TRANCHE C WARRANT AGREEMENT
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WARRANT AGREEMENT
RELATING TO THE ISSUANCE OF THE
TRANCHE C WARRANTS
WEI ACQUISITION CO.
(which will change its name to Wherehouse Entertainment, Inc.)
and
UNITED STATES TRUST COMPANY OF NEW YORK
Dated as of January 31, 1997
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TABLE OF CONTENTS
SECTIONS PAGE(S)
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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
i
(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
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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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .X-0
XXXXXXXX FORM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
iii
WARRANT AGREEMENT relating to the issuance of the Tranche C
Warrants, dated as of January 31, 1997, between WEI ACQUISITION CO. (which
will change its name to Wherehouse Entertainment, Inc.), a Delaware
corporation (the "Company"), and UNITED STATES TRUST COMPANY OF NEW YORK, as
Warrant Agent (the "Warrant Agent").
WITNESSETH:
WHEREAS, pursuant to the Debtors' First Amended Chapter 11 Plan, as
Revised for Technical Corrections dated October 4, 1996 and Supplemental
Amendments on December 2, 1996 and December 13, 1996 (the "POR") and an Asset
Purchase Agreement dated as of January 31, 1997 (the "ASSET PURCHASE
AGREEMENT"), the Company will acquire substantially all of the assets of
Wherehouse Entertainment, Inc., and its parent, WEI Holdings, Inc., which
companies are debtors and debtors-in-possession (collectively, the
"DEBTORS"), in Case No. 95-911 (HSB) (Jointly Administered) (the "BANKRUPTCY
CASE") in the Bankruptcy Court for the District of Delaware (the "BANKRUPTCY
COURT");
WHEREAS, as part of the purchase price for the assets of the
Debtors to be acquired by the Company, the Company proposes to issue up to
100,000 Common Stock Purchase Warrants hereinafter described (the "Warrants")
to purchase its Common Stock, par value $0.01 per share (the "Common Stock"),
each Warrant entitling the registered owner thereof to purchase one share of
Common Stock (each share of Common Stock purchasable upon the exercise of a
Warrant being referred to herein as a "WARRANT SHARE"); and
WHEREAS, the Company wishes the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing to act, in connection with the
issuance, transfer, exchange and exercise of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and for the
purpose of defining the terms and provisions of the Warrants and the
respective rights and obligations thereunder of the Company and the
registered owners of the Warrants (the "Holders"), the Company and the
Warrant Agent hereby agree as follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT.
The Company hereby appoints the Warrant Agent to act as agent for
the Company in accordance with the terms and conditions hereinafter set
forth, and the Warrant Agent hereby accepts such appointment.
SECTION 2. FORM OF WARRANTS.
2.1. FORM OF WARRANT CERTIFICATES. The text of the Warrant
certificate and of the form of election to purchase Warrant Shares shall be
substantially as set forth in Exhibit A attached hereto. The Warrant
certificates shall be appropriately
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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
certificates 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.
2
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.
3
SECTION 6. TERM OF WARRANTS; EXERCISE OF WARRANTS.
6.1. TERM OF WARRANTS. Subject to the terms of this Agreement,
each Holder shall have the right until 5:00 P.M., New York time, on January
31, 2004 (the seventh anniversary of the Effective Date (as defined in the
POR)) (the "Expiration Date"), to purchase from the Company the number of
fully paid and nonassessable Warrant Shares which the Holder may at the time
be entitled to purchase on exercise of such Warrants.
6.2. EXERCISE OF WARRANTS. Warrant Shares may be purchased upon
surrender to the Company at the office or agency of the Warrant Agent in the
City of New York, of the certificate or certificates evidencing the Warrants
to be exercised, together with the form of election to purchase on the
reverse thereof duly filled in and signed, which signature shall, if the
Warrant Shares are to be issued in the name of a person other than the Holder
of the Warrant, be guaranteed by a bank or trust company located in the
United States or a broker or dealer that is a member of a national securities
exchange, and upon payment to the Warrant Agent for the account of the
Company of the Exercise Price (as defined in and determined in accordance
with the provisions of Sections 10 and 11 hereof) for the number of Warrant
Shares in respect of which such Warrants are then being exercised. Payment
of the aggregate Exercise Price shall be made by certified or cashier's
check, or by any combination thereof.
Subject to Section 8 hereof, upon such surrender of Warrants and
payment of the Exercise Price as aforesaid, the Company shall issue and cause
to be delivered, with all reasonable dispatch, to or upon the written order
of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so
purchased upon the exercise of such Warrants. Such certificate or
certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of such Warrants and payment
of the Exercise Price, as aforesaid; PROVIDED, HOWEVER, that if such Warrants
are surrendered, and the Exercise Price is paid, on a Saturday, Sunday or
other day on which banking institutions in the City of New York are
authorized or obligated by law or executive order to close, or on a day when
the Common Stock transfer books of the Company are closed, the certificates
for the Warrant Shares in respect of which such Warrants are then exercised
shall be issuable as of the next succeeding Monday, Tuesday, Wednesday,
Thursday or Friday on which such banking institutions are not so authorized
or obligated to close (whether before or after the Expiration Date) and which
is a day on which the Common Stock transfer books of the Company are open.
The rights of purchase represented by the Warrants shall be exercisable, at
the election of the Holders thereof, either in full or from time to time in
part and, in the event that a certificate evidencing Warrants is exercised in
respect of less than all of the Warrant Shares specified therein at any time
prior to the expiration of such Warrants, a new certificate evidencing the
remaining Warrant or Warrants will be issued, and the Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new Warrant
certificates pursuant to the provisions of this subsection and of subsection
2.2
4
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
5
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.
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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
7
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
8
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
9
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
10
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
11
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
XXXXXXX & 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) Xxxxxxx &
Marsal, Inc. ("A&M") or any of its affiliates, in connection with the
management services to be provided by A&M to the Company under that certain
Management Services Agreement dated as of January 31, 1997 between the
Company, A&M, A&M Investment Associates #3, LLC, Xxxxxxx X. Xxxxxxx XX,
Cerberus Partners, L.P. and certain of A&M's employees.
SECTION 12. NO RIGHTS AS STOCKHOLDERS; NOTICES TO WARRANT HOLDERS.
(a) Nothing contained in this Agreement or in any of the Warrants
shall be construed as conferring upon the Holders or their transferees the
right to vote or to receive dividends or to consent or to receive notice as
shareholders in respect of any meeting of shareholders for the election of
directors of the Company or any other matter, or any rights whatsoever as
shareholders of the Company. If prior to the expiration of the Warrants:
(A) the Company shall declare a dividend or other distribution
on its Common Shares, other than (i) in cash as described in Section 11.2,
(ii) in other shares of Common Stock, or (iii) in rights to purchase shares
of Common Stock or other securities of the Company of the character
described in paragraph (a) of subsection 11.1; or
(B) the Company shall authorize the issuance to all holders of
its Common Stock of rights or warrants entitling them to subscribe for or
purchase any Common Stock or any other subscription
12
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.
13
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.
14
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.
15
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
16
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
17
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.
18
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., 00000
Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000-0000, Attention: Xxxxx Del
Xxxxxxxx and, if to the Warrant Agent, to United States Trust Company of New
York, Corporate Trust Division, 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx,
XX 00000-0000;, Attention: Xxxxx Xxxxx. 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
19
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.
20
SECTION 29. PLAN OF REORGANIZATION.
The Company will comply for the benefit of the Holders with
Section 8.04 of the POR.
21
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 /s/ Xxxxxx X. Xxxxxxxxx
-------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chief Financial Officer
and Secretary
UNITED STATES TRUST COMPANY OF NEW YORK,
as Warrant Agent
By /s/ Xxxxx X. Xxxxx
-------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President
S-1
TRANCHE C WARRANT TO PURCHASE COMMON STOCK VOID AFTER
5:00 P.M., NEW YORK TIME, ON JANUARY 31, 2004
WHEREHOUSE ENTERTAINMENT, INC.
This certifies that, for value received, __________
___________________ or registered assigns (the "Holder"), is entitled to
purchase from Wherehouse Entertainment, Inc., a Delaware corporation (the
"Company"), until 5:00 P.M., New York time, on January 31, 2004, or such other
date as may be provided for pursuant to the Warrant Agreement referred to below
(the "Expiration Date"), at the purchase price of $11.00 per share (the
"Exercise Price"), a number of shares of Common Stock, par value $0.01 per
share, of the Company (the "Common Stock") that is equal to the number of
Warrants represented hereby. The number of shares purchasable upon exercise of
this Warrant and the Exercise Price per share are subject to adjustment from
time to time as set forth in the Warrant Agreement referred to below.
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form on the reverse
side hereof duly executed (with a signature guarantee if required by the Warrant
Agreement) and simultaneous payment of the Exercise Price (subject to
adjustment) at the office or agency of the Company maintained for that purpose
in the City of New York. Initially, United States Trust Company of New York
will act as Warrant Agent (the "Warrant Agent"). Payment of such price shall be
made at the option of the holder hereof by certified or cashier's check. No
fractional shares will be issued upon the exercise of rights to purchase
hereunder, but the Company shall pay the cash value of any such fraction upon
the exercise of one or more Warrants, all as provided in the Warrant Agreement.
Upon any partial exercise of this Warrant Certificate, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the shares as to which this Warrant shall not have been exercised.
This Warrant Certificate may be exchanged at the office of the Warrant Agent
maintained for that purpose in the City of New York by surrender of this Warrant
Certificate properly endorsed (with a signature guarantee if required by the
Warrant Agreement), either separately or in combination with one or more other
Warrant Certificates, for one or more new Warrant Certificates for the same
aggregate number of shares as were evidenced by the Warrant Certificate or
Warrant Certificates exchanged.
This Warrant Certificate is transferable at the office of the Warrant
Agent maintained for that purpose in the City of New York in the manner and
subject to the limitations set forth in the Warrant Agreement.
The Warrants evidenced hereby are part of a duly authorized issue of
Common Stock Purchase Warrants with rights to purchase an aggregate of up to
1
100,000 shares of Common Stock (subject to adjustment) and are issued under and
in accordance with a Warrant Agreement dated as of January 31, 1997, between the
Company and the Warrant Agent and are subject to the terms and provisions
contained in the Warrant Agreement, to all of which the Holder of this Warrant
Certificate by acceptance hereof consents. Copies of the Warrant Agreement are
on file at the above mentioned office of the Warrant Agent and may be obtained
for inspection by the Holder hereof upon written request to the Warrant Agent.
The Holder hereof may be treated by the Company, the Warrant Agent,
and all other persons dealing with this Warrant Certificate as the absolute
owner hereof for any purpose and as the person entitled to exercise the rights
represented hereby, or to the transfer hereof on the books of the Company, any
notice to the contrary notwithstanding, and until such transfer on such books,
the Company, the Warrant Agent and all such other persons may treat the
registered holder hereof as the owner for all purposes.
The Warrants evidenced hereby do not entitle any Holder hereof to any
of the rights of a stockholder of the Company.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
2
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed by its duly authorized officers and the corporate seal hereunto
affixed.
Dated: WHEREHOUSE ENTERTAINMENT, INC.
By:
-------------------------------
Title:
ATTEST:
---------------------------
Name:
Title:
COUNTERSIGNED:
UNITED STATES TRUST COMPANY OF NEW YORK
WARRANT AGENT
By:
------------------------------
Name:
Title:
3
WHEREHOUSE ENTERTAINMENT, INC.
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, ______ shares of Common Stock, provided for therein, and requests
that certificates for such shares of Common Stock be issued in the name of:
Name:
------------------------------------------------------
Address:
------------------------------------------------------
----------------------------------------------------------------
Social Security or Taxpayer's
Identification Number:
---------------------------------------
and, if said number of shares of Common Stock shall not be all the Common Stock
purchasable thereunder, that a new Warrant Certificate for the balance remaining
of the Common Stock purchasable under the within Warrant Certificate be
registered in the name of the undersigned Warrantholder or his or her Assignee
as below indicated and delivered to the address stated below.
Name of Warrantholder
or Assignee:
----------------------------------
Address:
----------------------------------
Social Security or Taxpayer's
Identification Number:
----------------------------------
Signature:
-------------------
Dated:
-------------------
Signature Guaranteed:
NOTICE: The above signature must correspond with
the name as written upon the face of
this Warrant Certificate in every
particular, without alteration or
enlargement or any change whatever,
unless this Warrant has been assigned.
4
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.
5
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.
6
