company, then, in any such event the number of Warrant
Shares purchasable upon exercise of each Warrant immediately
prior thereto shall be adjusted so that the Holder of each
Warrant shall be entitled to receive upon exercise of such
Warrant the kind and number of shares of the Company and
rights to purchase Common Stock or other securities of the
Company (or, in the event of the redemption of any such
rights, any cash paid in respect of such redemption) that
he, she or it would have owned or have been entitled to
receive after the happening of any of the events described
above had such Warrant been exercised immediately prior to
the happening of such event or any record date with respect
thereto. An adjustment made pursuant to this paragraph
(a) shall become effective immediately after the opening of
business on the next business day following the record date
in the case of dividends or other distributions and shall
become effective immediately after the opening of business
on the next business day following the effective date in the
case of a subdivision or combination.
(b) Distributions of Assets. In case the Company
shall at any time after the date of this Agreement
distribute to all holders of its Common Stock evidences of
indebtedness of the Company or assets of the Company
(including cash dividends or distributions out of retained
earnings other than cash dividends or distributions made on
a quarterly or other periodic basis) or warrants to
subscribe for securities of the Company (excluding those
referred to in paragraph (a) above), then in each case the
Exercise Price shall be adjusted to a price determined by
multiplying the Exercise Price in effect immediately prior
to such distribution by a fraction, of which the numerator
shall be the then current market price per share of Common
Stock (as defined in paragraph (c) below) on the record date
for determination of shareholders entitled to receive such
distribution, less the then fair value (as determined in
good faith by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed or of
such subscription rights or warrants which are applicable to
one share of Common Stock, and of which the denominator
shall be such market price per share of Common Stock;
provided, however, that if the then current market price per
share of Common Stock on the record date for determination
of shareholders entitled to receive such distribution is
less than the then fair value of the portion of the assets
or evidences of indebtedness so distributed or of such
subscription rights or warrants which are applicable to one
share of Common Stock, the foregoing adjustment of the
Exercise Price shall not be made and in lieu thereof the
Holder of each Warrant shall be entitled to receive upon
exercise of such Warrant in addition to the Common Stock the
kind and number of assets, evidences of indebtedness,
subscription rights and warrants (or, in the event of the
redemption of any such evidences of indebtedness,
subscription rights and warrants, any cash paid in respect
of such redemption) that he or she would have owned or have
been entitled to receive after the happening of such
distribution had such Warrant been exercised immediately
prior to the record date for such distribution. Such
adjustment shall be made successively whenever such a record
date is fixed, and in the event that such distribution is
not so made, the Exercise Price shall again be adjusted to
be the Exercise Price which would then be in effect if such
record date had not been fixed.
(c) Computation of Market Price. For the purpose of
any computation under this Agreement, the current market
price per share of Common Stock at any date shall be deemed
to be the average of the daily Market Price (as defined
below) per share for the 30 consecutive Trading Days (as
defined below) commencing 45 Trading Days before the date in
question. "Market Price" is defined as the closing sale
price (or, if no closing sale price is reported, the closing
bid price) for the Common Stock in the over-the-counter
market, as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or,
if the Common Stock is not quoted on NASDAQ, as reported by
the National Quotation Bureau Incorporated, or, if the
Common Stock is not so reported, as furnished by any two
members of the National Association of Securities Dealers,
Inc., selected from time to time by the Company for that
purpose. In the event that the Common Stock is hereafter
listed for trading on one or more United States national or
regional securities exchanges, Market Price shall be the
closing price on the exchange or system designated by the
Board of Directors of the Company as the principal United
States market in which the Common Stock is traded. If
Market Price cannot be established as described above,
Market Price shall be the fair market value of the Common
Stock as determined in good faith by the Board of Directors.
"Trading Day" shall mean a Monday, Tuesday, Wednesday,
Thursday or Friday on which banking institutions in the City
of Los Angeles and the State of California or New York, New
York, are not authorized or obligated by law or executive
order to close or, if the Common Stock is listed or admitted
to trading on a national securities exchange, a day on which
the principal national securities exchange on which the
Common Stock is listed or admitted to trading is open for
the transaction of business.
(d) Minimum Adjustment. No adjustment in the number
of Warrant Shares purchasable hereunder or the Exercise
Price shall be required unless such adjustment would require
an increase or decrease of at least one per cent (1%) in the
number of Warrant Shares purchasable upon the exercise of
each Warrant, or the Exercise Price, as the case may be;
provided, however, that any adjustments which by reason of
this paragraph (d) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be
made to the nearest cent or the nearest ten-thousandth of a
share, as the case may be.
(e) Warrant Share Adjustment. Upon each adjustment of
the Exercise Price as a result of the calculations made in
paragraph (a) or (b) above, each Warrant outstanding
immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted
Exercise Price, that number of shares (calculated to the
nearest ten-thousandth) obtained by (A) multiplying (x) the
number of shares covered by a Warrant immediately prior to
such adjustment of the Exercise Price by (y) the Exercise
Price in effect immediately prior to such adjustment of the
Exercise Price and (ii) dividing the product so obtained by
the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
(f) Notice of Adjustment. Whenever the number of
Warrant Shares purchasable upon the exercise of Warrants or
the Exercise Price of such Warrant Shares is adjusted, as
herein provided, the Company shall cause the Warrant Agent
promptly to mail by first class mail, postage prepaid, to
each Holder of a Warrant or Warrants notice of such
adjustment or adjustments and shall deliver to the Warrant
Agent a certificate of a firm of independent public
accountants selected by the Board of Directors of the
Company (who may be the regular accountants employed by the
Company) setting forth (A) the number of Warrant Shares
purchasable upon the exercise of each Warrant and the
Exercise Price of such Warrant Shares after such adjustment,
(B) a brief statement of the facts requiring such adjustment
and (C) the computation by which such adjustment was made.
Such certificate shall be conclusive evidence of the
correctness of such adjustment. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no
duty or responsibility with respect to any such certificate,
except to exhibit the same, from time to time, to any Holder
desiring an inspection thereof during reasonable business
hours. The Warrant Agent shall not at any time be under any
duty or responsibility to any Holders to determine whether
any facts exist that may require any adjustment of the
Exercise Price or the number of Warrant Shares or other
stock or property purchasable upon exercise thereof or with
respect to the nature or extent of any such adjustment when
made, or with respect to the method employed in making such
adjustment.
(g) Definition of Common Stock. For the purpose of
this subsection 11.1, the term "Common Stock" shall mean
(A) the class of stock designated as the Common Stock of the
Company at the date of this Agreement or (B) any other class
of stock resulting from successive changes or
reclassifications of such shares consisting solely of
changes in par value, or from par value to no par value or
from no par value to par value. In the event that at any
time, as a result of an adjustment made pursuant to
paragraph (a) above, the Holders of a Warrant or Warrants
shall become entitled to purchase any securities of the
Company other than Common Stock, thereafter the number of
such other securities so purchasable upon exercise of each
Warrant and the Exercise Price of such securities shall be
subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions
with respect to the Warrant Shares contained in this
subsection 11.1 and the provisions of Section 6 and
subsections 11.2 and 11.3, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other
securities.
(h) Company May Reduce Exercise Price or Increase
Number of Warrant Shares Purchasable. The Company may, at
its option, at any time during the term of the Warrants,
reduce the then current Exercise Price, or increase the
number of Common Shares purchasable upon exercise of each
Warrant, to any amount deemed appropriate by the Board of
Directors of the Company.
(i) Subsequently Issued Warrants. All Warrants
originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall
evidence the right to purchase, at the adjusted Exercise
Price, the number of shares of Common Stock purchasable from
time to time hereunder upon exercise of the Warrants, all
subject to further adjustment as provided herein.
(j) Number of Warrant Shares on Warrant Certificates.
Irrespective of any adjustment or change in the Exercise
Price or the number of shares of Common Stock issuable upon
the exercise of the Warrants, the Warrant certificates
theretofore and thereafter issued may continue to express
the Exercise Price per share and the number of shares which
were expressed upon the initial Warrant certificates issued
hereunder.
11.2. No Adjustment for Dividends. Except as provided
in subsection 11.1, no adjustment in respect of any dividends
made on a quarterly or other periodic basis out of retained
earnings shall be made during the term of a Warrant or upon the
exercise of a Warrant.
11.3. Preservation of Purchase Rights and Adjustment
of Exercise Price upon Merger, Consolidation, etc. In case the
Company shall consolidate or merge with or into any other
corporation (other than a consolidation or merger in which the
Company is the surviving corporation and each share of Common
Stock outstanding immediately prior to such consolidation or
merger is to remain outstanding immediately after such
consolidation or merger and no cash, securities or other property
is distributed with respect to such shares) or shall sell or
transfer all or substantially all of its assets to any
corporation, the Company or such successor or purchasing
corporation, as the case may be (collectively, the "acquiring
corporation"), shall execute with the Warrant Agent an agreement
that each Holder of a Warrant shall have the right thereafter
upon payment of the Exercise Price in effect immediately prior to
such action to purchase upon exercise of each Warrant the kind
and amount of shares and other securities, cash and other
property that he or she would have owned or have been entitled to
receive after the happening of such consolidation, merger or sale
had such Warrant been exercised immediately prior to such action
(assuming that such Holder, as a holder of Common Stock prior to
such action, would not have exercised any rights of election as a
holder of Common Stock as to the kind or amount of securities,
cash or other property receivable upon such consolidation, merger
or sale; provided, that if the kind or amount of securities, cash
or other property receivable upon such consolidation, merger or
sale is not the same for each non-electing share of Common Stock,
then the kind and amount of securities, cash or other property
receivable shall be deemed to be the kind and amount so
receivable by a plurality of the non-electing shares). The
Company shall mail by first-class mail, postage prepaid, to each
Holder, notice of the execution of any agreement with an
acquiring corporation as provided in the first sentence of this
subsection 11.3. In addition to any adjustments required by this
subsection 11.3, such agreement shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 11. The Company shall
not effect any such consolidation, merger or sale unless prior to
or simultaneously with the consummation thereof the acquiring
corporation (if other than the Company) resulting from such
consolidation or merger or the acquiring corporation purchasing
such assets or other appropriate corporation or entity shall
assume, by written instrument executed and delivered to the
Warrant Agent, the obligation to deliver to each Holder such
shares of stock, securities or assets as, in accordance with the
foregoing provisions, such Holder may be entitled to receive and
the other obligations of the Company under this Agreement. The
provisions of this subsection 11.3 shall similarly apply to
successive consolidations, mergers, sales or conveyances. The
Warrant Agent shall be under no duty or responsibility to
determine the correctness of any provisions contained in any such
agreement relating either to the kind or amount of shares of
stock or other securities, cash or property receivable upon
exercise of Warrants or with respect to the method employed and
provided therein for any adjustments.
11.4 No Adjustment for Employee Compensation and
Issuances to Alvarez & Marsal, Inc. Notwithstanding anything to
the contrary contained herein, no adjustment to the Exercise
Price or the number of shares of Common Stock purchasable upon
exercise of any Warrant shall be made in connection with the
issuance by the Company of any shares of Common Stock or options
to purchase Common Stock or other securities which may be
convertible or exercisable into shares of Common Stock to (i) any
employee of the Company as compensation for services rendered to
the Company or (ii) Alvarez & Marsal, Inc. ("A&M") or any of its
affiliates, in connection with the management services to be
provided by A&M to the Company under that certain Management
Services Agreement dated as of __________ __, 1997 between the
Company and A&M.
SECTION 12. NO RIGHTS AS STOCKHOLDERS; NOTICES TO
WARRANT HOLDERS.
(a) Nothing contained in this Agreement or in any of
the Warrants shall be construed as conferring upon the
Holders or their transferees the right to vote or to receive
dividends or to consent or to receive notice as shareholders
in respect of any meeting of shareholders for the election
of directors of the Company or any other matter, or any
rights whatsoever as shareholders of the Company. If prior
to the expiration of the Warrants:
(A) the Company shall declare a dividend or other
distribution on its Common Shares, other than (i) in cash as
described in Section 11.2, (ii) in other shares of Common
Stock, or (iii) in rights to purchase shares of Common Stock
or other securities of the Company of the character
described in paragraph (a) of subsection 11.1; or
(B) the Company shall authorize the issuance to
all holders of its Common Stock of rights or warrants
entitling them to subscribe for or purchase any Common Stock
or any other subscription rights or warrants (other than
rights of the character described in paragraph (a) of
subsection 11.1); or
(C) there shall occur a reclassification of the
capital stock of the Company (other than a subdivision or
combination of its outstanding Common Stock); or
(D) the Company shall propose to effect any
consolidation or merger into or with, or to effect any sale
or other transfer requiring an adjustment pursuant to
Section 11.3; or
(E) the Company shall take an action ("Adjustment
Action") which would cause an adjustment pursuant to Section
11 hereof of the number or kind of Common Stock (or other
securities) purchasable upon the exercise of each Warrant or
of the Exercise Price that would have the effect of reducing
the price payable for a share of the Company's capital stock
by a Holder upon exercise of a Warrant to an amount which is
less than the current value of such share; or
(F) a voluntary or involuntary dissolution,
liquidation or winding up of the Company shall be proposed;
then, in any such event, the Company shall cause to be mailed to
the Warrant Agent and the Holders in the manner provided in
Section 21 hereof, at least 20 days prior to the applicable
record or effective date hereinafter specified, a notice stating
(i) the date as of which the holders of record of Common Stock to
be entitled to such dividend, distribution, rights or warrants
are to be determined, or (ii) the date on which such
reclassification, Adjustment Action, consolidation, merger, sale,
transfer, dissolution, liquidation, or winding up is expected to
become effective, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange
their shares of securities or other property, if any, deliverable
upon such reclassification, Adjustment Action, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up.
Such notice shall also state whether such transaction will result
in any adjustment of the number or kind of Common Stock (or other
securities) purchasable upon the exercise of a Warrant or of the
Exercise Price and, if so, shall set forth the nature thereof and
the date upon which it will become effective. In the event the
Company gives notice to the holders of its Common Stock of the
declaration or distribution of rights to purchase Common Stock or
other securities of the Company of the character described in
paragraph (a) of subsection 11.1, the Company will give
concurrently a similar notice to the Holders in the manner
provided in Section 21 hereof. The failure to give the notices
required by this Section 12, or any defect therein, shall not
affect the legality or validity of any such dividend,
distribution, right, warrant, reclassification, Adjustment
Action, dissolution, liquidation or winding up or other action,
or the vote on any action authorizing the same.
SECTION 13. PURCHASE RIGHTS.
If at any time or from time to time on or after the
date of the Agreement, the Corporation shall give notice (a
"Purchase Rights Notice") pursuant to paragraph (B) of Section
12(a) of an issuance of rights or warrants, (the "Purchase
Rights") to all record holders of Common Stock, such issuance
shall not result in an adjustment of the Exercise Price or the
number of Warrants under Section 11 hereof, but each Holder shall
be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder
could have acquired if it had held the number of shares of Common
Stock acquirable upon exercise of the Warrants immediately before
the record date for the grant, issuance, or sale of such Purchase
Rights. The Purchase Rights Notice shall describe the Purchase
Rights and their availability to the Holders.
SECTION 14. FRACTIONAL SHARES OF COMMON STOCK.
The Company will not issue fractions of Warrants or
distribute Warrant certificates which evidence fractional
Warrants. In lieu of such fractional Warrants, there shall be
paid to the Holders to whom Warrant certificates representing
such fractional Warrants would otherwise be issuable an amount in
cash equal to the product of such fraction of a Warrant
multiplied by the current market price per share of Common Stock
issuable with respect to such fraction of a Warrant.
SECTION 15. RIGHT OF ACTION.
All rights of action in respect of this Agreement are
vested in the respective Holders of the Warrant certificates, and
any Holder of any Warrant certificate, without the consent of the
Warrant Agent or of the Holder of any other Warrant certificate,
may, on such Holder's own behalf and for such Holder's own
benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in
respect of, such Holder's right to exercise the Warrants
evidenced by such Warrant certificate in the manner provided in
such Warrant certificate and in this Agreement.
SECTION 16. INSPECTION OF WARRANT AGREEMENT.
The Warrant Agent shall keep copies of this Agreement
and any notices given or received hereunder available for
inspection by the Holders during normal business hours at its
office in the City of New York for that purpose. The Company
shall supply the Warrant Agent from time to time with such
numbers of copies of this Agreement as the Warrant Agent may
request.
SECTION 17. MERGER OR CONSOLIDATION OR CHANGE OF
NAME OF WARRANT AGENT.
Any corporation into which the Warrant Agent may be
merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Warrant
Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust business of the Warrant Agent,
shall be the successor to the Warrant Agent hereunder without the
execution or filing of any paper or any further act on the part
of any of the parties hereto, provided that such corporation
would be eligible for appointment as successor Warrant Agent
under the provisions of Section 19 hereof. In case at the time
such successor to the Warrant Agent shall succeed to the agency
created by this Agreement any of the Warrants shall have been
countersigned but not delivered, any such successor to the
Warrant Agent may adopt the countersignature of the original
Warrant Agent and deliver such Warrants so countersigned; and in
case at that time any of the Warrants shall not have been
countersigned, any successor to the Warrant Agent may countersign
such Warrants either in the name of the predecessor Warrant Agent
or in the name of the successor Warrant Agent, and in all such
cases such Warrants shall have the full force provided in the
Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall
be changed and at such time any of the Warrants shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignatures under its prior name and deliver Warrants so
countersigned; and in case at that time any of the Warrants shall
not have been countersigned, the Warrant Agent may countersign
such Warrants either in its prior name or in its changed name;
and in all such cases such Warrants shall have the full force
provided in the Warrants and in this Agreement.
SECTION 18. CONCERNING THE WARRANT AGENT.
The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders of
Warrants, by their acceptance thereof, shall be bound:
18.1. Disclaimer of Representations. The
statements contained herein and in the Warrants shall be
taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the
same except such as describe the Warrant Agent or action
taken by it. The Warrant Agent assumes no responsibility
with respect to the distribution of the Warrants except as
herein otherwise provided.
18.2. No Responsibility for Failure of Company's
Covenants. The Warrant Agent shall not be responsible for
any failure of the Company to comply with any of the
covenants contained in this Agreement or in the Warrants.
18.3. Delegation. The Warrant Agent may execute
and exercise any of the rights or powers hereby vested in it
or perform any duty hereunder either itself or by or through
its attorneys or agents (which shall not include its
employees), and the Warrant Agent shall not be answerable or
accountable for any act, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting
from such neglect or misconduct provided reasonable care
shall have been exercised in the selection and continued
employment thereof.
18.4. Opinion of Counsel. The Warrant Agent may
consult at any time with legal counsel satisfactory to it,
and the Warrant Agent shall incur no liability or
responsibility to the Company or to any Holder in respect of
any action taken, suffered or omitted by it hereunder in
good faith and in accordance with the opinion or the advice
of such counsel.
18.5. Officer's Certificate. Whenever in the
performance of its duties under this Agreement the Warrant
Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to
taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President,
the Treasurer or the Secretary of the Company and delivered
to the Warrant Agent; and such certificate shall be full
authorization to the Warrant Agent for any action taken or
suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
18.6. Compensation and Reimbursement. The Company
agrees to pay the Warrant Agent reasonable compensation for
all services rendered by the Warrant Agent in the
performance of its duties under this Agreement, to reimburse
the Warrant Agent for all expenses, taxes and governmental
charges and other charges of any kind and nature reasonably
incurred by the Warrant Agent in the performance of its
duties under this Agreement, and agrees to indemnify the
Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and reasonable
counsel fees, for anything done or omitted by the Warrant
Agent in the performance of its duties under this Agreement
except as a result of the Warrant Agent's gross negligence
or willful misconduct.
18.7. No Action Without Assurance of Reimbursement.
The Warrant Agent shall be under no obligation to institute
any action, suit or legal proceeding or to take any other
action likely to involve expense unless the Company or one
or more Holders shall furnish the Warrant Agent with
reasonable security and indemnity for any costs and expenses
which may be incurred; but this provision shall not affect
the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without
any such security or indemnity. All rights or action under
this Agreement or under any of the Warrants may be enforced
by the Warrant Agent without the possession of any of the
Warrants or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent, and any recovery of judgment
shall be for the ratable benefit of the Holders, as their
respective rights or interests may appear.
18.8. Conflicts of Interest. The Warrant Agent and
any stockholder, director, officer or employee of the
Warrant Agent may buy, sell or deal in any of the Warrants
or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity
for the Company or for any other legal entity.
18.9. Solely as Agent. The Warrant Agent shall act
hereunder solely as agent, and its duties shall be
determined solely by the provisions hereof. The Warrant
Agent shall not be liable for anything that it may do or
refrain from doing in connection with this Agreement except
for its own gross negligence or bad faith.
18.10. Reliance on Documents. The Warrant Agent
will not incur any liability or responsibility to the
Company or to any Holder of any Warrant for any action taken
in reliance on any notice, resolution, waiver, consent,
order, certificate, or other paper, document or instrument
reasonably believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
18.11. No Representation Regarding Validity, Etc.
The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution and delivery
hereof by the Warrant Agent) or in respect of the validity
or execution of any Warrant (except its countersignature
thereof); nor shall the Warrant Agent by any act hereunder
be deemed to make any representation or warranty as to the
authorization or reservation of any Warrant Shares (or other
stock) to be issued pursuant to this Agreement or any
Warrant, or as to whether any Warrant Shares (or other
stock) will when issued be validly issued, fully paid and
nonassessable, or as to the Exercise Price or the number or
amount of Warrant Shares or other securities or other
property issuable upon exercise of any Warrant.
18.12. Instructions from Company. The Warrant Agent
is hereby authorized and directed to accept instructions
with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company,
and to apply to such officers for advice or instructions in
connection with its duties, and shall not be liable for any
action taken or suffered to be taken by it in good faith in
accordance with instructions of any such Officers.
SECTION 19. CHANGE OF WARRANT AGENT.
The Warrant Agent may resign and be discharged from its
duties under this Agreement by giving to the Company 60 days'
notice in writing. The Warrant Agent may be removed by like
notice to the Warrant Agent from the Company. If the Warrant
Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the
Warrant Agent. If the Company shall fail to make such
appointment within a period of 50 days after such notice of
removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated
Warrant Agent or by any Holder (who shall with such notice submit
his Warrant for inspection by the Company), then the resigning,
discharged or removed Warrant Agent or any Holder may apply to
any court of competent jurisdiction for the appointment of a
successor to the Warrant Agent. Any successor warrant agent,
whether appointed by the Company or such court, shall be (a) a
bank or trust company, in good standing, incorporated under the
laws of the United States of America or any state thereof and
having at the time of its appointment as warrant agent a combined
capital and surplus of at least $100,000,000, as set forth in its
most recent published annual report of condition or (b) an
affiliate of a corporation described in clause (a) above. After
appointment, the successor warrant agent shall be vested with the
same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent hereunder without further
act or deed; but the former Warrant Agent shall deliver and
transfer to the successor warrant agent any property at the time
held by it hereunder, and shall execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose.
Failure to file any notice provided for in this Section 19,
however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Warrant Agent or
the appointment of the successor warrant agent, as the case may
be. In the event of such resignation or removal, the successor
warrant agent shall mail, by first-class mail, postage prepaid,
to each Holder, written notice of such removal or resignation and
the name and address of such successor warrant agent.
SECTION 20. IDENTITY OF TRANSFER AGENT.
Forthwith upon the appointment of any subsequent
Transfer Agent for the Company's shares of Common Stock, or any
other shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrants,
the Company will file with the Warrant Agent a statement setting
forth the name and address of such Transfer Agent.
SECTION 21. NOTICES.
Any notice pursuant to this Agreement by the Company or
by the Holder of any Warrant to the Warrant Agent, or by the
Warrant Agent or by the Holder of any Warrant to the Company,
shall be in writing and shall be deemed to have been duly given
if delivered or mailed by certified mail, return receipt
requested, (a) if to the Company, to WEI Acquisition Co., 19701
Hamilton Avenue, Torrance, California 90502-1334, Attention:
[__________________] and, if to the Warrant Agent, to United
States Trust Company of New York, Corporate Trust Division, 114
West 47th Street, 15th Floor, New York, NY 10036-1532;,
Attention: Louis Young]. Each party hereto may from time to
time change the address to which notices to it are to be
delivered or mailed hereunder by notice in writing to the other
party.
Any notice mailed pursuant to this Agreement by the
Company or the Warrant Agent to the Holders of Warrants shall be
in writing and shall be deemed to have been duly given if mailed
by first-class mail, postage prepaid, to such Holders at their
respective addresses on the Warrant Register of the Warrant
Agent.
SECTION 22. SUPPLEMENTS AND AMENDMENTS.
(a) The Company and the Warrant Agent may from time to
time supplement or amend this Agreement, without the approval of
any Holder in order to cure any ambiguity or to correct or
supplement any provision contained herein that may be defective
or inconsistent with any other provisions herein, or to make any
other provisions with regard to matters or questions arising
hereunder that the Company and the Warrant Agent may deem
necessary or desirable and that shall not adversely affect the
interests of the Holders of Warrants.
(b) In addition to the foregoing, with the consent of
Holders of Warrants entitled, upon exercise thereof, to receive
not less than two-thirds of the shares of Common Stock issuable
thereunder, the Company and the Warrant Agent may modify this
Agreement for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this
Agreement or modifying in any manner the rights of the Holders of
the Warrants; provided, however, that no modification of the
terms (including, but not limited to the adjustments described in
Section 11) upon which the Warrants are exercisable or reducing
the percentage required for consent to modification of this
Agreement, no acceleration of the Expiration Date and no increase
in the Exercise Price may, in each case, be made without the
consent of the Holder of each outstanding Warrant affected
thereby.
SECTION 23. SUCCESSORS.
All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and
assigns hereunder.
SECTION 24. MERGER OR CONSOLIDATION OF THE COMPANY.
The Company will not merge or consolidate with or into
any other corporation unless the corporation resulting from such
merger or consolidation (if not the Company) shall expressly
assume, by supplemental agreement satisfactory in form to the
Warrant Agent in the exercise of its reasonable judgment and
executed and delivered to the Warrant Agent, the due and punctual
performance and observance of each and every covenant and
condition of this Agreement to be performed and observed by the
Company.
SECTION 25. APPLICABLE LAW.
This Agreement and each Warrant issued hereunder shall
be deemed to be a contract made under the internal laws of the
State of New York (without preference to conflicts of law
principles) and for all purposes shall be construed in accordance
with the laws of said State.
SECTION 26. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to
any person or corporation other than the Company, the Warrant
Agent and the Holders of the Warrants any legal or equitable
right, remedy or claim under this Agreement; and this Agreement
shall be for the sole and exclusive benefit of the Company, the
Warrant Agent, and their respective successors and assigns
hereunder, and the holders from time to time of the Warrants.
SECTION 27. COUNTERPARTS.
This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
SECTION 28. CAPTIONS.
The captions of the Sections and subsections of this
Agreement have been inserted for convenience only and shall have
no substantive effect.
SECTION 29. PLAN OF REORGANIZATION.
The Company will comply for the benefit of the Holders
with Section 8.04 of the POR.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
WEI ACQUISITION CO.
By ___________________________
Title:
Attest:
_____________________________
Title:
[UNITED STATES TRUST COMPANY OF NEW
YORK],
as Warrant Agent
By ___________________________
Title:
Attest:
_____________________________
Title:
TRANCHE B WARRANT TO PURCHASE COMMON STOCK VOID AFTER
5:00 P.M., NEW YORK TIME, ON JANUARY 31, 2004
[WEI ACQUISITION CO.]
This certifies that, for value received, __________
___________________ or registered assigns (the "Holder"), is
entitled to purchase from Wherehouse Entertainment, Inc., a
Delaware corporation (the "Company"), until 5:00 P.M., New York
time, on January 31, 2004, or such earlier date as may be
provided for pursuant to the Warrant Agreement referred to below
(the "Expiration Date"), at the purchase price of $9.00 per share
(the "Exercise Price"), a number of shares of Common Stock, par
value $0.01 per share, of the Company (the "Common Stock") that
is equal to the number of Warrants set forth above. The number
of shares purchasable upon exercise of this Warrant and the
Exercise Price per share are subject to adjustment from time to
time as set forth in the Warrant Agreement referred to below.
The Warrants evidenced hereby may be exercised in whole
or in part by presentation of this Warrant Certificate with the
Purchase Form on the reverse side hereof duly executed (with a
signature guarantee if required by the Warrant Agreement) and
simultaneous payment of the Exercise Price (subject to
adjustment) at the office or agency of the Company maintained for
that purpose in the City of New York. Initially, [United States
Trust Company of New York] will act as Warrant Agent (the
"Warrant Agent"). Payment of such price shall be made at the
option of the holder hereof by certified or cashier's check. No
fractional shares will be issued upon the exercise of rights to
purchase hereunder, but the Company shall pay the cash value of
any such fraction upon the exercise of one or more Warrants, all
as provided in the Warrant Agreement.
Upon any partial exercise of this Warrant Certificate,
there shall be countersigned and issued to the Holder hereof a
new Warrant Certificate in respect of the shares as to which this
Warrant shall not have been exercised. This Warrant Certificate
may be exchanged at the office of the Warrant Agent maintained
for that purpose in the City of New York by surrender of this
Warrant Certificate properly endorsed (with a signature guarantee
if required by the Warrant Agreement), either separately or in
combination with one or more other Warrant Certificates, for one
or more new Warrant Certificates for the same aggregate number of
shares as were evidenced by the Warrant Certificate or Warrant
Certificates exchanged.
This Warrant Certificate is transferable at the office
of the Warrant Agent maintained for that purpose in the City of
New York in the manner and subject to the limitations set forth
in the Warrant Agreement.
The Warrants evidenced hereby are part of a duly
authorized issue of Common Stock Purchase Warrants with rights to
purchase an aggregate of up to 100,000 shares of Common Stock
(subject to adjustment) and are issued under and in accordance
with a Warrant Agreement dated as of January 31, 1997, between
the Company and the Warrant Agent and are subject to the terms
and provisions contained in the Warrant Agreement, to all of
which the Holder of this Warrant Certificate by acceptance hereof
consents. Copies of the Warrant Agreement are on file at the
above mentioned office of the Warrant Agent and may be obtained
for inspection by the Holder hereof upon written request to the
Warrant Agent.
The Holder hereof may be treated by the Company, the
Warrant Agent, and all other persons dealing with this Warrant
Certificate as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby, or
to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding, and until such transfer on such
books, the Company, the Warrant Agent and all such other persons
may treat the registered holder hereof as the owner for all
purposes.
The Warrants evidenced hereby do not entitle any Holder
hereof to any of the rights of a shareholder of the Company.
This Warrant Certificate shall not be valid or
obligatory for any purpose until it shall have been countersigned
by the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be executed by its duly authorized officers and
the corporate seal hereunto affixed.
Dated: [WEI ACQUISITION CO.]
By:
-------------------------------
Title:
ATTEST:
----------------------------
Title:
COUNTERSIGNED:
[UNITED STATES TRUST COMPANY
OF NEW YORK]
WARRANT AGENT
By:
--------------------------
Title:
[WEI ACQUISITION CO.]
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise
the right of purchase represented by the within Warrant
Certificate for, and to purchase thereunder, ______ shares of
Common Stock, provided for therein, and requests that
certificates for such shares of Common Stock be issued in the
name of:
Name: _______________________________________________________
Address: _______________________________________________________
_________________________________________________________________
Social Security or Taxpayer's
Identification Number: ________________________________________
and, if said number of shares of Common Stock shall not be all
the Common Stock purchasable thereunder, that a new Warrant
Certificate for the balance remaining of the Common Stock
purchasable under the within Warrant Certificate be registered in
the name of the undersigned Warrantholder or his or her Assignee
as below indicated and delivered to the address stated below.
Name of Warrantholder
or Assignee: ___________________________________
Address: ___________________________________
Social Security or Taxpayer's
Identification Number: ___________________________________
Signature: ___________________
Dated: ____________________
Signature Guaranteed:
NOTICE: The above signature must
correspond with the name
as written upon the face
of this Warrant
Certificate in every
particular, without
alteration or enlargement
or any change whatever,
unless this Warrant has
been assigned.
ASSIGNMENT
(To be signed only upon
assignment of Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto ______________________________
(Name of Assignee)
__________________________________________________________
__________________________________________________________
__________________________________________________________
(Social Security or other Taxpayer Identification Number of
Assignee) the within Warrants, hereby irrevocably constituting
and appointing _______________________________________________
Attorney to transfer said Warrants on the books of the Company,
with full power of substitution in the premises.
DATED: _____________________
---------------------------------
Signature of Registered Holder
Signature Guaranteed:
NOTICE: The signature of this
assignment must
correspond with the name
as it appears upon the
face of the within
Warrant Certificate in
every particular, without
alteration or enlargement
or any change whatever.
EXHIBIT G
[TRANCHE C WARRANT AGREEMENT]
------------------------------------------------------------
WARRANT AGREEMENT
RELATING TO THE ISSUANCE OF THE
TRANCHE C WARRANTS
WEI ACQUISITION CO.
and
[UNITED STATES TRUST COMPANY OF NEW YORK]
Dated as of ______________ __, 1997
--------------------------------------------------------------
TABLE OF CONTENTS
Sections Page(s)
SECTION 1. Appointment of Warrant Agent. . . . . . . . . . . 1
SECTION 2. Form of Warrants. . . . . . . . . . . . . . . . . 1
2.1. Form of Warrant Certificates. . . . . . . . 1
2.2. Countersignature of Warrant
Certificates . . . . . . . . . . . . . . . 2
2.3. Registration. . . . . . . . . . . . . . . . 2
SECTION 3. Transfer or Exchange of Warrants. . . . . . . . . 3
3.1. Transfer. . . . . . . . . . . . . . . . . . 3
3.2. Exchange of Warrant Certificates. . . . . . 3
SECTION 4. . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 5. Mutilated or Missing Warrants . . . . . . . . . . 3
SECTION 6. Term of Warrants; Exercise of Warrants. . . . . . 4
6.1. Term of Warrants. . . . . . . . . . . . . . 4
6.2. Exercise of Warrants. . . . . . . . . . . . 4
SECTION 7. Disposition of Proceeds on Exercise of
Warrants. . . . . . . . . . . . . . . . . . . . . 5
SECTION 8. Payment of Taxes. . . . . . . . . . . . . . . . . 5
SECTION 9. Reservation of Warrant Shares; Purchase
and Cancellation of Warrants. . . . . . . . . . . 5
9.1. Reservation of Warrant Shares . . . . . . . 5
9.2. Governmental Approvals and
Listings . . . . . . . . . . . . . . . . . 6
9.3. Purchase of Warrants by the
Company. . . . . . . . . . . . . . . . . . 6
9.4. Cancellation of Warrants. . . . . . . . . . 6
SECTION 10. Exercise Price. . . . . . . . . . . . . . . . . . 6
SECTION 11. Adjustment of Exercise Price and Number
of Warrant Shares . . . . . . . . . . . . . . . . 6
11.1. Adjustments. . . . . . . . . . . . . . . . 6
(a) Stock Dividends, Splits,
etc.. . . . . . . . . . . . . . . . . 7
(b) Distributions of Assets . . . . . . . 7
(c) Computation of Market
Price . . . . . . . . . . . . . . . . 8
(d) Minimum Adjustment. . . . . . . . . . 8
(e) Warrant Share Adjustment. . . . . . . 9
(f) Notice of Adjustment. . . . . . . . . 9
(g) Definition of Common Stock. . . . . . 9
(h) Company May Reduce Exercise
Price or Increase Number of
Warrant Shares Purchasable. . . . . . 10
(i) Subsequently Issued
Warrants. . . . . . . . . . . . . . . 10
(j) Number of Warrant Shares on
Warrant Certificates. . . . . . . . . 10
11.2. No Adjustment for Dividends. . . . . . . . 10
11.3. Preservation of Purchase Rights
and Adjustment of Exercise Price
upon Merger, Consolidation,
etc. . . . . . . . . . . . . . . . . . . . 10
SECTION 12. No Rights as Stockholders; Notices to
Warrant Holders . . . . . . . . . . . . . . . . . 12
SECTION 13. Purchase Rights . . . . . . . . . . . . . . . . . 13
SECTION 14. Fractional Shares of Common Stock . . . . . . . . 13
SECTION 15. Right of Action . . . . . . . . . . . . . . . . . 13
SECTION 16. Inspection of Warrant Agreement . . . . . . . . . 14
SECTION 17. Merger or Consolidation or Change of
Name of Warrant Agent . . . . . . . . . . . . . . 14
SECTION 18. Concerning the Warrant Agent. . . . . . . . . . . 14
18.1. Disclaimer of Representations. . . . . . . 15
18.2. No Responsibility for Failure of
Company's Covenants. . . . . . . . . . . . 15
18.3. Delegation . . . . . . . . . . . . . . . . 15
18.4. Opinion of Counsel . . . . . . . . . . . . 15
18.5. Officer's Certificate. . . . . . . . . . . 15
18.6. Compensation and Reimbursement . . . . . . 15
18.7. No Action Without Assurance of
Reimbursement. . . . . . . . . . . . . . . 16
18.8. Conflicts of Interest. . . . . . . . . . . 16
18.9. Solely as Agent. . . . . . . . . . . . . . 16
18.10. Reliance on Documents. . . . . . . . . . . 16
18.11. No Representation Regarding
Validity, Etc. . . . . . . . . . . . . . . 17
18.12. Instructions from Company. . . . . . . . . 17
SECTION 19. Change of Warrant Agent . . . . . . . . . . . . . 17
SECTION 20. Identity of Transfer Agent. . . . . . . . . . . . 18
SECTION 21. Notices . . . . . . . . . . . . . . . . . . . . . 18
SECTION 22. Supplements and Amendments. . . . . . . . . . . . 18
SECTION 23. Successors. . . . . . . . . . . . . . . . . . . . 19
SECTION 24. Merger or Consolidation of the Company. . . . . . 19
SECTION 25. Applicable Law. . . . . . . . . . . . . . . . . . 19
SECTION 26. Benefits of this Agreement. . . . . . . . . . . . 19
SECTION 27. Counterparts. . . . . . . . . . . . . . . . . . . 19
SECTION 28. Captions. . . . . . . . . . . . . . . . . . . . . 20
SECTION 29. Plan of Reorganization. . . . . . . . . . . . . . 20
EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
PURCHASE FORM. . . . . . . . . . . . . . . . . . . . . . . . .A-4
ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
WARRANT AGREEMENT relating to the issuance of the
Tranche C Warrants, dated as of ______________ __, 1997, between
[WEI ACQUISITION CO.], a Delaware corporation (the "Company"),
and [UNITED STATES TRUST COMPANY OF NEW YORK], as Warrant Agent
(the "Warrant Agent").
WITNESSETH:
WHEREAS, pursuant to the Debtors' First Amended Chapter
11 Plan, as Revised for Technical Corrections dated October 4,
1996 (the "POR") and an Asset Purchase Agreement dated as of
____________, 1997 (the "ASSET PURCHASE AGREEMENT"), the Company
will acquire substantially all of the assets of Wherehouse
Entertainment, Inc., and its parent, WEI Holdings, Inc., which
companies are debtors and debtors-in-possession (collectively,
the "DEBTORS"), in Case No. 95-911 (HSB) (Jointly Administered)
(the "BANKRUPTCY CASE") in the Bankruptcy Court for the District
of Delaware (the "BANKRUPTCY COURT");
WHEREAS, as part of the purchase price for the assets
of the Debtors to be acquired by the Company, the Company
proposes to issue up to 100,000 Common Stock Purchase Warrants
hereinafter described (the "Warrants") to purchase its Common
Stock, par value $0.01 per share (the "Common Stock"), each
Warrant entitling the registered owner thereof to purchase one
share of Common Stock (each share of Common Stock purchasable
upon the exercise of a Warrant being referred to herein as a
"WARRANT SHARE"); and
WHEREAS, the Company wishes the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to act,
in connection with the issuance, transfer, exchange and exercise
of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and
for the purpose of defining the terms and provisions of the
Warrants and the respective rights and obligations thereunder of
the Company and the registered owners of the Warrants (the
"Holders"), the Company and the Warrant Agent hereby agree as
follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT.
The Company hereby appoints the Warrant Agent to act as
agent for the Company in accordance with the terms and conditions
hereinafter set forth, and the Warrant Agent hereby accepts such
appointment.
SECTION 2. FORM OF WARRANTS.
2.1. Form of Warrant Certificates. The text of the
Warrant certificate and of the form of election to purchase
Warrant Shares shall be substantially as set forth in Exhibit A
attached hereto. The Warrant certificates shall be appropriately
printed, lithographed or engraved and may have such letters,
numbers or other marks of identification as the Company may deem
appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any rule or
regulation of any stock exchange on which the Warrants may be
listed, or to conform to usage. The price per Warrant Share and
the number of Warrant Shares issuable upon exercise of each
Warrant are subject to adjustment upon the occurrence of certain
events, all as hereinafter provided. The Warrant certificates
shall be executed on behalf of the Company by its Chairman of the
Board, its President or one of its Vice Presidents under its
corporate seal reproduced thereon and attested by its Secretary
or an Assistant Secretary. The signature of any of such officers
on the Warrant certificates may be manual or facsimile.
Warrant certificates bearing the manual or facsimile
signatures of individuals who were at any time the proper
officers of the Company shall bind the Company, notwithstanding
that such individuals or any one of them shall have ceased to
hold such offices prior to the delivery of such Warrant certifi-
cates or did not hold such office on the date of this Agreement.
Warrant certificates shall be dated as of the date of
countersignature thereof by the Warrant Agent either upon initial
issuance or upon exchange, substitution or transfer.
2.2. Countersignature of Warrant Certificates. The
Warrant certificates shall be manually countersigned by the
Warrant Agent (or any successor to the Warrant Agent then acting
as warrant agent under this Agreement) and shall not be valid for
any purpose unless so countersigned. Warrant certificates may be
countersigned by the Warrant Agent (or by its successor as
warrant agent hereunder) and may be delivered by the Warrant
Agent notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company shall
have ceased to be such officers at the time of such
countersignature, issuance or delivery. The Warrant Agent shall,
upon written instructions of the Chairman of the Board, the
President, any Vice President or the Secretary of the Company,
countersign, issue and deliver Warrant certificates entitling the
Holders thereof to purchase in the aggregate Warrant Shares
(subject to adjustment pursuant to Section 11 hereof) and shall
countersign and deliver Warrant certificates as otherwise
provided in this Agreement.
2.3. Registration. The Warrant certificates shall be
numbered and shall be registered in a register (the "Warrant
Register") as they are issued. The Company and the Warrant Agent
shall be entitled to treat the registered holder of any Warrant
as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in
such Warrant on the part of any other person, notwithstanding any
notice to the Company or the Warrant Agent to the contrary.
SECTION 3. TRANSFER OR EXCHANGE OF WARRANTS.
3.1. Transfer. The Warrants shall be transferable
only in the books of the Company maintained at the office or
agency of the Warrant Agent in the City of New York upon delivery
thereof duly endorsed by the Holder or by his or her duly
authorized attorney or legal representative, or accompanied by
proper evidence of succession, assignment or authority to
transfer, which endorsement shall be guaranteed by a bank or
trust company located in the United States or a broker or dealer
that is a member of a national securities exchange. In all cases
of transfer by an attorney, the original power of attorney, duly
approved, or an official copy thereof, duly certified, shall be
deposited and remain with the Warrant Agent. In case of transfer
by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority
shall be produced, and may be required to be deposited and remain
with the Warrant Agent in its discretion. Upon any registration
of transfer, the Warrant Agent shall countersign and deliver a
new Warrant certificate to the person entitled thereto.
3.2. Exchange of Warrant Certificates. Warrant
certificates may be exchanged for another certificate or
certificates entitling the Holder thereof to purchase a like
aggregate number of Warrant Shares as the certificate or
certificates surrendered then entitle such Holder to purchase.
Any Holder desiring to exchange a Warrant certificate shall make
such request in writing delivered to the Warrant Agent, and shall
surrender, properly endorsed in the manner described in
subsection 3.1 hereof, the Warrant certificate or certificates to
be so exchanged. Thereupon, the Warrant Agent shall countersign
and deliver to the person entitled thereto a new Warrant
certificate or certificates, as the case may be, as so requested.
SECTION 4. [SECTION 4 INTENTIONALLY LEFT BLANK].
SECTION 5. MUTILATED OR MISSING WARRANTS.
In case any of the certificates evidencing the Warrants
shall be mutilated, lost, stolen or destroyed, the Company may,
in its discretion, issue and the Warrant Agent shall countersign
and deliver in exchange and substitution for and upon
cancellation of the mutilated Warrant certificate, or in lieu of
and substitution for the Warrant certificate lost, stolen or
destroyed, a new Warrant certificate of like tenor and
representing an equivalent right or interest, but only, in case
of any such loss, theft or destruction, upon receipt of evidence
satisfactory to the Company and the Warrant Agent thereof and an
indemnity also satisfactory to them. An applicant for such
substitute Warrant certificate shall also comply with such other
reasonable regulations and pay such other reasonable charges as
the Company or the Warrant Agent may prescribe.
SECTION 6. TERM OF WARRANTS; EXERCISE OF WARRANTS.
6.1. Term of Warrants. Subject to the terms of this
Agreement, each Holder shall have the right until 5:00 P.M., New
York time, on ___________ __, 2004 (the seventh anniversary of
the Effective Date (as defined in the POR)) (the "Expiration
Date"), to purchase from the Company the number of fully paid and
nonassessable Warrant Shares which the Holder may at the time be
entitled to purchase on exercise of such Warrants.
6.2. Exercise of Warrants. Warrant Shares may be
purchased upon surrender to the Company at the office or agency
of the Warrant Agent in the City of New York, of the certificate
or certificates evidencing the Warrants to be exercised, together
with the form of election to purchase on the reverse thereof duly
filled in and signed, which signature shall, if the Warrant
Shares are to be issued in the name of a person other than the
Holder of the Warrant, be guaranteed by a bank or trust company
located in the United States or a broker or dealer that is a
member of a national securities exchange, and upon payment to the
Warrant Agent for the account of the Company of the Exercise
Price (as defined in and determined in accordance with the
provisions of Sections 10 and 11 hereof) for the number of
Warrant Shares in respect of which such Warrants are then being
exercised. Payment of the aggregate Exercise Price shall be made
by certified or cashier's check, or by any combination thereof.
Subject to Section 8 hereof, upon such surrender of
Warrants and payment of the Exercise Price as aforesaid, the
Company shall issue and cause to be delivered, with all
reasonable dispatch, to or upon the written order of the Holder
and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares
so purchased upon the exercise of such Warrants. Such
certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed
to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrants and payment of the
Exercise Price, as aforesaid; provided, however, that if such
Warrants are surrendered, and the Exercise Price is paid, on a
Saturday, Sunday or other day on which banking institutions in
the City of New York are authorized or obligated by law or
executive order to close, or on a day when the Common Stock
transfer books of the Company are closed, the certificates for
the Warrant Shares in respect of which such Warrants are then
exercised shall be issuable as of the next succeeding Monday,
Tuesday, Wednesday, Thursday or Friday on which such banking
institutions are not so authorized or obligated to close (whether
before or after the Expiration Date) and which is a day on which
the Common Stock transfer books of the Company are open. The
rights of purchase represented by the Warrants shall be
exercisable, at the election of the Holders thereof, either in
full or from time to time in part and, in the event that a
certificate evidencing Warrants is exercised in respect of less
than all of the Warrant Shares specified therein at any time
prior to the expiration of such Warrants, a new certificate
evidencing the remaining Warrant or Warrants will be issued, and
the Warrant Agent is hereby irrevocably authorized to countersign
and to deliver the required new Warrant certificates pursuant to
the provisions of this subsection and of subsection 2.2 hereof
and the Company, whenever required by the Warrant Agent, will
supply the Warrant Agent with Warrant certificates duly executed
on behalf of the Company for such purpose.
SECTION 7. DISPOSITION OF PROCEEDS ON EXERCISE OF
WARRANTS.
The Warrant Agent shall account promptly to the Company
with respect to the Warrants exercised and concurrently pay to
the Company all moneys received by the Warrant Agent for the
purchase of the Warrant Shares through the exercise of such
Warrants.
SECTION 8. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes, if
any, attributable to the issuance of any Warrant certificates or
certificates for Warrant Shares issuable upon the exercise of
Warrants; provided, however, that the Company shall not be
required to pay, and the Holder shall pay, any tax or taxes that
may be payable in respect of any transfer involved in the issue
or delivery of any Warrant certificates or certificates for
Warrant Shares in a name other than that of the registered Holder
of the Warrants that were surrendered and the Company shall not
be required to issue or deliver such Warrant certificates or
certificates for Warrant Shares unless or until the persons
requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
SECTION 9. RESERVATION OF WARRANT SHARES; PURCHASE
AND CANCELLATION OF WARRANTS.
9.1. Reservation of Warrant Shares. There have been
reserved, and the Company shall at all times keep reserved out of
its authorized Common Stock, a number of shares of Common Stock
sufficient to provide for the exercise of the right of purchase
represented by the outstanding Warrants. The Company covenants
that all Warrant Shares will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable. Before taking any
action that would cause an adjustment reducing the Exercise Price
below the then par value, if any, of the shares of Common Stock
issuable upon exercise of the Warrants, the Company shall take
any corporate action which may, in the opinion of it counsel, be
necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of such Common Stock, at such
adjusted Exercise Price. The Transfer Agent for the Common Stock
and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably authorized and
directed at all times to reserve such number of authorized shares
as shall be requisite for such purpose. The Company will keep a
copy of this Agreement on file with the Transfer Agent for the
Common Stock and with every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise
of the rights of purchase represented by the Warrants. The
Warrant Agent is hereby irrevocably authorized to requisition
from time to time from such Transfer Agent stock certificates
required to honor outstanding Warrants upon exercise thereof in
accordance with the terms of this Agreement. The Company will
supply such Transfer Agent with duly executed stock certificates
for such purpose. Promptly after the Expiration Date, the
Warrant Agent shall certify to the Company the aggregate number
of Warrants then outstanding and thereafter no shares shall be
subject to reservation in respect of such Warrants.
9.2. Governmental Approvals and Listings. The Company
will as promptly as practicable take all action which may be
necessary to obtain and keep effective (a) any and all permits,
consents and approvals of governmental agencies and authorities,
and will make any and all filings under federal and state
securities laws, necessary in connection with the issuance,
distribution and transfer of Warrant certificates, the exercise
of the Warrants, and the issuance, sale, transfer and delivery of
Warrant Shares and (b) if any of the Warrant Shares have been
listed on any securities exchange, the listing of the Warrant
Shares on any securities exchange on which the Common Stock may
be listed (it being understood that the Company has no obligation
to list any Warrant Shares with any securities exchange).
9.3. Purchase of Warrants by the Company. The Company
shall have the right, except as limited by law, other agreement
or herein, to purchase or otherwise acquire Warrants at such
times, in such manner and for such consideration as it may deem
appropriate.
9.4. Cancellation of Warrants. In the event the
Company shall purchase or otherwise acquire Warrants, the related
Warrant certificates shall thereupon be delivered to the Warrant
Agent and be cancelled by it and retired. The Warrant Agent
shall cancel any Warrant certificate surrendered for exchange,
substitution, transfer or exercise in whole or in part. Warrant
certificates cancelled by the Warrant Agent pursuant to any
provision of this Agreement shall be delivered to the Company or,
upon the request of the Warrant Agent and with the consent of the
Company, destroyed by the Warrant Agent. The Warrant Agent shall
furnish to the Company written confirmation of the destruction of
the Warrant certificates so cancelled.
SECTION 10. EXERCISE PRICE.
The price per share at which Warrant Shares shall be
purchasable upon exercise of each Warrant (the "Exercise Price")
shall be $11.00, subject to adjustment pursuant to Section 11
hereof.
SECTION 11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER
OF WARRANT SHARES.
11.1. Adjustments. The number and kind of securities
purchasable upon the exercise of each Warrant and the Exercise
Price shall be subject to adjustment as follows:
(a) Stock Dividends, Splits, etc. In case the Company
shall at any time after the date of this Agreement (w) pay a
dividend or make a distribution on its Common Stock which is
paid or made (A) in Common Stock or other shares of the
Company's capital stock or (B) in rights to purchase Common
Stock or other capital stock of the Company if such rights
are not exercisable or separable from the Common Stock
except upon the occurrence of a contingency, (x) subdivide
its outstanding Common Stock into a greater number of shares
of Common Stock, (y) combine its outstanding shares into a
smaller number of shares of Common Stock or (z) issue by
reclassification of its Common Stock other securities of the
Company, then, in any such event the number of Warrant
Shares purchasable upon exercise of each Warrant immediately
prior thereto shall be adjusted so that the Holder of each
Warrant shall be entitled to receive upon exercise of such
Warrant the kind and number of shares of the Company and
rights to purchase Common Stock or other securities of the
Company (or, in the event of the redemption of any such
rights, any cash paid in respect of such redemption) that
he, she or it would have owned or have been entitled to
receive after the happening of any of the events described
above had such Warrant been exercised immediately prior to
the happening of such event or any record date with respect
thereto. An adjustment made pursuant to this paragraph
(a) shall become effective immediately after the opening of
business on the next business day following the record date
in the case of dividends or other distributions and shall
become effective immediately after the opening of business
on the next business day following the effective date in the
case of a subdivision or combination.
(b) Distributions of Assets. In case the Company
shall at any time after the date of this Agreement
distribute to all holders of its Common Stock evidences of
indebtedness of the Company or assets of the Company
(including cash dividends or distributions out of retained
earnings other than cash dividends or distributions made on
a quarterly or other periodic basis) or warrants to
subscribe for securities of the Company (excluding those
referred to in paragraph (a) above), then in each case the
Exercise Price shall be adjusted to a price determined by
multiplying the Exercise Price in effect immediately prior
to such distribution by a fraction, of which the numerator
shall be the then current market price per share of Common
Stock (as defined in paragraph (c) below) on the record date
for determination of shareholders entitled to receive such
distribution, less the then fair value (as determined in
good faith by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed or of
such subscription rights or warrants which are applicable to
one share of Common Stock, and of which the denominator
shall be such market price per share of Common Stock;
provided, however, that if the then current market price per
share of Common Stock on the record date for determination
of shareholders entitled to receive such distribution is
less than the then fair value of the portion of the assets
or evidences of indebtedness so distributed or of such
subscription rights or warrants which are applicable to one
share of Common Stock, the foregoing adjustment of the
Exercise Price shall not be made and in lieu thereof the
Holder of each Warrant shall be entitled to receive upon
exercise of such Warrant in addition to the Common Stock the
kind and number of assets, evidences of indebtedness,
subscription rights and warrants (or, in the event of the
redemption of any such evidences of indebtedness,
subscription rights and warrants, any cash paid in respect
of such redemption) that he or she would have owned or have
been entitled to receive after the happening of such
distribution had such Warrant been exercised immediately
prior to the record date for such distribution. Such
adjustment shall be made successively whenever such a record
date is fixed, and in the event that such distribution is
not so made, the Exercise Price shall again be adjusted to
be the Exercise Price which would then be in effect if such
record date had not been fixed.
(c) Computation of Market Price. For the purpose of
any computation under this Agreement, the current market
price per share of Common Stock at any date shall be deemed
to be the average of the daily Market Price (as defined
below) per share for the 30 consecutive Trading Days (as
defined below) commencing 45 Trading Days before the date in
question. "Market Price" is defined as the closing sale
price (or, if no closing sale price is reported, the closing
bid price) for the Common Stock in the over-the-counter
market, as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or,
if the Common Stock is not quoted on NASDAQ, as reported by
the National Quotation Bureau Incorporated, or, if the
Common Stock is not so reported, as furnished by any two
members of the National Association of Securities Dealers,
Inc., selected from time to time by the Company for that
purpose. In the event that the Common Stock is hereafter
listed for trading on one or more United States national or
regional securities exchanges, Market Price shall be the
closing price on the exchange or system designated by the
Board of Directors of the Company as the principal United
States market in which the Common Stock is traded. If
Market Price cannot be established as described above,
Market Price shall be the fair market value of the Common
Stock as determined in good faith by the Board of Directors.
"Trading Day" shall mean a Monday, Tuesday, Wednesday,
Thursday or Friday on which banking institutions in the City
of Los Angeles and the State of California or New York, New
York, are not authorized or obligated by law or executive
order to close or, if the Common Stock is listed or admitted
to trading on a national securities exchange, a day on which
the principal national securities exchange on which the
Common Stock is listed or admitted to trading is open for
the transaction of business.
(d) Minimum Adjustment. No adjustment in the number
of Warrant Shares purchasable hereunder or the Exercise
Price shall be required unless such adjustment would require
an increase or decrease of at least one per cent (1%) in the
number of Warrant Shares purchasable upon the exercise of
each Warrant, or the Exercise Price, as the case may be;
provided, however, that any adjustments which by reason of
this paragraph (d) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be
made to the nearest cent or the nearest ten-thousandth of a
share, as the case may be.
(e) Warrant Share Adjustment. Upon each adjustment of
the Exercise Price as a result of the calculations made in
paragraph (a) or (b) above, each Warrant outstanding
immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted
Exercise Price, that number of shares (calculated to the
nearest ten-thousandth) obtained by (A) multiplying (x) the
number of shares covered by a Warrant immediately prior to
such adjustment of the Exercise Price by (y) the Exercise
Price in effect immediately prior to such adjustment of the
Exercise Price and (ii) dividing the product so obtained by
the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
(f) Notice of Adjustment. Whenever the number of
Warrant Shares purchasable upon the exercise of Warrants or
the Exercise Price of such Warrant Shares is adjusted, as
herein provided, the Company shall cause the Warrant Agent
promptly to mail by first class mail, postage prepaid, to
each Holder of a Warrant or Warrants notice of such
adjustment or adjustments and shall deliver to the Warrant
Agent a certificate of a firm of independent public
accountants selected by the Board of Directors of the
Company (who may be the regular accountants employed by the
Company) setting forth (A) the number of Warrant Shares
purchasable upon the exercise of each Warrant and the
Exercise Price of such Warrant Shares after such adjustment,
(B) a brief statement of the facts requiring such adjustment
and (C) the computation by which such adjustment was made.
Such certificate shall be conclusive evidence of the
correctness of such adjustment. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no
duty or responsibility with respect to any such certificate,
except to exhibit the same, from time to time, to any Holder
desiring an inspection thereof during reasonable business
hours. The Warrant Agent shall not at any time be under any
duty or responsibility to any Holders to determine whether
any facts exist that may require any adjustment of the
Exercise Price or the number of Warrant Shares or other
stock or property purchasable upon exercise thereof or with
respect to the nature or extent of any such adjustment when
made, or with respect to the method employed in making such
adjustment.
(g) Definition of Common Stock. For the purpose of
this subsection 11.1, the term "Common Stock" shall mean
(A) the class of stock designated as the Common Stock of the
Company at the date of this Agreement or (B) any other class
of stock resulting from successive changes or
reclassifications of such shares consisting solely of
changes in par value, or from par value to no par value or
from no par value to par value. In the event that at any
time, as a result of an adjustment made pursuant to
paragraph (a) above, the Holders of a Warrant or Warrants
shall become entitled to purchase any securities of the
Company other than Common Stock, thereafter the number of
such other securities so purchasable upon exercise of each
Warrant and the Exercise Price of such securities shall be
subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions
with respect to the Warrant Shares contained in this
subsection 11.1 and the provisions of Section 6 and
subsections 11.2 and 11.3, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other
securities.
(h) Company May Reduce Exercise Price or Increase
Number of Warrant Shares Purchasable. The Company may, at
its option, at any time during the term of the Warrants,
reduce the then current Exercise Price, or increase the
number of Common Shares purchasable upon exercise of each
Warrant, to any amount deemed appropriate by the Board of
Directors of the Company.
(i) Subsequently Issued Warrants. All Warrants
originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall
evidence the right to purchase, at the adjusted Exercise
Price, the number of shares of Common Stock purchasable from
time to time hereunder upon exercise of the Warrants, all
subject to further adjustment as provided herein.
(j) Number of Warrant Shares on Warrant Certificates.
Irrespective of any adjustment or change in the Exercise
Price or the number of shares of Common Stock issuable upon
the exercise of the Warrants, the Warrant certificates
theretofore and thereafter issued may continue to express
the Exercise Price per share and the number of shares which
were expressed upon the initial Warrant certificates issued
hereunder.
11.2. No Adjustment for Dividends. Except as provided
in subsection 11.1, no adjustment in respect of any dividends
made on a quarterly or other periodic basis out of retained
earnings shall be made during the term of a Warrant or upon the
exercise of a Warrant.
11.3. Preservation of Purchase Rights and Adjustment
of Exercise Price upon Merger, Consolidation, etc. In case the
Company shall consolidate or merge with or into any other
corporation (other than a consolidation or merger in which the
Company is the surviving corporation and each share of Common
Stock outstanding immediately prior to such consolidation or
merger is to remain outstanding immediately after such
consolidation or merger and no cash, securities or other property
is distributed with respect to such shares) or shall sell or
transfer all or substantially all of its assets to any
corporation, the Company or such successor or purchasing
corporation, as the case may be (collectively, the "acquiring
corporation"), shall execute with the Warrant Agent an agreement
that each Holder of a Warrant shall have the right thereafter
upon payment of the Exercise Price in effect immediately prior to
such action to purchase upon exercise of each Warrant the kind
and amount of shares and other securities, cash and other
property that he or she would have owned or have been entitled to
receive after the happening of such consolidation, merger or sale
had such Warrant been exercised immediately prior to such action
(assuming that such Holder, as a holder of Common Stock prior to
such action, would not have exercised any rights of election as a
holder of Common Stock as to the kind or amount of securities,
cash or other property receivable upon such consolidation, merger
or sale; provided, that if the kind or amount of securities, cash
or other property receivable upon such consolidation, merger or
sale is not the same for each non-electing share of Common Stock,
then the kind and amount of securities, cash or other property
receivable shall be deemed to be the kind and amount so
receivable by a plurality of the non-electing shares). The
Company shall mail by first-class mail, postage prepaid, to each
Holder, notice of the execution of any agreement with an
acquiring corporation as provided in the first sentence of this
subsection 11.3. In addition to any adjustments required by this
subsection 11.3, such agreement shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 11. The Company shall
not effect any such consolidation, merger or sale unless prior to
or simultaneously with the consummation thereof the acquiring
corporation (if other than the Company) resulting from such
consolidation or merger or the acquiring corporation purchasing
such assets or other appropriate corporation or entity shall
assume, by written instrument executed and delivered to the
Warrant Agent, the obligation to deliver to each Holder such
shares of stock, securities or assets as, in accordance with the
foregoing provisions, such Holder may be entitled to receive and
the other obligations of the Company under this Agreement. The
provisions of this subsection 11.3 shall similarly apply to
successive consolidations, mergers, sales or conveyances. The
Warrant Agent shall be under no duty or responsibility to
determine the correctness of any provisions contained in any such
agreement relating either to the kind or amount of shares of
stock or other securities, cash or property receivable upon
exercise of Warrants or with respect to the method employed and
provided therein for any adjustments.
11.4 No Adjustment for Employee Compensation and
Issuances to Alvarez & Marsal, Inc. Notwithstanding anything to
the contrary contained herein, no adjustment to the Exercise
Price or the number of shares of Common Stock purchasable upon
exercise of any Warrant shall be made in connection with the
issuance by the Company of any shares of Common Stock or options
to purchase Common Stock or other securities which may be
convertible or exercisable into shares of Common Stock to (i) any
employee of the Company as compensation for services rendered to
the Company or (ii) Alvarez & Marsal, Inc. ("A&M") or any of its
affiliates, in connection with the management services to be
provided by A&M to the Company under that certain Management
Services Agreement dated as of __________ __, 1997 between the
Company and A&M.
SECTION 12. NO RIGHTS AS STOCKHOLDERS; NOTICES TO
WARRANT HOLDERS.
(a) Nothing contained in this Agreement or in any of
the Warrants shall be construed as conferring upon the
Holders or their transferees the right to vote or to receive
dividends or to consent or to receive notice as shareholders
in respect of any meeting of shareholders for the election
of directors of the Company or any other matter, or any
rights whatsoever as shareholders of the Company. If prior
to the expiration of the Warrants:
(A) the Company shall declare a dividend or other
distribution on its Common Shares, other than (i) in cash as
described in Section 11.2, (ii) in other shares of Common
Stock, or (iii) in rights to purchase shares of Common Stock
or other securities of the Company of the character
described in paragraph (a) of subsection 11.1; or
(B) the Company shall authorize the issuance to
all holders of its Common Stock of rights or warrants
entitling them to subscribe for or purchase any Common Stock
or any other subscription rights or warrants (other than
rights of the character described in paragraph (a) of
subsection 11.1); or
(C) there shall occur a reclassification of the
capital stock of the Company (other than a subdivision or
combination of its outstanding Common Stock); or
(D) the Company shall propose to effect any
consolidation or merger into or with, or to effect any sale
or other transfer requiring an adjustment pursuant to
Section 11.3; or
(E) the Company shall take an action ("Adjustment
Action") which would cause an adjustment pursuant to Section
11 hereof of the number or kind of Common Stock (or other
securities) purchasable upon the exercise of each Warrant or
of the Exercise Price that would have the effect of reducing
the price payable for a share of the Company's capital stock
by a Holder upon exercise of a Warrant to an amount which is
less than the current value of such share; or
(F) a voluntary or involuntary dissolution,
liquidation or winding up of the Company shall be proposed;
then, in any such event, the Company shall cause to be mailed to
the Warrant Agent and the Holders in the manner provided in
Section 21 hereof, at least 20 days prior to the applicable
record or effective date hereinafter specified, a notice stating
(i) the date as of which the holders of record of Common Stock to
be entitled to such dividend, distribution, rights or warrants
are to be determined, or (ii) the date on which such
reclassification, Adjustment Action, consolidation, merger, sale,
transfer, dissolution, liquidation, or winding up is expected to
become effective, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange
their shares of securities or other property, if any, deliverable
upon such reclassification, Adjustment Action, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up.
Such notice shall also state whether such transaction will result
in any adjustment of the number or kind of Common Stock (or other
securities) purchasable upon the exercise of a Warrant or of the
Exercise Price and, if so, shall set forth the nature thereof and
the date upon which it will become effective. In the event the
Company gives notice to the holders of its Common Stock of the
declaration or distribution of rights to purchase Common Stock or
other securities of the Company of the character described in
paragraph (a) of subsection 11.1, the Company will give
concurrently a similar notice to the Holders in the manner
provided in Section 21 hereof. The failure to give the notices
required by this Section 12, or any defect therein, shall not
affect the legality or validity of any such dividend,
distribution, right, warrant, reclassification, Adjustment
Action, dissolution, liquidation or winding up or other action,
or the vote on any action authorizing the same.
SECTION 13. PURCHASE RIGHTS.
If at any time or from time to time on or after the
date of the Agreement, the Corporation shall give notice (a
"Purchase Rights Notice") pursuant to paragraph (B) of Section
12(a) of an issuance of rights or warrants, (the "Purchase
Rights") to all record holders of Common Stock, such issuance
shall not result in an adjustment of the Exercise Price or the
number of Warrants under Section 11 hereof, but each Holder shall
be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder
could have acquired if it had held the number of shares of Common
Stock acquirable upon exercise of the Warrants immediately before
the record date for the grant, issuance, or sale of such Purchase
Rights. The Purchase Rights Notice shall describe the Purchase
Rights and their availability to the Holders.
SECTION 14. FRACTIONAL SHARES OF COMMON STOCK.
The Company will not issue fractions of Warrants or
distribute Warrant certificates which evidence fractional
Warrants. In lieu of such fractional Warrants, there shall be
paid to the Holders to whom Warrant certificates representing
such fractional Warrants would otherwise be issuable an amount in
cash equal to the product of such fraction of a Warrant
multiplied by the current market price per share of Common Stock
issuable with respect to such fraction of a Warrant.
SECTION 15. RIGHT OF ACTION.
All rights of action in respect of this Agreement are
vested in the respective Holders of the Warrant certificates, and
any Holder of any Warrant certificate, without the consent of the
Warrant Agent or of the Holder of any other Warrant certificate,
may, on such Holder's own behalf and for such Holder's own
benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in
respect of, such Holder's right to exercise the Warrants
evidenced by such Warrant certificate in the manner provided in
such Warrant certificate and in this Agreement.
SECTION 16. INSPECTION OF WARRANT AGREEMENT.
The Warrant Agent shall keep copies of this Agreement
and any notices given or received hereunder available for
inspection by the Holders during normal business hours at its
office in the City of New York for that purpose. The Company
shall supply the Warrant Agent from time to time with such
numbers of copies of this Agreement as the Warrant Agent may
request.
SECTION 17. MERGER OR CONSOLIDATION OR CHANGE OF
NAME OF WARRANT AGENT.
Any corporation into which the Warrant Agent may be
merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Warrant
Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust business of the Warrant Agent,
shall be the successor to the Warrant Agent hereunder without the
execution or filing of any paper or any further act on the part
of any of the parties hereto, provided that such corporation
would be eligible for appointment as successor Warrant Agent
under the provisions of Section 19 hereof. In case at the time
such successor to the Warrant Agent shall succeed to the agency
created by this Agreement any of the Warrants shall have been
countersigned but not delivered, any such successor to the
Warrant Agent may adopt the countersignature of the original
Warrant Agent and deliver such Warrants so countersigned; and in
case at that time any of the Warrants shall not have been
countersigned, any successor to the Warrant Agent may countersign
such Warrants either in the name of the predecessor Warrant Agent
or in the name of the successor Warrant Agent, and in all such
cases such Warrants shall have the full force provided in the
Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall
be changed and at such time any of the Warrants shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignatures under its prior name and deliver Warrants so
countersigned; and in case at that time any of the Warrants shall
not have been countersigned, the Warrant Agent may countersign
such Warrants either in its prior name or in its changed name;
and in all such cases such Warrants shall have the full force
provided in the Warrants and in this Agreement.
SECTION 18. CONCERNING THE WARRANT AGENT.
The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders of
Warrants, by their acceptance thereof, shall be bound:
18.1. Disclaimer of Representations. The
statements contained herein and in the Warrants shall be
taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the
same except such as describe the Warrant Agent or action
taken by it. The Warrant Agent assumes no responsibility
with respect to the distribution of the Warrants except as
herein otherwise provided.
18.2. No Responsibility for Failure of Company's
Covenants. The Warrant Agent shall not be responsible for
any failure of the Company to comply with any of the
covenants contained in this Agreement or in the Warrants.
18.3. Delegation. The Warrant Agent may execute
and exercise any of the rights or powers hereby vested in it
or perform any duty hereunder either itself or by or through
its attorneys or agents (which shall not include its
employees), and the Warrant Agent shall not be answerable or
accountable for any act, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting
from such neglect or misconduct provided reasonable care
shall have been exercised in the selection and continued
employment thereof.
18.4. Opinion of Counsel. The Warrant Agent may
consult at any time with legal counsel satisfactory to it,
and the Warrant Agent shall incur no liability or
responsibility to the Company or to any Holder in respect of
any action taken, suffered or omitted by it hereunder in
good faith and in accordance with the opinion or the advice
of such counsel.
18.5. Officer's Certificate. Whenever in the
performance of its duties under this Agreement the Warrant
Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to
taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President,
the Treasurer or the Secretary of the Company and delivered
to the Warrant Agent; and such certificate shall be full
authorization to the Warrant Agent for any action taken or
suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
18.6. Compensation and Reimbursement. The Company
agrees to pay the Warrant Agent reasonable compensation for
all services rendered by the Warrant Agent in the
performance of its duties under this Agreement, to reimburse
the Warrant Agent for all expenses, taxes and governmental
charges and other charges of any kind and nature reasonably
incurred by the Warrant Agent in the performance of its
duties under this Agreement, and agrees to indemnify the
Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and reasonable
counsel fees, for anything done or omitted by the Warrant
Agent in the performance of its duties under this Agreement
except as a result of the Warrant Agent's gross negligence
or willful misconduct.
18.7. No Action Without Assurance of Reimbursement.
The Warrant Agent shall be under no obligation to institute
any action, suit or legal proceeding or to take any other
action likely to involve expense unless the Company or one
or more Holders shall furnish the Warrant Agent with
reasonable security and indemnity for any costs and expenses
which may be incurred; but this provision shall not affect
the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without
any such security or indemnity. All rights or action under
this Agreement or under any of the Warrants may be enforced
by the Warrant Agent without the possession of any of the
Warrants or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent, and any recovery of judgment
shall be for the ratable benefit of the Holders, as their
respective rights or interests may appear.
18.8. Conflicts of Interest. The Warrant Agent and
any stockholder, director, officer or employee of the
Warrant Agent may buy, sell or deal in any of the Warrants
or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity
for the Company or for any other legal entity.
18.9. Solely as Agent. The Warrant Agent shall act
hereunder solely as agent, and its duties shall be
determined solely by the provisions hereof. The Warrant
Agent shall not be liable for anything that it may do or
refrain from doing in connection with this Agreement except
for its own gross negligence or bad faith.
18.10. Reliance on Documents. The Warrant Agent
will not incur any liability or responsibility to the
Company or to any Holder of any Warrant for any action taken
in reliance on any notice, resolution, waiver, consent,
order, certificate, or other paper, document or instrument
reasonably believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
18.11. No Representation Regarding Validity, Etc.
The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution and delivery
hereof by the Warrant Agent) or in respect of the validity
or execution of any Warrant (except its countersignature
thereof); nor shall the Warrant Agent by any act hereunder
be deemed to make any representation or warranty as to the
authorization or reservation of any Warrant Shares (or other
stock) to be issued pursuant to this Agreement or any
Warrant, or as to whether any Warrant Shares (or other
stock) will when issued be validly issued, fully paid and
nonassessable, or as to the Exercise Price or the number or
amount of Warrant Shares or other securities or other
property issuable upon exercise of any Warrant.
18.12. Instructions from Company. The Warrant Agent
is hereby authorized and directed to accept instructions
with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company,
and to apply to such officers for advice or instructions in
connection with its duties, and shall not be liable for any
action taken or suffered to be taken by it in good faith in
accordance with instructions of any such Officers.
SECTION 19. CHANGE OF WARRANT AGENT.
The Warrant Agent may resign and be discharged from its
duties under this Agreement by giving to the Company 60 days'
notice in writing. The Warrant Agent may be removed by like
notice to the Warrant Agent from the Company. If the Warrant
Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the
Warrant Agent. If the Company shall fail to make such
appointment within a period of 50 days after such notice of
removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated
Warrant Agent or by any Holder (who shall with such notice submit
his Warrant for inspection by the Company), then the resigning,
discharged or removed Warrant Agent or any Holder may apply to
any court of competent jurisdiction for the appointment of a
successor to the Warrant Agent. Any successor warrant agent,
whether appointed by the Company or such court, shall be (a) a
bank or trust company, in good standing, incorporated under the
laws of the United States of America or any state thereof and
having at the time of its appointment as warrant agent a combined
capital and surplus of at least $100,000,000, as set forth in its
most recent published annual report of condition or (b) an
affiliate of a corporation described in clause (a) above. After
appointment, the successor warrant agent shall be vested with the
same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent hereunder without further
act or deed; but the former Warrant Agent shall deliver and
transfer to the successor warrant agent any property at the time
held by it hereunder, and shall execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose.
Failure to file any notice provided for in this Section 19,
however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Warrant Agent or
the appointment of the successor warrant agent, as the case may
be. In the event of such resignation or removal, the successor
warrant agent shall mail, by first-class mail, postage prepaid,
to each Holder, written notice of such removal or resignation and
the name and address of such successor warrant agent.
SECTION 20. IDENTITY OF TRANSFER AGENT.
Forthwith upon the appointment of any subsequent
Transfer Agent for the Company's shares of Common Stock, or any
other shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrants,
the Company will file with the Warrant Agent a statement setting
forth the name and address of such Transfer Agent.
SECTION 21. NOTICES.
Any notice pursuant to this Agreement by the Company or
by the Holder of any Warrant to the Warrant Agent, or by the
Warrant Agent or by the Holder of any Warrant to the Company,
shall be in writing and shall be deemed to have been duly given
if delivered or mailed by certified mail, return receipt
requested, (a) if to the Company, to WEI Acquisition Co., 19701
Hamilton Avenue, Torrance, California 90502-1334, Attention:
[__________________] and, if to the Warrant Agent, to United
States Trust Company of New York, Corporate Trust Division, 114
West 47th Street, 15th Floor, New York, NY 10036-1532;,
Attention: Louis Young]. Each party hereto may from time to
time change the address to which notices to it are to be
delivered or mailed hereunder by notice in writing to the other
party.
Any notice mailed pursuant to this Agreement by the
Company or the Warrant Agent to the Holders of Warrants shall be
in writing and shall be deemed to have been duly given if mailed
by first-class mail, postage prepaid, to such Holders at their
respective addresses on the Warrant Register of the Warrant
Agent.
SECTION 22. SUPPLEMENTS AND AMENDMENTS.
(a) The Company and the Warrant Agent may from time to
time supplement or amend this Agreement, without the approval of
any Holder in order to cure any ambiguity or to correct or
supplement any provision contained herein that may be defective
or inconsistent with any other provisions herein, or to make any
other provisions with regard to matters or questions arising
hereunder that the Company and the Warrant Agent may deem
necessary or desirable and that shall not adversely affect the
interests of the Holders of Warrants.
(b) In addition to the foregoing, with the consent of
Holders of Warrants entitled, upon exercise thereof, to receive
not less than two-thirds of the shares of Common Stock issuable
thereunder, the Company and the Warrant Agent may modify this
Agreement for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this
Agreement or modifying in any manner the rights of the Holders of
the Warrants; provided, however, that no modification of the
terms (including, but not limited to the adjustments described in
Section 11) upon which the Warrants are exercisable or reducing
the percentage required for consent to modification of this
Agreement, no acceleration of the Expiration Date and no increase
in the Exercise Price may, in each case, be made without the
consent of the Holder of each outstanding Warrant affected
thereby.
SECTION 23. SUCCESSORS.
All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and
assigns hereunder.
SECTION 24. MERGER OR CONSOLIDATION OF THE COMPANY.
The Company will not merge or consolidate with or into
any other corporation unless the corporation resulting from such
merger or consolidation (if not the Company) shall expressly
assume, by supplemental agreement satisfactory in form to the
Warrant Agent in the exercise of its reasonable judgment and
executed and delivered to the Warrant Agent, the due and punctual
performance and observance of each and every covenant and
condition of this Agreement to be performed and observed by the
Company.
SECTION 25. APPLICABLE LAW.
This Agreement and each Warrant issued hereunder shall
be deemed to be a contract made under the internal laws of the
State of New York (without preference to conflicts of law
principles) and for all purposes shall be construed in accordance
with the laws of said State.
SECTION 26. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to
any person or corporation other than the Company, the Warrant
Agent and the Holders of the Warrants any legal or equitable
right, remedy or claim under this Agreement; and this Agreement
shall be for the sole and exclusive benefit of the Company, the
Warrant Agent, and their respective successors and assigns
hereunder, and the holders from time to time of the Warrants.
SECTION 27. COUNTERPARTS.
This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
SECTION 28. CAPTIONS.
The captions of the Sections and subsections of this
Agreement have been inserted for convenience only and shall have
no substantive effect.
SECTION 29. PLAN OF REORGANIZATION.
The Company will comply for the benefit of the Holders
with Section 8.04 of the POR.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
WEI ACQUISITION CO.
By:
-----------------------------
Title:
Attest:
_____________________________
Title:
[UNITED STATES TRUST COMPANY OF NEW
YORK],
as Warrant Agent
By:
-------------------------------
Title:
Attest:
_____________________________
Title:
EXHIBIT A
TRANCHE C WARRANT TO PURCHASE COMMON STOCK VOID AFTER
5:00 P.M., NEW YORK TIME, ON JANUARY 31, 2004
[WEI ACQUISITION CO.]
This certifies that, for value received, __________
___________________ or registered assigns (the "Holder"), is
entitled to purchase from Wherehouse Entertainment, Inc., a
Delaware corporation (the "Company"), until 5:00 P.M., New York
time, on January 31, 2004, or such earlier date as may be
provided for pursuant to the Warrant Agreement referred to below
(the "Expiration Date"), at the purchase price of $11.00 per
share (the "Exercise Price"), a number of shares of Common Stock,
par value $0.01 per share, of the Company (the "Common Stock")
that is equal to the number of Warrants set forth above. The
number of shares purchasable upon exercise of this Warrant and
the Exercise Price per share are subject to adjustment from time
to time as set forth in the Warrant Agreement referred to below.
The Warrants evidenced hereby may be exercised in whole
or in part by presentation of this Warrant Certificate with the
Purchase Form on the reverse side hereof duly executed (with a
signature guarantee if required by the Warrant Agreement) and
simultaneous payment of the Exercise Price (subject to
adjustment) at the office or agency of the Company maintained for
that purpose in the City of New York. Initially, [United States
Trust Company of New York] will act as Warrant Agent (the
"Warrant Agent"). Payment of such price shall be made at the
option of the holder hereof by certified or cashier's check. No
fractional shares will be issued upon the exercise of rights to
purchase hereunder, but the Company shall pay the cash value of
any such fraction upon the exercise of one or more Warrants, all
as provided in the Warrant Agreement.
Upon any partial exercise of this Warrant Certificate,
there shall be countersigned and issued to the Holder hereof a
new Warrant Certificate in respect of the shares as to which this
Warrant shall not have been exercised. This Warrant Certificate
may be exchanged at the office of the Warrant Agent maintained
for that purpose in the City of New York by surrender of this
Warrant Certificate properly endorsed (with a signature guarantee
if required by the Warrant Agreement), either separately or in
combination with one or more other Warrant Certificates, for one
or more new Warrant Certificates for the same aggregate number of
shares as were evidenced by the Warrant Certificate or Warrant
Certificates exchanged.
This Warrant Certificate is transferable at the office
of the Warrant Agent maintained for that purpose in the City of
New York in the manner and subject to the limitations set forth
in the Warrant Agreement.
The Warrants evidenced hereby are part of a duly
authorized issue of Common Stock Purchase Warrants with rights to
purchase an aggregate of up to 100,000 shares of Common Stock
(subject to adjustment) and are issued under and in accordance
with a Warrant Agreement dated as of January 31, 1997, between
the Company and the Warrant Agent and are subject to the terms
and provisions contained in the Warrant Agreement, to all of
which the Holder of this Warrant Certificate by acceptance hereof
consents. Copies of the Warrant Agreement are on file at the
above mentioned office of the Warrant Agent and may be obtained
for inspection by the Holder hereof upon written request to the
Warrant Agent.
The Holder hereof may be treated by the Company, the
Warrant Agent, and all other persons dealing with this Warrant
Certificate as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby, or
to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding, and until such transfer on such
books, the Company, the Warrant Agent and all such other persons
may treat the registered holder hereof as the owner for all
purposes.
The Warrants evidenced hereby do not entitle any Holder
hereof to any of the rights of a shareholder of the Company.
This Warrant Certificate shall not be valid or
obligatory for any purpose until it shall have been countersigned
by the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be executed by its duly authorized officers and
the corporate seal hereunto affixed.
Dated: [WEI ACQUISITION CO.]
By:
------------------------------
Title:
ATTEST: _________________________
Title:
COUNTERSIGNED:
[ ]
WARRANT AGENT
By:
----------------------------
Title:
[WEI ACQUISITION CO.]
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise
the right of purchase represented by the within Warrant
Certificate for, and to purchase thereunder, ______ shares of
Common Stock, provided for therein, and requests that
certificates for such shares of Common Stock be issued in the
name of:
Name: _______________________________________________________
Address: _______________________________________________________
_________________________________________________________________
Social Security or Taxpayer's
Identification Number: ________________________________________
and, if said number of shares of Common Stock shall not be all
the Common Stock purchasable thereunder, that a new Warrant
Certificate for the balance remaining of the Common Stock
purchasable under the within Warrant Certificate be registered in
the name of the undersigned Warrantholder or his or her Assignee
as below indicated and delivered to the address stated below.
Name of Warrantholder
or Assignee: ___________________________________
Address: ___________________________________
Social Security or Taxpayer's
Identification Number: ___________________________________
Signature: ___________________
Dated: ____________________
Signature Guaranteed:
NOTICE: The above signature must
correspond with the name
as written upon the face
of this Warrant
Certificate in every
particular, without
alteration or enlargement
or any change whatever,
unless this Warrant has
been assigned.
ASSIGNMENT
(To be signed only upon
assignment of Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto ______________________________
(Name of Assignee)
__________________________________________________________
__________________________________________________________
__________________________________________________________
(Social Security or other Taxpayer Identification Number of
Assignee) the within Warrants, hereby irrevocably constituting
and appointing ________________________________________________
Attorney to transfer said Warrants on the books of the Company,
with full power of substitution in the premises.
DATED: _____________________
______________________________
Signature of Registered Holder
Signature Guaranteed:
NOTICE: The signature of this
assignment must
correspond with the name
as it appears upon the
face of the within
Warrant Certificate in
every particular, without
alteration or enlargement
or any change whatever.
EXHIBIT H
TAG-ALONG RIGHTS AGREEMENT
This Tag-Along Rights Agreement (this "AGREEMENT") is
made as of ______ __, 1997 by and between Cerberus Partners,
L.P., a Delaware limited partnership ("CERBERUS") on behalf of
itself and its affiliates and the accounts referred to in clause
(B) of Section 1(b)(ii) below, [United States Trust Company of
New York], as the warrant agent (together with its successor and
assigns, the "WARRANT AGENT") under the Warrant Agreements (as
defined below) and the Initial Holders (as defined below).
RECITALS
WHEREAS, pursuant to the Debtors' First Amended Chapter
11 Plan, as Revised for Technical Corrections dated October 4,
1996 and Supplemental Amendments on December 2, 1996 and December
13, 1996, (the "POR"; all capitalized terms used herein without
definition having the meanings given thereto in the POR), and an
Asset Purchase Agreement dated as of ____________, 1997, WEI
Acquisition Co., a Delaware corporation (the "COMPANY") will
acquire substantially all of the assets of Wherehouse
Entertainment, Inc., and its parent, WEI Holdings, Inc., which
companies are debtors and debtors-in-possession in Case No.
95-911 (HSB) (Jointly Administered) in the United States
Bankruptcy Court for the District of Delaware;
WHEREAS, Cerberus and the other holders of the Senior
Lender Claims will acquire pursuant to the POR a majority of the
shares of common stock, par value $0.01, of the Company (the
"COMMON STOCK");
WHEREAS, the POR provides that the Company shall issue
to the holders of the Senior Subordinated Note Claims three
tranches of warrants and such warrants will be issued pursuant to
(i) that certain Warrant Agreement dated as of the date hereof
(the "TRANCHE A WARRANT AGREEMENT") by and between the Company
and the Warrant Agent relating to the Tranche A Warrants (the
"TRANCHE A WARRANTS"), (ii) that certain Warrant Agreement dated
as of the date hereof (the "TRANCHE B WARRANT AGREEMENT") by and
between the Company and the Warrant Agent relating to the Tranche
B Warrants (the "TRANCHE B WARRANTS") and (iii) that certain
Warrant Agreement dated as of the date hereof (the "TRANCHE C
WARRANT AGREEMENT"; and, together with the Tranche A Warrant
Agreement and the Tranche B Warrant Agreement, the "WARRANT
AGREEMENTS") by and between the Company and the Warrant Agent
relating to the Tranche C Warrants (the "TRANCHE C WARRANTS";
and, together with the Tranche A Warrants and the Tranche B
Warrants, the "WARRANTS");
WHEREAS, the POR provides that this Agreement shall
have been entered into by Cerberus and the Warrant Agent as a
condition to the effectiveness of the POR.
NOW, THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the parties hereto
agree as follows:
1. TAG-ALONG RIGHT; NOTICES; EXERCISED SHARES;
CUTBACKS; EXPIRATION.
(a) Tag-Along Right. Prior to the Expiration Date (as
defined in Section 1(e) below), each Holder (as defined below)
that executes and delivers a counterpart of this Agreement (each
an "INITIAL HOLDER") shall have the right (the "TAG-ALONG RIGHT")
to require Cerberus to cause any third party (the "THIRD PARTY
PURCHASER") who proposes to purchase from Cerberus (or any of its
affiliates or any accounts managed by Cerberus after which
purchase Cerberus shall cease to have the power to exercise
control of the shares of Common Stock so transferred) in one or a
series of related transactions beneficial ownership to at least
750,000 shares of Common Stock acquired by Cerberus under the POR
(as adjusted for any stock split, stock dividend, subdivision,
reissuance, reclassification or other adjustment to the Common
Stock held by Cerberus) (such sale, a "TAG-ALONG SALE") to
purchase from such Initial Holder up to the number of whole
Exercised Shares (as defined in Section 1(c) below and rounded to
avoid fractional shares) equal to the number (the
"WARRANTHOLDER'S PORTION") derived by multiplying the total
number of shares of Common Stock subject to the Warrant(s)
initially distributed to such Initial Holder exercising a Tag-
Along Right and held by such Initial Holder prior to the Tag-
Along Sale (whether through unexercised Warrants or through
Exercised Shares (as defined in Section 1(c) below)) by a
fraction, the numerator of which is the number of shares of
Common Stock proposed to be purchased by the Third Party
Purchaser in the Tag-Along Sale and the denominator of which is
the sum of (x) the total number of shares of Common Stock held by
Cerberus, (y) the total number of shares of Common Stock issuable
upon exercise of all of the unexercised Warrants and the total
number of Exercised Shares, in each case, held by all of the
Initial Holders prior to the Tag-Along Sale and (z) if Alvarez &
Marsal, Inc. or its affiliates (collectively, "A&M") have the
right to participate in the Tag-Along Sale, the total number of
shares of Common Stock issuable to A&M upon the exercise of all
stock options, rights or warrants held by A&M, in each case on a
fully diluted basis, assuming the exercise in full of all such
Warrants, options and other rights outstanding. The purchase
price for any Exercised Shares purchased from the Initial Holders
pursuant to this Section 1 shall be at the same price per share
and the sale shall also be made upon the same terms and
conditions as such proposed transfer by Cerberus (the "TRANSFER
TERMS"). As used in this Agreement, "Holder" shall mean only
those holders of Senior Subordinated Note Claims (i) that are
holders of Senior Subordinated Note Claims as of the date on
which the Confirmation Order is entered (the "Record Date") and
(ii) that have provided evidence reasonably satisfactory to the
Warrant Agent that they were holders of Senior Subordinated Note
Claims as of the Record Date. No other holders of Senior
Subordinated Note Claims or Warrants shall be entitled to any
rights under this Agreement.
(b) Notices; Election to Sell. (i) If a Tag-Along
Sale is a negotiated sale to a non-broker-dealer Third-Party
Purchaser, Cerberus shall promptly notify the Warrant Agent if
Cerberus proposes to make a Tag-Along Sale giving rise to the
Tag-Along Right, and shall furnish to the Warrant Agent the
Transfer Terms and a copy of any written offer or agreement
pertaining thereto (the "CERBERUS NOTICE"). Upon receipt of the
Cerberus Notice, the Warrant Agent shall, within three (3)
Business Days of the receipt of such notice from Cerberus,
provide written notice to the Initial Holders (the "WARRANT AGENT
NOTICE") of the proposed Tag-Along Sale setting forth the
Transfer Terms, together with a letter of transmittal in the form
set forth on Exhibit A attached hereto (the "LETTER OF
TRANSMITTAL"). The Tag-Along Right may be exercised by an
Initial Holder by delivery of a properly completed Letter of
Transmittal, together with the share certificates, to the Warrant
Agent within fifteen (15) Business Days following its receipt of
the Warrant Agent Notice. Among other matters, the Letter of
Transmittal shall state the number of Exercised Shares that the
Warrantholder proposes to include in the Tag-Along Sale (not to
exceed the Warrantholder's Portion). Any Tag-Along Rights held
by an Initial Holder to participate in a Tag-Along Sale shall
expire with respect to that Tag-Along Sale if a properly
completed Letter of Transmittal, together with the requisite
certificates and other documents required thereby, are not timely
received by the Warrant Agent.
(ii) Notwithstanding anything to the contrary in this
Agreement, Tag-Along Sales shall be deemed not to include, and
Tag-Along Rights shall not be available in connection with, any
of the following transfers: (A) transfers to affiliates of
Cerberus; (B) transfers to funds or accounts managed by Cerberus
after which Cerberus continues to have the power to exercise
control of the shares of Common Stock so transferred; and (C)
sales into the market or through customary broker transactions.
(iii)In the case of a sale of Common Stock that in the
absence of clause (C) of paragraph (ii) above would constitute a
Tag-Along Sale, Cerberus shall notify the Warrant Agent of the
number of shares sold and the cash price received in such sale
(the "CERBERUS TERMS") promptly following completion of the sale.
Upon receipt of such notice, the Warrant Agent shall promptly
provide written notice to the Initial Holders of the Cerberus
Terms, together with a letter of transmittal (a "MARKET SALE
COMMITMENT") in the form set forth in Exhibit B attached hereto.
An Initial Holder may sell to Cerberus, and Cerberus shall
purchase at the cash price specified in the Cerberus Terms (a
"TAG-ALONG MARKET SALE"), the Warrant Holder's Portion of the
Market Sale (calculated as if it were a Tag-Along Sale) if such
Initial Holder delivers a properly completed Market Sale
Commitment to the Warrant Agent within ten (10) Business Days
after receipt by such Initial Holder of notice from Cerberus of
the Cerberus Terms. Any right to cause Cerberus to purchase
shares hereunder shall expire if a properly completed Market Sale
Commitment, together with the requisite certificates and other
documents required thereby, is not timely received by the Warrant
Agent.
(c) Exercised Shares. Notwithstanding anything to the
contrary contained herein, only those Warrants that are exercised
into shares of Common Stock pursuant to the terms of the Warrant
Agreement under which they were issued (the "EXERCISED SHARES")
prior to the Tag-Along Sale or Tag-Along Market Sale, shall be
entitled to the Tag-Along Right. On or prior to the date on
which the Tag-Along Sale or Tag-Along Market Sale pursuant to
Section 1(b)(i) or (iii) above, respectively, is scheduled to
close, each Initial Holder that submitted a Letter of Transmittal
or Market Sale Commitment, as the case may be, shall exercise
that number of Warrants equal to the number of Exercised Shares
(not exceeding the Warrantholder's Portion) set forth in the
Letter of Transmittal or Market Sale Commitment, as the case may
be (the "Noticed Shares") in accordance with the terms of the
Warrant Agreement under which such Warrants were issued, such
exercise to be effective upon consummation of the sale, and any
such Warrants not so exercised shall be deemed exercised to the
extent of the Noticed Shares for all purposes on the date of the
Tag Along Sale or the Tag-Along Market Sale, as the case may be,
as reduced pursuant to Section 1(d) below, as applicable, and in
such event the Exercise Price shall be deducted from the purchase
price and delivered to the Warrant Agent.
(d) Cut-Backs. If the Third Party Purchaser purchases
a number of shares of Common Stock that is less than the number
of shares set forth in the Transfer Terms or the number of shares
that all persons entitled to participate in the Tag-Along Sale
propose to include in the Tag-Along Sale, the number of shares to
be included in the Tag-Along Sale by the Initial Holders,
Cerberus and the other parties entitled to participate in the
Tag-Along Sale shall be reduced pro-rata based on the number of
shares originally permitted to be included by such parties prior
to such reduction. Any Exercised Shares not actually sold by an
Initial Holder as a result of the application of the previous
sentence shall not be deemed exercised.
(e) Expiration. Each Initial Holder's rights under
Section 1 shall expire upon the earliest of (the "EXPIRATION
DATE") (i) three years after the issuance of the Warrants, (ii)
the completion of a public offering of the Common Stock yielding
proceeds of at least $5,000,000 pursuant to a registration
statement under the Securities Act of 1933, as amended, (iii) the
181st day after the listing of the Common Stock on the New York
Stock Exchange or the American Stock Exchange, or the
commencement of bid and ask or similar price quotations for the
Common Stock on the "National Market" system of NASDAQ, and (iv)
with respect to the Warrants and Exercised Shares so transferred,
upon the sale, disposition, grant or other transfer of a Warrant
or Exercised Share.
2. NON-TRANSFERABLE. The Tag-Along Right granted to
an Initial Holder under this Agreement shall not be transferrable
by the Initial Holder and the Warrant Agent shall not recognize
or give effect to any such transfer.
3. GENERAL.
(a) Amendment. No modification or amendment of, or
waiver under, this Agreement shall be valid unless in writing and
signed by each of the parties hereto.
(b) Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws of the
State of California without regard to conflict of law principles.
(c) Severability. If any term, provision, covenant or
restriction herein is held by a court of competent jurisdiction
to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated thereby.
(d) Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed
to have been duly given when delivered personally or sent by
overnight courier express service or two days after having been
deposited in the United States mail, registered or certified,
return receipt requested, postage prepaid, addressed as follows:
(1) If to the Warrant Agent, to:
[United States Trust Company of New York
Corporate Trust Division
114 West 47th Street, 15th Floor
New York, NY 10036-1532
Attention: Louis Young]
(2) If to the Company, to:
19701 Hamilton Avenue
Torrance, California 90502-1334
Attention: __________________
with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attention: Ben H. Logan, Esq. and
C. James Levin Esq.
and a copy to:
Cerberus Partners, L.P.
950 Third Avenue
New York, New York 10022
Attention: Robert Davenport
(3) If to the Initial Holders, to the address set
forth in the register maintained by the Warrant
Agent
or to such other address or addresses as each of the parties
hereto (except the Initial Holders) may communicate in writing to
the other. Written notice given by any other method shall be
deemed effective only when actually received by the party to whom
given.
(e) Entire Agreement. This Agreement contains the
entire understanding of the parties hereto respecting the subject
matter hereof and supersedes all prior discussions and
understandings.
(f) Assignment. This Agreement may not be assigned by
the Initial Holders.
(g) Counterparts. This Agreement may be signed in
counterparts and each such counterpart shall be deemed to be an
original and all such counterparts shall be deemed to be one and
the same instrument.
(h) Non-Signing Holders. This Agreement shall be
effective with respect to each Initial Holder irrespective of
whether there are other holders of Senior Subordinated Note
Claims who were eligible to become an Initial Holder with rights
under this Agreement, but failed to execute this Agreement or
failed to provide evidence to the Warrant Agent that they were
holders of Senior Subordinated Note Claims as of the Record Date.
Any holder of a Senior Subordinated Note Claim who fails to
execute this Agreement by the date that is two-months from the
Effective Date (the "INITIAL HOLDER DEADLINE") shall not be
entitled to any Tag-Along Rights or other rights under this
Agreement irrespective of whether such holder would otherwise
have qualified as an Initial Holder. Warrant Agent shall use its
commercially reasonable best efforts to identify the parties
entitled to become an Initial Holder hereunder prior to the
Initial Holder Deadline, but shall not have any obligation to
identify such parties after the Initial Holder Deadline.
[remainder of page intentionally left blank]
IN WITNESS THEREOF, the parties have executed this
Agreement as of the day and year first above written.
CERBERUS PARTNERS, L.P.
By:___________________
Name:_________________
Its: General Partner
[UNITED STATES TRUST COMPANY
OF NEW YORK]
By:___________________
Name:_________________
Its: _________________
INITIAL HOLDERS
_____________________
_____________________
_____________________
_____________________
_____________________
_____________________
_____________________
_____________________
_____________________
_____________________
Exhibit A
[Form of Letter of Transmittal for Tag-Along Sale]
[WEI Acquisition Co.]
19701 Hamilton Avenue
Torrance, CA 90502-1334
LETTER OF TRANSMITTAL
To be completed and returned to exercise your
tag-along rights under the
Tag-Along Rights Agreement
Dated as of _________ __, 1997
Among Cerberus Partners, L.P.,
[United States Trust Company of New York],
as the Warrant Agent, and the Initial Holders Party Thereto
This Letter of Transmittal should be returned to
[United States Trust Company of New York
Corporate Trust Division
114 West 47th Street, 15th Floor
New York, N.Y. 10036-1532]
________ __, 199_
[Name and address of Initial Holder]
Reference is hereby made to the Tag-Along Rights Agreement dated as
of ________ __, 1997 among Cerberus Partners, L.P. ("Cerberus"), [United
States Trust Company of New York], as the Warrant Agent (the "Warrant Agent")
and the Initial Holders party thereto (the "Tag-Along Agreement").
Capitalized terms used in this Letter of Transmittal (this "Letter") but not
herein defined have the meanings given to them in the Tag-Along Agreement.
Pursuant to the provisions of the Tag-Along Agreement, you are
entitled to sell all or a portion of your shares of Common Stock not exceeding
your Warrantholder's Portion in connection with a Tag-Along Sale. Section
1(a) of the Tag-Along Agreement defines Warrantholder's Portion to mean that
number of whole Exercised Shares (rounded to avoid fractional shares) equal to
the number derived by multiplying the total number of shares of Common Stock
subject to the Warrant(s) initially distributed to an Initial Holder
exercising a Tag-Along Right and held by such Initial Holder prior to the Tag-
Along Sale (whether through unexercised Warrants or through Exercised Shares)
by a fraction, the numerator of which is the number of shares of Common Stock
proposed to be purchased by the Third Party Purchaser in the Tag-Along Sale
and the denominator of which is the sum of (x) the total number of shares of
Common Stock held by Cerberus, (y) the total number of shares of Common Stock
issuable upon exercise of all of the unexercised Warrants and the total number
of Exercised Shares, in each case, held by all of the Initial Holders prior to
the Tag-Along Sale and (z) if Alvarez & Marsal, Inc. or its affiliates
(collectively, "A&M") have the right to participate in the Tag-Along Sale, the
total number of shares of Common Stock issuable to A&M upon the exercise of
all stock options, rights or warrants held by A&M, in each case on a fully
diluted basis, assuming the exercise in full of all such Warrants, options and
other rights outstanding. A&M does [not] have the right to participate in the
Tag-Along Sale.
Please indicate below your Warrantholder's Portion and the number of
Exercised Shares (not exceeding your Warrantholder's Portion) you wish to sell
in the Tag-Along Sale.
1. The total number of fully diluted shares of Common Stock
subject to the Warrants initially distributed to the Initial Holder and
currently held by the Initial Holder is:___________.
2. The number of shares of Common Stock proposed to be purchased
by the Third Party Purchaser is: _______________.
3. The total number of fully diluted shares of Common Stock held
by Cerberus is _________________.
4. The total number of fully diluted shares of Common Stock
issuable upon exercise of all of the unexercised Warrants and the total number
of Exercised Shares, in each case, currently held by all of the Initial
Holders is:__________________.
[5. The number of fully diluted shares of Common Stock issuable to
A&M upon the exercise of all stock options, rights or warrants held by A&M is
____________.]
6. The Warrantholder's Portion of the Initial Holder (1
multiplied by quotient of 2 divided by the sum of 3+4+[5]), rounded to avoid
fractional shares is: _________________.
7. The number of Exercised Shares Initial Holder proposes to
include in the Tag-Along Sale (not exceeding the Warrantholder's Portion)
is:______________________.
Only shares received upon exercise of Warrants prior to the Tag-
Along Sale may be sold in the Tag-Along Sale. You will not have the right to
participate in the Tag-Along Sale, however, unless and until you have
completed this Letter of Transmittal, including the Substitute W-9, and
returned it to the Warrant Agent. The Warrant Agent is [United States Trust
Company of New York], and its address is set forth on the first page of this
Letter of Transmittal.
In order to participate in the Tag-Along Sale, you must supply the
information requested in this Letter and return the completed Letter, with any
other documents that may be required and return all Warrant certificates
and/or share certificates, to the Warrant Agent by 5:00 p.m. New York time on
_____________, 199__.
DESCRIPTION OF SHARES TO BE SOLD
Name(s) and Address(es) of Registered Holder(s) Certificate(s)
Tendered
(Please fill in exactly as name(s) appear(s) on (Attach signed
list if
certificate(s)) necessary)
Number of Shares
Number of
Certificate Represented by
Shares To
(Number(s)) Certificate(s)
Be Sold<F1>
__Warrants__
__Shares__
Total Shares To Be Sold
Indicate in this box the order (by certificate number) in which Shares are to
be purchased in the event of proration.<F2> (Attach additional signed list if
necessary.) See Instruction 1.
1st: ; 2nd: ; 3rd: ; 4th: ; 5th:
<FN>
<F1> If you desire to sell fewer than all Exercised Shares evidenced by any
certificates listed above, please indicate in this column the number of
Exercised Shares you wish to sell. Otherwise, all Exercised Shares
evidenced by such certificates will be deemed to have been requested
to be included in the Tag-Along Sale. See Instruction 2.
<F2> If you do not designate an order, then in the event less than all
Shares tendered are purchased due to proration, Shares will be
selected for purchase by the Warrant Agent.
</FN>
The Instructions regarding the completion of this Letter of
Transmittal, printed below, must be followed in their entirety. Questions or
requests for assistance or for additional copies of this Letter of Transmittal
may
be directed to the Warrant Agent at [insert phone number].
If you intend to exercise your Warrants into Exercised Shares for
inclusion in the Tag-Along Sale, you must include with this Letter the
documents required to exercise your Warrants pursuant to the Warrant Agreement
under which your Warrants were issued. The exercise price of the Warrants
which are exercised into Exercised Shares and sold in the Tag-Along Sale will
be deducted from the proceeds of the Tag-Along Sale attributable to such
Exercised Shares. Warrants will only be deemed exercised to the extent that
Exercised Shares are actually sold in the Tag-Along Sale.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL IS AT
YOUR
ELECTION AND YOUR SOLE RISK. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
THIS LETTER OF
TRANSMITTAL SHOULD NOT BE SENT TO ANYONE OTHER THAN THE
WARRANT AGENT.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS
CAREFULLY
BEFORE COMPLETING THE BOXES BELOW
The undersigned hereby acknowledges that the undersigned has
received and reviewed, among other things, the Tag-Along Agreement, the
Warrant Agreement under which the undersigned's Warrants were issued and this
Letter of Transmittal, which together constitute the terms and conditions of
the rights of the Initial Holders to participate in any Tag-Along Sale.
The undersigned hereby tenders to Cerberus for inclusion in the Tag-
Along Sale to _______________ (the "Purchaser"), the above-described Warrants
and/or shares of the Company's Common Stock, par value $0.01 per share (the
"Shares"), at the price per Share indicated in the Transfer Terms (the
"Purchase Price"), upon the terms and subject to the conditions set forth in
the Tag-Along Agreement, and in this Letter of Transmittal.
The undersigned hereby irrevocably sells, assigns and transfers to
or upon the order of the Cerberus for inclusion in the Tag-Along Sale to the
Purchaser all right, title and interest in and to all Shares and irrevocably
constitutes and appoints the Warrant Agent as the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares, with full
power of substitution (such power of attorney being an irrevocable power
coupled with an interest), to:
(a) deliver certificates for Shares or transfer ownership of
such Shares on the account books maintained by [WEI Acquisition Co.] (the
"Company"), together in either such case with all accompanying evidences of
transfer and authenticity, to or upon the order of Cerberus for inclusion in
the Tag-Along Sale to the Purchaser, upon receipt by the Warrant Agent, as the
undersigned's agent, of the Purchase Price with respect to such Shares;
(b) present certificates for such Shares for cancellation and
transfer on the books of the Company; and
(c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, all in accordance with the terms of the
Tag-Along Sale.
The undersigned hereby represents and warrants to the Company,
Cerberus and the Purchaser that:
(a) the undersigned understands that sales of Shares pursuant to
the procedures described in Section 1 of the Tag-Along Agreement and in the
Instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Tag-Along Sale;
(b) when and to the extent the Purchaser accepts the Shares for
purchase, the Purchaser will acquire good, marketable and unencumbered title
to them, free and clear of all security interests, liens, charges,
encumbrances, conditional sales agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any
additional documents the Warrant Agent, Cerberus or the Purchaser deems
necessary or desirable to complete the assignment, transfer and purchase of
the Shares tendered hereby; and
(d) the undersigned has read, understands and agrees with, all
of the terms of the Tag Along Sale.
The undersigned understands that acceptance of Shares by the
Purchaser for payment will constitute a binding agreement between the
undersigned, Cerberus and the Purchaser upon the terms and subject to the
conditions of the Tag Along Agreement and this Letter of Transmittal.
Subject to the Instructions, the check for the aggregate Purchase
Price less the exercise price of the Warrants for such of the tendered Shares
as are purchased will be issued to the order of the undersigned and mailed to
the address indicated above.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligations of the undersigned under this Letter of Transmittal shall be
binding upon the heirs, personal representatives, successors and assigns of
the undersigned.
IMPORTANT: ALL INITIAL HOLDERS MUST COMPLETE
INITIAL HOLDER SHOULD SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9 BELOW
...............................................
............................
Signature(s) of Owner(s)
Tax Identification or Social Security Number ....................
Dated: ...................................................., 199__
[Must be signed by the Holder(s)
exactly as name(s) appear(s) on this Letter.]
If signature is by trustees, executors, administrators, attorneys-in-fact,
agents, officers of corporations or others acting in a fiduciary capacity,
please provide the following information; otherwise, leave blank. See
instruction 3.
Name(s) ........................................................
.................................................................
(Please Type or Print)
Capacity (Full Title) ...........................................
Address .........................................................
.................................................................
(Include Zip Code)
Area Code and Tel. No............................................
Tax Identification or Social Security Number ....................
ALL INITIAL HOLDERS MUST COMPLETE THIS
SUBSTITUTE FORM W-9 BELOW:
NO DISTRIBUTIONS WILL BE MADE TO INITIAL HOLDERS
WHO DO NOT COMPLETE THIS BOX.
SEE INSTRUCTION 6.
PAYOR'S NAME: _____[Insert Name]___________________
SUBSTITUTE Part 1-PLEASE PROVIDE YOUR TIN IN THE Social Security
Number
BOX AT RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW OR_________________
Employer
Identification Number
FORM W-9
Department of the Treasury Part 2-Check the box if you are NOT subject to
backup
Internal Revenue Service withholding under the provisions of Section
3406(a)(1)(C) of the Internal Revenue Code
because
(1) you have not been notified that you are
subject
to backup withholding as a result of failure
to report
all interest or dividends or (2) the Internal
Revenue
Service has notified you that you are no
longer
subject to backup withholding.
[ ]
Payor's Request for Taxpayer CERTIFICATION-UNDER THE PENALTIES OF
PERJURY, Part 3-
Identification Number ("TIN") I CERTIFY THAT THE INFORMATION PROVIDED
ON THIS
FORM IS TRUE, CORRECT AND COMPLETE.
SIGNATURE______________ Date________________,
199__
Awaiting
TIN
[ ]
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN
BACKUP WITHHOLDING OF 20 PERCENT OF ANY PAYMENTS MADE
TO YOU PURSUANT TO THE TAG-ALONG AGREEMENT. PLEASE
REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification
Number has not been issued to me, and either (a) I have mailed or
delivered an application to receive a Taxpayer Identification Number
to the appropriate Internal Revenue Service Center or Social Security
Administration Office, or (b) I intend to mail or deliver an application
in the near future. I understand that if I do not provide a Taxpayer
Identification Number within sixty (60) days, 20 percent of all
payments made to me thereafter will be withheld until I provide a number.
Signature________________________________ Date____________________,199_
INSTRUCTIONS FOR COMPLETING THIS LETTER:
1. Inadequate Space. If the space provided in the box
captioned "Description of Shares To Be Sold" is inadequate, the
certificate numbers and/or number of Shares or Warrants should
be listed on a separate signed schedule and attached to this
Letter of Transmittal.
2. Partial Tenders, Cut-Backs and Unpurchased Shares. If fewer than
all of the Shares evidenced by any certificate for Warrants or Shares are to
be sold, fill in the number of Shares which are to be sold in the column
entitled "Number of Shares To Be Sold" in the box captioned "Description of
Shares To Be Sold." In such case, and if less than all shares of Common Stock
proposed to be sold in the Tag-Along Sale by an Initial Holder are sold
pursuant to Section 1(d) of the Tag-Along Agreement, if any Shares to be sold
are purchased, a new Warrant or Share certificate, as applicable, for the
remainder of the Shares (including any Shares not purchased) evidenced by the
old certificate(s) will be issued and sent to the Initial Holders, as soon as
practicable after the Tag-Along Sale. Unless otherwise indicated, all Shares
represented by the certificates listed and delivered to the Warrant Agent (up
to the Warrantholder's Portion) will be deemed to have been requested to be
included in the Tag-Along Sale.
3. Completion and Delivery of Letter of Transmittal, including
Substitute Form W-9. This Letter of Transmittal must be completed and signed
in accordance with Instruction 4 below. Substitute Form W-9, which is
included within this Letter, must be completed and signed in accordance with
Instruction 6 below. This Letter of Transmittal, including the Substitute
Form W-9, must be delivered to the Warrant Agent, not to the Company or
Cerberus. The method of delivery of the Letter of Transmittal is at your
election and your sole risk, and delivery will be deemed made only when
actually received by the Warrant Agent. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. In all
cases, sufficient time should be allowed to ensure timely delivery. This
letter should be sent only to the Warrant Agent named above.
4. Signatures on Letter of Transmittal. This Letter of Transmittal
should be signed by the Initial Holder to whom it is addressed.
If this Letter of Transmittal or other required documents are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or other persons acting in a fiduciary or representative
capacity, such persons should so indicate when signing, should supply the
required additional information in the signature box, and should submit proper
evidence satisfactory to Cerberus and the Warrant Agent of such persons'
authority so to act together with this Letter of Transmittal.
5. Irregularities. All questions as to the validity, form,
eligibility and acceptance of any delivery will be determined by Cerberus in
its sole discretion, and Cerberus' determination will be final and binding.
Cerberus reserves the absolute right to reject any or all deliveries (i)
determined by Cerberus not to be in appropriate form or (ii) the acceptance of
which, may, in the opinion of counsel, be unlawful. Cerberus reserves the
absolute right to waive any defect or irregularity in deliveries with regard
to any particular holder(s). Unless waived, any defects or irregularities in
connection with deliveries must be cured prior to any distribution by the
Warrant Agent. Neither Cerberus nor any other person shall be under any duty
to give notice of any defects or irregularities in deliveries, nor shall
Cerberus or any person incur any liability for failure to give any such
notice. Deliveries will not be deemed to have been made until all defects and
irregularities have been cured or waived.
6. Substitute Form W-9 and Backup Withholding Tax. You must supply
your Taxpayer Identification Number ("TIN") on Substitute Form W-9 and sign
and date such form before you may participate in any Tag-Along Sale pursuant
to the Tag-Along Agreement. YOUR TIN IS EITHER YOUR SOCIAL SECURITY
NUMBER
(FOR AN INDIVIDUAL) OR YOUR EMPLOYER IDENTIFICATION NUMBER (FOR
ALL OTHER
ENTITIES, E.G., CORPORATIONS). In the alternative, you may establish a basis
for exemption from federal income tax backup withholding. If the Warrant
Agent is not provided with the correct TIN or an adequate basis for exemption,
you will not be entitled to participate in the Tag-Along Sale under the Tag-
Along Agreement.
In completing Substitute Form W-9, you must either (i) complete the
Substitute Form W-9 below, certifying that the TIN provided on the Substitute
Form W-9 is correct (or that you are awaiting a TIN) and that either (a) you
have not been notified by the IRS that you are subject to backup withholding
as a result of failure to report all interest or dividends, or (b) the IRS has
notified you that you are no longer subject to backup withholding; or in the
alternative (ii) you must provide an adequate basis for exemption.
The TIN that must be reported in this Substitute Form W-9 is either
the Social Security Number or the Employer Identification Number of the record
Initial Holder. If the Series [A][B][C] Warrants are in more than one name or
are not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9, below
on page G-1, for additional guidance on which number to report.
7. Requests for Assistance or Additional Copies. Requests for
assistance or for additional copies of the Tag-Along Agreement, the Series
[A][B][C] Warrant Agreement or this Letter of Transmittal may be directed to
the Warrant Agent at [insert phone number].
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
Social Security Numbers have nine digits separated by two hyphens, i.e.
000-00-000. Employer Identification Numbers have nine digits separated by
only one hyphen, i.e. 00-0000000. The table below will help determine the
number to give the payor:
For this type of Holder Give the name and SOCIAL SECURITY
number of
1. IndividualThe individual
2. Two or more individuals The actual owner of the account or,
(joint account) if combined funds, the first
individual on the account<F1>
3. Custodian account of a minor The minor<F2>
(Uniform Gift to Minor Act)
4. a. The visual revocable savings The grantor trustee<F1>
trust (grantor is also trustee)
b. The so-called trust account The actual owner<F1>
that is not a legal or valid
trust under state law
5. Sole proprietorship The owner<F3>
For this type of account Give the name and
EMPLOYER IDENTIFICATION
number of
6. A valid trust, estate or
pension trust The legal entity (do not furnish
the identification number of
the personal representative or
trustee unless the legal entity
itself is not designated in the
account title)<F4>
7. Corporation The corporation
8. Association, club, religious, The organization
charitable, educational or
other tax-exempt organization
9. PartnershipThe partnership
10. A broker or registered nominee The broker or nominee
11. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state
or local government, school
district, or prison) that receives
agricultural program payments
<FN>
<F1> List first and circle the name of the person whose number you furnish.
<F2> Circle the minor's name and furnish the minor's Social Security Number.
<F3> Show the name of the owner.
<F4> List first and circle the name of the legal trust, estate or pension
trust.
</FN>
Note:
If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
Exhibit B
[Form of Letter of Transmittal for Tag-Along Market Sale]
[WEI Acquisition Co.]
19701 Hamilton Avenue
Torrance, CA 90502-1334
LETTER OF TRANSMITTAL
To be completed and returned to exercise your
market sale tag-along rights under the
Tag-Along Rights Agreement
Dated as of _________ __, 1997
Among Cerberus Partners, L.P.,
[United States Trust Company of New York],
as the Warrant Agent, and the Initial Holders Party Thereto
This Letter of Transmittal should be returned to
[United States Trust Company of New York
Corporate Trust Division
114 West 47th Street, 15th Floor
New York, N.Y. 10036-1532]
________ __, 199_
[Name and address of Initial Holder]
Reference is hereby made to the Tag-Along Rights Agreement dated as
of ________ __, 1997 among Cerberus Partners, L.P. ("Cerberus"), [United
States Trust Company of New York], as the Warrant Agent (the "Warrant Agent")
and the Initial Holders party thereto (the "Tag-Along Agreement").
Capitalized terms used in this Letter of Transmittal (this "Letter") but not
herein defined have the meanings given to them in the Tag-Along Agreement.
Pursuant to the provisions of the Tag-Along Agreement, you are
entitled to sell to Cerberus all or a portion of your shares of Common Stock
not exceeding your Warrantholder's Portion in connection with a Tag-Along
Market Sale. Section 1(a) of the Tag-Along Agreement defines Warrantholder's
Portion to mean that number of whole Exercised Shares (rounded to avoid
fractional shares) equal to the number derived by multiplying the total number
of shares of Common Stock subject to the Warrant(s) initially distributed to
an Initial Holder exercising a Tag-Along Right and held by such Initial Holder
prior to the Tag-Along Market Sale (whether through unexercised Warrants or
through Exercised Shares) by a fraction, the numerator of which is the number
of shares of Common Stock purchased by the Third Party Purchaser and the
denominator of which is the sum of (x) the total number of shares of Common
Stock held by Cerberus, (y) the total number of shares of Common Stock
issuable upon exercise of all of the unexercised Warrants and the total number
of Exercised Shares, in each case, held by all of the Initial Holders prior to
the Tag-Along Market Sale and (z) if Alvarez & Marsal, Inc. or its affiliates
(collectively, "A&M") have the right to participate in the Tag-Along Market
Sale, the total number of shares of Common Stock issuable to A&M upon the
exercise of all stock options, rights or warrants held by A&M, in each case on
a fully diluted basis, assuming the exercise in full of all such Warrants,
options and other rights outstanding. A&M does [not] have the right to
participate in the Tag-Along Market Sale.
Please indicate below your Warrantholder's Portion and the number of
Exercised Shares (not exceeding your Warrantholder's Portion) you wish to sell
in the Tag-Along Market Sale.
1. The total number of fully diluted shares of Common Stock
subject to the Warrants initially distributed to the Initial Holder and
currently held by the Initial Holder is:___________.
2. The number of shares of Common Stock purchased by the Third
Party Purchaser is: _______________.
3. The total number of fully diluted shares of Common Stock held
by Cerberus is _________________.
4. The total number of fully diluted shares of Common Stock
issuable upon exercise of all of the unexercised Warrants and the total number
of Exercised Shares, in each case, currently held by all of the Initial
Holders is:________________.
[5. The number of fully diluted shares of Common Stock issuable to
A&M upon the exercise of all stock options, rights or warrants held by A&M is
____________.]
6. The Warrantholder's Portion of the Initial Holder (1
multiplied by quotient of 2 divided by the sum of 3+4+[5]), rounded to avoid
fractional shares is:_________________.
7. The number of Exercised Shares Initial Holder proposes to
include in the Tag-Along Market Sale (not exceeding the Warrantholder's
Portion) is:______________________.
Only shares received upon exercise of Warrants prior to the Tag-
Along Market Sale may be sold in the Tag-Along Market Sale. You will not have
the right to participate in the Tag-Along Market Sale, however, unless and
until you have completed this Letter of Transmittal, including the Substitute
W-9, and returned it to the Warrant Agent. The Warrant Agent is [United
States Trust Company of New York], and its address is set forth on the first
page of this Letter of Transmittal.
In order to participate in the Tag-Along Market Sale, you must
supply the information requested in this Letter and return the completed
Letter, with any other documents that may be required and return all Warrant
certificates and/or share certificates, to the Warrant Agent by 5:00 p.m. New
York time on _____________, 199__.
DESCRIPTION OF SHARES TO BE SOLD
Name(s) and Address(es) of Registered Certificate(s)
Tendered
Holder(s) (Please fill in exactly as name(s) (Attach signed list if
necessary)
appear(s) on certificate(s))
Certificate Number of Shares
Number of
(Number(s)) Represented by
Shares To
Certificate(s)
Be Sold<F1>
__Warrants__
__Shares__
Total Shares To Be Sold
<FN>
<F1> If you desire to sell fewer than all Exercised Shares
evidenced by any certificates listed above, please indicate
in this column the number of Exercised Shares you wish to sell.
Otherwise, all Exercised Shares evidenced by such certificates
will be deemed to have been requested to be included in the
Tag-Along Market Sale. See Instruction 2.
</FN>
The Instructions regarding the completion of this Letter of
Transmittal, printed below, must be followed in their entirety. Questions or
requests for assistance or for additional copies of this Letter of Transmittal
may be directed to the Warrant Agent at [insert phone number].
If you intend to exercise your Warrants into Exercised Shares for
inclusion in the Tag-Along Market Sale, you must include with this Letter the
documents required to exercise your Warrants pursuant to the Warrant Agreement
under which your Warrants were issued. The exercise price of the Warrants
which are exercised into Exercised Shares and sold in the Tag-Along Market
Sale will be deducted from the proceeds of the Tag-Along Market Sale
attributable to such Exercised Shares. Warrants will only be deemed exercised
to the extent that Exercised Shares are actually sold in the Tag-Along Market
Sale.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL IS AT
YOUR
ELECTION AND YOUR SOLE RISK. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
THIS LETTER OF
TRANSMITTAL SHOULD NOT BE SENT TO ANYONE OTHER THAN THE
WARRANT AGENT.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BEFORE COMPLETING THE BOXES BELOW
The undersigned hereby acknowledges that the undersigned has
received and reviewed, among other things, the Tag-Along Agreement, the
Warrant Agreement under which the undersigned's Warrants were issued and this
Letter of Transmittal, which together constitute the terms and conditions of
the rights of the Initial Holders to participate in any Tag-Along Market Sale.
The undersigned hereby tenders to Cerberus, the above-described
Warrants and/or shares of the Company's Common Stock, par value $0.01 per
share (the "Shares"), at the price per Share indicated in the Transfer Terms
(the "Purchase Price"), upon the terms and subject to the conditions set forth
in the Tag-Along Agreement, and in this Letter of Transmittal.
The undersigned hereby irrevocably sells, assigns and transfers to
or upon the order of the Cerberus all right, title and interest in and to all
Shares and irrevocably constitutes and appoints the Warrant Agent as the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares, with full power of substitution (such power of attorney being an
irrevocable power coupled with an interest), to:
(a) deliver certificates for Shares or transfer ownership of
such Shares on the account books maintained by [WEI Acquisition Co.] (the
"Company"), together in either such case with all accompanying evidences of
transfer and authenticity, to or upon the order of Cerberus, upon receipt by
the Warrant Agent, as the undersigned's agent, of the Purchase Price with
respect to such Shares;
(b) present certificates for such Shares for cancellation and
transfer on the books of the Company; and
(c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, all in accordance with the terms of the
Tag-Along Market Sale.
The undersigned hereby represents and warrants to the Company and
Cerberus that:
(a) the undersigned understands that sales of Shares pursuant to
the procedures described in Section 1 of the Tag-Along Agreement and in the
Instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Tag-Along Market Sale;
(b) when and to the extent Cerberus accepts the Shares for
purchase, Cerberus will acquire good, marketable and unencumbered title to
them, free and clear of all security interests, liens, charges, encumbrances,
conditional sales agreements or other obligations relating to their sale or
transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any
additional documents the Warrant Agent or Cerberus deems necessary or
desirable to complete the assignment, transfer and purchase of the Shares
tendered hereby; and
(d) the undersigned has read, understands and agrees with, all
of the terms of the Tag Along Market Sale.
The undersigned understands that acceptance of Shares by Cerberus
for payment will constitute a binding agreement between the undersigned and
Cerberus upon the terms and subject to the conditions of the Tag Along
Agreement and this Letter of Transmittal.
Subject to the Instructions, the check for the aggregate Purchase
Price less the exercise price of the Warrants for such of the tendered Shares
as are purchased will be issued to the order of the undersigned and mailed to
the address indicated above.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligations of the undersigned under this Letter of Transmittal shall be
binding upon the heirs, personal representatives, successors and assigns of
the undersigned.
IMPORTANT: ALL INITIAL HOLDERS MUST COMPLETE
INITIAL HOLDER SHOULD SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9 BELOW
..........................................................
..........................................................
Signature(s) of Owner(s)
Tax Identification or Social Security Number..............
Dated: ............................................, 199__
[Must be signed by the Holder(s) exactly
as name(s) appear(s) on this Letter.]
If signature is by trustees, executors, administrators, attorneys-in-fact,
agents, officers of corporations or others acting in a fiduciary capacity,
please provide the following information; otherwise, leave blank. See
instruction 3.
Name(s) ....................................................
............................................................
(Please Type or Print)
Capacity (Full Title) ......................................
Address ....................................................
............................................................
(Include Zip Code)
Area Code and Tel. No.......................................
Tax Identification or Social Security Number................
ALL INITIAL HOLDERS MUST COMPLETE THIS
SUBSTITUTE FORM W-9 BELOW:
NO DISTRIBUTIONS WILL BE MADE TO INITIAL HOLDERS WHO DO NOT
COMPLETE THIS BOX.
SEE INSTRUCTION 6.
PAYOR'S NAME: _____[Insert Name]___________________
SUBSTITUTE Part 1-PLEASE PROVIDE YOUR TIN IN Social Security Number
THE BOX AT RIGHT AND CERTIFY BY OR_________________
SIGNING AND DATING BELOW Employer Identification
Number
FORM W-9 Part 2-Check the box if you are NOT subject to
backup
withholding
Department of the Treasury under the provisions of Section 3406(a)(1)(C)
of the
Internal
Internal Revenue Service Revenue Code because (1) you have not been
notified that
you are
subject to backup withholding as a result of
failure to report all
interest or dividends or (2) the Internal
Revenue Service has
notified you that you are no longer subject to
backup withholding.
[ ]
Payor's Request for Taxpayer CERTIFICATION-UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE Part 3-
Identification Number ("TIN") INFORMATION PROVIDED ON THIS FORM IS TRUE,
CORRECT AND COMPLETE.
SIGNATURE______________________
Date_____________________, Awaiting
199_
TIN
[ ]
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN
BACKUP
WITHHOLDING OF 20 PERCENT OF ANY PAYMENTS MADE TO YOU
PURSUANT
TO THE TAG-ALONG AGREEMENT. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE
BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number within
sixty (60) days, 20 percent of all payments made to me thereafter will be
withheld until I provide a number.
Signature_____________________________ Date____________________,199_
INSTRUCTIONS FOR COMPLETING THIS LETTER:
1. Inadequate Space. If the space provided in the box captioned
"Description of Shares To Be Sold" is inadequate, the certificate numbers
and/or number of Shares or Warrants should be listed on a separate signed
schedule and attached to this Letter of Transmittal.
2. Partial Tenders and Unpurchased Shares. If fewer than all of the
Shares evidenced by any certificate for Warrants or Shares are to be sold,
fill in the number of Shares which are to be sold in the column entitled
"Number of Shares To Be Sold" in the box captioned "Description of Shares To
Be Sold." In such case, if any Shares to be sold are purchased, a new Warrant
or Share certificate, as applicable, for the remainder of the Shares
(including any Shares not purchased) evidenced by the old certificate(s) will
be issued and sent to the Initial Holders, as soon as practicable after the
Tag-Along Market Sale. Unless otherwise indicated, all Shares represented by
the certificates listed and delivered to the Warrant Agent (up to the
Warrantholder's Portion) will be deemed to have been requested to be included
in the Tag-Along Market Sale.
3. Completion and Delivery of Letter of Transmittal, including
Substitute Form W-9. This Letter of Transmittal must be completed and signed
in accordance with Instruction 4 below. Substitute Form W-9, which is
included within this Letter, must be completed and signed in accordance with
Instruction 6 below. This Letter of Transmittal, including the Substitute
Form W-9, must be delivered to the Warrant Agent, not to the Company or
Cerberus. The method of delivery of the Letter of Transmittal is at your
election and your sole risk, and delivery will be deemed made only when
actually received by the Warrant Agent. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. In all
cases, sufficient time should be allowed to ensure timely delivery. This
letter should be sent only to the Warrant Agent named above.
4. Signatures on Letter of Transmittal. This Letter of Transmittal
should be signed by the Initial Holder to whom it is addressed.
If this Letter of Transmittal or other required documents are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or other persons acting in a fiduciary or representative
capacity, such persons should so indicate when signing, should supply the
required additional information in the signature box, and should submit proper
evidence satisfactory to Cerberus and the Warrant Agent of such persons'
authority so to act together with this Letter of Transmittal.
5. Irregularities. All questions as to the validity, form,
eligibility and acceptance of any delivery will be determined by Cerberus in
its sole discretion, and Cerberus' determination will be final and binding.
Cerberus reserves the absolute right to reject any or all deliveries (i)
determined by Cerberus not to be in appropriate form or (ii) the acceptance of
which, may, in the opinion of counsel, be unlawful. Cerberus reserves the
absolute right to waive any defect or irregularity in deliveries with regard
to any particular holder(s). Unless waived, any defects or irregularities in
connection with deliveries must be cured prior to any distribution by the
Warrant Agent. Neither Cerberus nor any other person shall be under any duty
to give notice of any defects or irregularities in deliveries, nor shall
Cerberus or any person incur any liability for failure to give any such
notice. Deliveries will not be deemed to have been made until all defects and
irregularities have been cured or waived.
6. Substitute Form W-9 and Backup Withholding Tax. You must supply
your Taxpayer Identification Number ("TIN") on Substitute Form W-9 and sign
and date such form before you may participate in any Tag-Along Market Sale
pursuant to the Tag-Along Agreement. YOUR TIN IS EITHER YOUR SOCIAL
SECURITY NUMBER (FOR AN INDIVIDUAL) OR YOUR EMPLOYER
IDENTIFICATION NUMBER (FOR ALL OTHER ENTITIES, E.G., CORPORATIONS).
In the alternative, you may establish a basis for exemption
from federal income tax backup withholding. If the
Warrant Agent is not provided with the correct TIN or an adequate basis for
exemption, you will not be entitled to participate in the Tag-Along Market
Sale under the Tag-Along Agreement.
In completing Substitute Form W-9, you must either (i) complete the
Substitute Form W-9 below, certifying that the TIN provided on the Substitute
Form W-9 is correct (or that you are awaiting a TIN) and that either (a) you
have not been notified by the IRS that you are subject to backup withholding
as a result of failure to report all interest or dividends, or (b) the IRS has
notified you that you are no longer subject to backup withholding; or in the
alternative (ii) you must provide an adequate basis for exemption.
The TIN that must be reported in this Substitute Form W-9 is either
the Social Security Number or the Employer Identification Number of the record
Initial Holder. If the Series [A][B][C] Warrants are in more than one name or
are not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9, below
on page G-1, for additional guidance on which number to report.
7. Requests for Assistance or Additional Copies. Requests for
assistance or for additional copies of the Tag-Along Agreement, the Series
[A][B][C] Warrant Agreement or this Letter of Transmittal may be directed to
the Warrant Agent at [insert phone number].
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
Social Security Numbers have nine digits separated by two hyphens, i.e.
000-00-000. Employer Identification Numbers have nine digits separated by
only one hyphen, i.e. 00-0000000. The table below will help determine the
number to give the payor:
For this type of Holder Give the name and SOCIAL SECURITY
number of
1. IndividualThe individual
2. Two or more individuals The actual owner of the account or,
(joint account) if combined funds, the first
individual on the account<F1>
3. Custodian account of a minor The minor<F2>
(Uniform Gift to Minor Act)
4. a. The visual revocable savings The grantor trustee<F1>
trust (grantor is also trustee)
b. The so-called trust account The actual owner<F1>
that is not a legal or valid
trust under state law
5. Sole proprietorship The owner<F3>
For this type of account Give the name and
EMPLOYER IDENTIFICATION
number of
6. A valid trust, estate or
pension trust The legal entity (do not furnish
the identification number of
the personal representative or
trustee unless the legal entity
itself is not designated in the
account title)<F4>
7. Corporation The corporation
8. Association, club, religious, The organization
charitable, educational or
other tax-exempt organization
9. PartnershipThe partnership
10. A broker or registered nominee The broker or nominee
11. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state
or local government, school
district, or prison) that receives
agricultural program payments
<FN>
<F1> List first and circle the name of the person whose number you furnish.
<F2> Circle the minor's name and furnish the minor's Social Security Number.
<F3> Show the name of the owner.
<F4> List first and circle the name of the legal trust, estate or pension
trust.
</FN>
Note:
If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.