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EXHIBIT 10.7
THIS WARRANT AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "FEDERAL ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE SECURITIES
LAWS. NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE ACQUIRED UPON THE
EXERCISE OF THIS WARRANT MAY BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER PROVISIONS OF THE FEDERAL ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE
SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT
TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
TWEETER HOME ENTERTAINMENT GROUP, INC.
Common Stock Warrant
THIS WARRANT IS BEING ISSUED IN EXCHANGE FOR A NEW ENGLAND AUDIO CO., INC.
COMMON STOCK WARRANT DATED AS OF MAY 30, 1997.
TWEETER HOME ENTERTAINMENT GROUP, INC., a Delaware corporation (the
"Company"), hereby certifies that, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, HFB Associates LLC, a
Georgia limited liability company ("HFB"), or its permitted assigns under the
terms of this warrant (HFB or such permitted assigns at the time being the
registered holder or holders hereof being hereinafter referred to as "Holder")
is entitled, subject to the terms set forth below, to acquire from the Company,
at a purchase price per share of $8.08 (the "Purchase Price"), at any time or
from time to time on or after the date hereof and prior to 5:00 P.M., Boston
time, on the Expiration Date, 104,960 fully paid and non-assessable shares of
the Company's Common Stock, $.01 par value (the "Common Stock," such shares of
Common Stock, in each case as the number of such shares may be adjusted from
time to time pursuant to Section 2.4 and the provisions of the Company's
certificate of incorporation, are herein referred to as the "Warrant Shares").
Certain capitalized terms not otherwise defined herein shall have the
meanings set forth in Section 5 hereof.
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SECTION 1. EXERCISE OF WARRANT.
1.1. EXERCISE. Subject to Section 10, this Warrant may be converted
or exercised by Holder, in whole or in part (but not for less than 10% of the
Warrant Shares issuable under this Warrant, or the remaining Warrant Shares, if
less than such amount), at any time and from time to time by surrender of this
Warrant, together with the form of subscription at the end hereof duly executed
by Holder, to the Company at its principal office and accompanied by payment in
full, in cash or by check payable to the order of the Company, in the amount of
the aggregate Purchase Price for the Warrant Shares covered by such exercise. In
lieu of exercising this Warrant pursuant to the immediately preceding sentence,
the Holder shall have the right to require the Company to convert this Warrant,
in whole or in part and at any time or times (the "Conversion Right"), into
Warrant Shares, by surrendering this Warrant to the Company accompanied by the
form conversion notice (in the form attached hereto as Exhibit B) which has been
duly completed and signed. Upon exercise of the Conversion Right, the Company
shall deliver to the Holder (WITHOUT payment by the Holder of any Purchase
Price) that number of Warrant Shares which is equal to the quotient obtained by
dividing (x) the value this Warrant (or the portion thereof being converted) at
the time the Conversion Right is exercised determined by subtracting the
aggregate Purchase Price for the Warrant (or such portion thereof being
converted) immediately prior to the exercise of the Conversion Right from the
aggregate current market price (determined on the basis of the Current Market
Price Per Share) of that number of Warrant Shares purchasable upon exercise of
this Warrant (or such portion thereof) immediately prior to the exercise of the
Conversion Right (taking into account all applicable adjustments pursuant to
this Warrant) by (y) the Current Market Price Per Share of one share of Common
Stock immediately prior to the exercise of the Conversion Right. Any references
in this Warrant to the "exercise" of any Warrants, and the use of the term
"exercise" herein, shall be deemed to include (without limitation) any exercise
of the Conversion Right. In the event this Warrant is not exercised in full, the
Warrant Shares shall be reduced by the number of Warrant Shares subject to such
partial exercise, and the Company, at its expense, shall forthwith issue and
deliver to Holder a new Warrant of like tenor in the name of Holder, reflecting
such adjusted Warrant Shares.
1.2. DELIVERY OF STOCK CERTIFICATES. Subject to Section 12,
promptly upon exercise of this Warrant in full or in part, the Company will
issue and deliver to Holder, a certificate or certificates, in such name or
names as such Holder may designate, for the number of fully paid and
non-assessable shares of Common Stock to which Holder shall be entitled on such
exercise.
1.3. FRACTIONAL SHARES. This Warrant may not be exercised as to
fractional shares of Common Stock.
SECTION 2. CERTAIN OBLIGATIONS OF THE COMPANY.
2.1. RESERVATION OF STOCK. The Company covenants that it will at
all times reserve and keep available, free from preemptive rights, solely for
the purpose of
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effecting the exercise of this Warrant, a number of shares of Common Stock equal
to the total number of Warrant Shares then issuable upon the exercise of this
Warrant. The Company will from time to time, in accordance with the laws of its
state of incorporation take action to increase the authorized amount of its
Common Stock if at any time the number of shares of Common Stock authorized but
remaining unissued and unreserved for other purposes shall be insufficient to
permit the exercise of this Warrant.
2.2. CORPORATE ACTIONS. The Company covenants that all Warrant
Shares will, upon issuance in accordance with the terms of this Warrant
Agreement and the Company's certificate of incorporation, be fully paid and
nonassessable and free from all taxes with respect to the issuance thereof
(other than income taxes, if any, related to ordinary income attributable to the
Holder) and from all liens, charges and security interests. The Company will
not, by amendment of its certificate of incorporation or through any
consolidation, merger, reorganization, transfer of assets, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant. Without limiting
the generality of the foregoing, the Company (a) will not permit the par value
or the determined or stated value of any shares of the Company's Common Stock
receivable upon the exercise of the Warrants to exceed the amount payable
therefor upon such exercise, (b) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of the Company's Common Stock upon the exercise of
the Warrants from time to time outstanding, including, without limitation,
amending its certificate of incorporation, and (c) will not take any action
which results in an adjustment in the number of Warrant Shares obtainable upon
the exercise of any Warrants if the total number of shares of the Company's
Common Stock (or other securities) issuable after such action upon the exercise
of all of the then-outstanding Warrants would exceed the total number of shares
of the Company's Common Stock (or other securities) then authorized by the
Company's certificate of incorporation and available for purpose of issuance
upon such exercise.
2.3. MAINTENANCE OF OFFICE. The Company will maintain an office at
00 Xxxxxx Xxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, where presentations and demands to
or upon the Company in respect of this Warrant may be made. The Company will
give notice in writing to Holder, at the address of Holder appearing on the
books of the Company, of each change in the location of such office.
2.4. ADJUSTMENT OF WARRANT SHARES PURCHASABLE.
(a) The number of Warrant Shares which may be acquired upon the
exercise or conversion of this Warrant and the Purchase Price of such shares are
subject to adjustment from time to time upon the occurrence of any of the events
enumerated in this Section 2.4 at any time or from time to time after the date
hereof and prior to the Expiration Date.
(b) If the Company shall (i) declare a dividend on the Common
Stock in shares of its capital stock (whether shares of Common Stock or of
capital stock of any other class), (ii) split or subdivide the outstanding
Common Stock or (iii) combine the outstanding Common Stock into a smaller number
of shares, each Warrant outstanding at the time of the
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record date for such dividend or of the effective date of such split,
subdivision or combination shall thereafter entitle the Holder to receive the
aggregate number and kind of shares which, if such Warrant had been exercised
immediately prior to such time, such Holder would have owned or have become
entitled to receive by virtue of such dividend, subdivision or combination at a
Purchase Price adjusted for such change in the number of shares purchasable.
Such adjustment shall be made successively whenever any event listed above shall
occur and, if a dividend which is declared is not paid, each Warrant outstanding
shall again entitle the Holder thereof to receive the number of shares of Common
Stock as would have been the case had such dividend not been declared. If at any
time, as a result of an adjustment made pursuant to this subsection 2.4(b), the
Holder shall become entitled to receive any shares of capital stock of the
Company other than shares of Common Stock, thereafter the number of such other
shares so receivable upon exercise of any Warrant 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 Section
2.4, and the provisions of this Warrant with respect to the Warrant Shares shall
apply on like terms to such other shares.
(c) In case the Company shall make a distribution to all holders
of Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation) of
evidences of its indebtedness, cash or other assets, each Warrant outstanding on
the date of such distribution shall thereafter entitle the Holder to receive a
number of shares of Common Stock, at a Purchase Price adjusted for such change
in the number of shares purchasable, equal to the product of (i) the number of
shares of Common Stock to which the Holder was entitled immediately prior to
such date of distribution and (ii) a fraction of which the numerator shall be
the then Current Market Price Per Share of Common Stock on such date and of
which the denominator shall be the then Current Market Price Per Share of Common
Stock on such date less the fair market value, of the portion of the assets or
evidences of indebtedness, or the portion of the cash, so to be distributed
applicable to one share of then-outstanding Common Stock. Such adjustment shall
be made successively whenever a date for such distribution is fixed (which date
of distribution shall be the record date for such distribution if a record date
therefor is fixed) and, if such distribution is not so made, each Warrant
outstanding shall again entitle the holder thereof to receive the number of
shares of Common Stock as would have been the case had such date of distribution
not been fixed.
(d) In the event of any capital reorganization of the Company, or
of any reclassification of the Common Stock (other than a subdivision or
combination of outstanding shares of Common Stock), or in case of the
consolidation of the Company with or the merger of the Company with or into any
other corporation or of the sale of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation, each Warrant shall
after such capital reorganization, reclassification of Common Stock,
consolidation, merger or sale be exercisable upon the terms and conditions
specified in this Warrant, for the number of shares of stock or other securities
or assets to which the Holder (at the time of such capital reorganization,
reclassification of Common Stock, consolidation, merger or sale) upon exercise
of such Warrant would have been entitled upon such capital reorganization,
reclassification of Common Stock, consolidation,
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merger or sale; and in any such case, if necessary, the provisions set forth in
this Section 2.4 with respect to the rights thereafter of the Holder shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities or assets thereafter deliverable on
the exercise of the Warrants.
(e) If any event occurs, as to which, in the sole good faith
opinion of the Board of Directors of the Company, the other provisions of this
Section 2.4 are not strictly applicable or (if strictly applicable) would not
fairly protect the purchase rights of the Holder in accordance with the
essential intent and principles of such provisions, then the Board of Directors
may make an adjustment in the application of such provisions, in accordance with
such essential intent and principles, so as to protect such purchase rights as
aforesaid, but in no event shall any such adjustment have the effect of
decreasing or increasing the number of shares of Common Stock purchasable upon
the exercise of this Warrant from that which would otherwise be determined
pursuant to this Section 2.4.
(f) Anything in this Section 2.4 to the contrary notwithstanding:
(1) the Company shall be entitled, but not required, to
make such increases in the number of Warrant Shares purchasable upon
the exercise of each Warrant, in addition to those adjustments required
by this Section 2.4, as it in its sole discretion may determine to be
advisable in order that any consolidation or subdivision of the Common
Stock, or any issuance wholly for cash or any shares of Common Stock at
less than the Current Market Price Per Share, or any issuance wholly
for cash or shares of Common Stock or securities which by their terms
are convertible into or exchangeable for shares of Common Stock or any
stock dividend, or any issuance of rights, options or warrants referred
to hereinabove in this Section 2.4, hereinafter made by the Company to
the holders of its Common Stock shall not be taxable to them; and
(2) no adjustment in the number of Warrant Shares
purchasable shall be required in the event the Company pays a cash
dividend to holders of Common Stock; provided that the Company also
pays a cash dividend to the Holders which dividend shall be calculated
as if the Warrant had been exercised.
2.5. REPRESENTATIONS AND WARRANTIES. The Company hereby represents
and warrants to Holder as follows:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the Laws of the State of Delaware and has all
requisite corporate power and authority to execute, deliver and perform this
Warrant and all documents and agreements contemplated hereby and to consummate
the transactions contemplated hereby and thereby. The Company is duly qualified
to conduct business as a foreign corporation in every jurisdiction in which its
ownership or lease of property or conduct of its business makes such
qualification necessary, except for such jurisdictions in which the Company's
failure to be so qualified, individually or together with any other failure to
qualify, would not materially impair the Purchaser's ability to perform its
obligations hereunder. The
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execution and delivery of this Warrant and the consummation by the Company of
the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate action and, assuming the due execution of this Warrant
by HFB, this Warrant constitutes the valid and binding obligation of the Company
enforceable against it in accordance with its terms, subject only to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
relating to creditor's rights generally and to general principles of equity
(regardless of whether such enforcement is considered in a proceeding at law or
in equity).
(b) Neither the execution and delivery by the Company of this
Warrant or all documents and agreements contemplated hereby nor the consummation
of the transactions contemplated hereby or thereby: (i) violates or will violate
any Law applicable to the Company; (ii) violates or will violate any order,
writ, judgment, injunction or decree applicable to the Company; (iii) results or
will result in a breach of or default under the certificate of incorporation or
bylaws of the Company, or (iv) conflicts or will conflict with or results or
will result in any breach of any contract, agreement or other commitment of the
Company. No consent, authorization or approval from, or registration or filing
with, any governmental entity or third party (not obtained or made as of the
date hereof) is required to be obtained or made by or with respect to the
Company in connection with the execution and delivery of this Warrant or all
documents and agreements contemplated hereby or the consummation by the Company
of the transactions contemplated hereby or thereby.
SECTION 3. NOTICE OF CERTAIN EVENTS.
If at any time:
(a) the Company shall declare any dividend or distribution payable
to the holders of its Common Stock;
(b) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class;
(c) there shall be any recapitalization of the Company, or
consolidation or merger of the Company with, or sale of all or substantially all
of its assets to, another corporation or business organization; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company as a whole or substantially as a whole
in a single transaction or a series of related transactions;
then, in any one or more of such cases, the Company shall give Holder written
notice, by registered mail, of the date on which a record shall be taken for
such dividend, distribution or subscription rights or for determining
stockholders entitled to vote upon such recapitalization, consolidation, merger,
sale, dissolution, liquidation or winding up and of the date when any such
transaction shall take place, as the case may be. Such
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notice shall also specify the date as of which the holders of Common Stock of
record shall participate in such dividend, distribution or subscription rights
or shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such recapitalization, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be. Such notice shall
describe the proposed transaction in reasonable detail and specify the
consideration to be received by the Holder in respect thereto and/or any
adjustment which would be made to the number of Warrant Shares obtainable upon
the exercise of this Warrant as a result of such transaction. The Company shall
also furnish to each Holder all notices and materials furnished to its
stockholders in connection with such transaction as and when such notices and
materials are furnished to its stockholders. Such written notice shall be given
not less than 20 days prior to the record date with respect thereto. Upon the
effectiveness of such recapitalization, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be, this Warrant shall
terminate and cease to be exercisable.
SECTION 4. REGISTRATION RIGHTS.
4.1. GENERAL. For purposes of this Section 4, the terms "register,"
"registered," and "registration" refer to a registration effected by preparing
and filing a registration statement in compliance with the Securities Act of
1933 (the "Federal Act") and the declaration or ordering of effectiveness of
such registration statement.
4.2. COMPANY REGISTRATION. If at any time the Company proposes to
register any of its Common Stock under the Federal Act in connection with an
initial public offering of such securities for its own account or for the
accounts of its shareholders, except pursuant to a registration statement filed
on Form S-8 or Form S-4 or any successor forms which may be used for
transactions of the type currently contemplated in the instructions to such
forms, the Company shall, not later than thirty (30) days before filing the
registration statement with respect thereto, give Holder and each holder of
Warrant Shares (a "Warrant Shareholder") written notice of such proposal by
registered mail. Upon the written request of any such Holder or Warrant
Shareholder (each a "Selling Holder" and collectively, "Selling Holders") given
within fifteen (15) days after mailing of any such notice by the Company, the
Company shall use its best efforts to cause to be registered under the Federal
Act in connection with such initial public offering all of the Warrant Shares
that any Selling Holder has requested be registered; PROVIDED that if the
managing underwriter(s) advises the Selling Holders in writing that the total
amount of securities which they, the Company and all other Persons holding Other
Registration Rights intend to include in such offering is sufficiently large to
materially and adversely affect the success of such offering, the amount of
securities to be offered for the accounts of each Selling Holder and all other
Persons exercising piggy-back registration rights in such offering shall be
reduced pro rata (based upon the amount of securities each such Person sought to
include in the offering) to the extent necessary to reduce the total amount of
securities to be included in the offering to the amount recommended by such
managing underwriter(s).
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Notwithstanding the foregoing, the Company may withdraw any
registration statement referred to in this Section 4.2 without incurring
liability to any Selling Holder on account of such withdrawal and shall not be
under any obligation to complete any offering.
4.3. LOCK-UP AGREEMENTS, ETC. If requested by the managing
underwriter in connection with an offering of Common Stock, each Holder and
Warrant Shareholder shall agree that it will not, for a period of seven (7) days
prior to and 90 days following, the effective date of a registration statement
for the offering of the Common Stock, or any other period reasonably requested
by the managing underwriter, offer or sell any of the Warrant Shares without the
prior consent of the managing underwriter.
4.4. OBLIGATIONS OF THE COMPANY. Subsequent to the other provisions
of this Section 4, whenever required hereunder to use its best efforts to effect
the registration of any Warrant Shares, the Company shall, as expeditiously as
reasonably possible:
(a) Prepare and file with the SEC a registration
statement on the appropriate form with respect to such Warrant Shares
and use its best efforts to cause such registration statement to become
effective as soon as practicable after such filing and remain
effective: (i) in the case of an underwritten offering, for such period
as is required by the underwriter for such offering or (ii) in the case
of an offering not underwritten, until the Selling Holders have
informed the Company in writing that the distribution of their
securities has been completed, but in no event longer than 180 days
plus any period during which the Selling Holders are obligated to
refrain from selling because the Company is required to amend or
supplement the prospectus.
(b) Prepare and file with the SEC such amendments and
supplements (including post-effective amendments and supplements) to
such registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the
provisions of the Federal Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to each Selling Holder such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Federal Act, and such other documents as it may
reasonably request in order to facilitate the disposition of Warrant
Shares owned by it.
(d) Notify each Selling Holder if, at any time when a
prospectus relating to such Warrant Shares is required to be delivered
under the Federal Act, any event shall have occurred as a result of
which the prospectus then in use with respect to such Warrant Shares
would include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or for any other reason it shall be
necessary to amend or supplement such prospectus in order to comply
with the Federal Act and prepare and furnish to all sellers as promptly
as possible, and in any event within
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ninety (90) days of such notice, a reasonable number of copies of a
supplement to or an amendment of such prospectus to correct such
statement or omission or effect such compliance.
(e) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as the Selling
Holders may reasonably request for the distribution of the securities
covered by the registration statement; provided that the Company shall
not be required to qualify as a foreign corporation in any state where
it is not then otherwise required to qualify.
(f) Use its reasonable best efforts to keep the Selling
Holders informed of the Company's best estimate of the earliest date on
which such registration statement or any post-effective amendment or
supplement thereto will become effective and will promptly notify such
Selling Holders and the managing underwriters, if any, participating in
the distribution pursuant to such registration statement of the
following promptly after learning of the same: (A) when such
registration statement or any post-effective amendment or supplement
thereto becomes effective or is approved; (B) of the issuance by any
competent authority of any stop order suspending the effectiveness or
qualification of such registration statement or the prospectus then in
use or the initiation or threat of any proceeding for that purpose; and
(C) of the suspension of the qualification of any Warrant Shares
included in such registration statement for sale in any jurisdiction.
(g) Make available to its security holders, as soon as
practicable, an earnings statement covering a period of at least twelve
months which satisfies the provisions of Section 11(a) of the Federal
Act and Rule 158 thereunder.
(h) Cooperate with the Selling Holders and the
underwriters, if any, of such Warrant Shares; give each Selling Holder,
and the underwriters, if any, of such Warrant Shares and their
respective counsel and accountants, such access to its books and
records and such opportunities to discuss the business of the Company
with its officers and independent public accountants as shall be
necessary to enable them to conduct a reasonable investigation within
the meaning of the Federal Act and, in the event that Warrant Shares
are to be sold in an underwritten offering, enter into an underwriting
agreement with the underwriters and the Selling Holders containing
customary representations and warranties, covenants, conditions and
indemnification provisions, including without limitation the furnishing
to the underwriters of a customary opinion of independent counsel to
the Company and a customary "comfort" letter from the Company's
independent public accountants; provided, however, that nothing
contained in this Warrant shall limit the Company's right to terminate
any such offering of its Common Stock at any time.
(i) Provide a CUSIP number for all Warrant Shares not
later than the effective date of the registration statement.
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(j) Take such actions as the underwriters reasonably
request in order to expedite or facilitate the disposition of the
Warrant Shares to be included in any such offering (including, without
limitation, effecting a stock split, stock dividend or a combination of
shares of Common Stock).
(k) Provide a transfer agent for the Warrant Shares no
later than the effective date of the first registration of any Warrant
Shares.
4.5. FURNISH INFORMATION. Each Selling Holder shall furnish to the
Company such information regarding it and the Warrant Shares held by it and the
intended method of disposition of such securities as the Company shall
reasonably request and as shall be required in connection with the action to be
taken by the Company.
4.6. EXPENSES. All expenses incurred in connection with
registrations pursuant to this Section 4, excluding (a) underwriters' discounts
and commissions (which shall be paid ratably by all holders of securities
subject to such registrations) and (b) fees and disbursements of counsel to the
Selling Holders (which shall be paid by such Selling Holders which consent to
such counsel's employment) but including all registration and qualification
fees, transfer taxes, printers' and accounting fees (including the entire
expense of any audits required by the Federal Act), fees and disbursements of
counsel for the Company, shall be paid by the Company.
4.7. INDEMNIFICATION. In the event any Warrant Shares are included
in a registration statement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Selling Holder, any underwriter, and each person, if any, who
controls such Selling Holder or any such underwriter within the meaning of the
Federal Act, against any losses, claims, damages or liabilities and legal and
other expenses, joint or several, to which they may become subject under the
Federal Act or otherwise, insofar as such losses, claims, damages or liabilities
and legal and other expenses (or actions in respect thereof) arise out of or are
based on any untrue or alleged untrue statement of any material fact contained
in a registration statement under which Warrant Shares were registered
including, any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading or
arise out of any violation by the Company of any rule or regulation promulgated
under the Federal Act or state securities (or so-called "Blue Sky") laws, or
regulations promulgated thereunder, of any jurisdiction applicable to the
Company and relating to any action or inaction required of the Company in
connection with any such registration or such offering; and will reimburse such
Selling Holder, and each such underwriter or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the Company shall not be liable in any such case for any loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
an untrue statement or alleged untrue statement or omission
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or alleged omission that was furnished for use in connection with such
registration by such Selling Holder.
(b) To the extent permitted by law, each Selling Holder will,
severally but not jointly, indemnify and hold harmless the Company, each of its
officers, directors, agents, employees, each person, if any, who controls the
Company within the meaning of the Federal Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company or any of its
officers, directors, agents, employees, each person, if any, who controls the
Company within the meaning of the Federal Act, may become subject under the
Federal Act, state securities (or so-called "Blue Sky") laws or otherwise,
insofar as any such loss, claim, damage, or liability arises solely out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in connection with such registration statement,
preliminary prospectus, final prospectus, or amendments or supplements thereto,
that was furnished for use in connection with such registration by such Selling
Holder; provided, however, that the liability of any Selling Holder shall be
limited to the amount of proceeds received by such Selling Holder in the
offering or by the amount such Selling Holder would have received if the
offering is terminated.
(c) Promptly after receipt by a indemnified party under this
Section 4.7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify the indemnifying party in writing of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, to assume the defense thereof
with counsel selected by such party, but the failure to notify the indemnifying
party promptly of the commencement of any such action will not relieve the
indemnifying party of any liability that it may have to any indemnified party,
unless and to the extent that the indemnifying party is actually and materially
prejudiced by such failure. If any such action is against both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it that are
different from or additional to those available to the indemnifying party or
that its interests conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party.
4.8. TRANSFER OF REGISTRATION RIGHTS. The registration rights of
Holder may not be transferred to any transferee except in connection with a
transfer of this Warrant or of Warrant Shares permitted under Section 8 below.
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SECTION 5. DEFINITIONS.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
5.1 The term "COMMON STOCK" includes the Company's Common Stock,
without par value per share, and any other securities or rights into which or
for which the Common Stock is converted or exchanged, whether pursuant to a plan
of reclassification, reorganization, consolidation, merger, sale of assets,
dissolution, liquidation, or otherwise.
5.2 "COMPOSITE TRANSACTIONS TAPE" shall mean a security price
reporting service that includes all transactions in a security on each of the
exchanges and in the over-the-counter market.
5.3 "CURRENT MARKET PRICE PER SHARE" shall mean, with respect to
any of the Common Stock, as of any particular date of determination:
(i) if the Common Stock is then reported on the Composite
Transactions Tape, the average of the daily closing prices for the 30
consecutive trading days immediately prior to such date as reported on
the Composite Transactions Tape (as adjusted for any stock dividend,
split, combination or reclassification that occurred during such 30-day
period); or
(ii) if the Common Stock is not then reported on the
Composite Transaction Tape but is then listed or admitted to trading on
a national securities exchange, the average of the daily last sale
prices regular way of such Common Stock, for the 30 consecutive trading
days immediately prior to such date (as adjusted for any stock
dividend, split, combination or reclassification that occurred during
such 30-day period), on the principal national securities exchange on
which such Common Stock is traded or, in case no such sale takes place
on any such day, the average of the closing bid and asked prices
regular way, in either case on such national securities exchange; or
(iii) if the Common Stock is not then reported on the
Composite Transaction Tape but is then traded on the over-the-counter
market, the average of the daily closing sales prices, or, if there is
no closing sales price, the average of the closing bid and asked
prices, in the over-the-counter market, for the 30 consecutive trading
days immediately prior to such date (as adjusted for any stock
dividend, split, combination or reclassification that occurred during
such 30-day period), as reported by the National Association of
Securities Dealers' Automated Quotation System, or, if not so reported,
as reported by the National Quotation Bureau, Incorporated or any
successor thereof, or, if no so reported the average of the closing bid
and asked prices as furnished by any member of the national Association
of Securities Dealers, Inc. selected from time to time by the Board of
Directors of the Company for that purpose; or
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(iv) if no such prices are then furnished, the higher of
(x) the Exercise Price and (y) the fair market value of a share of the
Common Stock as determined by agreement between the holders of a
majority of the Warrants and the Company or, in the absence of such an
agreement, by an independent investment banking firm or an independent
appraiser engaged by the Company (in either case the cost of which
engagement will be divided equally between the Company and the holders
of a majority of the Warrants).
5.4 The term "EXPIRATION DATE" shall mean the earlier of (x) the
fifth anniversary of the date of the closing of an initial public offering of
the Common Stock and (y) May 30, 2007.
5.5 The term "FAIR MARKET VALUE PER SHARE OF THE WARRANT" shall
mean the difference between the Current Market Price Per Share and the Purchase
Price.
5.6 The term "OTHER REGISTRATION RIGHTS" shall mean rights to
register shares of Common Stock granted to any Person (other than rights granted
under this Warrant) by the Company at any time prior to the date hereof or on or
after the date hereof.
5.7 The term "WARRANT SHARES" shall mean the shares of Common
Stock from time to time issued upon exercise of this Warrant.
5.8 The term "PERSON" shall mean an individual, corporation,
partnership, limited liability company, association, trust, joint venture,
unincorporated organization or any government, governmental department or agency
or political subdivision thereof.
SECTION 6. REPLACEMENT OF WARRANTS.
Upon (a) surrender of this Warrant in mutilated form or receipt of
evidence satisfactory to the Company of the loss, theft or destruction of this
Warrant and (b) in the case of any loss, theft or destruction of this Warrant,
if requested, receipt of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company, then, the Company, at its
expense, shall execute and deliver, in lieu of and in replacement of this
Warrant, a Warrant identical in form to this Warrant.
SECTION 7. REMEDIES.
The Company stipulates that the remedies at law of the Holder in the
event of any breach or threatened breach by the Company of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a breach of any of the terms hereof
or otherwise. The Company hereby irrevocably waives, to the extent that it may
do so under applicable law, any defense based on the adequacy of a remedy at law
which may be asserted as a bar to the remedy of specific performance in any
action brought against the Company for specific performance of this Warrant by
the Holder.
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Such remedies and all other remedies provided for in this Warrant shall,
however, be cumulative and not exclusive and shall be in addition to any other
remedies which may be available under this Warrant.
SECTION 8. TRANSFER.
This Warrant and Warrant Shares issued hereunder shall not be sold,
transferred, pledged or hypothecated unless the proposed disposition is the
subject of a currently effective registration statement under the Federal Act or
such sale is made pursuant to an exemption from registration.
Until transfer hereof on the registration books of the Company, the
Company may treat the existing registered holder hereof as the owner hereof for
all purposes. Any transferee of this Warrant and the rights hereunder, by
acceptance thereof, agrees to assume all of the obligations of Holder and to be
bound by all of the terms and provisions of this Warrant.
SECTION 9. NOTICES.
Where this Warrant provides for notice of any event, such notice shall
be given (unless otherwise herein expressly provided) in writing and either (i)
delivered personally, (ii) sent by certified, registered or express mail,
postage prepaid (iii) telexed or sent by facsimile transmission, and shall be
deemed given when so delivered personally, telexed, sent by facsimile
transmission (confirmed in writing) or mailed. Notices shall be addressed, if to
Holder, to the address of Holder appearing in the registration books referred to
in Section 8 or, if to the Company, to its office maintained pursuant to Section
2.2.
SECTION 10. LIMITATIONS ON EXERCISE.
Notwithstanding any other provision of this Warrant, the Holder shall
not have the right to exercise or convert this Warrant into or for Warrant
Shares Except upon one or more of the following events: (a) the consummation of
a public offering of the Company's Common Stock; (b) the sale of all or
substantially all of the issued and outstanding capital stock of the Company by
the Company's stockholders to the same purchaser or group of purchasers in a
single transaction or series of related transactions; (c) a merger or
consolidation of the Company into or with another entity where the surviving or
resulting entity is not the Company and where, as part of such merger or
consolidation, the stockholders of the Company, including the Holder upon any
such exercise and conversion, receive equity securities of, or other
consideration from, the surviving or resulting entity in exchange for their
capital stock of the Company; (d) the liquidation or dissolution of the Company;
or (e) a transaction requiring or allowing such exercise or conversion pursuant
to and in accordance with Section 11.1 or Section 11.2. The right to exercise or
convert this Warrant upon the occurrence of the foregoing transactions or events
shall not be exercisable until immediately after the closing of the foregoing
events, and the Holder shall not be entitled to vote as a stockholder with
respect
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to, or otherwise object to, any such transaction. In the event that this Warrant
is not exercised or converted upon the closing of the transactions or events
described in (b) through (e) above, this Warrant shall terminate and shall be
null and void in all respects.
SECTION 11. DRAG-ALONG RIGHTS AND TAG-ALONG RIGHTS.
11.1 DRAG-ALONG RIGHTS. If at any time one or more stockholders of
the Company alone or together holding a majority of the then issued and
outstanding capital stock of the Company have agreed to sell, assign or
otherwise transfer such capital stock of the Company (a "Transfer of Control")
so held by such stockholders (the "Majority Stockholders") to the same purchaser
or group of purchasers (collectively, the "Purchaser"), then such Majority
Stockholders shall have the right, but not the obligation, upon written notice
to the Holder, to require the Holder to: (a) sell, assign or transfer this
Warrant and all Warrant Shares held by the Holder to such Purchaser, (b)
exercise and convert this Warrant in full and sell, assign and transfer and all
Warrant Shares held by the Holder prior to such exercise or conversion together
with all Warrant Shares issuable to the Holder as a result of such exercise and
conversion to such Purchaser; or (c) exercise and convert this Warrant in part
and sell, assign and transfer this Warrant and all Warrant Shares issuable to
the Holder as a result of such partial exercise or conversion to such Purchaser;
provided, however, that in no event shall the Holder be required to exercise
this warrant if the Current Market Price Per Share is less than the Purchase
Price. Any such sale, assignment or transfer by the Holder of this Warrant or
any Warrant Shares to the Purchaser shall be on the same substantive economic
terms and conditions applicable to the Transfer of Control. In such event, the
Holder will take such necessary and appropriate actions as shall be required to
implement such sale, assignment or transfer in accordance with such reasonable
terms as are agreed to by the Majority Stockholders and the Purchaser. If at the
end of 180 days following the date such Holder was notified of such sale
assignment or transfer the Majority Stockholders have not completed such
transaction, the Holder shall be released from his obligations pursuant to this
Section 11.1.
11.2. TAG-ALONG RIGHTS. In the event of a proposed Transfer of
Control where (i) the Majority Stockholders have not exercised their rights to
require the sale, assignment or transfer by the Holder of this Warrant or any
Warrant Shares as part of such Transfer of Control pursuant to Section 11.1, ,
and (ii) the Purchaser has not offered to purchase the Warrant and any Warrant
Shares at the same price per share and upon the same terms and conditions as are
available to the Majority Stockholders; the Holder will have the right, upon
written notice to the Majority Stockholders, to require the Purchaser, as a
condition precedent or concurrent to such Transfer of Control, to purchase or
otherwise acquire at the same price per share and upon the same terms and
conditions as to be paid and given to the Majority Stockholders, such number of
his Warrant Shares equal to the product of (a) all shares to be included in the
Transfer of Control multiplied by (b) a fraction, the numerator of which is the
total number of Warrant Shares then owned by the Holder and the denominator of
which is the total number of shares of Common Stock outstanding, taking into
account all shares then issuable upon conversion of all outstanding warrants,
options, and other rights as of such date, including without
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limitation this warrant; if (1) the Holder exercises and converts this Warrant
in full concurrently with or immediately prior to such Transfer of Control, and
(2) the Holder agrees to take such actions and execute such documents as shall
be reasonably necessary in order to consummate such proposed Transfer of
Control; provided, however, that in no event shall the Holder be required to
assume joint liability with the Majority Stockholders pursuant to the terms of
any agreement related to such Transfer of Control or be liable for any amounts
in excess of the proceeds received by such Holder pursuant to this Section 11.2
on consummation of any such Transfer of Control by way of indemnity or
otherwise. In the event that the Holder exercises his, her or its right to
require such purchase or acquisition of Warrant Shares in accordance with this
Section 11.2, the Majority Stockholders shall collectively be entitled to sell,
assign and transfer to the Purchaser the number of shares of capital stock held
by them equal to the difference between (a) the number of shares of capital
stock proposed to be transferred to the Purchaser pursuant to such Transfer of
Control and (b) the aggregate number of Warrant Shares to be sold, transferred
or assigned to the Purchaser as required by this Section 11.2.
SECTION 12. SET-OFF.
(a) In the event that an indemnification obligation related to
Purchaser Losses (as defined in the Asset Purchase Agreement dated May 30, 1997
by and among New England Audio Co., Inc. ("NEA") and HFB (f/k/a HiFi Buys
Incorporated) (the "Purchase Agreement")), shall become due and payable pursuant
to the terms of the Purchase Agreement, the Holder hereby consents that the
Company shall have the right, by written notice to the Holder, to reduce the
number of Warrant Shares issuable upon exercise or conversion hereof by that
number of Warrant Shares equal to the amount of such indemnification claim
payable, divided by the Fair Market Value Per Share of the Warrant. Such set-off
shall be asserted by the Company against the Holders pro-rata based upon the
number of Warrant Shares issued to such Holder.
(b) ESCROW UPON EXERCISE. If any Holder shall exercise or convert
this Warrant after delivery of a notice of an indemnification claim by the
Company or NEA, the Holder shall pay to an escrow agent (which escrow agent
shall be mutually agreeable to the Company and such Holder) an amount equal to
the lesser of (x) the number of Warrant Shares for which the Warrant is being
exercised or converted, multiplied by the Fair Market Value Per Share of the
Warrant and (y) the amount of the indemnification claim, as determined in the
good faith judgment of the Board of Directors. On final judgment or settlement
related to the amount payable with respect to such indemnification claim, the
escrow agent shall pay any amounts due with respect to such claim to the
Company; or if no amount is due with respect to such claim, the amount so
deposited shall be promptly paid to such Holder. In addition, in the event that
the indemnification amount, upon final judgment or settlement of such claim, is
less than the amount so deposited, then upon such final judgment or settlement
the escrow agent shall promptly return such excess amount to Holder.
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SECTION 13. SURVIVAL.
The provisions of Sections 4 and 8 shall survive the termination or
expiration of this Warrant and shall continue to be effective with respect to
Warrant Shares.
SECTION 14. MISCELLANEOUS.
This Warrant shall be binding upon the Company and Holder and their
legal representatives, successors and assigns. In case any provision of this
Warrant shall be invalid, illegal or unenforceable, or partially invalid,
illegal or unenforceable, the provision shall be enforced to the extent, if any,
that it may legally be enforced and the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by a statement in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant shall be governed by, and construed and enforced in accordance with, the
laws of the State of Delaware without regard to its principles of conflicts of
laws. The headings in this Warrant are for purposes of reference only, and shall
not limit or otherwise affect any of the terms hereof.
This Warrant shall take effect as an instrument under seal.
IN WITNESS WHEREOF, the Company and the Holder have caused this Warrant
to be executed as an instrument under seal by a duly authorized officer and, in
the case of the Company, attested by its Clerk or Assistant Clerk.
Dated as of June 5, 1998
(Corporate Seal)
Attest: TWEETER HOME ENTERTAINMENT GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------ ----------------------------------
Clerk/Assistant Clerk Name: Xxxxxxx Xxxxx
Title: President
HFB ASSOCIATES LLC
By: /s/ Xxxxxxx Xxxx
----------------------------------
Name: Xxxxxxx Xxxx
Title: Manager
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EXHIBIT A
FORM OF SUBSCRIPTION
(To be signed only on exercise of
Common Stock Warrant)
TO: TWEETER HOME ENTERTAINMENT GROUP, INC.
The undersigned, the holder of the within Common Stock Warrant, hereby
irrevocably elects to exercise this Common Stock Warrant for, and to receive
thereunder ______*______ shares of Common Stock of TWEETER HOME ENTERTAINMENT
GROUP, INC. (the "Company"), and requests that the certificates for such shares
be issued in the name of the undersigned, and delivered to
_____________________________________________ whose address is
__________________________________________________.
Dated:
________________________________________
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant)
________________________________________
(Address)
----------
* Insert here the number of shares of Common Stock as to which the Warrant
is being exercised.
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EXHIBIT B
FORM OF NOTICE OF CONVERSION
(To be executed upon conversion of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant delivered herewith, to convert Warrants represented
thereby into ___ Warrant Shares* in accordance with the terms hereof. The
undersigned requests that a certificate for such Warrant Shares be registered
in the name of ___________________ whose address is _________________________
and that such certificate be delivered to __________________________ whose
address is ___________________. If said number of Warrant Shares is less than
all of the Warrant Shares obtainable hereunder, the undersigned requests that
a new Warrant representing the remaining balance of the Warrant Shares be
registered in the name of _____________________________ whose address is
___________________ and that such Warrant be delivered to _______________
address is _________________.
Signature:
__________________________________
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant.)
Date:_____________
* Consisting of: ____ shares of Common Stock
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