SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 31, 1997
Wherehouse Dissolution Co.
(Exact name of registrant as specified in its charter)
Delaware 1-8281 95-2647555
(State or other (Commission IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
19701 Hamilton Avenue
Torrance, California 90502-1334
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (310) 538-2314
Wherehouse Entertainment, Inc.
(Former name or former address, if changed since last report)
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
A change in control of the registrant occurred on
January 31, 1997 by way of a transfer of assets to a successor of
the registrant which will be controlled by persons not currently
controlling the registrant. The registrant and its parent
company, WEI Holdings, Inc. ("Holdings"; and, together with the
registrant, the "Debtors") are debtors and debtors-in-possession
(collectively, the "Debtors"), in Case No. 95-911 (HSB) (Jointly
Administered) (the "Bankruptcy Case") in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). The Debtors' plan of reorganization, entitled 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 "Plan"), was
confirmed by an order of the Bankruptcy Court entered on
January 7, 1997 entitled "Findings of Fact, Conclusions of Law
and Order Confirming Debtors' First Amended Chapter 11 Plan Under
Chapter 11 of the Bankruptcy Code" (the "Confirmation Order").
The effective date of the Plan occurred on January 31, 1997.
The entry of the Confirmation Order and the material
features of the Plan are discussed in more detail in the Current
Report on Form 8-K filed by the registrant with the Securities
and Exchange Commission (the "Commission") on January 22, 1997
(the "Prior 8-K") which is incorporated herein by reference. The
Confirmation Order is incorporated herein by reference to Exhibit
3.1 of the Prior 8-K. The Plan is incorporated herein by
reference to Exhibit A of Exhibit 3.1 to the Prior 8-K.
Pursuant to the Plan, substantially all the assets of
the Debtors were transferred to WEI Acquisition Co., a
corporation (the "Successor") incorporated under the laws of the
State of Delaware on November 15, 1996, for the purpose of
acquiring the assets of the Debtors. In exchange for the assets
of the Debtors, the Successor has issued and will continue to
issue shares of its common stock, par value $0.01 per share (the
"Common Stock"). The Successor has also issued three tranches of
warrants (collectively, the "Warrants") to purchase an aggregate
of 776,000 shares of Common Stock pursuant to a Tranche A Warrant
Agreement, a Tranche B Warrant Agreement and a Tranche C Warrant
Agreement, as described in the Prior 8-K.
In an order dated January 30, 1997 entitled
"Stipulation and Order Authorizing Name Changes in Furtherance of
Implementation of Debtors' First Amended Chapter 11 Plan" (the
"Name Change Order") the Bankruptcy Court (i) authorized the
registrant to file with the Delaware Secretary of State an
amendment to its Certificate of Incorporation whereby the name of
the registrant would be changed to "Wherehouse Dissolution Co."
and (ii) authorized the Successor to file with the Delaware
Secretary of State an amendment to its Certificate of
Incorporation whereby the name of the Successor would be changed
to "Wherehouse Entertainment, Inc." The Name Change Order is
incorporated herein by reference to Exhibit 1.1 hereto. On
January 31, 1997, the registrant filed an amendment to its
Certificate of Incorporation whereby the registrant changed its
name to "Wherehouse Dissolution Co.," and the Successor filed an
amendment to its Certificate of Incorporation whereby the
Successor changed its name to "Wherehouse Entertainment, Inc."
The amendment to the registrant's Certificate of Incorporation is
incorporated herein by reference to Exhibit 1.2 hereto. The
amendment to the Successor's Certificate of Incorporation is
incorporated herein by reference to Exhibit 1.3 hereto.
Prior to the Succession, all of the capital stock of
Wherehouse was held by Holdings. The capital stock of Holdings
was held by the persons and in the amounts set forth in item 12
of the registrant's Annual Report on Form 10-K for the fiscal
year ended January 31, 1996 filed with the Commission on May 15,
1996, which Section 12 is incorporated herein by reference.
Pursuant to the Plan, the Debtors entered into an Asset
Purchase Agreement with the Successor dated as of January 31,
1997 (the "Purchase Agreement"), under which the Successor
acquired substantially all of the assets of the Debtors (the
"Acquisition"). The Purchase Agreement is incorporated herein by
reference to Exhibit 1.4 hereto. The closing of the Acquisition
(the "Closing") occurred on January 31, 1997, the date on which
the Plan became effective.
Pursuant to the Plan, the distributions of the
Successor's Common Stock described in Item 3 of the Prior 8-K
were and will be made to the creditors of the Debtors in respect
of the bankruptcy claims held by such creditors. No
distributions of the Common Stock were made in exchange for, or
otherwise in respect of, the capital stock of the Debtors and all
such capital stock were cancelled.
As a result of the distributions made pursuant to the
Plan as described in Item 3 of the Prior 8-K, the following
persons, who were the holders of the senior lender claims or
their affiliates in the Bankruptcy Case, acquired at the Closing
shares of the Successor's Common Stock as follows. Cerberus
Partners, L.P. ("Cerberus") acquired 5,712,558 shares of Common
Stock, representing approximately 62.38% of the shares of Common
Stock issued under the Plan at the Closing, prior to dilution for
the A&M Securities (as defined below) and the Warrants. Pequod
Investments, L.P. acquired 82,421 shares of Common Stock,
representing approximately 0.90% of the shares of Common Stock
issued under the Plan at the Closing, prior to dilution for the
A&M Securities and the Warrants. Amroc Investments, Inc.
acquired 100,480 shares of Common Stock, representing
approximately 1.10% of the shares of Common Stock issued under
the Plan at the Closing, prior to dilution for the A&M Securities
and the Warrants. Seneca Capital, L.P., acquired 602,879 shares
of Common Stock, representing approximately 6.58% of the shares
of Common Stock issued under the Plan at the Closing, prior to
dilution for the A&M Securities and the Warrants. Loeb Partners
Corp., acquired 124,896 shares of Common Stock, representing
approximately 1.36% of the shares of Common Stock issued under
the Plan at the Closing, prior to dilution for the A&M Securities
and the Warrants. Credit Suisse First Boston Corp., an affiliate
of CS First Boston Securities Corporation, acquired 2,041,246
shares of Common Stock, representing approximately 22.29% of the
shares of Common Stock issued under the Plan at the Closing,
prior to dilution for the A&M Securities and the Warrants.
BankAmerica Investment Corp., an affiliate of Bank of America,
Illinois, acquired 493,328 shares of Common Stock, representing
approximately 5.39% of the shares of Common Stock issued under
the Plan at the Closing, prior to dilution for the A&M Securities
and the Warrants. A total of 9,157,808 shares of Common Stock
were issued at the Closing to the holders of the senior lender
claims and/or their affiliates. Additional shares of Common
Stock will be issued to the holders of the senior lender claims
and to holders of certain unsecured claims as unsecured claims
become allowed in the Bankruptcy Case, as described in Item 3 of
the Prior 8-K.
Under the Plan, the bankruptcy claims against the
Debtors held by the holders of the senior lender claims were
canceled as of the Closing in exchange for cash and the shares of
Common Stock issued as described above. Accordingly, the amount
of the consideration paid by the holders of the senior lender
claims for the shares of Common Stock acquired by them and/or
their affiliates, and the source of such consideration, was the
cancellation of the claims held by them.
The Successor also entered into a Management Services
Agreement effective as of January 31, 1997 (the "Management
Services Agreement") with Alvarez & Marsal, Inc., a New York
corporation ("A&M"), Cerberus, Antonio C. Alvarez II and A&M
Investment Associates #3, LLC, a Delaware limited liability
company and an affiliate of A&M (the "A&M Affiliate"). The
Management Services Agreement is incorporated herein by reference
to Exhibit 1.5 hereto. Pursuant to the Management Services
Agreement and a Stock Subscription Agreement dated as of January
31, 1997 (the "Stock Subscription Agreement"), the Successor
agreed to sell, and the A&M Affiliate agreed to buy at a purchase
price of $6,340,000 ($1,000,000 in cash from the A&M Affiliate's
funds, plus a secured recourse promissory note in the principal
amount of $335,000 and a secured non-recourse promissory note in
the amount of $5,005,000), 1,100,000 shares of the Successor's
Common Stock, (the "A&M Shares") which may be adjusted upward or
downward to represent 10% of the sum of (i) the shares of Common
Stock ultimately issued under the Plan plus (ii) the number of
shares of Common Stock issued to the A&M Affiliate. The secured
recourse promissory note is incorporated herein by reference to
Exhibit 1.6 hereto. The secured non-recourse promissory note is
incorporated herein by reference to Exhibit 1.7 hereto. The
Pledge Agreement entered into in respect of the secured recourse
promissory note and the secured non-recourse promissory note is
incorporated herein by reference to Exhibit 1.8 hereto. The
Stock Subscription Agreement is incorporated herein by reference
to Exhibit 1.9 hereto.
In addition, the Successor and the A&M Affiliate
entered into a Non-Transferrable Stock Option Agreement dated as
of January 31, 1997 (the "Stock Option Agreement"), pursuant to
which the Successor issued to the A&M Affiliate three tranches of
options to purchase shares of Common Stock (the "A&M Options";
and, together with the A&M Shares, the "A&M Securities")
representing in the aggregate the right to purchase an additional
10% of the shares of Common Stock and the Warrants issued at the
Closing under the Plan. The first tranche of options represents
the right to purchase 331,127 shares of Common Stock at an
exercise price of $9.56. The second tranche of options
represents the right to purchase 331,127 shares of Common Stock
at an exercise price of $11.58. The third tranche of options
represents the right to purchase 331,126 shares of Common Stock
at an exercise price of $14.10. The A&M Options vest monthly in
equal installments through October 31, 1998 and all unexercised
A&M Options expire on January 31, 2003, subject to prior vesting
or termination as set forth in the Management Services Agreement
and as described in Item 5 below. The A&M Options are entitled
to certain anti-dilution provisions as set forth in the Stock
Option Agreement. The Stock Option Agreement is incorporated
herein by reference to Exhibit 1.10 hereto.
Pursuant to the Plan, the Board of Directors of the
Successor will consist of the following persons:
Antonio C. Alvarez II Chairman of the Board and
Chief Executive Officer
Bruce Ogilvie Director
Joe Smith Director
Robert C. Davenport Director
Jonathan Gallen Director
There are no arrangements known to the registrant,
including any pledge by any person of securities of the
registrant or any of its parents, the operation of which may, at
a subsequent date, result in a change in control of the
registrant other than as described above in this Item 1.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As described in Item 1 above, the Debtors transferred
substantially all of their tangible and intangible assets (which
related principally to its retail music distribution business and
related activities) to the Successor as of the Closing. Such
assets included fee title to a store located in Tucson, Arizona.
The Successor intends to use the assets acquired from the Debtors
to continue the business of the Debtors.
The consideration given for such assets by the
Successor was the issuance of the Successor's Common Stock and
the Warrants to the creditors of the Debtors as described in Item
1 above and in the Prior 8-K, and the assumption of certain
liabilities and obligations. As described in Item 1 above, the
Successor was formed for the purpose of acquiring substantially
all the assets of the Debtors in exchange for the issuance of its
Common Stock and the Warrants and the assumption of the
liabilities and obligations of the Debtors as provided in the
Plan.
ITEM 5 - OTHER EVENTS
As referenced in Item 1 above, the Management Services
Agreement became effective as of the Closing.
Upon the consummation of the Acquisition, the Successor
entered into a Loan and Security Agreement dated as of
January 31, 1997 (the "Loan and Security Agreement") with
Congress Financial Corporation (Western). The Loan and Security
Agreement is incorporated herein by reference to Exhibit 1.15
hereto.
The Successor also entered into Security Agreement
dated as of January 31, 1997 (the "Trade Security Agreement")
with the trade creditors named therein (the "Trade Creditors")
and United States Trust Company of New York, as the collateral
agent for the Trade Creditors (the "Collateral Agent"). The
Trade Security Agreement is incorporated herein by reference to
Exhibit 1.16 hereto.
The Successor also entered into an Intercreditor and
Collateral Agency Agreement dated as of January 31, 1997 (the
"Trade Collateral Agent Agreement") with the Trade Creditors and
the Collateral Agent. The Trade Collateral Agent Agreement is
incorporated herein by reference to Exhibit 1.17 hereto.
The Successor also entered into an Intercreditor and
Subordination Agreement dated as of January 31, 1997 (the
"Intercreditor Agreement") with Congress, the Trade Creditors and
the Collateral Agent. The Intercreditor Agreement is
incorporated herein by reference to Exhibit 1.18 hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) The audited historical financial statements of the
Debtors, which are the businesses being acquired, for the fiscal
year ended January 31, 1996, are incorporated herein by reference
to the registrant's Annual Report on Form 10-K filed with the
Commission on May 15, 1996.
The unaudited financial statements of the Debtors for
the period ended October 31, 1996 are incorporated herein by
reference to the registrant's Quarterly Report on Form 10-Q filed
with the Commission on December 20, 1996.
(b) It is impracticable to file at this time unaudited
pro forma information of the Successor, as adjusted to give
effect to the Acquisition. The registrant anticipates that such
pro forma information will be filed prior to February 28, 1997.
(c) EXHIBITS
The following exhibits are incorporated by reference
into this Current Report.
Exhibit
Number
99.1 Findings of Fact, Conclusions of Law and Order
Confirming Debtors' First Amended Chapter 11 Plan Under
Chapter 11 of the Bankruptcy Code (filed as Exhibit 3.1
of the Prior 8-K and incorporated herein by reference).
99.2 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 (filed as Exhibits A, B and C of
Exhibit 3.1 of the Prior 8-K and incorporated herein by
reference).
1.1 Stipulation and Order Authorizing Name Changes in
Furtherance of Implementation of Debtors' First Amended
Chapter 11 Plan.
1.2 Certificate of Amendment to Certificate of
Incorporation of Wherehouse Entertainment, Inc. filed
with the Delaware Secretary of State on January 31,
1997.
1.3 Certificate of Amendment to Certificate of
Incorporation of WEI Acquisition Co. filed with the
Delaware Secretary of State on January 31, 1997.
1.4 Asset Purchase Agreement dated as of January 31, 1997
among Wherehouse Entertainment, Inc., WEI Holdings,
Inc. and WEI Acquisition Co., together with the
following Exhibits thereto:
Exhibit A -- Form of Bill of Sale
Exhibit B -- Form of Trademarks Assignment
Exhibit C -- Form of Patents Assignment
Exhibit D-1 -- Form of Tranche A Warrant Agreement
Exhibit D-2 -- Form of Tranche B Warrant Agreement
Exhibit D-3 -- Form of Tranche C Warrant Agreement
Exhibit E -- Form of Liquidation Agent Agreement
Exhibit F -- Form of Assumption Agreement
Exhibit G -- Form of Employee Benefits Assignment and
Assumption Agreement
1.5 Management Services Agreement dated as of January 31,
1997 among WEI Acquisition Co., Alvarez & Marsal, Inc.,
Antonio C. Alvarez II, A&M Investment Associates #3,
LLC, Cerberus Partners, L.P. and the Support Employees,
together with Exhibits C and I thereto. Conformed
copies of executed versions of the Exhibits A, B, D, E,
F, G and H to the Management Services Agreement are
attached as Exhibits 1.11, 1.9, 1.6, 1.7, 1.8, 1.12,
and 1.10 hereto, respectively.
1.6 Secured Recourse Promissory Note made January 31, 1997
by A&M Investment Associates #3, LLC in favor of WEI
Acquisition Co. in the principal amount of $335,000.
1.7 Secured Non-Recourse Promissory Note made January 31,
1997 by A&M Investment Associates #3, LLC in favor of
WEI Acquisition Co. in the principal amount of
$5,005,000.
1.8 Stock Pledge Agreement dated as of January 31, 1997
between A&M Investment Associates #3, LLC and WEI
Acquisition Co.
1.9 Stock Subscription Agreement dated as of January 31,
1997 between WEI Acquisition Co and A&M Investment
Associates #3, LLC.
1.10 Non-Transferrable Stock Option Agreement dated as of
January 31, 1997 between A&M Investment Associates #3,
LLC and WEI Acquisition Co.
1.11 Letter agreement dated as of January 31, 1997 between
WEI Acquisition Co. and Cerberus Partners, L.P.
1.12 Registration Rights Agreement dated as of January 31,
1997 between A&M Investment Associates #3, LLC and WEI
Acquisition Co.
1.13 Letter agreement dated as of October 14, 1996 among
Cerberus Partners, L.P., CS First Boston Securities
Corporation and Bank of America, Illinois.
1.14 Registration Rights Agreement dated as of January 31,
1997 among Cerberus Partners, L.P., CS First Boston
Securities Corporation and Bank of America, Illinois.
1.15 Loan and Security Agreement dated as of January 31,
1997 between WEI Acquisition Co. and Congress Financial
Corporation (Western).
1.16 Security Agreement dated as of January 31, 1997 between
WEI Acquisition Co. and United States Trust Company of
New York, as Collateral Agent; together with:
Exhibit A -- Form of Agreement Regarding
Additional Trade Creditor
1.17 Intercreditor and Collateral Agency Agreement dated as
of January 31, 1997 among WEI Acquisition Co., the
Trade Creditors named therein and United States Trust
Company of New York, as Collateral Agent; together
with:
Exhibit A -- Form of Agreement Regarding
Additional Trade Creditor
1.18 Intercreditor and Subordination Agreement dated as of
January 31, 1997 among the Trade Creditors named
therein, United States Trust Company of New York, as
Collateral Agent for the Trade Creditors and Congress
Financial Corporation (Western); together with:
Exhibit A -- Description of Trade Collateral
Exhibit B -- Form of Agreement Regarding
Additional Trade Creditor
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to the
signed on its behalf by the undersigned hereunto duly authorized.
WHEREHOUSE DISSOLUTION CO.
(Registrant)
Date: February 11, 1997 By /s/ Eliot Cobb
-----------------------------
(Signature)
Name: Eliot Cobb
Treasurer and Assistant
Secretary