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EXHIBIT 10.2
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is made as of May 30,
1997 between NEW ENGLAND AUDIO CO., INC., a Massachusetts corporation (the
"Company"), and PNC CAPITAL CORP, a Delaware corporation, SEACOAST CAPITAL
PARTNERS L.P., a Delaware limited partnership and EXETER VENTURE LENDERS, L.P.,
a Delaware limited partnership (each an "Initial Holder" and, collectively, the
"Initial Holders").
PREAMBLE
The Initial Holders and the Company are parties to a Note Purchase
Agreement dated as of even date herewith (as the same may be amended from time
to time, the "Note Purchase Agreement"). As a condition to the obligations of
the Initial Holders under the Note Purchase Agreement, the Company is required
to enter into this Agreement and issue to the Initial Holders stock purchase
warrants to purchase certain shares of its common stock (said warrants and all
warrants subsequently issued by the Company to the Initial Holders, their
successors and assigns pursuant hereto or pursuant to any of said warrants,
whether upon transfer, exchange or replacement thereof or otherwise being
hereinafter referred to collectively as the "Warrants", and each individually as
a "Warrant"). Therefore, the parties agree as follows with the intent to be
legally bound.
AGREEMENT
1. CERTAIN DEFINITIONS. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to those terms in the Note Purchase
Agreement. In addition to terms defined elsewhere in this Agreement the
following terms shall have the following meanings:
"Acquired Securities" means the Warrants and the Warrant Shares.
"Commission" means the United States Securities and Exchange Commission and
any successor federal agency administering the Securities Act.
"Common Stock" means all classes and categories of the Company's common
stock, whether now or hereafter issued or issuable, including without limitation
the Company's common stock, no par value.
"EBITDA" means the Company's net income for any period of determination
thereof, prior to provision for interest expenses, income taxes, amortization,
depreciation, management bonuses in excess of those set forth in the Company's
annual budget and projections as approved by its Board of Directors and
delivered to the
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Initial Holders pursuant to the Note Purchase Agreement plus 10% annually and
other expenses that in accordance with GAAP would not be considered in
calculating cost of goods sold, revenues or selling, general or administrative
expenses.
"Exercise Price" of a Share issuable upon the exercise of a Warrant means
$.001.
"Fair Market Value" of the Company means the fair market value of the
Company's equity securities. Upon the occurrence of an event requiring a
determination of Fair Market Value, the Company and the Holders seeking such
determination shall endeavor to agree upon the same. If they cannot so agree
within 15 days after such event, then Fair Market Value will be determined by a
nationally-recognized investment banking firm chosen jointly by the Company and
such Holders or, if there is a dispute as to the selection of such investment
banking firm, by the American Arbitration Association in Pittsburgh,
Pennsylvania or Boston, Massachusetts upon application of the Company or such
Holders. The Company and such Holders shall be afforded adequate opportunities
to discuss said valuation with the investment bankers. Said valuation shall be
valid for 90 days following its issuance. In the case of an exercise by the
Company of its call rights under Section 10, the expense of said valuation shall
be borne completely by the Company (unless otherwise required by SBA
regulations). In all other cases (unless otherwise required by SBA regulations),
the expense of said valuation shall be borne as follows: if the valuation is
within 10% of the Fair Market Value determined by the Company's Board of
Directors (the "Company Valuation"), then said expense shall be borne one-half
by the Company and one-half by the Holders seeking such determination; if the
valuation is more than 10% higher than the Company Valuation, then said expense
shall be borne completely by the Company; if the valuation is more than 10%
lower than the Company Valuation, then said expense shall be borne completely by
the Holders seeking such determination.
"Formula Value" of the Company means, as of any date, the value of the
Company as established by the following formula:
7 x EBITDA based on the trailing 12 month income statement of the Company,
prepared in accordance with GAAP, for the 12 month period ended on the last
day of the month immediately prior to the month in which the date of
determination occurs, less funded and other long term debt, plus cash items
as presented in the Company's balance sheet, prepared in accordance with
GAAP, for the month ended prior to such date.
"Holder" and "Holders" means each Initial Holder and their registered
successors and assigns of the Acquired Securities.
"Outstanding Warrants" means (a) the Warrants, (b) the Common Stock Warrant
dated as of May 30, 1997 issued by the Company to HiFi Buys Incorporated and (c)
the
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Warrants issued to the holders of the Company's Series A Redeemable Convertible
Preferred Stock pursuant to that certain Warrant and Debenture Commitment dated
as of March 7, 1997.
"Preferred Stock" means the Company's Series A Redeemable Convertible
Preferred Stock, no par value, and the Company's Series B Redeemable Convertible
Preferred Stock, no par value.
"Preferred Stock Certificate" means the Company's Amended and Restated
Certificate of Vote of Directors Establishing Series A Redeemable Convertible
Preferred Stock and Series B Redeemable Convertible Preferred Stock.
"Put/Call Value" of a Warrant Share means the greater of (a) the Fair
Market Value of the Company divided by the number of Shares Deemed Outstanding
or (b) the Formula Value of the Company divided by the number of Shares Deemed
Outstanding. The Put/Call Value of a Warrant shall be the Put/Call Value of a
Warrant Share, multiplied by the number of Shares issuable upon the exercise of
such Warrant, minus the aggregate Exercise Price for Warrant Shares under such
Warrant. Put/Call Value shall be determined as of the date when a Holder gives
notice exercising its put rights under Section 9, or the Company gives notice
exercising its call rights under Section 10, as applicable
"Qualified Public Offering" means any underwritten public offering of
Common Stock the net proceeds of which to the Company and/or the selling holders
(if any) (after deducting any underwriting fees and commissions) are at least
$25 million; provided, that if such public offering is effected prior to the
date when all obligations of the Company under the Note Purchase Agreement and
the Notes issued pursuant thereto (but not under the other Transaction Document,
including this Agreement and the Warrants) have been satisfied in full, then in
the course of such public offering the underwriter shall issue its firm
commitment to, and thereafter shall, include in the offering a sufficient number
of Shares to ensure that following said offering the proceeds to the Company
shall be adequate to permit the Company to satisfy such obligations in full
after it has paid all fees and expenses incurred in connection with such
offering and made all payments with respect to the Senior Indebtedness which are
required because of such offering.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Securities Act" means the Securities Act of 1933 and all rules,
regulations and orders issued thereunder, as any of the same may be amended.
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"Share" means one share of Common Stock.
"Shares Deemed Outstanding" means the total number of Shares
outstanding on a fully diluted basis, including without limitation all
Shares obtainable upon exercise of the Warrants. For the purposes of this
Agreement (a) all Shares which are issuable upon the exercise of any Stock
Purchase Rights shall be deemed to be outstanding upon the issuance of such
Stock Purchase Rights whether or not such Stock Purchase Rights are immediately
exercisable and (b) the consideration received by the Company in respect of
each Share which is deemed to be outstanding pursuant to clause (a) above shall
be deemed to be (i) the sum of the aggregate amount received or receivable by
the Company as consideration for the issuance or sale of such Stock Purchase
Rights plus the minimum aggregate amount of consideration payable to the
Company upon the exercise thereof divided by (ii) the maximum aggregate number
of Shares issuable by the Company upon the exercise thereof. If and to the
extent that any Stock Purchase Rights shall expire or terminate without being
exercised, the number of Shares which may be acquired upon the exercise of each
Warrant on the date of such expiration or termination shall be readjusted to
the number that would have been in effect at such time had such rights never
existed and the Shares issuable upon conversion of such expired or terminated
rights shall no longer be deemed outstanding.
"Stock Purchase Right" means (a) evidence of indebtedness, warrants, stock
and other securities which are convertible into or exchangeable for Common
Stock, with or without the payment of additional consideration and either
immediately or upon the arrival of a specified date or the happening of a
specified event, and (b) options and other rights to subscribe for or purchase
any Common Stock.
"Warrant Shares" means the Shares issued or issuable upon the exercise of a
Warrant.
2. WARRANT PURCHASE. Contemporaneous with the execution of this Agreement,
the Company shall issue to each Initial Holder a Warrant in the form attached
hereto as EXHIBIT A, which Warrants, evidence the Initial Holders' right to
purchase at the Exercise Price up to 959,700 shares in the aggregate of the
Company's common stock, no par value. Notwithstanding anything to the contrary
set forth in the Note Purchase Agreement, the parties agree to allocate
$14,999,999.00 in the aggregate to the Notes and $1.00 in the aggregate to the
Warrants for all tax and reporting purposes.
3. ANTIDILUTION. Subject to Section 4 whenever after the date hereof and
prior to the closing of a Qualified Public Offering the Company shall propose to
issue or sell any Shares (or shall issue or sell any Stock Purchase Right) upon
terms which are less than Fair Market Value, the number of Warrant Shares shall
be adjusted to the number of Shares determined as follows:
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(a) The Fair Market Value of the Company immediately prior to such issuance
or sale (each event being an "Issuance") shall be divided by the number of
Shares Deemed Outstanding immediately prior to the Issuance (the "Pre-Dilution
Share Value").
(b) The number of Warrant Shares immediately prior to the issuance shall be
multiplied by the Pre-Dilution Share Value (the "Pre-Dilution Warrant Value").
(c) The dollar proceeds from the issuance shall be added to the Fair Market
Value of the Company immediately prior to the issuance to determine the Fair
Market Value of the Company immediately after the issuance.
(d) The Pre-Dilution Warrant Value shall be divided by the Fair Market
Value of the Company immediately after the issuance and the resulting quotient
shall be rounded up or down to the nearest one-thousandth (the "Adjusted Warrant
Percentage").
(e) The result obtained by (i) subtracting the number of Warrant Shares
immediately prior to the issuance from the number of Shares Deemed Outstanding
immediately prior to the Issuance and (ii) adding the number of Shares issued in
the Issuance, each on a fully diluted basis (the "Post-Issuance Non-Warrant
Shares"), shall be divided by the result of one minus the Adjusted Warrant
Percentage, and the resulting quotient shall be rounded up or down to the
nearest one-thousandth (the "Adjusted Shares Deemed Outstanding").
(f) The adjusted number of Warrant Shares shall be equal to (i) the
Adjusted Shares Deemed Outstanding minus (ii) the Post-Issuance Non-Warrant
Shares.
For Example:
If the Company had (i) 1,000 Shares Deemed Outstanding immediately prior to
the Issuance, (ii) 100 Warrant Shares immediately prior to the Issuance,
(iii) Fair Market Value immediately prior to the Issuance of $1,000, (iv)
1,000 Shares issued in the Issuance and (v) proceeds of $500 from the
Issuance then:
(A) $1,000 [divide] 1,000 Shares = $1.00 per Share
(Pre-Dilution Share Value)
(B) 100 Shares x $1.00 = $100
(Pre-Dilution Warrant Value)
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(C) $500 + $1,000 = $1,500
(Fair Market Value of the Company after Issuance)
(D) $100 / $1,500 = .0667
(Adjusted Warrant Percentage
(E) 900 Shares + 1,000 Shares = 1,900 Shares
(Post-Issuance Non-Warrant Shares)
(F) 1,900 Shares / (1-.0667) = 2,035.79 Shares
(Adjusted Shares Deemed Outstanding)
(G) 2,035.79 Shares - 1,900 Shares = 135.79 Shares
(Adjusted Number of Warrant Shares)
4. EXCEPTIONS TO ANTIDILUTION PROVISIONS. The antidilution provisions of
Section 3 shall not apply if an adjustment is otherwise made pursuant to Section
5 below, and shall not apply to sales, issuances or distributions of Shares or
Stock Purchase Rights (a) consisting of stock options which have been, or in the
future may be, issued to employees of the Company's 1995 Stock Option Plan as
currently in effect or Shares issuable upon the exercise of such options, (b)
upon the exercise of the Outstanding Warrants or the conversion of the Preferred
Stock, (c) consisting of warrants issued pursuant to Section 6.4 of the
Preferred Certificate as currently in effect or Shares issuable upon the
exercise of such Warrants or (d) by way of dividend or other distribution on
account of any of the foregoing items (a) through (c); provided, that if any of
the foregoing contain antidilution provisions which are triggered by an
Issuance described in Section 3, then the adjustments made as a result of such
antidilution provisions shall be taken into account in determining the
adjustment to the Warrants pursuant to Section 3.
5. OTHER ADJUSTMENTS TO WARRANTS.
(a) If the Company shall at any time (i) make a dividend or other
distribution to holders of Shares in Shares or in Stock Purchase Rights, (ii)
subdivide its outstanding Shares into a greater number of Shares by means of a
stock split or otherwise (iii) combine its outstanding Shares into a smaller
number of Shares, the number of Shares which may be acquired upon the exercise
under each Warrant shall be adjusted so that the Holder of a Warrant exercised
after the record date fixing shareholders to be affected by such event shall be
entitled to receive upon the exercise of such Warrant the number of Shares
which such Holder would have been entitled to receive after the happening of
such event had such Warrant been exercised immediately prior to such record
date.
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(b) In the case of a capital reorganization or reclassification of the
stock of the Company, a consolidation or merger of the Company with or into
another entity or a sale or other disposition of all or substantially all the
assets of the Company, in each case occurring prior to the exercise of a
Warrant, the Holder of any Warrant which is still outstanding after such event
shall be entitled to obtain the number of Shares or other securities or other
property which such Holder would have been entitled to obtain if such Holder had
exercised its Warrant immediately prior to such reorganization,
reclassification, consolidation, merger or conveyance; and, in each case,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the Holder to the end
that the provisions set forth herein (including provisions with respect to
adjustments in the number of Shares covered hereby) shall thereafter be
applicable, as nearly as possible in relation to stock or other securities or
property thereafter deliverable upon exercise of the Warrants.
6. CERTIFICATE SHOWING ADJUSTMENTS. Whenever the number of Shares covered
by a Warrant is adjusted, the Chief Financial Officer or Treasurer of the
Company shall compute the adjusted number of Shares in accordance with the
applicable provisions of this Agreement and prepare and deliver to each Holder a
certificate setting forth the adjustment and showing in detail the facts upon
which such adjustment is based.
7. NOTICE IN CERTAIN CIRCUMSTANCES. In case at any time prior to the date
when a Qualified Public Offering occurs the Company proposes to:
(a) declare any dividends or other distributions (whether in cash or
other property) in respect of the Common Stock;
(b) issue any Shares or any Stock Purchase Rights (except pursuant to
the exercise of Warrants or other Stock Purchase Rights in accordance with their
terms and except for issuances described in Section 4);
(c) effect a capital reorganization or reclassification of the Shares of
the Company, a consolidation or merger of the Company with or into another
entity or a sale or other disposition of all or substantially all of its assets;
or
(d) effect a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall give to each Holder notice of such event at least 30 days
(but not more than 90 days) prior to the earlier to occur of (x) the date when
such Holder must be a holder of Shares in order to participate in such event (if
applicable) or (y) the date when such event is scheduled to occur.
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8. PREEMPTIVE RIGHTS. The Holders shall have such preemptive rights as are
granted to holders of Warrants and Warrant Shares under the Certificate of
Designation.
9. PUT RIGHTS.
(a) From and after the earliest to occur of (i) the fifth anniversary of
the date hereof, (ii) the date when the Company consolidates or merges with any
other entity (but only if such other entity is the survivor of such
consideration or merger) or conveys all or a substantial portion of its assets
to another entity or (iii) the date when a Change of Control occurs, each Holder
shall have the right in its sole discretion to "put" to the Company (force the
purchase by the Company of) all or any part of its Acquired Securities for their
Put/Call Value.
(b) Upon receipt of a notice that a Holder intends to exercise its put
rights hereunder, the Company and such Holder shall promptly determine the
Put/Call Value. The Company shall purchase the Acquired Securities being put for
cash within 30 days after the Put/Call Value is determined; provided, that the
Company may extend such 30-day period by an additional 60 days if it agrees to
pay interest at the rate specified in subsection (c)(i) below from the end of
such 30-day period through the date of payment.
(c) Notwithstanding anything in this Section to the contrary, if the
Company is in default with respect to the Senior Indebtedness, or if the Company
shall determine in good faith that honoring any put right would cause a default
with respect to the Senior Indebtedness, violate any Governmental Rule
applicable to the Company, cause the Company to be insolvent or materially
impair the ability of the Company to operate as a going concern, then the
Company shall promptly notify the Holder exercising such put right of such fact.
In the circumstances described above, a Holder (in lieu of its right to receive
cash as provided above) shall have the right to elect, at its sole option by
giving notice to the Company to such effect, to either:
(i) exercise its put rights in return for the Company's obligation to pay
the purchase price for the Acquired Securities being put (including partial
payments thereof and accrued interest thereon) as soon as the Company ceases to
be in default with respect to the Senior Indebtedness and the Company can do so
without causing a default under the Senior Indebtedness, a violation of
Governmental Rules or the insolvency of the Company or without materially
impairing the ability of the Company to operate as a going concern, but in no
event later than three years from the date when such obligation is given,
together with interest accrued on the unpaid balance thereof from the date when
the purchase price for the Acquired Securities being put is determined until the
date when such Holder receives payment in full at a rate per annum equal to the
greater of (A) the rate announced by PNC Bank in
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Pittsburgh, Pennsylvania from time to time as its prime rate plus 4% or (B) 14%
(and, in each case, a default rate equal to the rate otherwise in effect plus
3%), which obligation shall be evidenced by a promissory note of the Company
satisfactory in form and substance to each Holder receiving the same, shall be
secured by a pledge of the Acquired Securities being put and, if required by
the holders of the Senior Indebtedness, shall be subordinate in right of payment
to the Senior Indebtedness pursuant to a subordination agreement substantially
similar to that which is currently in effect between the Initial Holders and the
Senior Agent with respect to the Notes.
(ii) withdraw such exercise of its put rights,
in which case the Company shall inform such Holder as soon as the Company and
can honor such put rights, in whole or in part, without causing such a default
or violation.
(d) The put rights granted to the Holders under this
Section shall terminate upon the closing of a Qualified Public Offering.
10. CALL RIGHTS.
(a) At any time after the sixth anniversary of the date
hereof, and so long as no Event of Default under and as defined in the Note
Purchase Agreement has occurred and is continuing, the Company shall have the
right in its sole discretion to "call" (force the sale by the Holders of) all,
but not less than all, of the Acquired Securities for their Put/Call Value.
(b) If the Company desires to exercise its call rights
hereunder, it shall give notice to the Holders to such effect, whereupon the
Company and the Holders shall promptly determine the Put/Call Value. The Company
shall purchase the Acquired Securities for cash within 30 days after the
Put/Call Value is determined.
(c) Notwithstanding anything in this Section to the
contrary, if a Recapture Event (defined below) shall (i) occur within 12 months
after the closing described in subsection (b) above or (ii) be approved by the
Company's Board of Directors within 12 months after such closing and occur
within 24 months after such closing then, within 10 days after the occurrence of
such Recapture Event (or, if a redetermination of the Put/Call Value is made
pursuant to subsection (d) below, within 10 days after such redetermination),
the Company shall pay to each Holder an amount equal to the product of (A) the
difference, if any, between the value of one share of common stock immediately
after such Recapture Event and the Put/Call Value assigned to one Warrant Share
as determined in connection with such call multiplied by (B) the number of such
Warrant Holder's Warrant Shares and/or the number of Warrant Shares issuable
upon the exercise of such Warrant Holder's Warrants which were subject to such
call.
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(d) A "Recapture Event" means any of the following events
which results in the Common Stock having a higher value, on a per share basis,
than the Put/Call Value of one Warrant Share as determined in connection with
the exercise by the Company of its call rights: (i) a merger or consolidation
with any other entity (but only if such other entity is the survivor of such
consolidation or merger); (ii) a sale of all or substantially all of the
Company's assets; or (iii) a public offering of the Common Stock. If a value is
assigned to the Company's Common Stock as a result of such Recapture Event, then
such value shall be the value which is used in calculating the amount, if any,
to be paid to the Holders pursuant to subsection (c) above. If no such value is
assigned then, upon the request of the Holders, the Put/Call Value shall be
redetermined as of the date of the occurrence of such Recapture Event.
(e) The call rights granted to the Company under this
Section shall terminate upon the closing of a Qualified Public Offering.
11. COVENANTS OF THE COMPANY.
(a) The Company shall not engage in any public offering
of the Common Stock or any of its other securities unless the first of such
public offerings is a Qualified Public Offering.
(b) At all times prior to the Occurrence of a Qualified
Public Offering, the Company shall promptly notify the Holders of any change of
more than 2% in the holders of the Shares (other than Warrant Shares) or
Preferred Stock.
(c) The Company will not, by amendment to its Articles of
Organization or through any reorganization, reclassification, consolidation,
merger, sale of assets, dissolution, issue or sale of securities or other
action, avoid or seek to avoid the observance or performance of any of the terms
of this Agreement, but will at all times in good faith carry out all such terms
and take all such action as may be necessary or appropriate to protect the
rights of the Holders.
(d) The covenants of the Company set forth in Sections
4.01 through 4.08, 5.07 and 5.12 of the Note Purchase Agreement are hereby
incorporated herein by reference as if the same were set forth in full herein.
Such covenants shall not terminate upon the payment in full of the Notes, or the
termination of the Note Purchase Agreement, but shall remain in full force and
effect for so long as any Holder has put rights under Section 9.
(e) At all times prior to the closing of a Qualified
Public Offering the Holders shall receive at least seven days prior notice of,
and their representatives shall have the right to attend, all meetings of the
Boards of Directors of the Company and its Executive Committee (if applicable),
and shall receive all information which is prepared by or on behalf of the
Company in conjunction with any such meeting. The
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Company shall promptly reimburse the representatives of the Holders for all
reasonable out-of-pocket expenses incurred by them in attending such meetings.
12. REPRESENTATIONS AND WARRANTIES OF THE HOLDERS. Each Initial
Holder hereby severally, but not jointly, represents and warrants to the Company
as set forth in this Section and each Holder other than an Initial Holder shall,
upon its acquisition of a Warrant, be deemed to represent and warrant to the
Company (severally and not jointly) as set forth in this Section. The
representations and warranties set forth in this Section shall be deemed to be
remade by a Holder from time to time to the Company when a Warrant is exercised
by such Holder.
(a) Each Holder is acquiring the Acquired Securities for its
own account with no present intention of reselling or otherwise distributing the
same.
(b) Each Holder is an "accredited investor" as defined in
Regulation D under the Securities Act and has (i) substantial knowledge and
experience in financial and business matters (including investing in companies
similar to the Company) such that it can evaluate and invest in securities of
speculative companies and is capable of evaluating the merits and risks of an
investment in such securities (including the Acquired Securities) and (ii) such
financial condition and income that it is under no present need to dispose of
any portion of the Acquired Securities to satisfy any existing or contemplated
undertaking or indebtedness and such that it can bear, the economic risk of an
investment in the Acquired Securities.
(c) Each Holder has independently examined and investigated
the Company in making its decision to purchase the Acquired Securities. Each
Holder acknowledges that the Company has made available to it the opportunity to
obtain such information as it has deemed necessary to evaluate the merits and
risks of an investment in the Acquired Securities, and that it has no knowledge
of any additional information regarding the Company which it wishes to receive
in order to make an informed investment decision with respect to the Acquired
Securities.
(d) Each Holder acknowledges that: (i)it has acquired the
Warrant issued to it after extensive negotiations with the Company concerning
the terms of its investment; (ii) the Company is relying upon an exemption under
the Securities Act predicated upon such Holder's representations and warranties
in this Section in connection with the issuance of the Acquired Securities;
(iii) none of the Acquired Securities have been registered under the Securities
Act and none of them may be sold, pledged, transferred or otherwise disposed of
unless such Acquired Securities are so registered or an exemption from such
registration is available and unless any such proposed sale, pledge, transfer or
disposition is effected in compliance with state securities laws; (iv) the
Acquired Securities may only be registered under the Securities Act by the
Company; (v) there is no trading market in the Acquired Securities; (vi) the
Acquired Securities are being sold in reliance upon an exemption from the
registration
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requirements of the Securities Act afforded to private offerings; and (vii) in
light of the foregoing, each Holder may not be able to liquidate its investment
in any Acquired Securities at any given time, and each Holder is prepared to
bear that economic risk.
13. RESTRICTIONS ON TRANSFERABILITY.
(a) The Holders acknowledge that the Acquired Securities
are subject to certain restrictions on transfer set forth in that certain
Tag-Along, Transfer Restriction and Bring-Along Agreement dated as of November
28, 1995 among the Company and its shareholders, as amended, and that the
Acquired Securities may not be transferred in violation of such restrictions.
(b) Unless and until otherwise permitted by this Section
or unless distributed pursuant to an effective registration statement:
(i) Each Warrant shall be stamped or otherwise
imprinted with a legend in substantially the following form:
NEITHER THIS WARRANT NOR THE SECURITIES FOR WHICH IT IS
EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY APPLICABLE STATE SECURITIES LAWS, AND NO TRANSFER
OF THIS WARRANT OR THE SECURITIES ISSUABLE UPON ITS EXERCISE
MAY BE MADE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH LAWS OR THE AVAILABILITY OF EXEMPTIONS
FROM THE REGISTRATION PROVISIONS THEREOF. THIS WARRANT AND THE
SECURITIES FOR WHICH IT IS EXERCISABLE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND CERTAIN OTHER RESTRICTIONS SET
FORTH IN A TAG-ALONG, TRANSFER RESTRICTION AND BRING-ALONG
AGREEMENT DATED AS OF NOVEMBER 28, 1995, AS AMENDED (WHICH
AGREEMENT IS ON FILE WITH THE COMPANY'S SECRETARY).
(ii) Each certificate for Warrant Shares shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES
LAWS, AND NO TRANSFER OF SUCH SECURITIES MAY BE MADE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS
OR THE AVAILABILITY OF EXEMPTIONS FROM THE REGISTRATION
PROVISIONS THEREOF. SUCH SECURITIES ARE SUBJECT TO
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RESTRICTIONS ON TRANSFERABILITY AND CERTAIN OTHER RESTRICTIONS
SET FORTH IN A TAG-ALONG, TRANSFER RESTRICTION AND BRING-ALONG
AGREEMENT DATED AS OF NOVEMBER 28, 1995, AS AMENDED (WHICH
AGREEMENT IS ON FILE WITH THE COMPANY'S SECRETARY).
14. ACTION BY HOLDERS. Whenever any consent, waiver, agreement or
other action of the Holders as a group is required or permitted hereunder such
action shall be effective if it is taken by Holders who hold Warrants or Warrant
Shares representing at least 66-2/3% of the Warrant Shares issuable upon the
exercise of all Warrants; provided, that if such action affects less than all of
the Holders then it need only be taken by Holders who hold Warrants or Warrant
Shares representing a majority of the Warrant Shares issuable upon the exercise
of all Warrants held by the affected Holders.
15. AMENDMENTS. This Agreement may be amended or terminated only
by a writing signed by the Company and the Holders necessary to take such action
pursuant to Section 14, and any such amendment or termination shall be effective
only to the extent specifically set forth in such writing.
16. COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts, and by each of the parties on separate
counterparts, each of which, when so executed, shall be deemed an original, and
all of which shall constitute but one and the same instrument. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of a manually executed counterpart of this Agreement, but
the failure to deliver a manually executed counterpart shall not affect the
validity, enforceability or binding effect of this Agreement.
17. ENTIRE AGREEMENT. This Agreement contains the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior written and oral agreements, and all contemporaneous oral agreements,
relating to such matters.
18. EQUITABLE RELIEF. The parties acknowledge and agree that money
damages may not be an adequate remedy for any breach of the provisions hereof
and that any party may apply to a court of competent jurisdiction for specific
performance or injunctive relief in order to enforce or prevent a breach of this
Agreement.
19. GOVERNING LAW. This Agreement shall be a contract under the
laws of the Commonwealth of Massachusetts and for all purposes shall be governed
by and construed and enforced in accordance with the laws of said Commonwealth.
20. NOTICES. All notices, consents, requests, demands and other
communications required or permitted hereunder:
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(a) shall be in writing;
(b) shall be sent by messenger, certified or registered U.S.
mail, a reliable express delivery service or telecopier (with a copy sent by one
of the foregoing means), charges prepaid as applicable, to the appropriate
address(es) or number(s) set forth below; and
(c) shall be deemed to have been given on the date of receipt
by the addressee (or, if the date of receipt is not a business day, on the first
business day after the date of receipt), as evidenced by (i) a receipt executed
by the addressee (or a responsible person in his or her office), the records of
the Person delivering such communication or a notice to the effect that such
addressee refused to claim or accept such communication, if sent by messenger,
U.S. mail or express delivery service, or (ii) a receipt generated by the
sender's telecopier showing that such communication was sent to the appropriate
number on a specified date, if sent by telecopier.
All such communications shall be sent to the following addresses or numbers, or
to such other addresses or numbers as any party may inform the others by giving
five business day's prior notice:
If to the Company: With a copy to:
New England Audio Company, Inc. Goulston & Storrs, P.C.
00 Xxxxxx Xxxx 000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000 Xxxxxx, XX 00000-0000
Attn: Xxxxxxx Xxxxx Attn: Xxxx Xxxxxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
If to PNC Capital Corp: With a copy to:
PNC Capital Corp Xxxxx & Xxxxxxx, P.C.
One PNC Plaza 2900 CNG Tower
00xx Xxxxx 000 Xxxxxxx Xxxxxx
000 Xxxxx Xxxxxx Xxxxxxxxxx, XX 00000
Xxxxxxxxxx, XX 00000 Attn: Xxxxxxx X. Xxxxxx
Attn: Xxxxxxx Xxxxx Fax: (000) 000-0000
Fax: (000) 000-0000
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15
If to Seacoast Capital With a copy to:
Seacoast Capital Xxxxxx & Xxxx, LLP
00 Xxxxxxxxx Xxxx 0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000 Xxxxxx, XX 00000
Attn: Xxxx Xxxxxxxxxxx Attn: Xxxxx X. Xxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
If to Exeter Venture Lenders, L.P. With a copy to:
Exeter Venture Lenders, X.X. X'Xxxxxxxx, Graev & Karabell, LLP
00 Xxxx 00xx Xxxxxx 00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxx Attn: Xxxxxxx X. Xxxxxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
If to any other Holder, to the address or number supplied by such Holder to the
Company for the purpose of giving notice.
21. SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
22. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties and their respective heirs,
successors and permitted assigns.
23. WAIVERS. The due performance or observance by the parties of their
respective obligations hereunder shall not be waived, and the rights and
remedies of the parties hereunder shall not be affected, by any course of
dealing or performance or by any delay or failure of any party in exercising any
such right or remedy. The due performance or observance by a party of any of its
obligations hereunder may be waived only by a writing signed by the party or
parties against whom enforcement of such waiver is sought, and any such waiver
shall be effective only to the extent specifically set forth in such writing.
24. TRANSFER BY EXETER. The parties acknowledge that Exeter Venture
Lenders, L.P. intends to transfer to Exeter Equity Partners, L.P. a 50% interest
in its Warrant promptly after the closing of the transactions contemplated
hereby and hereby consent to such transaction.
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SIGNATURE PAGE TO WARRANT PURCHASE AGREEMENT
NEW ENGLAND AUDIO CO., INC.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Title: President
----------------------------
PNC CAPITAL CORP
By: /s/ Xxxxxxx Xxxxx
-------------------------------
Title: Vice President
----------------------------
SEACOAST CAPITAL PARTNERS, L.P.
By: Seacoast Capital Corporation,
its General Partner
By: /s/ X. X. Xxxxxxxxxxx
-------------------------------
Title: Vice President
----------------------------
EXETER VENTURE LENDERS, L.P.
By: Exeter Venture Advisors, Inc.
By: /s/ Xxxxx X. Xxx
-------------------------------
Title:
----------------------------
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EXHIBIT A
NEITHER THIS WARRANT NOR THE SECURITIES FOR WHICH IT IS EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES
LAWS, AND NO TRANSFER OF THIS WARRANT OR THE SECURITIES ISSUABLE UPON ITS
EXERCISE MAY BE MADE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH LAWS OR THE AVAILABILITY OF EXEMPTIONS FROM THE REGISTRATION PROVISIONS
THEREOF. MOREOVER, THIS WARRANT AND THE SECURITIES FOR WHICH IT IS EXERCISABLE
ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND CERTAIN OTHER RESTRICTIONS SET FORTH
IN A TAG-ALONG, TRANSFER RESTRICTION AND BRING-ALONG AGREEMENT DATED AS OF
NOVEMBER 28, 1995, AS AMENDED (WHICH AGREEMENT IS ON FILE WITH THE COMPANY'S
SECRETARY).
NEW ENGLAND AUDIO CO., INC.
May __,1997 Certificate No. _______
STOCK PURCHASE WARRANT
____________ Shares of Common Stock
This is to certify that, for value received, __________________________
(the "Initial Holder"), its registered successors and assigns, is entitled upon
the due exercise hereof to purchase (subject to adjustment as provided in the
Purchase Agreement) __________ shares of the Common Stock, no par value (such
stock, together with such other securities or properties as may be issued upon
the exercise hereof, being referred to herein as the "Stock"), of New England
Audio Co., Inc., a Massachusetts corporation (the "Company"), for the price of
$.001 per share (the "Exercise Price") and to exercise the other rights, powers
and privileges provided for herein, all upon the terms and subject to the
conditions specified herein.
1. CERTAIN DEFINITIONS. Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to such terms in that certain Warrant
Purchase Agreement dated as of May __, 1997 between the Company, the Initial
Holder and certain other parties (the "Purchase Agreement") unless the context
otherwise requires.
2. EXERCISE. This Warrant may be exercised by the registered Holder
hereof at any time during the period commencing on the date hereof and ending at
5:00 p.m., Boston, Massachusetts time on the Expiration Date specified in
Paragraph 9 by surrender of this Warrant at the Company's principal offices at
00 Xxxxxx Xxxx,
00
Xxxxxx, Xxxxxxxxxxxxx 00000 (or such other address as the Company may advise the
Holder by notice given in the manner provided in the Purchase Agreement), with
the form of election to subscribe attached hereto as ANNEX A duly executed and
upon tender to the Company of the Exercise Price. Upon the date the Company
receives all of the foregoing from the Holder this Warrant shall be deemed to
have been exercised and the Holder exercising the same to have become a holder
of record of shares of Stock purchased hereunder for all purposes and
certificates for such shares shall be delivered to such Holder or its transferee
within a reasonable time (not exceeding ten business days) after this Warrant
shall have been exercised. If an exercise of this Warrant is for less than all
of the Stock then, concurrently with its delivery of such certificates, the
Company shall deliver to such Holder (or, so long as such Holder has also
complied with Paragraph 6, its transferee) a new warrant or warrants which shall
be of like tenor and date as this Warrant and shall represent in the aggregate
the right to subscribe for and purchase the remaining number of shares which may
be subscribed for and purchased hereunder.
3. PAYMENT OF EXERCISE PRICE. Upon any exercise of this Warrant the
Exercise Price may be paid, in the sole discretion of the Holder, by (a)
tendering the same to the Company in cash, (b) setting-off the same against any
debt owed by the Company to the Holder or (c) tendering to the Company such
number of shares of Stock issuable upon the exercise of this Warrant as have a
value equal to the Exercise Price. If the Holder shall choose option (b) or (c)
above then, in lieu of tendering the Exercise Price upon the exercise this
Warrant, it shall tender to the Company a notice specifying the manner in which
it has elected to pay the Exercise Price.
4. TAXES. If any tax (other than income tax) is payable by the Holder
by reason of the issuance of any certificates representing Stock, such tax shall
be paid by the Company; provided, that the Company shall not be required to pay
any tax which may be payable in respect of the issuance of any such certificate
in a name other than that of the registered Holder of this Warrant, and the
Company shall not be required to issue any such certificate in a name other than
such Holder's unless and until any tax payable by reason of such issuance has
been paid.
5. WARRANT REGISTER. The Company shall at all times while any portion
of this Warrant remains outstanding and exercisable keep and maintain at its
principal office a register (the "Warrant Register") in which the registration,
transfer and exchange of this Warrant shall be recorded. The Company shall not
at any time, except upon the dissolution, liquidation or winding up of the
Company, close such register so as to result in preventing or delaying the
exercise, transfer or exchange of this Warrant. If at any time the Company shall
appoint an agent (the "Warrant Agent") to maintain such register, the Company
shall promptly give notice in the manner provided in the Purchase Agreement to
the registered Holder hereof of the name of such Warrant Agent and of the place
or places at which this Warrant may be presented for transfer, exchange or
exercise. The terms of the agreement between the Company and any
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Warrant Agent at any time in effect will be in conformity with the terms of this
Warrant and the Purchase Agreement.
6. TRANSFER. Subject to compliance with applicable securities laws and
with the restrictions on transfer set forth in the Tag-Along, Transfer
Restriction and Bring-Along Agreement among the Company and certain of its
shareholders, as amended, this Warrant and all rights hereunder are transferable
on the books of the Company by the registered Holder hereof in person or by duly
authorized attorney upon surrender of this Warrant at the address set forth in
Paragraph 2, together with the form of transfer authorization attached hereto as
ANNEX B duly executed. Absent any such transfer, the Company may deem and treat
the registered Holder of this Warrant at any time as the absolute owner hereof
for all purposes and shall not be affected by any notice to the contrary.
7. EXCHANGE. This Warrant is exchangeable, upon the surrender hereof by
the Holder at the address set forth in Paragraph 2 together with the form of
exchange authorization attached hereto as ANNEX C duly executed, for new
warrants in such denominations as the Holder shall designate at the time of
surrender for exchange (but not for less than 10% of the shares of Stock for
which this Warrant is originally exerciseable), which new warrants shall be of
like tenor and date and shall represent in the aggregate the right to subscribe
for and purchase the number of shares which may be subscribed for and purchased
hereunder.
8. LOST, STOLEN, MUTILATED, OR DESTROYED WARRANTS. If this Warrant
shall become lost, stolen, mutilated or destroyed the Company shall issue a new
warrant of like denomination, tenor and date as this Warrant upon its receipt
from the Holder of reasonably satisfactory evidence of such event and assurances
that the Holder will indemnify the Company on account of any loss incurred by
the Company which is occasioned by such event. Any such new warrant shall
constitute an original contractual obligation of the Company whether or not the
allegedly lost, stolen, mutilated or destroyed warrant shall be at any time
enforceable by anyone.
9. EXPIRATION. This Warrant shall expire and be of no further force and
effect on the date (the "Expiration Date") which is the earlier to occur of (a)
the date when the Company has fully complied with Paragraph 2 hereof, in the
event of a complete exercise hereof or (b) the earlier to occur of (i) the tenth
anniversary of the date hereof or (ii) the fourth anniversary of the date on
which Senior Subordinate Promissory Notes issued under the Note Purchase
Agreement have been paid in full.
10. MANDATORY EXERCISE. Notwithstanding any other provision hereof,
the Holder shall, upon the request of the Company, fully exercise this Warrant
concurrently with the closing of a Qualified Public Offering.
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11. WARRANT PURCHASE AGREEMENT. The terms of the Purchase Agreement, as
they relate to this Warrant, are incorporated by reference in this Warrant as
fully as if the same were set forth herein.
12. APPLICABLE LAW. The validity, interpretation and performance of
this Warrant shall be governed by the laws of the Commonwealth of
Massachusetts.
13. SUCCESSORS AND ASSIGNS. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
permitted assigns of the Company and the Holder.
14. NOTICES. All notices and other correspondence which is required or
may be given hereunder shall be given in the manner and to the addresses
specified in the Purchase Agreement.
WITNESS the due execution of this Stock Purchase Warrant as of the date
first written above with the intent to be legally bound.
NEW ENGLAND AUDIO CO., INC.
By:
-------------------------------
Title:
----------------------------
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ANNEX A
to Warrant
[SUBSCRIPTION FORM TO BE EXECUTED UPON EXERCISE OF THE WARRANT]
The undersigned registered holder of the within Warrant hereby (1)
subscribes for _____________ shares which the undersigned is entitled to
purchase under the terms of the within Warrant, (2) makes the full cash payment
therefor called for by the within Warrant, and (3) directs that the shares
issuable upon exercise of said Warrant be issued as follows:
-----------------------------------
(Name)
Signature:
------------------------
Dated:
----------------------------
22
ANNEX B
to Warrant
[TO BE EXECUTED TO EFFECT A TRANSFER OF THE WARRANT]
FOR VALUE RECEIVED _______________________________ hereby sells,
assigns, and transfers unto ___________________________________________________,
the right to purchase ____________________ shares evidenced by the within
Warrant, and does hereby irrevocably constitute and appoint ___________________
to transfer such right on the books of Company, with full power of substitution.
-----------------------------------
(Name)
Signature:
------------------------
Dated:
----------------------------
23
ANNEX C
to Warrant
[TO BE EXECUTED TO EFFECT AN EXCHANGE OF THE WARRANT]
The undersigned registered holder of the within Warrant hereby directs
the Company to exchange said Warrant for like warrants in the following
denominations: _______________________.
-----------------------------------
(Name)
Signature:
------------------------
Dated:
----------------------------
24
223397 EXECUTION COPY
JOINDER TO WARRANT PURCHASE AGREEMENT
This Joinder is made as of May 31, 1997 by EXETER EQUITY PARTNERS, L.P.
("Exeter Equity") in favor of the parties to that certain Warrant Purchase
Agreement dated as of May 30, 1997 among New England Audio Co., Inc. (the
"Company") and the Initial Holders under and as defined therein (the "Warrant
Purchase Agreement"). Capitalized terms used herein and not otherwise defined
have the meanings assigned to such terms in the Warrant Purchase Agreement.
PREAMBLE
Exeter Equity, as a transferee pursuant to Section 24 of the Warrant
Purchase Agreement of a portion of the Warrant which was originally issued to
Exeter Venture Lenders, L.P., has become a Holder under and as defined in the
Warrant Purchase Agreement. Exeter Equity, as such transferee, desires to become
a party to the Warrant Purchase Agreement. Therefore, Exeter Equity agrees as
follows with the intent to be legally bound.
AGREEMENT
1. Joinder of New Holder. Exeter Equity acknowledges that it has received a
fully-executed copy of the Warrant Purchase Agreement. Effective as of the date
hereof, Exeter Equity joins in and becomes party to the Warrant Purchase
Agreement as a Holder. By executing this Joinder, Exeter Equity (a) hereby makes
all of the representations and warranties of the Holders set forth therein and
(b) agrees to be bound by all of the provisions thereof applicable to the
Holders. The notice address of Exeter Equity shall be the same address as for
Equity Venture Lenders, L.P.
2. Effect on Warrant Purchase Agreement. Except for the joinder effected
hereby, the Warrant Purchase Agreement remains unmodified and is confirmed as
being in full force and effect.
3. Miscellaneous. This Joinder: (a) may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument; (b) contains the entire agreement of the
parties with respect to the transactions contemplated hereby and supersedes all
prior written and oral agreements, and all contemporaneous oral agreements,
relating to such transactions; (c) shall be governed by, and construed and
enforced in accordance with, the laws of the Commonwealth of Pennsylvania; and
(d) shall be binding upon, and inure to the benefit of, the parties and their
respective successors and permitted assigns.
25
SIGNATURE PAGE TO
JOINDER TO WARRANT PURCHASE AGREEMENT
EXETER EQUITY PARTNERS, L.P.
By: Exeter Equity Advisors, L.P.,
its General Partner
By: Exeter Equity Advisors, Inc.,
its General Partner
By: [Illegible]
------------------------------
Title: Vice President
--------------------------
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