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Exhibit 10.12
EXECUTION COPY
TAG ALONG AGREEMENT
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THIS TAG ALONG AGREEMENT (this "AGREEMENT") dated as of April
16, 1998, by and among NATIONAL RECORD MART INC., a Delaware corporation (the
"COMPANY"), SENECA CAPITAL L.P., a Delaware limited partnership ("SENECA"),
XXXXXX XXXXXXX INC., a Delaware corporation ("XXXXXXX" and with Seneca, the
"SENIOR HOLDERS") and those certain holders of shares of common stock of the
Company, par value $0.01, (the "COMMON STOCK") listed on the attached Schedule A
(collectively referred to as the "SELLING HOLDERS"). Terms used herein are
defined below.
WITNESSETH
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WHEREAS, pursuant to that certain Senior Subordinated Secured
Note Purchase Agreement of even date herewith, by and among the Company, Xxxxxxx
and the Guarantors referred to therein (the "SECURED NOTE PURCHASE AGREEMENT"),
Xxxxxxx has purchased $7,500,000 in aggregate principal amount of the Company's
11.75% Senior Subordinated Secured Notes due 2001(the "SECURED NOTES") and is to
receive warrants to acquire 200,000 shares of Common Stock;
WHEREAS, pursuant to that certain Senior Subordinated Note
Purchase Agreement of even date herewith, by and among the Company, Seneca,
Xxxxxxx and the Guarantors referred to therein (the "UNSECURED NOTE PURCHASE
AGREEMENT"), Xxxxxxx and Seneca have purchased $7,500,000 in aggregate principal
amount of the Company's 11.75% Senior Subordinated Notes due 2001 (the
"UNSECURED NOTES") and are to receive warrants to acquire 200,000 shares of
Common Stock (the warrants issued pursuant to the Secured Note Purchase
Agreement and Unsecured Note Purchase Agreement being, collectively, the
"WARRANTS");
WHEREAS, the Selling Holders are stockholders of the Company
and as such are interested in the welfare of the Company and will benefit if the
Secured Notes and Unsecured Notes are purchased from the Company; and
WHEREAS, it is a condition precedent to the purchase of
Secured Notes and Unsecured Notes that the Selling Holders shall have executed
and delivered this Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the
premises set forth herein and as an inducement for Purchasers of Secured Notes
and Unsecured Notes to extend credit to the Company, and intending to be legally
bound hereby, agree as follows:
1. DEFINITIONS. Terms used in this Agreement and not defined below
shall have the meanings set forth in the Secured Note Purchase Agreement.
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"AFFILIATE" means, at any time, and with respect to any
Person, any other Person that at such time directly or indirectly through one or
more intermediaries Controls, or is Controlled by, or is under common Control
with, such Person. As used in this definition, "CONTROL" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"FAMILY MEMBER OF THE SELLING HOLDER" means, with respect to a
proposed Transfer of Shares by a Selling Holder, the spouse, issue or adopted
child of such Selling Holder.
"PRO RATA" shall mean with respect to any offer of securities,
an offer based on the relative percentages of such securities then held by all
of the Persons to whom such offer is made. By way of example, if a Selling
Holder sells or has sold in one or more transactions an aggregate of 85% of its
Shares, then the Senior Holders shall be entitled to sell 85% of the Common
Stock (or an equivalent number of Warrants) they hold.
"SHARES" means the shares held by the Selling Holders as
indicated on Exhibit A hereto.
"TRANSFER" means any volitional change in the record or
beneficial ownership of a Selling Holder's Shares and shall include a change due
to sale, assignment, gift or any other disposition. A pledge or other grant of
security interest in the Shares shall not be deemed a Transfer for purposes of
this Agreement.
"TRANSFEREE" means the Person to whom Shares are to be
Transferred.
"TRANSFEROR" means a Selling Holder who desires to Transfer
Shares hereunder.
2. GENERAL PROVISIONS REGARDING TRANSFER.
2.1 GENERAL RESTRICTIONS. So long as this Agreement shall
remain in force, no Shares may be Transferred to a Transferee unless such
Transfer is made in compliance with Sections 3 and 4 this Agreement.
2.2 TRANSFERS VOID. Any Transfer of the Shares in violation of
this Agreement shall be void and of no force and effect. Upon a Senior Holder's
notice to the Company's transfer agent of a Transfer in violation of this
Agreement, the transfer agent shall not effect said Transfer.
3. TRANSFERS NOT SUBJECT TO TAG ALONG.
3.1 PERMITTED TRANSFERS. The following Transfers shall not be
subject to the tag along right set forth in Section 4 hereof (each, a "Permitted
Transfer"):
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(a) CERTAIN TRANSFERS BY SELLING HOLDERS.
Subject to the restrictions set forth in Section 6, each Selling Holder who is
not a natural person or any subsequent holder of the Shares initially held by
such Selling Holder may Transfer any or all of its Shares to any Affiliate of
such Selling Holder. Any Shares, or interest therein, transferred pursuant to
this Section 3.1(a)(i) may be subsequently transferred back to the Transferor.
(b) INTER VIVOS TRANSFERS. Subject to the
restrictions set forth in Section 6, any Selling Holder who is a natural person
may Transfer any or all of his or her Shares to a trust primarily for such
Selling Holder's benefit or a trust for the benefit of a Family Member of the
Selling Holder so long as such Selling Holder acts as the trustee or co-trustee
of such trust. Any Shares transferred pursuant to this Section 3.1(a)(ii) may
subsequently be transferred back to the transferor.
(c) TESTAMENTARY TRANSFERS. Subject to the
restrictions set forth in Section 6, any Selling Holder who is a natural person
may, upon the death of such Selling Holder, Transfer by gift, will or intestacy
any or all of his or her Shares to any other Person.
3.2 OTHER SHARES. Notwithstanding the fact that a particular
Transfer of Shares may be a Permitted Transfer, the tag along right set forth in
Section 4 shall be applicable to any subsequent transfer of such Shares, unless
any such subsequent Transfer shall also constitute a Permitted Transfer
hereunder.
3.3 NOTICES. A Selling Holder who desires to Transfer Shares
as a Permitted Transfer shall notify the Senior Holders of the foregoing prior
to the closing of the Transfer and provide such details of the Transfer as to
enable the Senior Holders to determine if the Transfer complies with Sections 2
and 3 hereof.
3.4 TRANSFEREE ACKNOWLEDGMENT. The Transferee shall deliver to
the Senior Holders a written acknowledgment reasonably satisfactory in form and
substance to the Senior Holders that the Shares delivered in a Permitted
Transfer are subject to this Agreement and that such Transferee and such
Transferee's successors in interest are bound hereby. The Shares transferred by
all Transferees in a Permitted Transfer shall be aggregated with the Shares held
by all of the Holders hereunder in determining whether the Senior Holders are
entitled to Tag Along rights.
4. TAG-ALONG RIGHT. Each Selling Holder of Shares agrees that, subject
to Section 2 and except as provided in Section 3 hereof, such Holder will not
Transfer any Shares, or any right, title or interest therein, unless and until
such Holder shall have first complied with the provisions set forth in this
Section 4.
(a) TRANSFER NOTICE. A Transferor who desires in good faith to
Transfer Shares that would confer Tag Along rights under Section 4(b) pursuant
to a bona fide written offer to purchase such Shares received from an
unaffiliated, third party shall deliver a written
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notice of the proposed Transfer (the "Transfer Notice") to the Senior Holders.
The Transfer Notice shall contain a description of the proposed transaction and
the terms thereof including the number of Shares proposed to be transferred
(collectively, the "Transfer Shares"), the name of the Transferor, the name of
each Transferee, a description of the consideration to be received by the
Transferor upon Transfer of the Transfer Shares and the proposed closing
arrangements. The Transfer Notice shall be accompanied by a copy of the bona
fide written third party offer. No offer shall be considered bona fide, and no
Transfer to a Transferee shall be permissible, unless the consideration for the
Transfer involved is to consist of cash, recourse promissory notes of a
credit-worthy Transferee or a combination of cash and such promissory notes.
(b) TAG ALONG RIGHT. If the proposed Transfer would constitute
when aggregated with all prior Transfers of any Selling Holder and Transferees
thereof other than a Permitted Transfer, a Transfer of Common Stock representing
more than eighty-five percent (85%) of the outstanding Common Stock of the
Company held by the Selling Holders as measured on April 16, 1998 (with
appropriate adjustments for stock splits, dividends, reverse splits and other
similar events), then in either case the Transferor shall make no sale or
Transfer to the Transferee of such shares unless the Senior Holders shall be
offered the right (which shall be accepted or rejected within thirty (30) days
of receipt of the notice set forth in Section 4(a) above) to sell to the
Transferee on terms and conditions at least as favorable to the Transferee as
set out in the Transfer Notice, their Pro Rata (as to the Transferor) portion of
such Transfer Shares (and the Senior Holders may in lieu of selling shares of
the Company's Common Stock sell Warrants to purchase the same). This provision
shall be applied to each individual Transfer by each individual Transferor.
(c) TRANSFER OF SHARES. Transfers of Shares pursuant to offers
subject to this Section 4 made and accepted in accordance with this Section 4
and to a Transferee shall occur simultaneously on a business day not more than
thirty (30) days after the last date on which any offer made in accordance with
this Section 4 could have been accepted.
5. COVENANT OF THE SELLING HOLDERS. Each Selling Holder covenants that
upon any Transfer of Shares subject to this Agreement, the Selling Holder shall
provide written notice to the Transferee that the Shares are subject to the
terms of this Agreement and shall provide such Transferee with a copy of this
Agreement upon request.
6. ALL SHARES SUBJECT TO THIS AGREEMENT. All Shares shall be held
subject to the terms of this Agreement and the holder thereof shall be deemed a
Selling Holder for purposes of this Agreement, as follows:
6.1 Any Shares hereafter held by any Person shall be held by
such Person subject to the provisions of this Agreement and such Person shall be
deemed to be a "Selling Holder" for all purposes of this Agreement;
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6.2 Any Selling Holder who ceases to own any Shares as
provided for in this Agreement shall cease to be a Selling Holder for purposes
of this Agreement, except that such Selling Holder shall be responsible for any
subsequent Transfers in violation of this Agreement by a Transferor who obtained
such Shares through a Permitted Transfer;
6.3 If Xxxxxxx Xxxxxxxxxx'x employment is terminated by the
Company, unless such termination is directly or indirectly related to a Transfer
of the Shares, the Shares owned by Xxxxxxx Xxxxxxxxxx shall cease to be subject
to this Agreement; and
6.4 The provisions of this Agreement shall be deemed to apply
equally to any security or other Shares or other securities distributed in
respect of the Shares.
7. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which will be deemed an original but all of which will
constitute one and the same.
8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto and contains all of the agreements among such parties
with respect to the subject matter hereof. This Agreement supersedes any and all
other agreements, either oral or written, between such parties with respect to
the subject matter hereof.
9. PARTIAL INVALIDITY. Wherever possible, each provision hereof shall
be interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
10. AMENDMENT. Except as expressly provided herein, this Agreement may
be amended only by a written agreement executed by all Selling Holders.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH
STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER
THAN SUCH STATE. AS PART OF THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED,
AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS
OF THE SENIOR HOLDERS OR SELLING HOLDERS, THE SELLING HOLDERS HEREBY CONSENT AND
AGREE THAT THE SUPREME COURT OF NEW YORK COUNTY, NEW YORK OR, AT SENIOR HOLDER'S
OPTION, THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
SHALL HAVE THE EXCLUSIVE JURISDICTION TO BEAR AND DETERMINE ANY CLAIMS OR
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DISPUTES BETWEEN SENIOR HOLDERS AND SELLING HOLDERS PERTAINING TO THIS AGREEMENT
OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. SELLING HOLDERS
EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND SELLING HOLDERS HEREBY WAIVE ANY OBJECTION
WHICH SELLING HOLDERS MAY HAVE BASED ON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENT TO THE GRANTING FOR SUCH LEGAL
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. SELLING HOLDERS
HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED
IN ANY SUCH ACTION OR SUIT AND AGREE THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE
SELLING HOLDERS AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO
MADE SHALL BE DEEMED COMPLETE UPON THE EARLIER OF THE SELLING HOLDER'S ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT
THE RIGHT OF THE SENIOR HOLDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY THE SENIOR HOLDER OF ANY
JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
12. FURTHER ASSURANCES. In connection with this Agreement and the
transactions contemplated hereby, each Selling Holder shall execute and deliver
any additional documents and instruments and perform any additional acts that
may be necessary or appropriate to effectuate and perform the provisions of this
Agreement and such transactions.
13. NOTICES. All notices, requests, and other communications made or
given in connection with this Agreement shall be in writing and, unless receipt
is stated herein to be required shall be deemed to have been validly given if
delivered personally against receipt by private carrier, registered or certified
mail, return receipt requested, or by telecopy with the original forwarded by
first class mail, in all cases with charges prepaid, addressed as follows, or
delivered to the individual or division or department to whose attention notices
to a party are to be addressed, until some other address (or individual or
division or department for attention) shall have been designated by notice given
by a party to the other:
To Senior Holders: Xxxxxx Xxxxxxx Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxx
Telecopier: (000) 000-0000
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and
Seneca Capital L.P.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx
Telecopier: (000) 000-0000
To Company: National Record Mart, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Attn: Xxxxxxx Xxxxxxx
Telecopy: (000) 000-0000
To the Selling Holders: See Schedule A
14. MISCELLANEOUS. Subject to the provisions of this Agreement relating
to transferability, this Agreement will be binding upon and shall inure to the
benefit of the parties, and their respective distributees, heirs, successors and
assigns. If any party hereto is a partnership, all provisions of this Agreement
applicable to such party shall be binding upon and include not only the
partnership but each and all of the partners thereof individually. This
Agreement may not be modified except in writing executed by the party against
which enforcement of such modification is sought. The rights granted to Senior
Holders hereby shall be in addition to any other rights of Senior Holders under
any other subordination agreement, if any, now or hereafter outstanding. All
rights and remedies of Senior Holders shall be cumulative. The provisions of
this Agreement shall operate only in favor of and only for the benefit of Senior
Holders, their successors and assigns, and not in favor of or for the benefit of
any Selling Holder or any other person or entity. Whenever Senior Holder's
consent is required or permitted, such consent shall be in the sole and absolute
discretion of Senior Holder.
15. SEVERABILITY. If any provision herein shall for any reason be held
invalid or unenforceable, no other provision shall be affected thereby, and this
Agreement shall be construed as if the invalid or unenforceable provision had
never been a part of it.
16. WAIVER OF RIGHT TO TRIAL BY JURY. SENIOR HOLDERS AND SELLING
HOLDERS WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION (a) ARISING UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT
REFERRED TO HEREIN OR DELIVERED IN CONNECTION HEREWITH, OR (b) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT REFERRED TO
HEREIN OR DELIVERED IN CONNECTION HEREWITH IN EACH CASE WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE, SENIOR HOLDERS AND SELLING
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HOLDERS AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE SENIOR HOLDERS AND SELLING HOLDERS TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY. SENIOR HOLDERS AND SELLING HOLDERS
ACKNOWLEDGE THAT THEY HAVE HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL REGARDING
THIS SECTION THAT THEY FULLY UNDERSTAND ITS TERMS, CONTENT AND EFFECT, AND THAT
THEY VOLUNTARILY AND KNOWINGLY AGREE TO THE TERMS OF THIS SECTION.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed as of the day, month and year first above written.
THE COMPANY:
NATIONAL RECORD MART, INC.,
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxxx
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Name: Xxxxxxx Xxxxxxx
Title:CFO
THE SELLING HOLDERS: THE SENIOR HOLDERS:
Xxxxxxx Xxxxxxxxxx XXXXXX XXXXXXX, INC.,
a Delaware corporation
/s/ Xxxxxxx Xxxxxxxxxx
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Xxxxxxx Xxxxxxxxxx By: ????
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Name:
Title:
SENECA CAPITAL L.P.
a Delaware limited partnership
By: ????
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Name:
Title:
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