<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission file number: 0-24091
TWEETER HOME ENTERTAINMENT GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-3417513
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 Hudson Road
Canton, MA 02021
(Address of principal executive offices including zip code)
781-830-3000
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
---
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title of Class Outstanding at August 10, 1998
Common Stock, $.01 par value 6,082,690
<PAGE> 2
Tweeter Home Entertainment Group, Inc.
Index
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
June 30, 1998 and September 30, 1997........................ 4
Consolidated Statements of Operations
For the Three and Nine Month Periods
Ended June 30, 1998 and 1997................................ 5
Consolidated Statements of Stockholders'
Equity (Deficit) for the Nine Month Period
Ended June 30, 1998......................................... 6
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended June 30, 1998 and 1997 ........... 7
Notes to Condensed Consolidated Financial Statements........ 8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 9
Part II. OTHER INFORMATION ................................................11
Item 2 Report of Offering of Securities and
Use of Proceeds Therefrom...................................10
Exhibit Index........................................................11
SIGNATURE PAGE ..........................................................12
2
<PAGE> 3
TWEETER HOME ENTERTAINMENT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
ASSETS 1998 1997
----------- ------------
Unaudited
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,271,528 $ 1,156,837
Accounts receivable, net of allowance for doubtful
accounts of $564,000 and $631,000 6,211,069 5,472,779
Inventory 36,391,887 31,160,043
Deferred tax asset 1,276,020 1,220,481
Prepaid expenses and other current assets 287,045 822,904
----------- -----------
Total current assets 45,437,549 39,833,044
PROPERTY AND EQUIPMENT - Net 22,442,427 17,967,504
DEFERRED TAX ASSET 108,605 59,397
OTHER ASSETS - Net 1,308,128 331,870
GOODWILL - Net 20,097,835 20,496,115
----------- -----------
TOTAL $89,394,544 $78,687,930
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 400,000 $ 400,000
Amount due to bank 3,480,326 4,948,702
Accounts payable 7,927,791 11,456,967
Accrued expenses 13,613,703 8,392,505
Customer deposits 1,419,314 1,255,024
Deferred warranty 1,209,342 1,509,481
----------- -----------
Total current liabilities 28,050,476 27,962,679
----------- -----------
LONG-TERM DEBT:
Note payable to bank 21,500,000 14,500,000
Subordinated debt 16,074,617 16,387,816
----------- -----------
Total long-term debt 37,574,617 30,887,816
----------- -----------
OTHER LONG-TERM LIABILITIES:
Rent related accruals 2,797,636 2,421,082
Deferred warranty 1,311,487 2,175,577
Other long-term liabilities 221,760 318,780
----------- -----------
Total other long-term liabilities 4,330,883 4,915,439
Total liabilities 69,955,976 63,765,934
----------- -----------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE CONVERTIBLE PREFERRED STOCK
Series A Convertible Preferred Stock, .01 par value; authorized:
4,000,000 shares; 1,700,136 shares issued and outstanding in
1998 and 1997 (liquidation preference, $14,949,801) 14,949,801 13,399,386
Series B Convertible Preferred Stock, no par value; authorized:
4,000,000 shares; 866,425 shares issued and outstanding in
1998 and 1997 (liquidation preference, $8,016,261) 8,016,261 7,191,221
----------- -----------
Total: 22,966,062 20,590,607
----------- -----------
Stockholders Equity (deficit)
Common stock, .01 par value; authorized: 30,000,000
shares; 2,755,202 shares issued in 1998 and 1997 27,552 27,552
Additional paid-in capital (2,732,300) (2,732,300)
Retained earnings (deficit) 758,771 (1,382,346)
Note receivable from officer (31,500) (31,500)
----------- -----------
Total: (1,977,477) (4,118,594)
Less treasury stock: 1,698,929 shares at cost (1,550,017) (1,550,017)
----------- -----------
Total stockholders' equity (deficit): (3,527,494) (5,668,611)
----------- -----------
TOTAL $89,394,544 $78,687,930
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE> 4
TWEETER HOME ENTERTAINMENT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------------------- ----------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenue $ 49,675,691 $ 28,211,492 $ 178,805,403 $ 88,794,340
Cost of sales (32,256,264) (18,552,435) (116,536,620) (57,732,904)
------------ ------------ ------------- ------------
Gross profit 17,419,427 9,659,057 62,268,783 31,061,436
Selling expenses 13,379,069 8,159,847 43,586,722 22,957,272
Corporate, general and
administrative expenses 2,733,932 2,069,263 8,121,283 5,862,165
Amortization of goodwill 221,301 121,971 677,214 241,533
------------ ------------ ------------- ------------
Income (loss) from operations 1,085,125 (692,024) 9,883,564 2,000,466
Interest expense 745,498 472,899 2,355,944 986,019
------------ ------------ ------------- ------------
Income (loss) before income taxes 339,627 (1,164,923) 7,527,620 1,014,447
Income tax expense (benefit) 135,850 (467,337) 3,011,048 409,000
------------ ------------ ------------- ------------
NET INCOME (LOSS) $ 203,777 $ (697,586) $ 4,516,572 $ 605,447
============ ============ ============= ============
Accretion of preferred stock 791,815 536,054 2,375,455 1,437,315
------------ ------------ ------------- ------------
Net income (loss) available to
common shareholders (588,038) (1,233,640) 2,141,117 (831,868)
============ ============ ============= ============
Basic earnings (loss) per share $ (0.35) $ (0.74) $ 1.28 $ (0.50)
============ ============ ============= ============
Weighted average shares
outstanding 1,672,507 1,672,507 1,672,507 1,672,507
============ ============ ============= ============
Diluted earnings (loss) per
share $ (0.35) $ (0.74) $ 0.96 $ (0.50)
============ ============ ============= ============
Weighted average shares 1,672,507 1,672,507 4,694,321 1,672,507
outstanding ============ ============ ============= ============
</TABLE>
See notes to condensed consolidated financial statements
4
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\
TWEETER HOME ENTERTAINMENT GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Total
Common Stock Additional Retained Note Stockholders'
-------------------- Paid-in Earnings Receivable Treasury Stock Equity
Shares Amount Capital (Deficit) from Officer Shares Amount (Deficit)
---------- -------- ----------- ---------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1997 2,755,202 $27,552 $(2,732,300) $(1,382,346) $(31,500) 1,698,929 $(1,550,017) $(5,668,611)
Accretion of Series A
Convertible Preferred
Stock (1,550,415) (1,550,415)
Accretion of Series B
Convertible Preferred
Stock (825,040) (825,040)
Net Income 4,516,572 4,516,572
--------- -------- ----------- ---------- ------- --------- ----------- -----------
Balance, June 30, 1998 2,755,202 $ 27,552 $(2,732,300) $ 758,771 $(31,500) 1,698,929 $(1,550,017) $(3,527,494)
========= ======== =========== ========== ========= ========= =========== ===========
</TABLE>
See notes to condensed consolidated financial statements
5
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TWEETER HOME ENTERTAINMENT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
--------------------------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,516,572 $ 605,447
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 2,878,919 1,853,606
Gain on disposal of equipment (13,350) --
Deferred income tax provision (benefit) (104,747) 58,683
Changes in operating assets and liabilities,
net of effects from acquisition of business:
Increase in accounts receivable (738,290) (1,957,377)
Increase in inventory (5,231,844) (2,883,241)
(Increase) decrease in prepaid expenses
and other current assets (797,140) 677,637
Increase (decrease) in accounts payable and accrued expenses 1,692,022 (2,517,327)
Increase (decrease)in customer deposits 164,290 (188,073)
Increase in deferred rent 376,554 242,403
Decrease in deferred warranty (1,164,229) (367,709)
Decrease in other liabilities (97,020) --
----------- ------------
Net cash provided by (used in) operating activities 1,481,737 (4,475,951)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (6,612,020) (2,315,390)
Proceeds from sale of property and equipment 13,350 --
Acquisition of business -- (19,539,800)
----------- ------------
Net cash used in investing activities (6,598,670) (21,855,190)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Amount due to bank (1,468,376) 4,322,067
Proceeds from long-term borrowings, net of debt issue costs 7,000,000 15,868,130
Payments of subordinated debt (300,000) (33,333)
Issuance of Series B Preferred Stock 6,837,386
----------- ------------
Net cash provided by financing activities 5,231,624 26,994,250
----------- ------------
INCREASE IN CASH AND CASH EQUIVALENTS 114,691 663,109
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,156,837 438,607
----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,271,528 $ 1,101,716
=========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 2,699,274 $ 1,008,302
=========== ============
Taxes $ 2,629,985 $ 358,000
=========== ============
</TABLE>
See notes to consolidated financial statements
6
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Tweeter Home Entertainment Group, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The unaudited, condensed consolidated financial statements of Tweeter
Home Entertainment Group, Inc. and its subsidiaries (the "Company"),
included herein, should be read in conjunction with the financial
statements and related notes included in the Company's Registration
Statement filed with the Securities and Exchange Commission on Form S-1
on June 28, 1998.
2. Accounting Policies
The unaudited consolidated financial statements of the Company have
been prepared in accordance with generally accepted accounting
principles. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair
presentation of the interim consolidated financial statements have been
included. Operating results for the nine month period ended June
30, 1998 are not necessarily indicative of the results that may be
expected for the year ending September 30, 1998. The Company typically
records its highest revenue and earnings in the first fiscal quarter.
3. Earnings per Share
Net income per common share has been computed in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" (SFAS 128). SFAS 128 requires a dual presentation of basic and
diluted EPS. Basic EPS excludes dilution and is computed by dividing
net income available to common shareholders by the weighted average of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that would occur if securities or other contracts to
issue common stock were exercised or converted into common stock.
4. New Accounting Pronouncements:
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" has recently been issued. The Company does not expect that
the implementation of this SFAS will have a material effect on the
consolidated financial or results of operations. This SFAS will become
effective for the Company for the year ending September 30, 2000.
5. Recent Events
On July 16, 1998, the Company completed an Initial Public Offering of
2,710,000 shares of common stock. The Company sold 2,200,000 shares and
510,000 shares were sold by existing shareholders. Net proceeds
received by the Company were $33,193,000 (before deducting estimated
offering expenses). In addition, the Company has granted the
Underwriters a 30 day option to purchase up to 406,500 shares to cover
over-allotments.
7
<PAGE> 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The Company is a specialty retailer of mid to high-end audio and video consumer
electronics products. The Company operates 51 stores under the Tweeter, Bryn
Mawr Stereo and Video and HiFi Buys names.
RESULTS OF OPERATIONS
Sales for the third quarter of fiscal 1998 were $49.7 million, an increase of
76.2% from $28.2 million in the same period last year. These numbers reflect the
addition of the HiFi Buys stores as of June 1, 1997. Comparable store sales
(including HiFi Buys for the entire quarter) increased 18%. The increase was
mainly comprised of $11.2 million from the HiFi Buys Acquisition, $3.3 million
from new stores, and $6.2 million comparable store sales growth. Sales for the
nine months ended June 30, 1998 were $178.8 million compared to $88.8 million
for the nine months ended June 30, 1997, an increase of 101.4%. Comparable store
sales for the nine months ended June 30, 1998 increased 11.7%. The increase was
mainly comprised of $57.3 million from the HiFi Buys Acquisition, $11.2 million
from new stores, and $19.7 million comparable store sales growth.
The gross profit margin for the quarter ended June 30, 1998 was 35.1% compared
to 34.2% for the quarter ended June 30, 1997. The increase in margin is
primarily due to the increase in audio products sold as a percentage of total
merchandise. For the nine months ended June 30, 1998, gross profit margin
decreased to 34.8% from 35.0% for the nine months ended June 30, 1997, primarily
due to the impact of the HiFi Buys acquisition.
Selling expenses for the quarter ended June 30, 1998 decreased to 26.9% as a
percentage of total revenue compared to 28.9% for the quarter ended June 30,
1997. For the nine months ended June 30, 1998, selling expenses were 24.4% as
compared to 25.9% for the nine months ended June 30, 1997.
Corporate, general and administrative expenses for the quarter decreased to 5.5%
as a percentage of total revenue compared to 7.3% for the quarter ended June 30,
1997. For the nine months ended June 30, 1998, corporate, general and
administrative expenses decreased to 4.5% from 6.6% for the nine months ended
June 30, 1997. The improvement in selling expenses and corporate, general and
administrative expenses as a percentage of total revenue is a result of the
Company exceeding its sales plan and achieving its operating model for the
period.
Amortization of goodwill increased by $99,000 or 81.4% to $221,000 for the
three months ended June 30, 1998 compared to $122,000 for the three months
ended June 30, 1997. This increase is attributable to the additional goodwill
recorded in connection with the HiFi Buys Acquisition. Amortization of goodwill
increased to $677,000 for the nine months ended June 30, 1998 from $242,000 for
the nine months ended June 30, 1997. This increase is attributable to the
additional goodwill recorded in connection with the HiFi Buys Acquisition.
Interest expense increased by $272,000 or 57.6% to $745,000 for the three
months ended June 30, 1998 compared to $473,000 for the three months ended June
30, 1997 due primarily to the increased debt incurred to fund the HiFi Buys
Acquisition. Interest expense increased to $2.4 million for the nine months
ended June 30, 1998 from $1.0 million for the nine months ended June 30, 1997
due primarily to the increased debt incurred to fund the HiFi Buys Acquisition.
The effective tax rate for all periods presented was consistent at 40%.
Net income for the third quarter of fiscal 1998 was $204,000 or .4%, compared to
a loss of ($698,000) or (2.5%) in the same period last year. Net income for the
nine months ended June 30, 1998 was $4.5 million compared to $.6 million for
the same period last year, an increase of 646%.
On June 1, 1998, the Company opened its fifty-first store in Deptford, NJ. The
8,000 square foot facility includes a two bay mobile installation center and is
operating under the Bryn Mawr Stereo & Video name.
The Company's operations, in common with other retailers, are subject to
seasonal influences. Historically, the Company has realized more of its revenue
and net earnings in the first fiscal quarter, which includes the holiday season,
than in any other fiscal quarter. The net earnings of any interim quarter are
seasonally disproportionate to net sales since certain selling expenses and
administrative expenses are relatively fixed during the year. Therefore, interim
results should not be relied upon as necessarily indicative of results for the
entire fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $1,481,737 for the nine-month
period ending June 30, 1998. This compares to net cash used by operating
activities of $4,475,951 for the nine-month period ended June 30, 1997. Cash
provided by operations in 1998 was primarily the result of $4.5 million in Net
Income and adjustments due to depreciation and amortization of $2.9 million,
offset by an increase in inventory of $5.2 million and a $1.2 million decrease
in deferred warranties, as well as minor changes in other operating accounts.
At June 30, 1998, working capital was $17.4 million, compared to $9.2 million
for the period ended June 30, 1997. The ratio of current assets to current
liabilities was 1.62 to 1 at June 30, 1998 and 1.34 to 1 at June 30, 1997.
8
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EBIT for the nine-month period ending June 30, 1998 was $9,883,564, compared to
$2,000,466 for the same period last year, representing EBIT growth of 394%. This
resulted from the addition and acquisition of new stores and increased
performance in existing stores.
Capital expenditures for fiscal 1998 to date were $6,612,020, primarily used for
the building of new stores, the remodeling and re-siting of existing stores and
approximately $900,000 booked to date for the improvements made to the new HiFi
Buys warehouse. Additionally, during the month of June, the Company purchased a
new corporate headquarters in Canton Massachusetts for an approximate purchase
price of $4,000,000.
The Company had available at quarter end a $24,000,000 credit facility with the
bank, of which $21.5 million was outstanding. This facility has been refinanced
by a new credit facility described in "Recent Events" below.
The Company believes that cash expected to be generated from operations and
available borrowings under the Credit Facility will be sufficient to finance
its working capital and capital expenditure requirements, exclusive of
acquisitions, for at least the next 12 months.
FORWARD-LOOKING STATEMENTS:
Certain statements contained in this Quarterly Report on Form 10-Q, including,
without limitation, statements containing the words "expects," "anticipates,"
"believes" and words of similar import, constitute "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward looking statements are subject to various risks and
uncertainties, including those relating to Company growth and acquisitions,
dependence on key personnel, the need for additional financings, competition
and seasonal fluctuations, and those referred to in the Company's Registration
Statement on Form S-1 (Reg. No. 333-51015), that could cause actual future
results and events to differ materially from those currently anticipated.
Readers are cautioned not to place undue reliance on these forward looking
statements.
YEAR 2000
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a
two-digit year is commonly referred to as the Year 2000 Compliance issue. As the
year 2000 approaches, such systems may be unable to accurately process certain
data-based information.
The Company believes that it has identified all significant applications that
will require modification to ensure Year 2000 Compliance. Internal and external
resources are being used to make the required modifications and test Year 2000
Compliance. The Company expects to complete the testing process of all
significant applications by Mid 1999.
In addition, the Company has communicated with others with whom it does
significant business to determine their Year 2000 Compliance readiness and the
extent to which the Company is vulnerable to any third party Year 2000 issues.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would have a material adverse effect on the Company.
The total cost to the Company of these Year 2000 Compliance activities has not
been and is not anticipated to be material to its financial position or results
of operations in any given year. These costs and the date on which the Company
plans to complete the Year 2000 modification and testing processes are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events including the continued availability of certain resources,
third party modification plans and other factors. However, there can be no
guarantees that these estimates will be achieved and actual results could differ
from those plans.
RECENT EVENTS
On July 16, 1998, the Company completed an initial public offering of 2,710,000
shares of common stock. The Company sold 2,200,000 shares and 510,000 shares
were sold by existing shareholders. Net proceeds received by the Company were
$33,193,000 (before deducting estimated offering expenses). In addition, the
Company has granted the Underwriters a 30 day option to purchase up to 406,500
shares to cover over-allotments.
9
<PAGE> 10
The proceeds were used (after deducting estimated offering expense) to repay
$14.1 million in outstanding indebtedness under its existing Credit Agreement
with BankBoston, N.A. and to repay $17.8 million in outstanding indebtedness
under various Subordinated Promissory Notes.
Also, on July 20, 1998, the Company entered into a new credit agreement with its
lender which increased the credit facility to $30,000,000. This new facility
has a three-year term and is secured by assets of the Company (including
pledges of stock in certain affiliates). At the Company's election, interest
accrues on borrowing at either (i) the higher of BankBoston's Base Rate or the
Federal Funds rate plus 0.50% or (ii) the London InterBank Offered Rate
("LIBOR") plus an applicable margin varying from 100 to 175 basis points.
Interest, but not principal, is payable during the term of the loan. The credit
agreement contains various financial covenants, including a maximum ratio of
debt to EBITDA (as defined therein), cash flow and interest coverage tests, and
a minimum net worth test, and also provides for limitations on other
indebtedness, liens, capital expenditures, mergers, payment of dividends, and
certain other matters.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings.
ITEM 2. REPORT OF OFFERING OF SECURITIES AND USE OF PROCEEDS THEREFROM.
On July 15, 1998, the Company's Registration Statement on Form S-1
(File No. 333-51015) was declared effective. This Registration Statement
relates to the Company's initial public offering, on July 16, 1998 of 2,710,000
shares of its Common Stock (the "Offering"). The Company has granted the
underwriters a 30-day option, beginning July 15, 1998, to acquire up to
406,500 shares from the Company at the initial public offering price. As of
August 10, 1998, such option has not yet been exercised. The Offering has not
been terminated.
The managing Offering underwriters (who also act as representatives
of the other Offering underwriters) are BT Alex. Brown, PaineWebber Incorporated
and Dain Rauscher Wessels, a division of Dain Rauscher Incorporated. The
following table reflects the shares registered and sold by the Company and
selling stockholders in connection with the Offering to date:
<TABLE>
<CAPTION>
Number of Shares Aggregate Price
Number of Shares Aggregate Price Sold in Offering of Shares Sold
Registered(1) of Shares Offered to Date to Date
---------------- ------------------ ---------------- ---------------
<S> <C> <C> <C> <C>
For Account
of Company 2,606,500 44,310,500 2,200,000 37,400,000
For Account
of Selling
Shareholders 510,000 8,670,000 510,000 8,670,000
--------- ----------- --------- -----------
Total 3,116,500 $52,980,500 2,710,000 $46,070,000
</TABLE>
- ---------
(1) Included within the number of shares registered are 406,500 shares which
the underwriters may purchase from the Company pursuant to the exercise of an
option to cover over-allotments as described above.
Through August 10, 1998, total underwriting discounts in the Offering
were $3,224,900 (based on 2,710,000 shares sold with an underwriting discount of
$1.19 per share). No other fees were paid to the underwriters in connection with
the Offering. The Company estimates that its aggregate expenses (excluding
underwriting discounts) incurred in connection with the Offering through August
10, 1998 (including legal, accounting and other professional fees, printing
expenses and NASDAQ fees) are approximately $2.85 million. No such payments were
made to directors or officers of the Company or their associates, or to persons
owning ten (10) percent or more of any class of equity securities of the Company
or to affiliates of the Company, except that the Company notes that Kitt
Sawitsky and Daniel R. Avery, Secretary and Assistant Secretary, respectively,
of the Company, are directors and shareholders of Goulston & Storrs, P.C., which
firm is counsel to the Company (including with respect to the Offering) and
which firm's fees are included within such total amount of expenses. After
deducting such total estimated expenses (and underwriting discounts), the net
offering proceeds to the Company from the Offering, through August 10, 1998,
were $31,932,000.
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<PAGE> 11
The Company has used these net proceeds to repay (i) approximately
$14.1 million in outstanding indebtedness under its existing Credit Agreement
with BankBoston, N.A.; (ii) approximately $15.1 million in outstanding
indebtedness under the Senior Subordinated Promissory Notes dated May 30, 1997
issued in connection with the HiFi Buys Acquisition; (iii) approximately $1.9
million in outstanding indebtedness under the Senior Subordinated Note dated
November 28, 1995 issued in connection with a recapitalization pursuant to
which the Company repurchased common stock from certain of its stockholders
which amount includes a one-time payment of approximately $820,000 which became
due to these stockholders upon the consummation of the Offering; and (iv)
approximately $771,000 to repay outstanding indebtedness under the Subordinated
Note dated June 1, 1997 issued in connection with the HiFi Buys acquisition.
No such payments were made to directors or officers of the Company, or
to persons owning ten (10) percent of or more of any class of equity securities
of the Company or to any affiliate of the Company, except that the Company notes
that PNC Capital Corp was repaid approximately $5.0 million on account of its
Promissory Note as described in the foregoing clause (ii). PNC beneficially
owned 11.2% of the Company's common stock, calculated as described in the
Company's Registration Statement, immediately prior to the Offering.
The total expenses estimated to be incurred by the Company in
connection with the Offering, as described above, have increased since the
estimate thereof in the Company's Registration Statement. Such increase is
attributable primarily to the incurring of additional accounting, legal and
printing fees needed to consummate the Offering and which were in excess of the
fees originally estimated by the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
The Exhibit Index is attached hereto.
(b) Reports on Form 8-K.
No reports have been filed on Form 8-K during the quarter for which this report
is filed.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Tweeter Home Entertainment Group, Inc.
August 10, 1998 By: /s/ Joseph McGuire
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Date Joseph McGuire, Chief Financial Officer
12
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Tweeter Home Entertainment Group, Inc.
Report on Form 10-Q For Quarter Ended June 30, 1998
Exhibit Index
EXHIBIT DESCRIPTION
NUMBER
3.1 Amended and Restated Certificate of the Incorporation of the Company
as filed with the Secretary of State of Delaware on July 21, 1998.
3.2 Certificate of Designation relating to Preferred Stock under
Shareholders' Rights Agreement as filed with the Secretary of State of
Delaware on July 21, 1998.
4.1 Shareholders' Rights Agreement effective as of July 21, 1998.
10.1 Amended and Restated Credit Agreement dated as of July 20, 1998, by
and among BankBoston, N.A. (the "Bank"), the Company and its
subsidiaries.
10.2 $30,000,000 Revolving Credit Note, dated July 20, 1998, executed by
New England Audio Co., Inc. ("NEA") and NEA Delaware, Inc. ("NEAD"),
subsidiaries of the Company.
10.3 Tweeter Trust Subordination Agreement dated as of July 20, 1998,
between the Bank, NEA, NEAD and Tweeter Home Entertainment Group
Financing Company Trust ("Finco"), a subsidiary of the Company.
10.4 Amended and Restated Security Agreement dated as of July 20, 1998,
between the Bank, NEA and NEAD.
10.5 Tweeter Security Agreement dated as of July 20, 1998, between the
Bank, the Company and Finco.
10.6 Amended and Restated Stock Pledge Agreement dated as of July 20, 1998,
between the Bank and NEA.
10.7 Tweeter Stock Pledge Agreement dated as of July 20, 1998, between the
Bank and the Company.
27 Financial Data Schedule (filed electronically with the Commission
only).
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EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TWEETER HOME ENTERTAINMENT GROUP, INC.
Tweeter Home Entertainment Group, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), hereby
certifies as follows:
1. The name of the Corporation is Tweeter Home Entertainment Group,
Inc. The date of the filing of its original Certificate of Incorporation with
the Secretary of State of the State of Delaware was April 14, 1998 (the
"Original Certificate of Incorporation"). The Original Certificate of
Incorporation was amended and restated on June 5, 1998 (the "First Amended and
Restated Certificate of Incorporation").
2. This Amended and Restated Certificate of Incorporation (the
"Certificate"), which amends, restates and integrates the provisions of the
First Amended and Restated Certificate of Incorporation, was duly adopted by the
Board of Directors of the Corporation in accordance with the provisions of
Sections 141(f), 242 and 245 of the General Corporation Law of the State of
Delaware, as amended from time to time (the "DGCL"), and was duly adopted by the
written consent of the stockholders of the Corporation in accordance with the
applicable provisions of Sections 228, 242 and 245 of the DGCL.
3. The text of the First Amended and Restated Certificate of
Incorporation, as amended to date, is hereby amended and restated in its
entirety to provide as herein set forth in full.
ARTICLE I
NAME
The name of the corporation is Tweeter Home Entertainment Group, Inc.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of the Corporation's registered agent at such address is The
Corporation Trust Company.
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ARTICLE III
PURPOSES
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
A. AUTHORIZED CAPITAL. The Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares of stock which the Corporation shall have authority
to issue is Forty Million (40,000,000) shares, consisting of Thirty Million
(30,000,000) shares of Common Stock, $.01 par value, and Ten Million
(10,000,000) shares of Preferred Stock, $.01 par value.
B. COMMON STOCK.
1. The holders of shares of Common Stock shall be entitled to one
vote for each share so held with respect to all matters voted on by the
stockholders of the Corporation.
2. Subject to any preferential dividend rights of the Preferred
Stock, dividends may be paid on the Common Stock as and when declared by the
Board of Directors or any authorized committee thereof.
3. Upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, after payment shall have been made to the holders
of the Preferred Stock having a prior and superior right to any assets of the
Corporation of the full amount to which they are entitled, the net assets of the
Corporation available for distribution to the holders of Common Stock shall be
distributed pro rata to such holders in proportion to the number of shares of
Common Stock held by each.
C. PREFERRED STOCK. The Board of Directors of the Corporation is hereby
expressly vested with the power by resolution to designate one or more series of
the Preferred Stock of the Corporation from time to time and by resolution to
designate the powers, preferences and relative, participating, optional or other
special rights of any such series, and the qualifications, limitations or
restrictions thereof, to the extent not in conflict with the powers,
designations, preferences or relative, participating, optional or other special
rights, or the qualifications, limitations or restrictions of any other series
fixed by resolution of the Board of Directors and set forth in a certificate of
designation filed with the Secretary of State of Delaware. The power of the
Board of Directors as describe in this paragraph shall include the right to fix
one or more of the following with respect to each series of Preferred Stock to
the extent permitted by law:
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1. the annual or other periodic dividend rate or amount of dividends
to be paid on the shares of such series, the dividend payment dates, the date
from which dividends on all shares of such series issued shall be cumulative, if
applicable, and the extent of participation and other rights, if any;
2. whether the shares of such series shall be redeemable and, if so,
the redemption price or prices, if any, for such series and other terms and
conditions on which such series may be retired and redeemed;
3. the distinctive serial designation and maximum number of shares
of such series issuable;
4. the right to vote, if any, with holders of shares of any other
class or series, either generally or as a condition to specified corporate
action;
5. the amount payable upon shares of such series and the preferences
applicable thereto in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
6. the rights, if any, of the holders of shares of such series to
convert such shares into other classes of stock of the Corporation or into any
other securities, or to exchange such shares for other securities, and, if so,
the conversion price or prices, or the rate or rates of exchange, and the
adjustments thereof, if any, at which such conversion or exchange may be made
and any other terms and conditions of any such conversion or exchange;
7. the price or other consideration for which the shares of such
series shall be issued;
8. whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of Preferred Stock (or
series thereof) and whether such shares may be reissued as shares of the same or
any other class or series of stock; and
9. such other powers, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, as the Board of Directors may deem advisable and as are
not prohibited by law.
All shares of Preferred Stock shall be identical with each other in all
respects except as provided herein or in the resolution or resolutions providing
for the issue of a particular series. All shares of Preferred Stock of any one
series shall be identical with each other in all respects except, if so
determined by the Board of Directors, as to the dates from which dividends
thereon shall be cumulative.
Any action by the Board of Directors under this Section C of Article IV
shall require the affirmative vote of a majority of the directors then in
office.
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ARTICLE V
STOCKHOLDER ACTION
Except as may be provided in the resolutions of the Board of Directors
designating any series of Preferred Stock solely with respect to action taken by
the holders of that series, any action required or permitted to be taken by
stockholders of the Corporation at any annual or special meeting of stockholders
of the Corporation must be effected at a duly called annual or special meeting
of stockholders and may not be taken or effected by a written consent of
stockholders in lieu thereof.
ARTICLE VI
DIRECTORS
A. GENERAL POWERS OF THE BOARD OF DIRECTORS. The business and affairs of
the Corporation shall be managed by or under the direction of its Board of
Directors. In furtherance, and not in limitation, of the powers conferred by the
State of Delaware, the Board of Directors of the Corporation is expressly
authorized to:
1. adopt, amend, or repeal the By-laws of the Corporation; provided,
however, that no By-laws hereafter adopted shall invalidate any prior act of the
directors that would have been valid if such new By-laws had not been adopted.
2. determine the rights, powers, duties, rules and procedures that
affect the power of the Board of Directors to manage the business and affairs of
the Corporation, including the power to designate and empower committees of the
Board of Directors, to elect, appoint and empower the officers and other agents
of the Corporation, and to determine the time and place of, and the notice
requirements for, Board meetings, as well as quorum and voting requirements for,
and manner of taking, Board action; and
3. exercise all such powers and do all such acts as may be exercised or
done by the Corporation, subject to the provisions of the laws of the State of
Delaware, this Certificate of Incorporation, and the By-laws of the Corporation.
B. NUMBER OF DIRECTORS. The number of directors constituting the Board of
Directors shall be fixed by, or in the manner provided in, the By-laws.
C. CLASSIFIED BOARD OF DIRECTORS. Effective as of the filing of this
Certificate, the directors shall be divided into three classes, with each class
to be as nearly equal in number as possible, and shall be referred to Class I
Directors, Class II Directors and Class III Directors, respectively. The initial
Class I Directors shall serve for a term expiring at the annual meeting of
stockholders to be held in 1999; the initial Class II Directors shall serve for
a term expiring at the annual meeting of stockholders to be held in 2000; and
the initial Class III Directors shall serve for a term expiring at the annual
meeting of stockholders to be held in 2001. At each annual meeting of
stockholders, the successor or successors of the class of directors whose term
expires at that meeting shall
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be elected by a plurality of the votes of the shares present in person or
represented by proxy at such meeting and entitled to vote on the election of
directors, and shall hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election. The
directors elected to each class shall hold office until their successors are
duly elected and qualified or until their earlier resignation or removal. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain or attain, if possible, the number of
directors in each class as nearly equal as possible, but in no case will a
decrease in the number of directors shorten the term of an incumbent director.
D. REMOVAL OF DIRECTORS. Subject to the rights, if any, of the holders of
any series of Preferred Stock to elect directors and to remove any director whom
such holders have the right to elect, any director (including persons elected by
directors to fill vacancies in the Board of Directors) may be removed from
office (a) only for cause and (b) only by the affirmative vote of the holders of
at least 75% of the voting power of all of the shares of capital stock of the
Corporation then entitled to vote generally in the election of directors, voting
together as a single class.
E. VACANCIES. Subject to the rights, if any, of the holders of any series
of Preferred Stock to elect directors and to fill vacancies in the Board of
Directors relating thereto, any vacancies in the Board of Directors, however
occurring, including, without limitation, by reason of an increase in size of
the Board of Directors, or the resignation or removal of a director, may filled
only by the affirmative vote of a majority of the remaining directors then in
office, even if less than a quorum of the Board of Directors. Any director
appointed in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been duly elected and qualified or until such director's
earlier resignation or removal. Subject to the rights, if any, of the holders of
any series of Preferred Stock, when the number of directors is increased or
decreased, the Board of Directors shall determine the class or classes to which
the increased or decreased number of directors shall be apportioned, but in no
case will a decrease in the number of directors shorten the term of an incumbent
director. In the event of a vacancy in the Board of Directors, the remaining
directors, except as otherwise provided by law, may exercise the powers of the
full Board of Directors until such vacancy is filled.
F. AMENDMENT OF BY-LAWS. Except as may be may be provided otherwise in the
By-laws, the Board of Directors shall have the power to adopt, amend, or repeal
any By-laws of the Corporation, subject to the right of the stockholders of the
Corporation to amend or repeal the By-laws as provided therein.
G. CONSIDERATION OF CERTAIN FACTORS BY DIRECTORS. In determining what he or
she reasonably believes to be in the best interests of the Corporation in the
performance of his or her duties as a director, a director may consider, both in
the consideration of tender and exchange offers, mergers, consolidations and
sales
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of all or substantially all of the corporation's assets and otherwise, such
factors as the Board of Directors determines to be relevant, including without
limitation:
1. the long-term and short-term interests of the Corporation and its
stockholders, including the possibility that these interests may be best served
by the continued independence of the Corporation;
2. whether the proposed transaction might violate federal or state laws;
3. if applicable, not only the consideration being offered in a proposed
transaction, in relation to the then current market price for the outstanding
capital stock of the Corporation, but also to the market price for such capital
stock of the Corporation over a period of years, the estimated price that might
be achieved in a negotiated sale of the Corporation as a whole or in part or
through orderly liquidation, the premiums over market price for the securities
or other corporations in similar transactions, current political, economic and
other factors bearing on securities prices and the Corporation's financial
condition and future prospects; and
4. the social, legal and economic effects of the proposed transaction
upon the Corporation's employees, suppliers, customers, creditors and others
having similar relationships with the Corporation, upon the communities in which
the Corporation conducts business and upon the economy of the state, region and
nation.
ARTICLE VII
LIMITATION OF LIABILITY OF DIRECTORS
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the DGCL or (d) for any transaction
from which the director derived an improper personal benefit. If the DGCL is
amended after the effective date of this Certificate to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the DGCL, as so amended.
Any amendment or repeal of this Article VII by either (i) the stockholders
of the Corporation or (ii) an amendment to the DGCL shall not adversely affect
any right or protection existing at the time of such amendment or repeal with
respect to any acts or omissions occurring before such amendment or repeal of a
person who has served as a director prior to, or is then serving as a director
at the time of, such amendment or repeal.
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ARTICLE VIII
INDEMNIFICATION OF DIRECTORS
The corporation shall, to the fullest extent permitted by Section 145 of the
DGCL, indemnify all persons whom it shall have the power to indemnify under that
section from and against all of the expenses, liabilities or other matters
referred to in or covered by that section and the indemnification provided for
herein shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend or repeal this Certificate in
the manner now or hereafter prescribed by statute and this Certificate, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
No amendment or repeal of this Certificate shall be made unless the same is
first approved by the Board of Directors pursuant to a resolution adopted by the
Board of Directors in accordance with Section 242 of the DGCL, and, except as
otherwise provided by law, thereafter approved by the stockholders. Whenever any
vote of the holders of voting stock is required to amend or repeal any provision
of this Certificate, then in addition to any other vote of the holders of voting
stock that is required by this Certificate or by law, the affirmative vote of at
least a majority of the outstanding shares of capital stock of the Corporation
entitled to vote on such amendment or repeal, voting together as a single class,
and the affirmative vote of at least a majority of the outstanding shares of
each class entitled to vote thereon as a class, shall be required to amend or
repeal any provision of this Certificate; provided, however, that the
affirmative vote of not less than 75% of the outstanding shares entitled to vote
on such amendment or repeal, voting together as a single class, and the
affirmative vote of not less than 75% of the outstanding shares of each class
entitled to vote thereon as a class, shall be required in any event to amend,
adopt any provision inconsistent with, or repeal any of the provisions of
Articles V through X of this Certificate.
IN WITNESS WHEREOF, the undersigned has executed this Amended and
Restated Certificate of Incorporation this 21st day of July, 1998.
/s/ Jeffrey Stone
-------------------------
Jeffrey Stone
President
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EXHIBIT 3.2
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING CUMULATIVE PREFERRED STOCK
OF
TWEETER HOME ENTERTAINMENT GROUP, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
TWEETER HOME ENTERTAINMENT GROUP, INC. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "DGCL"), DOES HEREBY CERTIFY:
That the following resolution was duly adopted by the Board of Directors
of the Company, pursuant to the authority conferred upon the Board of Directors
by Article IV, Section C of the Company's Amended and Restated Certificate of
Incorporation and the provisions of Section 151 of the DGCL, at a duly called
meeting of the Board of Directors held on June 1, 1998:
RESOLVED: That the Board of Directors hereby designates 200,000 shares of the
Company's Preferred Stock, $.01 par value, as Series A Junior
Participating Cumulative Preferred Stock with the designations,
powers, preferences, and relative, participating, optional or other
rights, and the qualifications, limitations or restrictions thereof,
set forth on EXHIBIT I hereto.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation to be executed by Jeffrey S. Stone, its President, as of the 21st
day of July, 1998.
TWEETER HOME ENTERTAINMENT GROUP, INC.
By: /s/ Jeffrey Stone
----------------------------------
Jeffrey S. Stone
President
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DESIGNATIONS, POWERS, PREFERENCES, AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER RIGHTS, AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF,
OF
SERIES A JUNIOR PARTICIPATING CUMULATIVE PREFERRED STOCK
OF
TWEETER HOME ENTERTAINMENT GROUP, INC.
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Cumulative Preferred Stock," $.01
par value, (hereinafter called "Series A Preferred Stock"), and the number of
shares initially constituting such series shall be 200,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors and
by the filing of a certificate pursuant to the provisions of the General
Corporation Law of the State of Delaware stating that such increase or reduction
has been so authorized; provided, however, that no decrease shall reduce the
number of shares of Series A Preferred Stock to a number less than that of the
shares then outstanding plus the number of shares of Series A Preferred Stock
issuable upon exercise of outstanding rights, options or warrants or upon
conversion of outstanding securities issued by the Corporation.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) (i) Subject to the rights of the holders of any shares of any
series of preferred stock (or any similar stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of shares of Common Stock
and of any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provisions for
adjustment hereinafter set forth, 1,000 times the aggregate per share amount of
all cash dividends, and 1,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the shares of
Common Stock since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred Stock. The
multiple of cash and non-cash dividends declared on the shares of Common Stock
to which
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holders of the Series A Preferred Stock are entitled, which shall be
1,000 initially but which shall be adjusted from time to time as hereinafter
provided, is hereinafter referred to as the "Dividend Multiple." In the event
the Corporation shall at any time after July 21, 1998 (the "Rights Declaration
Date") (i) declare or pay any dividend on the shares of Common Stock payable in
shares of Common Stock, or (ii) effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
Dividend Multiple thereafter applicable to the determination of the amount of
dividends which holders of shares of Series A Preferred Stock shall be entitled
to receive shall be the Dividend Multiple applicable immediately prior to such
event multiplied by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(ii) Notwithstanding anything else contained in this
paragraph (A), the Corporation shall, out of funds legally available for that
purpose, declare a dividend or distribution on the Series A Preferred Stock as
provided in this paragraph (A) immediately after it declares a dividend or
distribution on the shares of Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend or distribution
shall have been declared on the shares of Common Stock during the period between
any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(B) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of Series
A Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix in accordance with applicable law a record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than such number of days prior to the date fixed for the
payment thereof as may be allowed by applicable law.
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SECTION 3. VOTING RIGHTS. In addition to any other voting rights
required by law, the holders of shares of Series A Preferred Stock shall have
the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 1,000 votes on all matters submitted to a vote of the stockholders of the
Corporation. The number of votes which a holder of a share of Series A Preferred
Stock is entitled to cast, which shall initially be 1,000 but which may be
adjusted from time to time as hereinafter provided, is hereinafter referred to
as the "Vote Multiple." In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare or pay any dividend on shares of Common
Stock payable in shares of Common Stock, or (ii) effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the Vote Multiple thereafter applicable to the determination of the
number of votes per share to which holders of shares of Series A Preferred Stock
shall be entitled shall be the Vote Multiple immediately prior to such event
multiplied by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) Except as otherwise provided herein or by law, the
holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock and the holders of shares of any other capital stock of this
Corporation having general voting rights, shall vote together as one class on
all matters submitted to a vote of stockholders of the Corporation.
(C) (i) Whenever, at any time or times, dividends payable on
any shares of Series A Preferred Stock shall be in arrears in an amount equal to
at least two full quarter dividends (whether or not declared and whether or not
consecutive), the holders of record of the outstanding shares of Series A
Preferred Stock shall have the exclusive right, voting separately as a single
class, to elect two directors of the Corporation at a special meeting of
stockholders of the Corporation or at the Corporation's next annual meeting of
stockholders, and at each subsequent annual meeting of stockholders, as provided
below. At elections for such directors, each Series A Preferred Share shall
entitle the holder thereof to 1,000 votes in such elections.
(ii) Upon the vesting of such right of the holders of
shares of Series A Preferred Stock, the maximum authorized number of members of
the Board of Directors shall automatically be increased by two and the two
vacancies so created shall be filled by vote of the holders of the outstanding
shares of Series A Preferred Stock as hereinafter set forth. A special meeting
of the stockholders of the Corporation then entitled to vote shall be called by
the Chairman of the Board of Directors or the President or the Secretary of the
Corporation, if requested in writing by the holders of record of not less than
10% of the shares of Series A Preferred Stock then outstanding. At such special
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meeting, or, if no such special meeting shall have been called, then at the next
annual meeting of stockholders of the Corporation, the holders of the shares of
Series A Preferred Stock shall elect, voting as above provided, two directors of
the Corporation to fill the aforesaid vacancies created by the automatic
increase in the number of members of the Board of Directors. At any and all such
meetings for such election, the holders of a majority of the outstanding shares
of Series A Preferred Stock shall be necessary to constitute a quorum for such
election, whether present in person or proxy, and such two directors shall be
elected by the vote of at least a majority of the shares of Series A Preferred
Stock held by such stockholders present or represented at the meeting. Any
director elected by holders of shares of Series A Preferred Stock pursuant to
this Section may be removed at any annual or special meeting, by vote of a
majority of the stockholders voting as a class who elected such director, with
or without cause. In case any vacancy shall occur among the directors elected by
the holders of shares of Series A Preferred Stock pursuant to this Section, such
vacancy may be filled by the remaining director so elected, or his successor
then in office, and the director so elected to fill such vacancy shall serve
until the next meeting of stockholders for the election of directors. After the
holders of shares of Series A Preferred Stock shall have exercised their right
to elect directors in any default period and during the continuance of such
period, the number of directors shall not be further increased or decreased
except by vote of the holders of shares of Series A Preferred Stock as herein
provided or pursuant to the rights of any equity securities ranking senior to or
pari passu with the Series A Preferred Stock.
(iii) The right of the holders of shares of Series A
Preferred Stock, voting separately as a class, to elect two members of the Board
of Directors of the Corporation as aforesaid shall continue until, and only
until, such time as all arrears in dividends (whether or not declared) on the
Series A Preferred Stock shall have been paid or declared and set apart for
payment, at which time such right shall terminate, except as herein or by law
expressly provided subject to revesting in the event of each and every
subsequent default of the character above-mentioned. Upon any termination of the
right of the holders of the Series A Preferred Stock as a class to vote for
directors as herein provided, the term of office of all directors then in office
elected by the holders of shares of Series A Preferred Stock pursuant to this
Section shall terminate immediately. Whenever the term of office of the
directors elected by the holders of shares of Series A Preferred Stock pursuant
to this Section shall terminate and the special voting powers vested in the
holders of the Series A Preferred Stock pursuant to this Section shall have
expired, the maximum number of members of this Board of Directors of the
Corporation shall be such number as may be provided for in the By-laws of the
Corporation, irrespective of any increase made pursuant to the provisions of
this Section.
(D) Except as otherwise required by applicable law or as set
forth herein, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of shares of Common Stock as set forth herein) for
taking any corporate action.
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<PAGE> 6
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever dividends or distributions payable on the Series
A Preferred Stock as provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not: (i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay
dividends on or make any other distributions on any shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled; (iii) except as permitted in subsection 4(A)(iv)
below, redeem, purchase or otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such parity stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Preferred Stock; or (iv) purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any shares of any stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under subsection (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
preferred stock and may be reissued as part of a new series of preferred stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution
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<PAGE> 7
shall be made (a) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (1) $1,000.00 per share or
(2) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (b) to the
holders of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all other
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up. In
the event the Corporation shall at any time after the Rights Declaration Date
(i) declare or pay any dividend on shares of Common Stock payable in shares of
Common Stock, or (ii) effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount per share
to which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause (a) of this paragraph shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Neither the consolidation of nor merging of the Corporation with or into
any other corporation or corporations, nor the sale or other transfer of all or
substantially all of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 6.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged,
plus accrued and unpaid dividends, if any, payable with respect to the Series A
Preferred Stock. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare or pay any dividend on shares of Common Stock
payable in shares of Common Stock, or (ii) effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by
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<PAGE> 8
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
SECTION 8. REDEMPTION. The shares of Series A Preferred Stock shall not
be redeemable; provided, however, that the foregoing shall not limit the ability
of the Corporation to purchase or otherwise deal in such shares to the extent
otherwise permitted hereby and by law.
SECTION 9. RANKING. Unless otherwise provided in the Certificate of
Incorporation or a Certificate of Designation relating to a subsequently-
designated series of preferred stock of the Corporation, the Series A Preferred
Stock shall rank junior to any other series of the Corporation's preferred
stock subsequently issued, as to the payment of dividends and the distribution
of assets on liquidation, dissolution or winding up and shall rank senior to
the Common Stock.
SECTION 10. AMENDMENT. The Certificate of Incorporation and this
Certificate of Designation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of two-thirds or more of the outstanding shares of Series A
Preferred Stock, voting separately as a class.
SECTION 11. FRACTIONAL SHARES. Shares of Series A Preferred Stock may be
issued in whole shares or in any fraction of a share that is one one-thousandth
(1/1,000th) of a share or any integral multiple of such fraction, which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of shares of Series A Preferred
Stock. In lieu of fractional shares, the Corporation may elect to make a cash
payment as provided in the Rights Agreement for fractions of a share other than
one one-thousandth (1/1,000th) of a share or any integral multiple thereof.
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<PAGE> 1
EXHIBIT 4.1
TWEETER HOME ENTERTAINMENT GROUP, INC.
AND
BANKBOSTON, N.A., RIGHTS AGENT
SHAREHOLDERS' RIGHTS AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
Section Page
Certain Definitions...........................................................1
Appointment of Rights Agent...................................................6
Issue of Right Certificates...................................................7
Form of Right Certificates....................................................8
Countersignature and Registration............................................10
Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates....................10
Exercise of Rights; Exercise Price; Expiration Date of Rights................11
Cancellation and Destruction of Right Certificates...........................13
Reservation and Availability of Preferred Stock..............................14
Preferred Stock Record Date..................................................15
Adjustment of Exercise Price, Number and Kind of Shares or Number
of Rights..................................................................15
Certificate of Adjusted Exercise Price or Number of Shares...................24
Consolidation, Merger or Sale or Transfer of Assets..........................24
Fractional Rights and Fractional Shares......................................27
Rights of Action.............................................................28
Agreement of Right Holders...................................................28
Right Certificate Holder Not Deemed a Shareholder............................29
Concerning the Rights Agent..................................................29
Merger or Consolidation or Change of Name of Rights..........................30
Duties of Rights Agent.......................................................31
Change of Rights Agent.......................................................33
Issuance of New Right Certificates...........................................34
Redemption...................................................................34
Exchange.....................................................................35
Notice of Certain Events.....................................................37
Notices......................................................................38
Supplements and Amendments...................................................39
Successors...................................................................39
Determinations and Actions by the Board of Directors.........................39
Benefits of this Agreement...................................................40
Severability.................................................................40
Governing Law................................................................40
Counterparts.................................................................41
Descriptive Headings.........................................................41
Exhibit A -- Certificate of Designation of Series A Junior Participating
Cumulative Preferred Stock
Exhibit B -- Form of Right Certificate
<PAGE> 3
TWEETER HOME ENTERTAINMENT GROUP, INC.
SHAREHOLDER RIGHTS AGREEMENT
This Shareholder Rights Agreement is dated as of July 21, 1998, between
Tweeter Home Entertainment Group, Inc., a Delaware corporation (the "Company"),
and BankBoston, N.A., a national banking association (the "Rights Agent").
W I T N E S S E T H
WHEREAS, the Board of Directors of the Company desires to provide
shareholders of the Company with the opportunity to benefit from the long-term
prospects and value of the Company and to ensure that shareholders of the
Company receive fair and equal treatment in the event of any proposed takeover
of the Company; and
WHEREAS, on June 1, 1998, the Board of Directors of the Company
authorized and declared a dividend distribution of one Right (as such term is
hereinafter defined) for each outstanding share of Common Stock, $.01 par value
per share, of the Company outstanding as of the commencement of business on July
14, 1998 (the "Record Date"), and contemplates the issuance of one Right for
each share of Common Stock of the Company issued (whether originally issued or
sold from the Company's treasury) between the Record Date and the earlier of the
Distribution Date or the Expiration Date (as such terms are hereinafter
defined), each Right initially representing the right to purchase one
one-thousandth of one share of Series A Junior Participating Cumulative
Preferred Stock of the Company having the rights, powers and preferences set
forth on Exhibit A hereto, upon the terms and subject to the conditions
hereinafter set forth (the "Rights"); and
WHEREAS, the Company desires to appoint the Rights Agent to act as
rights agent hereunder, in accordance with the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings indicated:
1.1 "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as such term is
hereinafter defined) and Associates (as such term is hereinafter defined) of
such Person, shall be the Beneficial Owner (as such term is hereinafter defined)
of more than 20% of the Common Shares (as such term is hereinafter defined) then
outstanding, but shall not include (a) the Company, (b) any Subsidiary (as such
term is hereinafter defined) of the Company, or (c) any employee benefit plan or
compensation arrangement of the Company or any
<PAGE> 4
Subsidiary of the Company (the Persons described in clauses (a) through (c)
above are referred to herein as "Exempt Persons").
Notwithstanding the foregoing, no Person shall become an "Acquiring
Person" as the result of an acquisition by the Company of Common Shares which,
by reducing the number of Common Shares outstanding, increases the proportionate
number of Common Shares beneficially owned by such Person to more than 20% of
the Common Shares then outstanding; provided, however, that if a Person shall
become the Beneficial Owner of more than 20% of the Common Shares then
outstanding by reason of share purchases by the Company and shall, after such
share purchases by the Company, become the Beneficial Owner of any additional
shares (other than pursuant to a stock split, stock dividend or similar
transaction) of Common Shares and immediately thereafter be the Beneficial Owner
of more than 20% of the Common Shares then outstanding, then such Person shall
be deemed to be an "Acquiring Person."
In addition, notwithstanding the foregoing, a Person shall not be an
"Acquiring Person" if the Board of Directors of the Company determines that a
Person who would otherwise be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this Section 1.1, has become such inadvertently, and
such Person divests as promptly as practicable (or within such period of time as
the Board of Directors determines is reasonable) a sufficient number of shares
of Common Stock of the Company so that such person would no longer be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
Section 1.1.
Furthermore, no person who is a stockholder of the Company prior to
the completion of the Company's Initial Public Offering will be an Acquiring
Person unless such person is the Beneficial Owner of both (i) more than 20% of
the Common Shares then outstanding and (ii) a greater percentage of the
outstanding Common Shares than the percentage held by such person immediately
after the completion of the Initial Public Offering. The preceding two
paragraphs shall apply, mutatis mutandi, to such persons after taking into
account the preceding sentence.
1.2 "Adjustment Shares" shall have the meaning set forth in Section
11.1.2 hereof.
1.3 "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the Rules under the Exchange Act, as in
effect on the date of this Agreement; provided, however, that no Person who is a
director or officer of the Company shall be deemed an Affiliate or an Associate
of any other director or officer of the Company solely as a result of his or her
position as director or officer of the Company.
1.4 A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities: (i) which such Person or any of
such Person's Affiliates or Associates, directly or indirectly, beneficially
owns (as determined pursuant to Rule 13d-3 of the Rules under the Exchange Act,
as in effect on the date of
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<PAGE> 5
this Agreement); (ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has:
1.4.1 the right to acquire (whether such right is exercisable
immediately or only after the passage of time or upon the satisfaction of any
conditions or both) pursuant to any agreement, arrangement or understanding
(whether or not in writing) (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," (1) securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; (2) securities issuable upon exercise of these Rights at
any time prior to the occurrence of a Triggering Event; or (3) securities
issuable upon exercise of Rights from and after the occurrence of a Triggering
Event, which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or pursuant to Sections
3.1, 11.9 or 22 hereof; or
1.4.2 the right to vote pursuant to any agreement, arrangement or
understanding (whether or not in writing); provided, however, that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially own," any
security under this clause (B) if the agreement, arrangement or understanding to
vote such security (1) arises solely from a revocable proxy given in response to
a public proxy or consent solicitation made pursuant to, and in accordance with,
the Rules under the Exchange Act and (2) is not also then reportable by such
person on Schedule 13D under the Exchange Act (or any comparable or successor
report); or
1.4.3 the right to dispose of pursuant to any agreement,
arrangement or understanding (whether or not in writing) (other than customary
arrangements with and between underwriters and selling group members with
respect to a bona fide public offering of securities); or
1.4.4 which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person or
any of such Person's Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing) (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in clause (B) of Section
1.4.2 hereof) or disposing of any securities of the Company; provided, however,
that (a) no Person engaged in business as an underwriter of securities shall be
deemed the Beneficial Owner of any securities acquired through such Person's
participation as an underwriter in good faith in a firm commitment underwriting
until the expiration of forty (40) days after the date of such acquisition, (b)
no trustee or similar Person, organized, appointed or established by the Company
or
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<PAGE> 6
any Subsidiary of the Company, holding shares of Common Stock of the Company
for or pursuant to the terms of any employee benefit plan or compensation
arrangement of the Company or any Subsidiary of the Company shall be deemed the
Beneficial Owner of any securities acquired or held by such Person in such
capacity, and (c) no Person shall be deemed the Beneficial Owner of any
securities acquired or received from the Company by such Person pursuant to an
employee benefit plan or compensation arrangement of the Company or any
Subsidiary of the Company.
1.5 "Business Day" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in Boston, Massachusetts are authorized
or obligated by law or executive order to close.
1.6 "Certificate" shall mean the Company's Amended and Restated
Certificate of Incorporation as in effect at the closing of the Initial Public
Offering.
1.7 "Close of Business" on any given date shall mean 5:00 P.M.,
Boston, Massachusetts time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., Boston, Massachusetts time, on
the next succeeding Business Day.
1.8 "Common Shares" shall mean shares of Common Stock.
1.9 "Common Stock" when used in reference to the Company shall mean
the common stock, $.01 par value per share, of the Company or any other shares
of capital stock of the Company into which such stock shall be reclassified or
changed. "Common Stock" when used with reference to any Person other than the
Company organized in corporate form shall mean (i) the capital stock or other
equity interest of such Person with the greatest voting power or (ii) the equity
securities or other equity interest having power to control or direct the
management of such Person or, if such Person is a Subsidiary of another Person,
the Person or Persons which ultimately control such first-mentioned Person and
which have issued any such outstanding capital stock, equity securities or
equity interest. "Common Stock" when used with reference to any Person not
organized in corporate form shall mean units of beneficial interest which shall
be entitled to exercise the greatest voting power of such Person or, in the case
of a limited partnership, shall have the power to remove or otherwise replace
the general partner or partners.
1.10 "Current Value" shall have the meaning set forth in Section
11.1.3 hereof.
1.11 "Distribution Date" shall have the meaning set forth in Section
3.1 hereof.
1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor statute.
1.13 "Exercise Price" shall have the meaning set forth in Section 4.1
hereof.
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<PAGE> 7
1.14 "Expiration Date" and "Final Expiration Date" shall have the
meanings set forth in Section 7.1 hereof.
1.15 "Fair Market Value" of any securities or other property shall be
as determined in accordance with Section 11.4 hereof.
1.16 "Group" shall have the meaning ascribed thereto in clause (b) of
the definition of "Person."
1.17 "Initial Public Offering" means the initial public offering of
Common Stock of the Company by the Company pursuant to a Registration Statement
on Form S-1.
1.18 "Person" shall mean (a) an individual, a corporation, a
partnership, an association, a joint stock company, a trust, a business trust, a
government or political subdivision, any unincorporated organization, or any
other association or entity, and (b) a "group" as that term is used for purposes
of Section 13(d)(3) of the Exchange Act (any such group under this clause (b), a
"Group").
1.19 "Preferred Stock" shall mean shares of Series A Junior
Participating Cumulative Preferred Stock, $.01 par value per share, of the
Company having the rights and preferences set forth in the form of Certificate
of Designation attached hereto as Exhibit A.
1.20 "Preferred Stock Equivalents" shall have the meaning set forth in
Section 11.2 hereof.
1.21 "Principal Party" shall have the meaning set forth in Section
13.2 hereof.
1.22 "Record Date" shall have the meaning set forth in the preamble to
this Agreement.
1.23 "Redemption Price" shall have the meaning set forth in Section 23
hereof.
1.24 "Right Certificate" shall have the meaning set forth in Section
3.1.
1.25 "Related Party" shall have the meaning ascribed thereto in the
Certificate.
1.26 "Rules" when used with reference to the Exchange Act or the
Securities Act, shall mean the rules and regulations of the Securities and
Exchange Commission, or any successor federal agency under such acts.
1.27 "Section 11.1.2 Event" shall have the meaning set forth in
Section 11.1.2 hereof.
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<PAGE> 8
1.28 "Section 11.1.2 Trigger Date" shall have the meaning set forth in
Section 11.1.3 hereof.
1.29 "Section 13 Event" shall mean any event described in clauses (a),
(b) or (c) of Section 13.1 hereof.
1.30 "Section 24.1.1 Exchange Ratio" shall have the meaning set forth
in Section 24.1.1 hereof.
1.31 "Section 24.1.2 Exchange Ratio" shall have the meaning set forth
in Section 24.1.2 hereof.
1.32 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor statute.
1.33 "Spread" shall have the meaning set forth in Section 11.1.3
hereof.
1.34 "Stock Acquisition Date" shall mean the date of the first public
announcement (which for purposes of this definition shall include, without
limitation, the issuance of a press release or the filing of a
publicly-available report or other document with the Securities and Exchange
Commission or any other governmental agency) by the Company or an Acquiring
Person that an Acquiring Person has become such.
1.35 "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which securities or other ownership interests
having ordinary voting power sufficient, in the absence of contingencies, to
elect a majority of the board of directors or other persons performing similar
functions of such corporation or other entity are at the time directly or
indirectly beneficially owned or otherwise controlled by such Person either
alone or together with one or more Affiliates of such Person.
1.36 "Substitution Period" shall have the meaning set forth in Section
11.1.3 hereof.
1.37 "Triggering Event" shall mean any Section 11.1.2 Event or any
Section 13 Event.
2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights
Agent to act as agent for the Company and the holders of the Rights (who, in
accordance with Section 3 hereof, shall prior to the Distribution Date also be
the holders of the Common Stock of the Company) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable. In the event the Company appoints one or more Co-Rights
Agents, the respective duties of the Rights
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<PAGE> 9
Agent and any such Co-Rights Agents. The Rights Agent shall have no duty to
supervise, and shall in no event be liable for, the acts or omissions of any
such Co-Rights Agent.
3. ISSUE OF RIGHT CERTIFICATES.
3.1 From the date hereof until the earlier of (a) the Close of
Business on the tenth calendar day after the Stock Acquisition Date or (b) the
Close of Business on the tenth Business Day (or such other calendar day, if any,
as the Board of Directors may determine in its sole discretion) after the date a
tender or exchange offer by any Person, other than an Exempt Person, is first
published or sent or given within the meaning of Rule 14d-4(a) of the Exchange
Act, or any successor rule, if, upon consummation thereof, such Person would be
the Beneficial Owner of more than 20% of the Common Shares then outstanding
(and, if such person was a stockholder of the Company prior to the completion of
the Company's Initial Public Offering, such person's Beneficial Ownership of
Common Shares after consummation would cause such person to be the Beneficial
Owners of a greater percentage of the outstanding Common Shares than the
percentage held by such person immediately after the completion of the Initial
Public Offering) (including any such date which is after the date of this
Agreement and prior to the issuance of the Rights) (the earlier of such dates
being herein referred to as the "Distribution Date"), (i) the Rights will be
evidenced (subject to the provisions of Section 3.2 hereof) by the certificates
for the Common Stock of the Company registered in the names of the holders of
the Common Stock of the Company (which certificates for Common Stock of the
Company shall be deemed also to be certificates for Rights) and not by separate
certificates, and (ii) the Rights will be transferable only in connection with
the transfer of the underlying shares of Common Stock of the Company. As soon as
practicable after the Distribution Date, the Rights Agent will, at the Company's
expense, send, by first-class, insured, postage prepaid mail, to each record
holder of the Common Stock of the Company as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more certificates, in substantially the form of Exhibit B hereto
(the "Right Certificates"), evidencing one Right for each share of Common Stock
of the Company so held, subject to adjustment as provided herein. In the event
that an adjustment in the number of Rights per share of Common Stock of the
Company has been made pursuant to Section 11.15 hereof, the Company may make the
necessary and appropriate rounding adjustments (in accordance with Section 14.1
hereof) at the time of distribution of the Right Certificates, so that Right
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Close of Business
on the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
3.2 With respect to certificates for the Common Stock of the Company
issued prior to the Close of Business on the Record Date, the Rights will be
evidenced by such certificates for the Common Stock of the Company on or until
the Distribution Date (or the earlier redemption, expiration or termination of
the Rights), and the registered holders of the Common Stock of the Company also
shall be the registered holders of the
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<PAGE> 10
associated Rights. Until the Distribution Date (or the earlier redemption,
expiration or termination of the Rights), the transfer of any of the
certificates for the Common Stock of the Company outstanding prior to the date
of this Agreement shall also constitute the transfer of the Rights associated
with the Common Stock of the Company represented by such certificate.
3.3 Certificates for the Common Stock of the Company issued after the
Record Date, but prior to the earlier of the Distribution Date or the
redemption, expiration or termination of the Rights, shall be deemed also to be
certificates for Rights, and shall bear a legend, substantially in the form set
forth below:
"This certificate evidences and entitles the holder to Rights set
forth in a Shareholders' Rights Agreement between the Company and BankBoston,
N.A. as Rights Agent (the "Rights Agent"), dated as of July 21, 1998, as amended
from time to time (the "Rights Agreement"), the terms of which are incorporated
herein by reference and a copy of which is on file at the principal offices of
the Company. The Company will mail to the registered holder of this certificate
a copy of the Rights Agreement without charge upon written request. Under
certain circumstances set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by any Person who is, was or becomes, or acquires
shares from, an Acquiring Person or any Affiliate of an Acquiring Person (as
each such term is defined in the Rights Agreement, and generally relating to the
ownership or purchase of large shareholdings), whether currently held by or on
behalf of such Person or Affiliate or by certain subsequent holders, may become
null and void."
With respect to such certificates containing the foregoing legend, the
Rights associated with the Common Stock of the Company represented by such
certificates shall be evidenced by such certificates alone until the
Distribution Date (or the earlier redemption, expiration or termination of the
Rights), and the transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Stock of the Company
represented by such certificates. In the event that the Company purchases or
acquires any shares of Common Stock of the Company after the Record Date but
prior to the Distribution Date, any Rights associated with such Common Stock of
the Company shall be deemed cancelled and retired so that the Company shall not
be entitled to exercise any Rights associated with the shares of Common Stock of
the Company which are no longer outstanding. The failure to print the foregoing
legend on any such certificate representing Common Stock of the Company or any
defect therein shall not affect in any manner whatsoever the application or
interpretation of the provisions of Section 7.5 hereof.
4. FORM OF RIGHT CERTIFICATES.
4.1 The Right Certificates (and the forms of election to purchase
shares and of assignment and certificate to be printed on the reverse thereof)
shall each be
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substantially in the form of EXHIBIT B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law, rule or regulation or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
customary usage. The Right Certificates shall be in a machine printable format
and in a form reasonably satisfactory to the Rights Agent. Subject to the
provisions of Section 11 and Section 22 hereof, the Right Certificates, whenever
distributed, shall be dated as of the Record Date, shall show the date of
countersignature, and on their face shall entitle the holders thereof to
purchase such number of one one-thousandths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (the "Exercise
Price"), but the number of such shares and the Exercise Price shall be subject
to adjustment as provided herein.
4.2 Any Right Certificate issued pursuant to Section 3.1 or Section 22
hereof that represents Rights beneficially owned by (a) an Acquiring Person or
any Associate or Affiliate of an Acquiring Person, (b) a transferee of an
Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who
becomes a transferee after the Acquiring Person becomes such, or (c) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (i) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding (whether or not in writing)
regarding the transferred Rights, the shares of Common Stock of the Company
associated with such Rights or the Company or (ii) a transfer which the Board of
Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of Section
7.5 hereof, and any Right Certificate issued pursuant to Section 6, Section 11
or Section 22 upon transfer, exchange, replacement or adjustment of any other
Right Certificate referred to in this sentence, shall have deleted therefrom the
second sentence of the existing legend on such Right Certificate and in
substitution therefor shall contain the following legend:
"The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or an
Affiliate or an Associate of an Acquiring Person (as such terms are defined in
the Rights Agreement). This Right Certificate and the Rights represented hereby
may become null and void under certain circumstances as specified in Section 7.5
of the Rights Agreement."
The Company shall give notice to the Rights Agent promptly after it
becomes aware of the existence and identity of any Acquiring Person or any
Associate or Affiliate thereof. The Company shall instruct the Rights Agent in
writing of the Rights which should be so legended. The failure to print the
foregoing legend on any such Right Certificate or any defect therein shall not
affect in any manner whatsoever the application or interpretation of the
provisions of Section 7.5 hereof.
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5. COUNTERSIGNATURE AND REGISTRATION.
5.1 The Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board of Directors, or its President or any Vice
President and by its Treasurer or any Assistant Treasurer, or by its Secretary
or any Assistant Secretary, either manually or by facsimile signature, and shall
have affixed thereto the Company's seal or a facsimile thereof which shall be
attested to by the Secretary or any Assistant Secretary of the Company, either
manually or by facsimile signature. The Right Certificates shall be manually
countersigned by an authorized signatory of the Rights Agent and shall not be
valid for any purpose unless so countersigned, and such countersignature upon
any Right Certificate shall be conclusive evidence, and the only evidence, that
such Right Certificate has been duly countersigned as required hereunder. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by an authorized
signatory of the Rights Agent, and issued and delivered by the Company with the
same force and effect as though the person who signed such Right Certificates
had not ceased to be such officer of the Company; and any Right Certificates may
be signed on behalf of the Company by any person who, at the actual date of the
execution of such Right Certificate, shall be a proper officer of the Company to
sign such Right Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
5.2 Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at one of its offices designated as the appropriate place for
surrender of Right Certificates upon exercise or transfer, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.
6.1 Subject to the provisions of Section 4.2, Section 7.5 and Section
14 hereof, at any time after the Close of Business on the Distribution Date, and
at or prior to the Close of Business on the Expiration Date, any Right
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Right Certificate or Certificates, entitling the registered holder
to purchase a like number of one one-thousandths of a share of Preferred Stock
(or following a Triggering Event, preferred stock, cash, property, debt
securities, Common Stock of the Company or any combination thereof) as the Right
Certificate or Certificates surrendered then entitled such holder to purchase
and at the same Exercise Price. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right Certificate
or Certificates to be transferred, split up, combined or exchanged, with the
form of assignment and certificate duly executed, at the
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<PAGE> 13
office or offices of the Rights Agent designated for such purpose. Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Right Certificate until the
registered holder shall have completed and signed the certificate contained in
the form of assignment on the reverse side of such Right Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Section
4.2, Section 7.5 and Section 14 hereof, countersign and deliver to the Person
entitled thereto a Right Certificate or Certificates, as the case may be, as so
requested. The Company may require payment by the registered holder of a Right
Certificate, of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Right Certificates.
6.2 Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security satisfactory to them, and reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate, if mutilated, the
Company will execute and deliver a new Right Certificate of like tenor to the
Rights Agent for countersignature and delivery to the registered owner in lieu
of the Right Certificate so lost, stolen, destroyed or mutilated.
7. EXERCISE OF RIGHTS; EXERCISE PRICE; EXPIRATION DATE OF RIGHTS.
7.1 Subject to Section 7.5 hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Exercise Price for the total number of
one one-thousandths of a share of Preferred Stock (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercised, at or prior to the earlier of (a) the Close of Business on the tenth
anniversary of the date of this Agreement (the "Final Expiration Date"), (b) the
time at which the Rights are redeemed as provided in Section 23 hereof or (c)
the time at which such Rights are exchanged as provided in Section 24 hereof
(the earliest of (a), (b) or (c) being herein referred to as the "Expiration
Date"). Except as set forth in Section 7.5 hereof and notwithstanding any other
provision of this Agreement, any Person who prior to the Distribution Date
becomes a record holder of shares of Common Stock of the Company may exercise
all of the rights of a registered holder of a Right Certificate with respect to
the Rights associated with such shares of Common Stock of the Company in
accordance with the provisions of this Agreement, as of the date such Person
becomes a record holder of shares of Common Stock of the Company.
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<PAGE> 14
7.2 The Exercise Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be one
hundred dollars ($100), shall be subject to adjustment from time to time as
provided in Section 11 and Section 13 hereof and shall be payable in lawful
money of the United States of America in accordance with Section 7.3 below.
7.3 As promptly as practicable following the Distribution Date, the
Company shall deposit with a corporation, trust, bank or similar institution in
good standing organized under the laws of the United States or any State of the
United States, which is authorized under such laws to exercise corporate trust
or stock transfer powers and is subject to supervision or examination by a
federal or state authority (such institution is hereinafter referred to as the
"Depositary Agent"), certificates representing the shares of Preferred Stock
that may be acquired upon exercise of the Rights and the Company shall cause
such Depositary Agent to enter into an agreement pursuant to which the
Depositary Agent shall issue receipts representing interests in the shares of
Preferred Stock so deposited. Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase and the certificate on
the reverse side thereof duly executed, accompanied by payment of the Exercise
Price for the shares to be purchased and an amount equal to any applicable
transfer tax (as determined by the Rights Agent) in cash, or by certified check
or bank draft payable to the order of the Company, the Rights Agent shall,
subject to Section 20.11 hereof, thereupon promptly (a) requisition from the
Depositary Agent (or make available, if the Rights Agent is the Depository
Agent) depository receipts or certificates for the number of one one-thousandths
of a share of Preferred Stock to be purchased and the Company hereby irrevocably
authorizes the Depositary Agent to comply with all such requests, (b) when
appropriate, requisition from the Company the amount of cash, if any, to be paid
in lieu of issuance of fractional shares in accordance with Section 14 hereof,
(c) promptly after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Right Certificate, registered in such name or names as may be designated by such
holder and (d) when appropriate, after receipt promptly deliver such cash to or
upon the order of the registered holder of such Right Certificate. In the event
that the Company is obligated to issue other securities (including Common Stock)
of the Company, pay cash or distribute other property pursuant to Section 11.1
hereof, the Company will make all arrangements necessary so that such other
securities, cash or other property are available for distribution by the Rights
Agent, if and when appropriate. The payment of the Exercise Price may be made in
cash or by certified or bank check payable to the order of the Company, or by
wire transfer of immediately available funds to the account of the Company
(provided that notice of such wire transfer shall be given by the holder of the
related Right to the Rights Agent).
7.4 In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
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<PAGE> 15
7.5 Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11.1.2 Event or Section 13 Event,
any Rights beneficially owned by (a) an Acquiring Person or any Associate or
Affiliate of an Acquiring Person, (b) a transferee of an Acquiring Person (or of
any Associate or Affiliate of an Acquiring Person) who becomes a transferee
after the Acquiring Person becomes such or (c) a transferee of an Acquiring
Person (or of any Associate or Affiliate of an Acquiring Person) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (i) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights, the shares of Common Stock of the Company associated with such Rights or
the Company, or (ii) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7.5, shall be null and
void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 7.5 and Section 4.2 hereof are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or any Affiliates or Associates of an Acquiring
Person or any transferee of any of them hereunder.
7.6 Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of Rights upon the occurrence of any
purported exercise as set forth in this Section 7 unless such registered holder
shall have (a) completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise and (b) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Right Certificates to the Company.
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<PAGE> 16
9. RESERVATION AND AVAILABILITY OF PREFERRED STOCK.
9.1 The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued shares of Preferred Stock
or any authorized and issued shares of Preferred Stock held in its treasury, the
number of shares of Preferred Stock that will be sufficient to permit the
exercise in full of all outstanding and exercisable Rights. Upon the occurrence
of any events resulting in an increase in the aggregate number of shares of
Preferred Stock issuable upon exercise of all outstanding Rights in excess of
the number then reserved, the Company shall make appropriate increases in the
number of shares so reserved.
9.2 The Company shall use its best efforts to cause, from and after
such time as the Rights become exercisable, all shares of Preferred Stock issued
or reserved for issuance to be listed, upon official notice of issuance, upon
the principal national securities exchange, if any, upon which the Common Stock
of the Company is listed or, if the principal market for the Common Stock of the
Company is not on any national securities exchange, to be eligible for quotation
on the Nasdaq Stock Market ("Nasdaq") or any successor thereto or other
comparable quotation system.
9.3 The Company shall use its best efforts to (a) file, as soon as
practicable following the earliest date after the occurrence of a Section 11.1.2
Event on which the consideration to be delivered by the Company upon exercise of
the Rights has been determined in accordance with Section 11.1.3 hereof, or as
soon as required by law following the Distribution Date, as the case may be, a
registration statement under the Securities Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (b) cause such
registration statement to become effective as soon as practicable after such
filing and (c) cause such registration statement to remain effective (with a
prospectus that at all times meets the requirements of the Securities Act) until
the earlier of (i) the date as of which the Rights are no longer exercisable for
such securities or (ii) the Expiration Date. The Company will also take such
action as may be appropriate under, and which will ensure compliance with, the
securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date determined in accordance
with the provisions of the first sentence of this Section 9.3, the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect, in each case with prompt written notice
to the Rights Agent. Notwithstanding any such provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained.
9.4 The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all shares of Preferred Stock delivered upon
the exercise
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<PAGE> 17
of the Rights shall, at the time of delivery of the certificates or depositary
receipts for such shares (subject to payment of the Exercise Price), be duly and
validly authorized and issued and fully paid and nonassessable.
9.5 The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any certificates for shares of Preferred Stock upon the exercise of Rights.
The Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Right Certificates to a person
other than, or in respect of the issuance or delivery of securities in a name
other than that of, the registered holder of the Right Certificates evidencing
Rights surrendered for exercise or to issue or deliver any certificates for
securities in a name other than that of the registered holder upon the exercise
of any Rights until such tax shall have been paid (any such tax being payable by
the holder of such Right Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
10. PREFERRED STOCK RECORD DATE. Each Person in whose name any certificate
for Preferred Stock (including any fraction of a share of Preferred Stock) is
issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the shares of Preferred Stock represented thereby
on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of the
Exercise Price (and any applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Stock transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Preferred Stock
transfer books of the Company are open; and further provided, however, that if
delivery of shares of Preferred Stock is delayed pursuant to Section 9.3, such
Person shall be deemed to have become the record holder of such shares of
Preferred Stock only when such shares first become deliverable. Prior to the
exercise of the Right evidenced thereby, the holder of a Right Certificate shall
not be entitled to any rights of a shareholder of the Company with respect to
shares for which the Rights shall be exercisable, including, without limitation,
the right to vote, to receive dividends or other distributions or to exercise
any preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
11. ADJUSTMENT OF EXERCISE PRICE, NUMBER AND KIND OF SHARES OR NUMBER OF
RIGHTS. The Exercise Price, the number and kind of shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
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<PAGE> 18
11.1
11.1.1 In the event the Company shall at any time after the date
of this Agreement (a) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (b) subdivide the outstanding Preferred Stock, (c)
combine the outstanding Preferred Stock into a smaller number of shares or (d)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11.1 and Section 7.5 hereof, the Exercise
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Stock transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of a Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of a Right. If an
event occurs which would require an adjustment under both Section 11.1.1 and
Section 11.1.2 hereof, the adjustment provided for in this Section 11.1.1 shall
be in addition to, and shall be made prior to, any adjustment required pursuant
to Section 11.1.2 hereof.
11.1.2 Subject to the provisions of Section 24 hereof, in the
event any Person, alone or together with its Affiliates and Associates, shall
become an Acquiring Person (a "Section 11.1.2 Event"), then promptly following
any such occurrence, proper provision shall be made so that each holder of a
Right, except as provided in Section 7.5 hereof, shall thereafter have a right
to receive, upon exercise thereof at the then current Exercise Price in
accordance with the terms of this Agreement, such number of shares of Preferred
Stock of the Company as shall equal the result obtained by (a) multiplying the
then current Exercise Price by the then number of one one-thousandths of a share
of Preferred Stock for which a Right was exercisable immediately prior to the
first occurrence of a Section 11.1.2 Event, whether or not such Right was then
exercisable, and dividing that product by (b) 50% of the Fair Market Value per
one one-thousandth of a share of the Preferred Stock (determined pursuant to
Section 11.4) on the date of the occurrence of a Section 11.1.2 Event (such
number of shares being referred to as the "Adjustment Shares").
11.1.3 In lieu of issuing any shares of Preferred Stock in
accordance with Section 11.1.2 hereof, the Company, acting by or pursuant to
resolution of the Board of Directors, may, and in the event that the number of
shares of Preferred Stock which are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights is not sufficient to permit the exercise in
full of the Rights in accordance with the foregoing Section 11.1.2, the
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<PAGE> 19
Company, acting by or pursuant to resolution of the Board of Directors, shall:
(a) determine the excess of (i) the Fair Market Value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value") over (ii) the
Exercise Price attributable to each Right (such excess being referred to as the
"Spread") and (b) with respect to all or a portion of each Right (subject to
Section 7.5 hereof), make adequate provision to substitute for the Adjustment
Shares, upon payment of the applicable Exercise Price, (1) cash, (2) a reduction
in the Exercise Price, (3) Preferred Stock Equivalents which the Board of
Directors has deemed to have the same value as shares of Common Stock of the
Company, (4) debt securities of the Company, (5) other assets of the Company or
(6) any combination of the foregoing which, when added to any shares of
Preferred Stock issued upon such exercise, has an aggregate value equal to the
Current Value, where such aggregate value has been determined by the Board of
Directors based upon the advice of a nationally recognized investment banking
firm selected by the Board of Directors; provided, however, that if the Company
shall not have made adequate provision to deliver value pursuant to clause (b)
above within thirty (30) days following the later of (x) the first occurrence of
a Section 11.1.2 Event and (y) the date on which the Company's right of
redemption pursuant to Section 23.1 expires (the later of (x) and (y) being
referred to herein as the "Section 11.1.2 Trigger Date"), then the Company shall
be obligated to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Exercise Price, shares of Preferred Stock (to the
extent available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If the Board of Directors shall determine
in good faith that it is likely that sufficient additional shares of Preferred
Stock could be authorized for issuance upon exercise in full of the Rights, the
30-day period set forth above may be extended to the extent necessary, but not
more than ninety (90) days after the Section 11.1.2 Trigger Date, in order that
the Company may seek stockholder approval for the authorization of such
additional shares (such period, as it may be extended, being referred to herein
as the "Substitution Period"). To the extent that the Company determines that
some action need be taken pursuant to the first and/or second sentences of this
Section 11.1.3, the Company (1) shall provide, subject to Section 7.5 hereof,
that such action shall apply uniformly to all outstanding Rights and (2) may
suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended and a public
announcement at such time as the suspension is no longer in effect. For purposes
of this Section 11.1.3, the value of the Preferred Stock shall be the Fair
Market Value (as determined pursuant to Section 11.4 hereof) per share of the
Preferred Stock on the Section 11.1.2 Trigger Date and the value of any
Preferred Stock Equivalent shall be deemed to have the same value as the
Preferred Stock on such date.
11.2 If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them
(for a period expiring within forty-five (45) calendar days after such record
date) to subscribe for or purchase Preferred
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<PAGE> 20
Stock (or securities having the same or more favorable rights, privileges and
preferences as the shares of Preferred Stock ("Preferred Stock Equivalents")) or
securities convertible into Preferred Stock or Preferred Stock Equivalents at a
price per share of Preferred Stock or per share of Preferred Stock Equivalents
(or having a conversion price per share, if a security convertible into
Preferred Stock or Preferred Stock Equivalents) less than the Fair Market Value
(as determined pursuant to Section 11.4 hereof) per share of Preferred Stock on
such record date, the Exercise Price to be in effect after such record date
shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of shares of Preferred Stock which the aggregate offering price of the
total number of shares of Preferred Stock and/or Preferred Stock Equivalents to
be offered (and the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such Fair Market Value and the
denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of additional shares of
Preferred Stock and Preferred Stock Equivalents to be offered for subscription
or purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of a Right be less than the aggregate
par value of the shares of capital stock of the Company issuable upon exercise
of a Right. In case such subscription price may be paid in a consideration part
or all of which shall be in a form other than cash, the value of such
consideration shall be the Fair Market Value thereof determined in accordance
with Section 11.4 hereof. Shares of Preferred Stock owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such rights or warrants are not so
issued, the Exercise Price shall be adjusted to be the Exercise Price which
would then be in effect if such record date had not been fixed.
11.3 If the Company shall fix a record date for the making of a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), of evidences of indebtedness, cash (other
than a regular periodic cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
convertible securities, subscription rights or warrants (excluding those
referred to in Section 11.2, the Exercise Price to be in effect after such
record date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Fair Market Value (as determined pursuant to Section 11.4 hereof)
per one one-thousandth of a share of Preferred Stock on such record date, less
the Fair Market Value (as determined pursuant to Section 11.4 hereof) of the
portion of the cash, assets or evidences of indebtedness so to be distributed or
of such convertible securities, subscription rights or warrants applicable to
one one-thousandth of a share of Preferred Stock and the denominator of which
shall be the Fair Market Value (as determined pursuant to Section 11.4 hereof)
per one one-thousandth of a share of Preferred Stock; provided, however, that in
no event
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shall the consideration to be paid upon the exercise of a Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of a Right. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Exercise Price shall again be adjusted to be the Exercise Price which would
be in effect if such record date had not been fixed.
11.4 For the purpose of this Agreement, the "Fair Market Value" of any
share of Preferred Stock, Common Stock or any other stock or any Right or other
security or any other property shall be determined as provided in this Section
11.4.
11.4.1 In the case of a publicly-traded stock or other security,
the Fair Market Value on any date shall be deemed to be the average of the daily
closing prices per share of such stock or per unit of such other security for
the 30 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; provided, however, that in the event that the
Fair Market Value per share of any share of stock is determined during a period
following the announcement by the issuer of such stock of (a) a dividend or
distribution on such stock payable in shares of such stock or securities
convertible into shares of such stock or (b) any subdivision, combination or
reclassification of such stock, and prior to the expiration of the 30 Trading
Day period after the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the Fair Market Value shall be properly adjusted to take into
account ex-dividend trading. The closing price for each day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the securities are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which such security is listed or admitted to trading; or, if not listed or
admitted to trading on any national securities exchange, the last sale price as
reported by Nasdaq for securities listed on the Nasdaq National Market or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices as reported by Nasdaq; or, if not listed or admitted to trading on
a national securities exchange or the Nasdaq National Market, the last quoted
price (or, if not so quoted, the average of the last quoted high bid and low
asked prices) in the over-the-counter market, as reported by Nasdaq or such
other system then in use; or, if on any such date no bids for such security are
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in such security
selected by the Board of Directors of the Company. If on any such date no market
maker is making a market in such security, the Fair Market Value of such
security on such date shall be determined reasonably and with utmost good faith
to the holders of the Rights by the Board of Directors of the Company, provided,
however, that if at the time of such determination there is an Acquiring Person,
the Fair Market Value of such security on such date shall be determined by a
nationally recognized investment banking firm selected by the Board of
Directors, which
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determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which such security is listed or admitted to trading is open for the
transaction of business or, if such security is not listed or admitted to
trading on any national securities exchange, a Business Day.
11.4.2 If a security is not publicly held or not so listed or
traded, "Fair Market Value" shall mean the fair value per share of stock or per
other unit of such security, determined reasonably and with utmost good faith to
the holders of the Rights by the Board of Directors of the Company, provided,
however, that if at the time of such determination there is an Acquiring Person,
the Fair Market Value of such security on such date shall be determined by a
nationally recognized investment banking firm selected by the Board of
Directors, which determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights; provided, however, that for the purposes of making any adjustment
provided for by Section 11.1.2 hereof, the Fair Market Value of a share of
Preferred Stock shall not be less than the product of the then Fair Market Value
of a share of Common Stock multiplied by the higher of the then Dividend
Multiple or Vote Multiple (as both of such terms are defined in the Certificate
of Designation attached as Exhibit A hereto) applicable to the Preferred Stock
and shall not exceed 105% of the product of the then Fair Market Value of a
share of Common Stock multiplied by the higher of the then Dividend Multiple or
Vote Multiple applicable to the Preferred Stock.
11.4.3 In the case of property other than securities, the Fair
Market Value thereof shall be determined reasonably and with utmost good faith
to the holders of Rights by the Board of Directors of the Company, provided,
however, that if at the time of such determination there is an Acquiring Person,
the Fair Market Value of such property on such date shall be determined by a
nationally recognized investment banking firm selected by the Board of
Directors, which determination shall be described in a statement filed with the
Rights Agent and shall be binding upon the Rights Agent and the holders of the
Rights.
11.5 Anything herein to the contrary notwithstanding, no adjustment in
the Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Exercise Price; provided, however,
that any adjustments which by reason of this Section 11.5 are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest hundred-thousandth of a share of Common Stock of the
Company or ten-millionth of a share of Preferred Stock, as the case may be, or
to such other figure as the Board of Directors may deem appropriate.
Notwithstanding the first sentence of this Section 11.5, any adjustment required
by this Section 11 shall be made no later than the earlier of (i) three (3)
years from the date of the transaction which mandates such adjustment or (ii)
the Expiration Date.
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11.6 If as a result of any provision of Section 11.1 or Section 13.1
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right 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
Preferred Stock contained in Sections 11.1 through 11.5, Sections 11.7 through
11.11, and Section 11.13, inclusive, and the provisions of Sections 7, 9, 10, 13
and 14 hereof with respect to the Preferred Stock shall apply on like terms to
any such other shares.
11.7 All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one one-thousandths of a
share of Preferred Stock (or other securities or amount of cash or combination
thereof) purchasable from time to time hereunder upon exercise of the Rights,
all subject to further adjustment as provided herein.
11.8 Unless the Company shall have exercised its election as provided
in Section 11.9, upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 11.2 and 11.3, each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of one one-thousandths of
a share of Preferred Stock (calculated to the nearest one ten-millionth) as the
Board of Directors reasonably determines is appropriate to preserve the economic
value of the Rights, including, by way of example, that number obtained by (a)
multiplying (i) the number of one one-thousandths of a share of Preferred Stock
for which a Right may be exercisable immediately prior to this adjustment by
(ii) the Exercise Price in effect immediately prior to such adjustment of the
Exercise Price and (b) dividing the product so obtained by the Exercise Price in
effect immediately after such adjustment of the Exercise Price.
11.9 The Company may elect on or after the date of any adjustment of
the Exercise Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one one-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one hundred-thousandth) obtained by dividing the Exercise Price in effect
immediately prior to adjustment of the Exercise Price by the Exercise Price in
effect immediately after adjustment of the Exercise Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Exercise Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Right Certificates have been issued, upon
each
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adjustment of the number of Rights pursuant to this Section 11.9, the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing, subject
to Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein (and may bear, at
the option of the Company, the adjusted Exercise Price) and shall be registered
in the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
11.10 Irrespective of any adjustment or change in the Exercise Price
or the number of one one-thousandths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Exercise Price per share and the number of
shares which were expressed in the initial Right Certificates issued hereunder
without prejudice to any adjustment or change.
11.11 Before taking any action that would cause an adjustment reducing
the Exercise Price below the then stated value, if any, of the number of one
one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Preferred Stock at such adjusted
Exercise Price. 11.12 In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the number of one one-thousandths of a share of Preferred Stock or other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Exercise Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
11.13 Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Exercise Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment a majority of the Board of
Directors shall determine to be advisable in order that any consolidation or
subdivision of the Preferred Stock, issuance wholly for cash of any shares of
Preferred Stock at less than the Fair Market Value, issuance wholly
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for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, stock dividends
or issuance of rights, options or warrants referred to hereinabove in this
Section 11, hereafter made by the Company to holders of its Preferred Stock,
shall not be taxable to such shareholders.
11.14 The Company covenants and agrees that it shall not, at any time
after the Distribution Date and so long as the Rights have not been redeemed
pursuant to Section 23 hereof or exchanged pursuant to Section 24 hereof, (a)
consolidate with (other than a Subsidiary of the Company in a transaction which
complies with the proviso at the end of this sentence), (b) merge with or into,
or (c) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries taken as a whole, to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with the proviso at the end of this sentence) if (i) at the time of or
immediately after such consolidation, merger or sale there are any rights,
warrants or other instruments outstanding or agreements or arrangements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights, or (ii) prior to, simultaneously with or
immediately after such consolidation, merger or sale the shareholders of a
Person who constitutes, or would constitute, the "Principal Party" for the
purposes of Section 13.1 hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates;
provided, however, that this Section 11.14 shall not affect the ability of any
Subsidiary of the Company to consolidate with, merge with or into, or sell or
transfer assets or earning power to, any other Subsidiary of the Company. The
Company further covenants and agrees that after the Distribution Date it will
not, except as permitted by Section 23 or Section 27 hereof, take (or permit any
Subsidiary to take) any action if at the time such action is taken it is
reasonably foreseeable that such action will substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights.
11.15 Notwithstanding anything in this Agreement to the contrary, in
the event the Company shall at any time after the date of this Agreement and
prior to the Distribution Date (a) declare or pay any dividend on the
outstanding Common Stock of the Company payable in shares of Common Stock of the
Company or (b) effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock of the Company (by reclassification or
otherwise than by payment of dividends in shares of Common Stock of the Company)
into a greater or lesser number of shares of Common Stock of the Company, then
in any such case (i) the number of one one-thousandths of a share of Preferred
Stock purchasable after such event upon proper exercise of each Right shall be
determined by multiplying the number of one one-thousandths of a share of
Preferred Stock so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of shares of Common Stock of the Company
outstanding immediately prior to such event and the denominator of which is the
number of shares of Common Stock of the Company outstanding immediately after
such event,
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and (ii) each share of Common Stock of the Company outstanding immediately after
such event shall have issued with respect to it that number of Rights which each
share of Common Stock of the Company outstanding immediately prior to such event
had issued with respect to it. The adjustments provided for in this Section
11.15 shall be made successively whenever such a dividend is declared or paid or
such a subdivision, combination or consolidation is effected.
11.16 The exercise of Rights under Section 11.1.2 shall only result in
the loss of rights under Section 11.1.2 to the extent so exercised and shall not
otherwise affect the rights of holders of Right Certificates under this Rights
Agreement, including rights to purchase securities of the Principal Party
following a Section 13 Event which has occurred or may thereafter occur, as set
forth in Section 13 hereof. Upon exercise of a Right Certificate under Section
11.1.2, the Rights Agent shall return such Right Certificate duly marked to
indicate that such exercise has occurred.
12. CERTIFICATE OF ADJUSTED EXERCISE PRICE OR NUMBER OF SHARES. Whenever
an adjustment is made as provided in Section 11 or Section 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Preferred Stock
and the Common Stock of the Company a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate in accordance with
Section 26 hereof. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment contained therein and shall not be deemed
to have knowledge of any such adjustment unless and until it shall have received
such certificate.
13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS.
13.1 In the event that, following the Stock Acquisition Date,
directly or indirectly, (a) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction which is not prohibited by Section 11.14 hereof), and the Company
shall not be the continuing or surviving corporation of such consolidation or
merger, (b) any Person (other than a Subsidiary of the Company in a transaction
which is not prohibited by the proviso at the end of the first sentence of
Section 11.14 hereof) shall consolidate with the Company, or merge with and into
the Company and the Company shall be the continuing or surviving corporation of
such merger and, in connection with such merger, all or part of the shares of
Common Stock of the Company shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other property, or (c) the
Company shall sell, mortgage or otherwise transfer (or one or more of its
Subsidiaries shall sell, mortgage or otherwise transfer), in one transaction or
a series of related transactions, assets or earning power aggregating 50% or
more of the assets or earning power of the Company and its Subsidiaries (taken
as a whole) to any other Person or Persons (other than the Company or any
Subsidiary of the Company in one or more transactions, each of which is not
prohibited by the proviso at the end of the first sentence of Section 11.14
hereof), then,
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and in each such case, proper provision shall be made so that: (i) each holder
of a Right, except as provided in Section 7.5 hereof, shall have the right to
receive, upon the exercise thereof at the then current Exercise Price in
accordance with the terms of this Agreement, such number of validly authorized
and issued, fully paid and nonassessable shares of freely tradeable Common Stock
of the Principal Party (as hereinafter defined in Section 13.2), free and clear
of rights of call or first refusal, liens, encumbrances, transfer restrictions
or other adverse claims, as shall be equal to the result obtained by (x)
multiplying the then current Exercise Price by the number of one one-thousandths
of a share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event, and dividing that product by (y)
50% of the Fair Market Value (determined pursuant to Section 11.4 hereof) per
share of the Common Stock of such Principal Party on the date of consummation of
such consolidation, merger, sale or transfer; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale, mortgage or transfer, all the obligations and duties of the
Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply to such Principal Party; and (iv)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock to permit
exercise of all outstanding Rights in accordance with this Section 13.1 and the
making of payments in cash and/or other securities in accordance with Section
11.1.3 hereof) in connection with such consummation as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights.
13.2 "Principal Party" shall mean (a) in the case of any transaction
described in clause (a) or (b) of the first sentence of Section 13.1, the Person
that is the issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation, or, if there is more than
one such issuer, the issuer of Common Stock that has the highest aggregate Fair
Market Value (determined pursuant to Section 11.4), and if no securities are so
issued, the Person that is the other party to the merger or consolidation, or,
if there is more than one such Person, the Person the Common Stock of which has
the highest aggregate Fair Market Value (determined pursuant to Section 11.4);
and (b) in the case of any transaction described in clause (c) of the first
sentence of Section 13.1, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if each Person that is a party to such transaction or
transactions receives the same portion of the assets or earning power
transferred pursuant to such transaction or transactions or if the Person
receiving the largest portion of the assets or earning power cannot be
determined, whichever Person the Common Stock of which has the highest aggregate
Fair Market Value (determined pursuant to Section 11.4); provided, however, that
in any such case, (i) if the Common Stock of such Person is not at such time and
has not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act ("Registered Common Stock") or such Person is not
a corporation, and such Person is a direct or indirect Subsidiary or Affiliate
of another Person who has Registered Common
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Stock outstanding, "Principal Party" shall refer to such other Person; (ii) if
the Common Stock of such Person is not Registered Common Stock or such Person is
not a corporation, and such Person is a direct or indirect Subsidiary of another
Person but is not a direct or indirect Subsidiary of another Person which has
Registered Common Stock outstanding, "Principal Party" shall refer to the
ultimate parent entity of such first-mentioned Person; (iii) if the Common Stock
of such Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and one or more of such other Persons has Registered Common Stock
outstanding, "Principal Party" shall refer to whichever of such other Persons is
the issuer of the Registered Common Stock having the highest aggregate Fair
Market Value (determined pursuant to Section 11.4); and (iv) if the Common Stock
of such Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and none of such other Persons has Registered Common Stock
outstanding, "Principal Party" shall refer to whichever ultimate parent entity
is the corporation having the greatest stockholders' equity or, if no such
ultimate parent entity is a corporation, "Principal Party" shall refer to
whichever ultimate parent entity is the entity having the greatest net assets.
13.3 The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto (a) the Principal Party shall have a
sufficient number of authorized shares of its Common Stock, which have not been
issued or reserved for issuance, to permit the exercise in full of the Rights in
accordance with this Section 13, and (b) the Company and each Principal Party
and each other Person who may become a Principal Party as a result of such
consolidation, merger, sale or transfer shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
Sections 13.1 and 13.2 and further providing that, as soon as practicable after
the date of any consolidation, merger, sale or transfer of assets mentioned in
Section 13.1, the Principal Party at its own expense will:
13.3.1 prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, use its reasonable best efforts
to cause such registration statement to become effective as soon as practicable
after such filing and use its reasonable best efforts to cause such registration
statement to remain effective (with a prospectus that at all times meets the
requirements of the Securities Act) until the Expiration Date;
13.3.2 use its reasonable best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under the blue
sky laws of such jurisdictions as may be necessary or appropriate;
13.3.3 use its reasonable best efforts to list (or continue the
listing of) the Rights and the securities purchasable upon exercise of the
Rights on a national securities exchange or to meet the eligibility requirements
for quotation on Nasdaq; and
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13.3.4 deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under the
Exchange Act.
13.4 In case the Principal Party which is to be a party to a
transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its Certificate of Incorporation or By-laws or other
instrument governing its corporate affairs, which provision would have the
effect of (a) causing such Principal Party to issue (other than to holders of
Rights pursuant to this Section 13), in connection with, or as a consequence of,
the consummation of a transaction referred to in this Section 13, shares of
Common Stock of such Principal Party at less than the then current Fair Market
Value (determined pursuant to Section 11.4) or securities exercisable for, or
convertible into, Common Stock of such Principal Party at less than such Fair
Market Value, or (b) providing for any special payment, tax or similar
provisions in connection with the issuance of the Common Stock of such Principal
Party pursuant to the provisions of this Section 13, then, in such event, the
Company shall not consummate any such transaction unless prior thereto the
Company and such Principal Party shall have executed and delivered to the Rights
Agent a supplemental agreement providing that the provision in question of such
Principal Party shall have been cancelled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction. The provisions of this Section 13 shall similarly
apply to successive mergers or consolidations or sales or other transfers.
14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
14.1 The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11.15 hereof, or to
distribute Right Certificates which evidence fractional Rights. If the Company
elects not to issue such fractional Rights, the Company shall pay, in lieu of
such fractional Rights, to the registered holders of the Right Certificates with
regard to which such fractional Rights would otherwise be issuable, an amount in
cash equal to the same fraction of the Fair Market Value of a whole Right, as
determined pursuant to Section 11.4 hereof.
14.2 The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the Fair Market Value of one one-thousandth of a share of Preferred
Stock. For purposes of this Section 14.2, the Fair Market Value of one one-
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thousandth of a share of Preferred Stock shall be determined pursuant to Section
11.4 hereof for the Trading Day immediately prior to the date of such exercise.
14.3 The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
15. RIGHTS OF ACTION. All rights of action in respect of this Agreement,
other than rights of action vested in the Rights Agent pursuant to Sections 18
and 20 hereof, are vested in the respective registered holders of the Right
Certificates (or, prior to the Distribution Date, the registered holders of the
Common Stock of the Company); and any registered holder of any Right Certificate
(or, prior to the Distribution Date, of the Common Stock of the Company),
without the consent of the Rights Agent or of the holder of any other Right
Certificate (or, prior to the Distribution Date, of the Common Stock of the
Company), may, in such registered holder's own behalf and for such registered
holder's own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his right to exercise the Right evidenced by such Right Certificate in the
manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement. Holders of Rights shall be entitled to recover the reasonable costs
and expenses, including attorneys' fees, incurred by them in any action to
enforce the provisions of this Agreement.
16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by accepting the
same, consents and agrees with the Company and the Rights Agent and with every
other holder of a Right that:
16.1 prior to the Distribution Date, each Right will be transferable
only simultaneously and together with the transfer of shares of Common Stock of
the Company;
16.2 after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer;
16.3 subject to Sections 6.1 and 7.6, the Company and the Rights Agent
may deem and treat the person in whose name a Right Certificate (or, prior to
the Distribution Date, the associated certificate representing Common Stock of
the Company) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the associated certificate representing Common Stock of
the Company made by anyone other than the Company or
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the Rights Agent) for all purposes whatsoever, and, subject to the last sentence
of Section 7.5, neither the Company nor the Rights Agent shall be affected by
any notice to the contrary; and
16.4 notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as the result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligations; provided, however, that the Company must use
its best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No holder, as such,
of any Right Certificate shall be entitled to vote, receive dividends or be
deemed for any purpose the holder of the shares of Preferred Stock or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
18. CONCERNING THE RIGHTS AGENT.
18.1 The Company agrees to pay to the Rights Agent such compensation
as shall be agreed to in writing between the Company and the Rights Agent for
all services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability arising therefrom, directly or indirectly. The provisions of this
Section 18.1 shall survive the expiration of the Rights and the termination of
this Agreement.
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18.2 The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Right Certificate
or certificate representing Common Stock of the Company, Preferred Stock, or
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it in good faith
and without negligence to be genuine and to be signed and executed by the proper
Person or Persons.
18.3 The Rights Agent shall not be liable for consequential damages
under any provision of this Agreement or for any consequential damages arising
out of any act or failure to act hereunder.
19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS.
19.1 Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
19.2 In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and
obligations expressly imposed by this Agreement upon the following terms and
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conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
20.1 The Rights Agent may consult with legal counsel selected by it
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
opinion.
20.2 Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "Fair Market Value") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof shall be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by a
person believed by the Rights Agent to be the Chairman of the Board of
Directors, a Vice Chairman of the Board of Directors, the President, a Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or an Assistant
Secretary of the Company and delivered to the Rights Agent. Any such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
20.3 The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
20.4 The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
20.5 The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7.5 hereof) or any adjustment required
under the provisions of Sections 11, 13 or 23.3 hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Right Certificates after receipt of a
certificate describing any such adjustment furnished in accordance with Section
12 hereof), nor shall it be responsible for any determination by the Board of
Directors of the Company of the Fair Market Value of the Rights or Preferred
Stock pursuant to the provisions of Section 14 hereof; nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock of the
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Company or Preferred Stock to be issued pursuant to this Agreement or any Right
Certificate or as to whether any shares of Common Stock of the Company or
Preferred Stock will, when so issued, be validly authorized and issued, fully
paid and nonassessable.
20.6 The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
20.7 The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder and
certificates delivered pursuant to any provision hereof from any person believed
by the Rights Agent to be the Chairman of the Board of Directors, any Vice
Chairman of the Board of Directors, the President, a Vice President, the
Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of
the Company, and is authorized to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent under this Agreement and the date on or after which such action shall be
taken or such omission shall be effective. The Rights Agent shall not be liable
for any action taken by, or omission of, the Rights Agent in accordance with a
proposal included in such application on or after the date specified in such
application (which date shall not be less than five (5) Business Days after the
date any officer of the Company actually receives such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
20.8 The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
20.9 The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents.
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20.10 No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
20.11 If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause (1) or clause (2)
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights Agent
may resign and be discharged from its duties under this Agreement upon thirty
(30) days' notice in writing mailed to the Company by first class mail. The
Company may remove the Rights Agent or any successor Rights Agent (with or
without cause) upon thirty (30) days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Stock of the Company and Preferred Stock by certified mail, and to
the holders of the Right Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall fail
to make such appointment within a period of thirty (30) days after giving notice
of such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the incumbent Rights Agent or the registered
holder of any Right Certificate may apply to any court of competent jurisdiction
for the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of the
Commonwealth of Massachusetts (or of any other state of the United States so
long as such corporation is authorized to do business as a banking institution
in the Commonwealth of Massachusetts), in good standing, which is authorized
under such laws to exercise stock transfer or corporate trust powers and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $100,000,000 or (b) an Affiliate of a corporation described
in clause (a) of this sentence. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock of the Company and the Preferred Stock, and mail a notice
thereof in writing to the registered holders of
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the Right Certificates. Failure to give any notice provided for in this Section
21, however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.
22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Exercise Price per share and the number or kind or class of shares of stock
or other securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock of the Company following the
Distribution Date and prior to the redemption or expiration of the Rights, the
Company (a) shall, with respect to shares of Common Stock of the Company so
issued or sold pursuant to the exercise of stock options or under any employee
plan or arrangement, or upon the exercise, conversion or exchange of securities
hereafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Right
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Right Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the person to whom such Right Certificate
would be issued, and (ii) no such Right Certificate shall be issued if, and to
the extent that, appropriate adjustments shall otherwise have been made in lieu
of the issuance thereof.
23. REDEMPTION.
23.1 The Board of Directors of the Company may, at its option, redeem
all but not less than all of the then outstanding Rights at a redemption price
of $0.001 per Right, appropriately adjusted to reflect any dividend declared or
paid on the Common Stock of the Company in shares of Common Stock of the Company
or any subdivision or combination of the outstanding shares of Common Stock of
the Company or similar event occurring after the date of this Agreement (such
redemption price, as adjusted from time to time, being hereinafter referred to
as the "Redemption Price"). The Rights may be redeemed only until the earlier to
occur of (i) 5:00 P.M., Boston, Massachusetts time, on the tenth calendar day
after the Stock Acquisition Date or (ii) the Final Expiration Date.
23.2 Immediately upon the action of the Board of Directors ordering
the redemption of the Rights, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to the Rights Agent and to all such holders at their last
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addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the Transfer Agent for the
Common Stock of the Company. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or Section
24 hereof or in connection with the purchase of shares of Common Stock of the
Company prior to the Distribution Date.
23.3 The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock of the Company (based on the Fair Market Value of the
Common Stock of the Company as of the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
24. EXCHANGE.
24.1
24.1.1 The Board of Directors of the Company may, at its option,
at any time on or after the Distribution Date, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 7.5 hereof) for shares of
Common Stock of the Company at an exchange ratio of one share of Common Stock of
the Company per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Section 24.1.1 Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than an Exempt Person),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Stock of the Company.
24.1.2 Notwithstanding the foregoing, the Board of Directors of
the Company may, at its option, at any time on or after the Distribution Date,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
7.5 hereof) for shares of Common Stock of the Company at an exchange ratio
specified in the following sentence, as appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date of
this Agreement. Subject to the adjustment described in the foregoing sentence,
each Right may be exchanged for that number of shares of Common Stock of the
Company obtained by dividing the Spread (as defined in Section 11.1.3) by the
then Fair Market Value per one one-thousandth of a share of Preferred Stock on
the earlier of (a) the date on which any person becomes an Acquiring Person or
(b) the date on which a tender or exchange offer by any Person (other than an
Exempt Person) is first published or sent or given within the meaning of Rule
14d-4(a) of the Exchange Act or any successor rule, if upon consummation thereof
such Person would be the Beneficial
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Owner of more than 20% of the shares of Common Stock of the Company then
outstanding (such exchange ratio being referred to herein as the "Section 24.1.2
Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors shall not be
empowered to effect such exchange at any time after any Person (other than an
Exempt Person), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Stock of the Company.
24.2 Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Common Stock of the
Company equal to the number of such Rights held by such holder multiplied by the
Section 24.1.1 Exchange Ratio or the Section 24.1.2 Exchange Ratio, as
applicable. The Company shall promptly give notice of any such exchange in
accordance with Section 26 hereof and shall promptly mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the shares of Common
Stock of the Company for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 7.5 hereof)
held by each holder of Rights.
24.3 In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or Preferred Stock Equivalent, as such
term is defined in Section 11.2 hereof) for Common Stock of the Company
exchangeable for Rights, at the initial rate of one one-thousandth of a share of
Preferred Stock (or Preferred Stock Equivalent) for each share of Common Stock
of the Company, as appropriately adjusted to reflect adjustments in the voting
rights of the Preferred Stock pursuant to the terms thereof, so that the
fraction of a share of Preferred Stock delivered in lieu of each share of Common
Stock of the Company shall have the same voting rights as one share of Common
Stock of the Company.
24.4 In the event that there shall not be sufficient shares of Common
Stock of the Company or Preferred Stock (or Preferred Stock Equivalent) issued
but not outstanding or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with this Section 24, the Company shall take all
such action as may be necessary to authorize additional shares of Common Stock
of the Company or Preferred Stock (or Preferred Stock Equivalent) for issuance
upon exchange of the Rights.
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24.5 The Company shall not be required to issue fractions of Common
Stock of the Company or to distribute certificates which evidence fractional
shares of Common Stock of the Company. If the Company elects not to issue such
fractional shares of Common Stock of the Company, the Company shall pay, in lieu
of such fractional shares of Common Stock of the Company, to the registered
holders of the Right Certificates with regard to which such fractional shares of
Common Stock of the Company would otherwise be issuable, an amount in cash equal
to the same fraction of the Fair Market Value of a whole share of Common Stock
of the Company. For the purposes of this Section 24.5, the Fair Market Value of
a whole share of Common Stock of the Company shall be the closing price of a
share of Common Stock of the Company (as determined pursuant to the second
sentence of Section 11.4.1 hereof) for the Trading Day immediately prior to the
date of exchange pursuant to this Section 24.
25. NOTICE OF CERTAIN EVENTS.
25.1 In case the Company shall propose, at any time after the
Distribution Date, to (a) pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular periodic cash dividend out of earnings or
retained earnings of the Company), (b) offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, (c) effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision of outstanding shares of
Preferred Stock), (d) effect any consolidation or merger into or with, or to
effect any sale, mortgage or other transfer (or to permit one or more of its
Subsidiaries to effect any sale, mortgage or other transfer), in one transaction
or a series of related transactions, of 50% or more of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to, any other
Person (other than a Subsidiary of the Company in one or more transactions each
of which is not prohibited by the proviso at the end of the first sentence of
Section 11.14 hereof), (e) effect the liquidation, dissolution or winding up of
the Company, or (f) declare or pay any dividend on the Common Stock of the
Company payable in Common Stock of the Company or to effect a subdivision,
combination or consolidation of the Common Stock of the Company (by
reclassification or otherwise than by payment of dividends in Common Stock of
the Company) then in each such case, the Company shall give to each holder of a
Right Certificate and to the Rights Agent, in accordance with Section 26 hereof,
a notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the date
on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Common Stock of the
Company and/or Preferred Stock, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (a) or (b above at
least twenty (20) days prior to the record date for determining holders of the
shares of Preferred Stock for purposes of such action, and in the case of any
such other action, at least twenty (20) days prior to the date of the taking of
such proposed action or the date of participation therein by the holders of the
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shares of Common Stock of the Company and/or Preferred Stock, whichever shall be
the earlier; provided, however, no such notice shall be required pursuant to
this Section 25 as a result of any Subsidiary of the Company effecting a
consolidation or merger with or into, or effecting a sale or other transfer of
assets or earnings power to, any other Subsidiary of the Company in a manner not
inconsistent with the provisions of this Agreement.
25.2 In case any Section 11.1.2 Event shall occur, then, in any such
case, the Company shall as soon as practicable thereafter give to each
registered holder of a Right Certificate and to the Rights Agent, in accordance
with Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11.1.2 hereof.
26. NOTICES. Notices or demands authorized by this Agreement to be given
or made by the Rights Agent or by the holder of any Right Certificate to or on
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, by facsimile transmission or by nationally recognized overnight
courier addressed (until another address is filed in writing with the Rights
Agent) as follows:
Tweeter Home Entertainment Group, Inc.
40 Hudson Road
Canton, Massachusetts 02021
Attention: President
Subject to the provisions of Section 21, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, by facsimile transmission or by
nationally-recognized overnight courier addressed (until another address is
filed in writing with the Company) as follows:
BankBoston, N.A.
c/o Boston Equiserve Limited Partnership
150 Royall Street
Canton, MA 02021
Attention: Client Administration
Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right Certificate (or,
prior to the Distribution Date, to the holder of any certificate representing
shares of Common Stock of the Company) shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed to such holder at the
address of such holder as shown on the registry books of the Company.
27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement as the Company may deem necessary or
desirable
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without the approval of any holders of certificates representing shares of
Common Stock of the Company. From and after the Distribution Date, the Company
and the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holder of Right Certificates in order (i)
to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereof in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Right Certificates (other than an Acquiring Person or any Affiliate
or Associate of an Acquiring Person); provided, however, that from and after the
Distribution Date this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable or
(B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and the benefits to, the
holders of Rights (other than an Acquiring Person or any Affiliate or Associate
of an Acquiring Person). Upon the delivery of such certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock of the Company. Notwithstanding any other
provision hereof, the Rights Agent's consent must be obtained regarding any
amendment or supplement pursuant to this Section 27 which alters the Rights
Agent's rights or duties.
28. SUCCESSORS. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS. For all purposes
of this Agreement, any calculation of the number of shares of Common Stock of
the Company outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of the Company of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the Rules under the
Exchange Act as in effect on the date hereof. The Board of Directors of the
Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including without limitation, the right and
power to (a) interpret the provisions of this Agreement and (b) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (ii) below, all omissions with
respect to the foregoing) which are done or made by the Board of Directors in
good faith shall (i) be final, conclusive and binding on the Company, the Rights
Agent, the holders of the Rights and all other parties, and (ii) not
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<PAGE> 42
subject any member of the Board of Directors to any liability to the holders of
the Rights or to any other person.
30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Stock of the Company) any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock of the Company).
31. SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated; provided,
however, that notwithstanding anything in this Agreement to the contrary, if any
such term, provision, covenant or restriction is held by such court or authority
to be invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language from
the Agreement would adversely affect the purpose or effect of the Agreement, the
right of redemption set forth in Section 23 hereof shall be reinstated and shall
not expire until the Close of Business on the tenth day following the date of
such determination by the Board of Directors.
32. GOVERNING LAW. This Agreement, each Right and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such state applicable to contracts to be made and to
be performed entirely within such state. The courts of the State of Delaware and
of the United States of America located in the State of Delaware (the "Delaware
Courts") shall have exclusive jurisdiction over any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby, and any
Person commencing or otherwise involved in any such litigation shall waive any
objection to the laying of venue of such litigation in the Delaware Courts and
shall not plead or claim in any Delaware Court that such litigation brought
therein has been brought in an inconvenient forum.
33. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
34. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections of
this Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
TWEETER HOME ENTERTAINMENT GROUP, INC.
By:
_______________________________
Name:
Title:
BANKBOSTON, N.A.
By:
_______________________________
Name:
Title:
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<PAGE> 44
EXHIBIT A
FORM OF
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING CUMULATIVE PREFERRED STOCK
OF
TWEETER HOME ENTERTAINMENT GROUP, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
TWEETER HOME ENTERTAINMENT GROUP, INC. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "DGCL"), DOES HEREBY CERTIFY:
That the following resolution was duly adopted by the Board of Directors
of the Company, pursuant to the authority conferred upon the Board of Directors
by Article IV, Section C of the Company's Amended and Restated Certificate of
Incorporation and the provisions of Section 151 of the DGCL, at a duly called
meeting of the Board of Directors held on _____________, 1998:
RESOLVED: That the Board of Directors hereby designates 200,000 shares of the
Company's Preferred Stock, $.01 par value, as Series A Junior
Participating Cumulative Preferred Stock with the designations,
powers, preferences, and relative, participating, optional or other
rights, and the qualifications, limitations or restrictions thereof,
set forth on EXHIBIT 1 hereto.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation to be executed by _________________, its ___________.
TWEETER HOME ENTERTAINMENT GROUP,
INC.
By:
___________________________________
Name:
Title:
<PAGE> 45
EXHIBIT 1
DESIGNATIONS, POWERS, PREFERENCES, AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER RIGHTS, AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF,
OF
SERIES A JUNIOR PARTICIPATING CUMULATIVE PREFERRED STOCK
OF
TWEETER HOME ENTERTAINMENT GROUP, INC.
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Cumulative Preferred Stock," $.01
par value, (hereinafter called "Series A Preferred Stock"), and the number of
shares initially constituting such series shall be 200,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors and
by the filing of a certificate pursuant to the provisions of the General
Corporation Law of the State of Delaware stating that such increase or reduction
has been so authorized; provided, however, that no decrease shall reduce the
number of shares of Series A Preferred Stock to a number less than that of the
shares then outstanding plus the number of shares of Series A Preferred Stock
issuable upon exercise of outstanding rights, options or warrants or upon
conversion of outstanding securities issued by the Corporation.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) (i) Subject to the rights of the holders of any shares of any
series of preferred stock (or any similar stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of shares of Common Stock
and of any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provisions for
adjustment hereinafter set forth, 1,000 times the aggregate per share amount of
all cash dividends, and 1,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the shares of
Common Stock since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred Stock. The
multiple
<PAGE> 46
of cash and non-cash dividends declared on the shares of Common Stock to which
holders of the Series A Preferred Stock are entitled, which shall be 1,000
initially but which shall be adjusted from time to time as hereinafter provided,
is hereinafter referred to as the "Dividend Multiple." In the event the
Corporation shall at any time after __________, 1998 (the "Rights Declaration
Date") (i) declare or pay any dividend on the shares of Common Stock payable in
shares of Common Stock, or (ii) effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
Dividend Multiple thereafter applicable to the determination of the amount of
dividends which holders of shares of Series A Preferred Stock shall be entitled
to receive shall be the Dividend Multiple applicable immediately prior to such
event multiplied by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(ii) Notwithstanding anything else contained in this
paragraph (A), the Corporation shall, out of funds legally available for that
purpose, declare a dividend or distribution on the Series A Preferred Stock as
provided in this paragraph (A) immediately after it declares a dividend or
distribution on the shares of Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend or distribution
shall have been declared on the shares of Common Stock during the period between
any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(B) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of Series
A Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix in accordance with applicable law a record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than such number of days prior to the date fixed for the
payment thereof as may be allowed by applicable law.
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<PAGE> 47
SECTION 3. VOTING RIGHTS. In addition to any other voting rights
required by law, the holders of shares of Series A Preferred Stock shall have
the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 1,000 votes on all matters submitted to a vote of the stockholders of the
Corporation. The number of votes which a holder of a share of Series A Preferred
Stock is entitled to cast, which shall initially be 1,000 but which may be
adjusted from time to time as hereinafter provided, is hereinafter referred to
as the "Vote Multiple." In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare or pay any dividend on shares of Common
Stock payable in shares of Common Stock, or (ii) effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the Vote Multiple thereafter applicable to the determination of the
number of votes per share to which holders of shares of Series A Preferred Stock
shall be entitled shall be the Vote Multiple immediately prior to such event
multiplied by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) Except as otherwise provided herein or by law, the
holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock and the holders of shares of any other capital stock of this
Corporation having general voting rights, shall vote together as one class on
all matters submitted to a vote of stockholders of the Corporation.
(C) (i) Whenever, at any time or times, dividends payable on
any shares of Series A Preferred Stock shall be in arrears in an amount equal to
at least two full quarter dividends (whether or not declared and whether or not
consecutive), the holders of record of the outstanding shares of Series A
Preferred Stock shall have the exclusive right, voting separately as a single
class, to elect two directors of the Corporation at a special meeting of
stockholders of the Corporation or at the Corporation's next annual meeting of
stockholders, and at each subsequent annual meeting of stockholders, as provided
below. At elections for such directors, each Series A Preferred Share shall
entitle the holder thereof to 1,000 votes in such elections.
(ii) Upon the vesting of such right of the holders of
shares of Series A Preferred Stock, the maximum authorized number of members of
the Board of Directors shall automatically be increased by two and the two
vacancies so created shall be filled by vote of the holders of the outstanding
shares of Series A Preferred Stock as hereinafter set forth. A special meeting
of the stockholders of the Corporation then entitled to vote shall be called by
the Chairman of the Board of Directors or the President or the Secretary of the
Corporation, if requested in writing by the holders of record of not
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<PAGE> 48
less than 10% of the shares of Series A Preferred Stock then outstanding. At
such special meeting, or, if no such special meeting shall have been called,
then at the next annual meeting of stockholders of the Corporation, the holders
of the shares of Series A Preferred Stock shall elect, voting as above provided,
two directors of the Corporation to fill the aforesaid vacancies created by the
automatic increase in the number of members of the Board of Directors. At any
and all such meetings for such election, the holders of a majority of the
outstanding shares of Series A Preferred Stock shall be necessary to constitute
a quorum for such election, whether present in person or proxy, and such two
directors shall be elected by the vote of at least a majority of the shares of
Series A Preferred Stock held by such stockholders present or represented at the
meeting. Any director elected by holders of shares of Series A Preferred Stock
pursuant to this Section may be removed at any annual or special meeting, by
vote of a majority of the stockholders voting as a class who elected such
director, with or without cause. In case any vacancy shall occur among the
directors elected by the holders of shares of Series A Preferred Stock pursuant
to this Section, such vacancy may be filled by the remaining director so
elected, or his successor then in office, and the director so elected to fill
such vacancy shall serve until the next meeting of stockholders for the election
of directors. After the holders of shares of Series A Preferred Stock shall have
exercised their right to elect directors in any default period and during the
continuance of such period, the number of directors shall not be further
increased or decreased except by vote of the holders of shares of Series A
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Preferred Stock.
(iii) The right of the holders of shares of Series A
Preferred Stock, voting separately as a class, to elect two members of the Board
of Directors of the Corporation as aforesaid shall continue until, and only
until, such time as all arrears in dividends (whether or not declared) on the
Series A Preferred Stock shall have been paid or declared and set apart for
payment, at which time such right shall terminate, except as herein or by law
expressly provided subject to revesting in the event of each and every
subsequent default of the character above-mentioned. Upon any termination of the
right of the holders of the Series A Preferred Stock as a class to vote for
directors as herein provided, the term of office of all directors then in office
elected by the holders of shares of Series A Preferred Stock pursuant to this
Section shall terminate immediately. Whenever the term of office of the
directors elected by the holders of shares of Series A Preferred Stock pursuant
to this Section shall terminate and the special voting powers vested in the
holders of the Series A Preferred Stock pursuant to this Section shall have
expired, the maximum number of members of this Board of Directors of the
Corporation shall be such number as may be provided for in the By-laws of the
Corporation, irrespective of any increase made pursuant to the provisions of
this Section.
(D) Except as otherwise required by applicable law or as set
forth herein, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of shares of Common Stock as set forth herein) for
taking any corporate action.
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<PAGE> 49
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever dividends or distributions payable on the Series
A Preferred Stock as provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not: (i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay
dividends on or make any other distributions on any shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled; (iii) except as permitted in subsection 4(A)(iv)
below, redeem, purchase or otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such parity stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Preferred Stock; or (iv) purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any shares of any stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under subsection (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
preferred stock and may be reissued as part of a new series of preferred stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution
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<PAGE> 50
shall be made (a) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (1) $1,000.00 per share or
(2) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (b) to the
holders of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all other
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up. In
the event the Corporation shall at any time after the Rights Declaration Date
(i) declare or pay any dividend on shares of Common Stock payable in shares of
Common Stock, or (ii) effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount per share
to which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause (a) of this paragraph shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Neither the consolidation of nor merging of the Corporation with or into
any other corporation or corporations, nor the sale or other transfer of all or
substantially all of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 6.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged,
plus accrued and unpaid dividends, if any, payable with respect to the Series A
Preferred Stock. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare or pay any dividend on shares of Common Stock
payable in shares of Common Stock, or (ii) effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by
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<PAGE> 51
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
SECTION 8. REDEMPTION. The shares of Series A Preferred Stock shall not
be redeemable; provided, however, that the foregoing shall not limit the ability
of the Corporation to purchase or otherwise deal in such shares to the extent
otherwise permitted hereby and by law.
SECTION 9. RANKING. Unless otherwise provided in the Certificate of
Incorporation or a Certificate of Designation relating to a
subsequently-designated series of preferred stock of the Corporation, the Series
A Preferred Stock shall rank junior to any other series of the Corporation's
preferred stock subsequently issued, as to the payment of dividends and the
distribution of assets on liquidation, dissolution or winding up and shall rank
senior to the Common Stock.
SECTION 10. AMENDMENT. The Certificate of Incorporation and this
Certificate of Designation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of two-thirds or more of the outstanding shares of Series A
Preferred Stock, voting separately as a class.
SECTION 11. FRACTIONAL SHARES. Shares of Series A Preferred Stock may be
issued in whole shares or in any fraction of a share that is one one-thousandth
(1/1,000th) of a share or any integral multiple of such fraction, which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of shares of Series A Preferred
Stock. In lieu of fractional shares, the Corporation may elect to make a cash
payment as provided in the Rights Agreement for fractions of a share other than
one one-thousandth (1/1,000th) of a share or any integral multiple thereof.
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<PAGE> 52
EXHIBIT B
FORM OF RIGHT CERTIFICATE
Certificate No. R- [NUMBER] Rights
NOT EXERCISABLE AFTER ___________, 200__ OR EARLIER IF NOTICE OF REDEMPTION IS
GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF TWEETER HOME
ENTERTAINMENT GROUP, INC., AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE
SHAREHOLDER RIGHTS AGREEMENT BETWEEN TWEETER HOME ENTERTAINMENT GROUP, INC. AND
BANKBOSTON, N.A., AS RIGHTS AGENT, DATED AS OF _________, 1998 (THE "RIGHTS
AGREEMENT"). UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN SECTION 7.5 OF THE RIGHTS
AGREEMENT, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ASSOCIATE OR
AFFILIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
TWEETER HOME ENTERTAINMENT GROUP, INC.
RIGHT CERTIFICATE
This certifies that ________________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the
Shareholder Rights Agreement dated as of , 199 (the "Rights Agreement") between
TWEETER HOME ENTERTAINMENT GROUP, INC. (the "Company") and BANKBOSTON, N.A., as
Rights Agent (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to the close of business on _________, 200__ at the office or offices
of the Rights Agent designated for such purpose, or its successors as Rights
Agent, one one-thousandth of a fully paid, non-assessable share of Series A
Junior Participating Cumulative Preferred Stock (the "Preferred Stock") of the
Company, at a purchase price of $___ per one one-thousandth of a share (the
"Exercise Price"), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase and the related Certificate duly executed.
The number of Rights evidenced by this Right Certificate (and the number of
shares which may be purchased upon exercise thereof) set forth above, and the
Exercise Price per share set forth above, are the number and Exercise Price as
of , based on the shares of Preferred Stock as constituted at such date.
Upon the occurrence of a Section 11.1.2 Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (a) an Acquiring Person or an Affiliate or Associate of
any such Person (as
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<PAGE> 53
such terms are defined in the Rights Agreement), (b) a transferee of any such
Acquiring Person, Associate or Affiliate, or (c) under certain circumstances
specified in the Rights Agreement, a transferee of a Person who, after such
transfer, became an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of such Section 11.1.2 Event.
As provided in the Rights Agreement, the Exercise Price and the number
of shares of Preferred Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal office of the
Company and the designated office of the Rights Agent and are also available
upon written request to the Company or the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or
Certificates for the number of whole Rights not exercised. If this Right
Certificate shall be exercised in whole or in part pursuant to Section 11.1.2 of
the Rights Agreement, the holder shall be entitled to receive this Right
Certificate duly marked to indicate that such exercise has occurred as set forth
in the Rights Agreement.
Under certain circumstances, subject to the provisions of the Rights
Agreement, the Board of Directors of the Company at its option may exchange all
or any part of the Rights evidenced by this Certificate for shares of the
Company's Common Stock or Preferred Stock at an exchange ratio (subject to
adjustment) of one share of Common Stock or one one-thousandth of a share of
Preferred Stock per Right.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Board of Directors of the Company at
its option at a redemption price of $0.001 per Right (payable in cash, Common
Stock or other consideration deemed appropriate by the Board of Directors).
-9-
<PAGE> 54
The Company is not obligated to issue fractional shares of stock upon
the exercise of any Right or Rights evidenced hereby (other than fractions which
are integral multiples of one one-thousandth of a share of Preferred Stock,
which may, at the election of the Company, be evidenced by depositary receipts).
If the Company elects not to issue such fractional shares, in lieu thereof a
cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock, Common Stock or any other securities of the Company which may
at any time be issuable on the exercise hereof, nor shall anything contained in
the Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by an authorized signatory of the Rights
Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Corporate Seal
TWEETER HOME ENTERTAINMENT COUNTERSIGNED:
GROUP, INC.
BANKBOSTON, N.A., as Rights Agent
By: _________________________
Name: By: ______________________________
Title: Name:
Title:
Attest: Authorized Signatory
Date of countersignature:_________
_____________________________
Name:
Title:
-10-
<PAGE> 55
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED __________________________ hereby sells, assigns and
transfers unto (Please print name and address of transferee) this Right
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ___________________________________ as
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated:
Signature:___________________________
Printed name:________________________
Signature Guaranteed:
-11-
<PAGE> 56
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate ___are ___are not
being transferred by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of any such Person (as such terms are defined in
the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned ___did ___did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.
Dated:
Signature:________________________
Printed name:_____________________
-12-
<PAGE> 57
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
-13-
<PAGE> 58
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Right Certificate.)
To TWEETER HOME ENTERTAINMENT GROUP, INC.:
The undersigned hereby irrevocably elects to exercise _____________ Rights
represented by this Right Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
_________________________:
Please insert social security or other identifying taxpayer number:
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate or if the Rights are being exercised pursuant to Section
11.1.2 of the Rights Agreement, a new Right Certificate for the balance of such
Rights shall be registered in the name of and delivered to____________________:
Please insert social security or other identifying taxpayer number:
Please insert social security or other identifying taxpayer number:
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
(Please print name and address)
Signature:_________________________
Signature Guaranteed:
-14-
<PAGE> 59
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate ___are ___are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned ___did ___did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.
Dated:
Signature:________________________
Printed name:_____________________
-15-
<PAGE> 60
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
-16
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of July 20, 1998
Among
NEW ENGLAND AUDIO CO., INC. and NEA DELAWARE, INC.,
as Borrowers,
TWEETER HOME ENTERTAINMENT GROUP, INC.
and
TWEETER HOME ENTERTAINMENT GROUP FINANCING COMPANY TRUST,
as Guarantors
THE LENDERS PARTY HERETO
and
BANKBOSTON, N.A.,
as Agent for the Lenders
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS.................................................................. 1
Section 1.1. Definitions.......................................................................... 1
Section 1.2. Accounting Terms..................................................................... 13
ARTICLE 2. THE REVOLVING CREDIT.............................................................................. 13
Section 2.1. The Revolving Credit................................................................. 13
Section 2.2. Making of Revolving Credit Advances.................................................. 14
Section 2.3. Interest on Revolving Credit Advances................................................ 16
Section 2.4. Election of Eurodollar Pricing Options............................................... 16
Section 2.5. Additional Payments.................................................................. 17
Section 2.6. Computation of Interest, Etc......................................................... 17
Section 2.7. Fees................................................................................. 17
Section 2.8. Set-Off.............................................................................. 18
Section 2.9. Sharing of Payments.................................................................. 18
Section 2.10. Reduction of Commitment by the Borrowers............................................. 18
Section 2.11. Letters of Credit.................................................................... 18
Section 2.12. Increased Costs, Etc................................................................. 22
Section 2.13. Changed Circumstances................................................................ 24
Section 2.14. Use of Proceeds...................................................................... 24
Section 2.15. Guaranty............................................................................. 25
ARTICLE 3. CONDITIONS TO LOANS AND ADVANCES.................................................................. 26
Section 3.1. Conditions to First Revolving Credit Advance......................................... 26
Section 3.2. Conditions to All Revolving Credit Advances.......................................... 28
ARTICLE 4. PAYMENT AND REPAYMENT............................................................................. 28
Section 4.1. Mandatory Prepayment................................................................. 28
Section 4.2. Voluntary Prepayments................................................................ 28
Section 4.3. Payment and Interest Cutoff.......................................................... 29
Section 4.4. Payment or Other Actions on Non-Business Days........................................ 29
Section 4.5. Method and Timing of Payments........................................................ 29
Section 4.6. Payments Not at End of Interest Period............................................... 30
Section 4.7. Currency............................................................................. 30
ARTICLE 5. REPRESENTATIONS AND WARRANTIES.................................................................... 30
Section 5.1. Corporate Existence, Charter Documents, Etc.......................................... 31
Section 5.2. Principal Place of Business; Location of Records..................................... 31
Section 5.3. Qualification........................................................................ 31
Section 5.4. Subsidiaries......................................................................... 31
Section 5.5. Corporate Power...................................................................... 31
Section 5.6. Valid and Binding Obligations........................................................ 32
</TABLE>
(i)
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<TABLE>
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Section 5.7. Other Agreements..................................................................... 32
Section 5.8. Payment of Taxes..................................................................... 32
Section 5.9. Financial Statements................................................................. 33
Section 5.10. Other Materials Furnished............................................................ 33
Section 5.11. Stock................................................................................ 33
Section 5.12. Changes in Condition................................................................. 33
Section 5.13. Assets, Licenses, Patents, Trademarks, Etc........................................... 34
Section 5.14. Litigation........................................................................... 34
Section 5.15. Pension Plans........................................................................ 34
Section 5.16. Outstanding Indebtedness............................................................. 35
Section 5.17. Environmental Matters................................................................ 35
Section 5.18. Governmental Regulations............................................................. 36
Section 5.19. Margin Stock......................................................................... 36
Section 5.20. Consummation of Tweeter IPO.......................................................... 36
Section 5.21. Repurchase and Cancellation of Subordinated Notes and Preferred Stock................ 36
ARTICLE 6. REPORTS AND INFORMATION........................................................................... 37
Section 6.1. Interim Financial Statements and Reports............................................. 37
Section 6.2. Annual Financial Statements and Budgets.............................................. 37
Section 6.3. Notice of Defaults, Etc.............................................................. 38
Section 6.4. Notice of Litigation................................................................. 38
Section 6.5. Communications with Others........................................................... 38
Section 6.6. Reportable Events.................................................................... 38
Section 6.7. Reports to other Creditors........................................................... 38
Section 6.8. Communications with Independent Public Accountants................................... 39
Section 6.9. Environmental Reports................................................................ 39
Section 6.10. Notice of Permitted Acquisitions..................................................... 39
Section 6.11. Miscellaneous........................................................................ 40
ARTICLE 7. FINANCIAL COVENANTS............................................................................... 40
Section 7.1. Ratio of Consolidated Total Funded Debt to Consolidated EBITDA....................... 40
Section 7.2. Ratio of Consolidated Operating Cash Flow to Consolidated Debt Service............... 40
Section 7.3. Consolidated Net Worth............................................................... 40
Section 7.4. Ratio of Consolidated EBIT to Consolidated Interest Expense.......................... 41
Section 7.5. Consolidated Capital Expenditures.................................................... 41
ARTICLE 8. AFFIRMATIVE COVENANTS............................................................................. 41
Section 8.1. Existence and Business............................................................... 41
Section 8.2. Taxes and Other Obligations.......................................................... 42
Section 8.3. Maintenance of Properties and Leases................................................. 42
</TABLE>
(ii)
<PAGE> 4
<TABLE>
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Section 8.4. Insurance............................................................................ 42
Section 8.5. Records, Accounts and Places of Business............................................. 42
Section 8.6. Inspection........................................................................... 43
Section 8.7. Maintenance of Accounts.............................................................. 43
Section 8.8. Formation and Acquisition of Subsidiaries............................................ 43
ARTICLE 9. NEGATIVE COVENANTS................................................................................ 44
Section 9.1. Restrictions on Indebtedness......................................................... 44
Section 9.2. Restriction on Liens................................................................. 45
Section 9.3. Investments.......................................................................... 47
Section 9.4. Dispositions of Assets............................................................... 47
Section 9.5. Assumptions, Guaranties, Etc. of Indebtedness of Other Persons....................... 48
Section 9.6. Mergers, Etc......................................................................... 48
Section 9.7. ERISA................................................................................ 48
Section 9.8. Restricted Payments.................................................................. 48
Section 9.9. Sale and Leaseback................................................................... 48
Section 9.10. Transactions with Affiliates......................................................... 49
Section 9.11. Preferred Stock...................................................................... 49
ARTICLE 10. EVENTS OF DEFAULT AND REMEDIES................................................................... 49
Section 10.1. Events of Default.................................................................... 49
Section 10.2. Remedies............................................................................. 51
Section 10.3. Distribution of Proceeds............................................................. 51
ARTICLE 11. CONSENTS; AMENDMENTS; WAIVERS; REMEDIES.......................................................... 52
Section 11.1. Actions by Lenders................................................................... 52
Section 11.2. Actions by Borrowers................................................................. 53
ARTICLE 12. SUCCESSORS AND ASSIGNS........................................................................... 53
Section 12.1. General.............................................................................. 53
Section 12.2. Assignments.......................................................................... 54
Section 12.3. Participations....................................................................... 55
ARTICLE 13. THE AGENT........................................................................................ 56
Section 13.1. Authorization and Action............................................................. 56
Section 13.2. Agent's Reliance, Etc................................................................ 56
Section 13.3. Agent as a Lender.................................................................... 57
Section 13.4. Lender Credit Decision............................................................... 57
Section 13.5. Indemnification of Agent............................................................. 57
Section 13.6. Successor Agent...................................................................... 58
Section 13.7. Amendment of Article 13.............................................................. 58
</TABLE>
(iii)
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<TABLE>
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ARTICLE 14. MISCELLANEOUS.................................................................................... 58
Section 14.1. Notices.............................................................................. 58
Section 14.2. Merger............................................................................... 59
Section 14.3. Governing Law; Consent to Jurisdiction............................................... 59
Section 14.4. Counterparts......................................................................... 59
Section 14.5. Expenses and Indemnification......................................................... 60
Section 14.6. Confidentiality...................................................................... 61
Section 14.7. Reliance on Representations and Actions of Tweeter................................... 61
Section 14.8. Joint and Several Obligations........................................................ 62
Section 14.9. WAIVER OF JURY TRIAL................................................................. 62
</TABLE>
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Notice of Revolving Credit Borrowing
Exhibit C Form of Compliance Certificate
Exhibit D Form of Eurodollar Pricing Notice
Exhibit E-1 Form of Amended and Restated Stock Pledge Agreement
Exhibit E-2 Form of Tweeter Stock Pledge Agreement
Exhibit F-1 Form of Amended and Restated Security Agreement
Exhibit F-2 Form of Tweeter Security Agreement
Exhibit G Form of Landlord Waiver
Exhibit H Form of Opinion of Borrowers' Counsel
Exhibit I Form of Assignment and Acceptance Agreement
Exhibit J Form of Tweeter Trust Subordination Agreement
Exhibit K Form of Intercreditor Subordination Agreement
Schedule 1 Schedule of Commitment Percentages
Schedule 2 Pricing Schedule
Schedule 3.1 Schedule of Subordinated Indebtedness Paid in Full
Schedule 5.2 Schedule of Principal Place of Business
Schedule 5.9 Schedule of Financial Statements
Schedule 5.11 Schedule of Issued and Outstanding Stock
Schedule 5.12 Changes in Condition
Schedule 5.13 Schedule of Licenses, Patents, Copyrights and Trademarks
Schedule 5.14 Schedule of Litigation
Schedule 5.15 Schedule of Pension Plans
Schedule 5.16 Schedule of Indebtedness, Liens, Charges and Encumbrances
Schedule 5.17 Schedule of Environmental Matters
Schedule 5.20 Schedule of Application of Proceeds of Tweeter IPO
Schedule 8.4 Schedule of Insurance
Schedule 9.3 Schedule of Investments in Subsidiaries
(iv)
<PAGE> 6
AMENDED AND RESTATED
CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of July
20, 1998 by and among NEW ENGLAND AUDIO CO., INC., a Massachusetts corporation
("New England Audio"), NEA DELAWARE, INC., a Delaware corporation ("NEA
Delaware") (New England Audio and NEA Delaware each, a "Borrower" and
collectively, the "Borrowers"), TWEETER HOME ENTERTAINMENT GROUP, INC., a
Delaware corporation ("Tweeter"), TWEETER HOME ENTERTAINMENT GROUP FINANCING
COMPANY TRUST, a Massachusetts business trust ("Tweeter Trust") (Tweeter and
Tweeter Trust each a "Guarantor" and collectively the "Guarantors") (each
Borrower and each Guarantor a "Loan Party" and the Borrowers and the Guarantors
collectively the "Loan Parties") the lenders from time to time party hereto (the
"Lenders") and BANKBOSTON, N.A., a national banking association, as agent for
the Lenders from time to time party hereto.
Recitals
The Borrowers, the Lenders and the Agent are parties to a Credit
Agreement dated as of May 30, 1997 (as amended, the "1997 Credit Agreement").
New England Audio is a wholly-owned subsidiary of Tweeter and Tweeter has, on or
about the date hereof, made an initial public offering of its common stock. NEA
Trust is also a wholly-owned subsidiary of Tweeter. The Borrowers desire to
amend the 1997 Credit Agreement to increase the maximum amount of the revolving
credit facility thereunder, to modify certain covenants, to add the Guarantors
as parties thereto to guaranty all Lender Obligations and to make certain other
changes therein. The Lenders and the Agent are willing to amend the 1997 Credit
Agreement, and the Guarantors are willing to enter into this Agreement, all on
the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, (a) the Borrowers, the Lenders and
the Agent hereby amend the 1997 Credit Agreement in its entirety as set forth
herein and (b) the parties hereto do hereby agree as follows:
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS
Section 1.1. Definitions. In addition to the terms defined elsewhere in
this Agreement, unless otherwise specifically provided herein, the following
terms shall have the following meanings for all purposes when used in this
Agreement, and in any note, agreement, certificate, report or other document
made or delivered in connection with this Agreement:
"Account" or "Accounts Receivable" shall mean all of a
Borrower's rights to payment for goods sold or leased or for services
rendered, all proceeds thereof, all
<PAGE> 7
instruments pertaining thereto, all guarantees and security therefor,
all goods or services which gave rise thereto and the rights pertaining
to such goods, including rights to reclamation and stoppage in transit
and all rights of an unpaid seller of goods or services, and all
related insurance.
"Affiliate" shall mean, with reference to any Person, (a) any
director, officer or employee of that Person, (b) any other Person
controlling, controlled by or under direct or indirect common control
of that Person, (c) any other Person directly or indirectly holding 10%
or more of any class of the capital stock or other equity interests
(including options, warrants, convertible securities and similar
rights) of that Person and (d) any other Person 10% or more of any
class of whose capital stock or other equity interests (including
options, warrants, convertible securities and similar rights) is held
directly or indirectly by that Person.
"Agent" shall mean BankBoston, N.A., in its capacity as agent
for the Lenders, and its successors in that capacity.
"Agreement" shall mean this Credit Agreement, as amended or
supplemented from time to time. References to Articles, Sections,
Exhibits, Schedules and the like refer to the Articles, Sections,
Exhibits, Schedules and the like of this Agreement unless otherwise
indicated, as amended and supplemented from time to time.
"Applicable Base Rate" shall mean the Base Rate in effect from
time to time.
"Applicable Commitment Fee" shall mean a rate per annum
determined in accordance with the Pricing Schedule.
"Applicable Eurodollar Rate" shall mean the sum of (a) the
Eurodollar Rate plus (b) the Eurodollar Rate Margin, as each is in
effect from time to time.
"Assignment and Acceptance Agreement" shall have the meaning
set forth in Section 12.2(a) hereof.
"Base Rate" shall mean the greater of (a) the rate of interest
announced from time to time by the Agent at its head office located at
100 Federal Street, Boston, Massachusetts 02110 as its "Base Rate" and
(b) the Federal Funds Effective Rate plus 1/2 of 1% per annum (rounded
upwards, if necessary, to the next 1/8 of 1%).
"Base Rate Loan" shall mean any Revolving Credit Advance
bearing interest at a fluctuating rate determined by reference to the
Applicable Base Rate.
"Business Day" shall mean (a) for all purposes other than as
covered by clause (b) below, any day other than a Saturday, Sunday or
legal holiday on which banks in Boston, Massachusetts are open for the
conduct of a substantial part of their
2
<PAGE> 8
commercial banking business, and (b) with respect to all notices and
determinations in connection with, and payments of principal and
interest on, Eurodollar Rate Loans, any day that is a Business Day
described in clause (a) and that is also a day for trading by and
between banks in U.S. Dollar deposits in the London interbank
Eurodollar market.
"Canton Facility" shall mean the land and improvements thereon
owned by New England Audio and located at 10 Pequot Way, Pequot
Industrial Park, Canton, Massachusetts 02021.
"Canton Mortgage" shall mean the Mortgage, Security Agreement,
Fixture Filing and Financial Statement dated as of June 23, 1998 by and
between the Agent, as mortgagee, and New England Audio Co. Inc., as
mortgagor.
"Capital Expenditures" shall mean the amount of any
expenditure for fixed assets, computer software, leasehold
improvements, capital leases under GAAP, installment purchases of
machinery and equipment, acquisitions of real estate and other similar
expenditures which are required to be capitalized on a balance sheet
pursuant to GAAP.
"Capitalized Lease" shall mean any lease which is or should be
capitalized on the balance sheet of the lessee in accordance with
generally accepted accounting principles and Statement of Financial
Accounting Standards No. 13.
"Capitalized Lease Obligations" shall mean the amount of the
liability reflecting the aggregate discounted amount of future payments
under all Capitalized Leases calculated in accordance with generally
accepted accounting principles and Statement of Financial Accounting
Standards No. 13.
"Change of Control" shall mean the occurrence of any of the
following: (a) any Person or group of Persons, within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended,
shall own of record or beneficially more than 40% of the issued and
outstanding capital stock of Tweeter; (b) 120 days shall have passed
after Jeffrey Stone ceases to be employed by New England Audio in
Executive Management positions for any reason; (c) Tweeter shall cease
to own 100% of the capital stock of New England Audio or 100% of the
beneficial interest of Tweeter Trust or 100% of the equity interest of
any other Subsidiary; or (d) New England Audio ceases to hold 100% of
the issued and outstanding capital stock of NEA Delaware.
"Closing Date" shall mean the date on which all of the
conditions set forth in Section 3.1 have been satisfied.
"Collateral" shall mean any and all real and personal property
of Tweeter and its Subsidiaries, whether tangible or intangible, in
which the Agent now has, is granted by this Agreement or otherwise, or
hereafter acquires a security interest in or any other
3
<PAGE> 9
lien (including, without limitation, by way of mortgage or assignment)
to secure the Lender Obligations. It being recognized that the Canton
Facility is subject to being released as Collateral by the Agent in
accordance with Section 8.9.
"Commitment Percentage" shall mean as to each Lender its
percentage interest in the Maximum Revolving Credit Amount as set forth
on Schedule 1 hereto.
"Compliance Certificate" shall mean a certificate in the form
of Exhibit C hereto and executed by the chief executive officer or
chief financial officer of Tweeter.
"Consolidated" and "consolidated" when used with reference to
any term, mean that term (or the term "combined" and as the case may
be, in the case of partnerships, joint ventures and Affiliates that are
not Subsidiaries) as applied to the accounts of Tweeter (or other
specified Person) and all of its Subsidiaries (or other specified
Persons), or such of its Subsidiaries as may be specified, consolidated
(or combined) in accordance with generally accepted accounting
principles and with appropriate deductions for minority interests in
Subsidiaries, as required by generally accepted accounting principles.
"Consolidated Current Liabilities" shall mean, at any date as
of which the amount thereof shall be determined, all liabilities of
Tweeter and its Subsidiaries which should properly be classified as
current in accordance with generally accepted accounting principles
consistently applied, including, without limitation, all fixed
prepayments of, and sinking fund payments with respect to, Indebtedness
and all estimated taxes of Tweeter and its Subsidiaries required to be
paid within one year from the date of determination.
"Consolidated EBIT" shall mean, for any period, the sum of (a)
Consolidated Net Income and (b) all amounts deducted in computing
Consolidated Net Income in respect of (i) interest expense on
Indebtedness and (ii) taxes based on or measured by income, in each
case for the period under review.
"Consolidated EBITDA" shall mean, for any period, the sum of
(a) Consolidated EBIT plus (b) all amounts deducted in computing
Consolidated Net Income in respect of depreciation and amortization
expense for the period under review.
"Consolidated Debt Service" shall mean, for any period, the
sum of (a) Interest Charges on all Indebtedness for such period, plus
(b) the aggregate amount of all regularly scheduled principal payments
made or coming due during such period in respect of any Indebtedness
for borrowed money or Capitalized Leases, but excluding any such
principal payments required to be made hereunder on the Revolving
Credit Termination Date.
4
<PAGE> 10
"Consolidated Leverage Ratio" shall mean the ratio of (a)
Consolidated Total Funded Debt as of the end of any fiscal quarter to
(b) Consolidated EBITDA for the four-quarter period ending on such
date.
"Consolidated Net Income" shall mean the net income (or
deficit) from operations of Tweeter and its Subsidiaries, after taxes,
determined in accordance with generally accepted accounting principles
consistently applied.
"Consolidated Net Worth" shall mean, at any date as of which
the amount thereof shall be determined, (a) the consolidated assets of
Tweeter and its Subsidiaries less (b) the consolidated total
liabilities of Tweeter and its Subsidiaries, determined in accordance
with generally accepted accounting principles consistently applied.
"Consolidated Operating Cash Flow" shall mean, for any fiscal
period, an amount equal to: (a) Consolidated EBITDA, minus (b) Capital
Expenditures made or incurred during such period, minus (c) Taxes
required to be paid by Tweeter and its Subsidiaries in cash during such
period based on income of Tweeter and its Subsidiaries, minus (d) cash
dividends or distributions of any nature to any Person holding an
equity interest in Tweeter or any of its Subsidiaries made during such
period.
"Consolidated Total Funded Debt" shall mean all Indebtedness
of Tweeter and its Subsidiaries for borrowed money, including without
limitation, Capitalized Lease Obligations, Subordinated Indebtedness
and the stated amount of all Letters of Credit.
"Credit Participants" shall have the meaning set forth in
Section 12.3 hereof.
"Default" shall mean an Event of Default or an event or
condition which with the passage of time or giving of notice, or both,
would become such an Event of Default.
"Encumbrances" shall have the meaning set forth in Section 9.2
hereof.
"Environmental Law" means any judgment, decree, order, law,
license, rule or regulation pertaining to environmental matters, or any
federal, state, county or local statute, regulation, ordinance, order
or decree relating to public health, welfare, the environment, or to
the storage, handling, use or generation of hazardous substances in or
at the workplace, worker health or safety, whether now existing or
hereafter enacted.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
5
<PAGE> 11
"Eurodollar Pricing Notice" shall have the meaning set forth
in Section 2.4 hereof.
"Eurodollar Pricing Option" shall mean the option granted to
the Borrowers pursuant to Section 2.4 hereof to have interest on all or
a portion of the Loans computed on the basis of the Applicable
Eurodollar Rate for an applicable Interest Period.
"Eurodollar Rate" shall mean for any Interest Period for any
Eurodollar Rate Loan, the quotient of (a) the rate of interest
determined by the Agent, at about 10:00 a.m. (Boston time) on the
Eurodollar Rate Fixing Day as being the rate at which deposits in U.S.
dollars are offered to it by first-class banks in any Eurodollar
interbank market selected by the Agent, acting in good faith, for
deposit for such Interest Period in amounts comparable to the aggregate
principal amount of Eurodollar Rate Loans to which such Interest Period
relates, divided by (b) the difference between one (1) minus the
Reserve Requirement (expressed as a decimal) applicable to that
Interest Period. The Eurodollar Rate shall be adjusted automatically as
of the effective date of any change in the Reserve Requirement.
"Eurodollar Rate Fixing Day" shall mean, in the case of any
Eurodollar Rate Loan, the second Business Day preceding the Business
Day on which an Interest Period begins.
"Eurodollar Rate Loan" shall mean any Loan hereunder upon
which interest will accrue on the basis of a formula including as a
component thereof the Eurodollar Rate. The expiration date of any
Eurodollar Rate Loan shall be the last day of the Interest Period
applicable to such Eurodollar Rate Loan.
"Eurodollar Rate Margin" shall mean a rate per annum
determined in accordance with the Pricing Schedule.
"Event of Default" shall have the meaning set forth in Section
10.1 hereof.
"Executive Management" shall mean the individuals holding the
following offices of New England Audio: (i) President, (ii) Chief
Executive Officer, (iii) Chief Operating Officer and (iv) Chairman of
the Board of Directors.
"Fee Letter" shall have the meaning set forth in Section 2.7
hereof.
"Generally Accepted Accounting Principles" or "GAAP" shall
mean generally accepted accounting principles as defined by controlling
pronouncements of the Financial Accounting Standards Board, as from
time to time supplemented and amended.
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"Guaranty" or "Guarantee" or "Guaranties" shall include any
arrangement whereby a Person is or becomes liable in respect of any
Indebtedness or other obligation of another and any other arrangement
whereby credit is extended to another obligor on the basis of any
promise of a guarantor, whether that promise is expressed in terms of
an obligation to pay the Indebtedness of such obligor, or to purchase
or lease assets under circumstances that would enable such obligor to
discharge one or more of its obligations, or to maintain the capital,
the working capital, solvency or general financial condition of such
obligor, whether or not such arrangement is listed in the balance sheet
of the guarantor or referred to in a footnote thereto.
"Indebtedness" shall mean, as to any Person, all obligations,
contingent and otherwise, which in accordance with generally accepted
accounting principles consistently applied should be classified upon
such Person's balance sheet as liabilities, but in any event including
liabilities secured by any mortgage, pledge, security interest, lien,
charge or other encumbrance existing on property owned or acquired by
such Person whether or not the liability secured thereby shall have
been assumed, letters of credit open for account, obligations under
acceptance facilities, Capitalized Lease Obligations and all
obligations on account of Guaranties, endorsements and any other
contingent obligations in respect of the Indebtedness of others whether
or not reflected on such balance sheet or in a footnote thereto.
"Interest Charges" shall mean, for any period, without
duplication, all interest and all amortization of debt discount and
expense on any particular Indebtedness for which such calculations are
being made, all as determined in accordance with GAAP. Computations of
Interest Charges on a pro forma basis for Indebtedness having a
variable interest rate shall be calculated at the rate in effect on the
date of any determination.
"Interest Period" shall mean with respect to each Eurodollar
Rate Loan, the period commencing on the date of such Eurodollar Rate
Loan and ending one, two, three or six months thereafter, as the
Borrower may request as provided in Sections 2.1(a) or 2.5 hereof,
provided, that:
(a) any Interest Period (other than an Interest
Period determined pursuant to clause (c) below) that would otherwise
end on a day that is not a Business Day shall be extended to the next
succeeding Business Day unless such Business Day falls in the next
calendar month, in which case such Interest Period shall end on the
immediately preceding Business Day;
(b) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Business Day of a calendar month;
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(c) any Interest Period that would otherwise end
after the Revolving Credit Termination Date shall end on the Revolving
Credit Termination Date; and
(d) notwithstanding clause (c) above, no Interest
Period shall have a duration of less than one month, and if any
Interest Period applicable to any Eurodollar Rate Loan would be for a
shorter period, such Interest Period shall not be available hereunder.
"Interest Rate Protection Agreement" shall mean any interest
rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedging agreement, interest rate floor
agreement or other similar agreement or arrangement.
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
"Investment" shall mean (a) any stock, evidence of
Indebtedness or other security of another Person, (b) any loan,
advance, contribution to capital, extension of credit (except for
current trade and customer accounts receivable for inventory sold or
services rendered in the ordinary course of business and payable in
accordance with customary trade terms) to another Person, (c) any
purchase of (i) stock or other securities of another Person or (ii) any
business or undertaking of another Person (whether by purchase of
assets or securities), any commitment or option to make any such
purchase if, in the case of an option, the aggregate consideration paid
for such option was in excess of $100 or (d) any other investment, in
all cases whether existing on the date of this Agreement or thereafter
made.
"Issuing Bank" shall mean the Agent acting as issuer of a
Letter of Credit.
"Leases" shall mean any agreement, whether written or oral,
granting a person the right to occupy space in a structure or real
estate for any period of time or any capital lease or other lease of or
agreement to use personal property.
"Lender Agreements" shall mean this Agreement, the Revolving
Credit Notes, the Security Documents, the Canton Mortgage, letter of
credit applications, Interest Rate Protection Agreements between
Tweeter or any Subsidiary and the Agent or any Lender, and any other
present or future agreement from time to time entered into between
Tweeter or any Subsidiary and the Agent, the Lenders or the Issuing
Bank in which BankBoston, N.A. acts as Agent for the Lenders under this
Agreement or between Tweeter or any Subsidiary and BankBoston, N.A.
acting independently with respect to Tweeter or any Subsidiary, each as
from time to time amended or supplemented, and all statements, reports
and certificates delivered by the Borrower to the Agent or the Lenders
in connection therewith.
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"Lender Obligations" shall mean all present and future
obligations and Indebtedness of Tweeter and its Subsidiaries owing to
the Agent, the Lenders or the Issuing Bank under this Agreement or any
other Lender Agreement, including, without limitation, the obligations
to pay the Indebtedness from time to time evidenced by the Revolving
Credit Notes, obligations to reimburse the Issuing Bank for amounts
drawn on Letters of Credit, obligations under Interest Rate Protection
Agreements, obligations under foreign exchange arrangements, and
obligations to pay interest, commitment fees, balance deficiency fees,
charges, expenses and indemnification from time to time owed under any
Lender Agreement.
"Lenders" shall mean (a) initially, each Lender listed on the
signature pages hereof, (b) any other Person who becomes a Successor
Lender hereunder in accordance with the terms of Section 12.3 hereof
and (c) their respective successors.
"Letter of Credit" shall mean a standby letter of credit
issued by the Issuing Bank for the account of New England Audio in
accordance with Section 2.11 hereof.
"Loan" shall mean any Revolving Credit Advance outstanding
hereunder or made to the Borrowers by the Lenders pursuant to Article 2
of this Agreement, and "Loans" means all of such Revolving Credit
Advances, collectively.
"Majority Lenders" shall mean, at any time, the Lenders having
made not less than a stipulated percentage (which shall not be less
than 51% and, if there are more than three Lenders, not more than 75%)
of the outstanding principal amount of the Loans hereunder, or, if no
Loans are outstanding, the Lenders having aggregate Commitment
Percentages of not less than a stipulated percentage, each as
stipulated from time to time by the Agent and the Lenders.
"Material Adverse Effect" shall mean a material adverse effect
on the business, properties, assets or condition, financial or
otherwise, of Tweeter and its Subsidiaries, taken as a whole.
"Maximum Revolving Credit Amount" shall mean as of any date of
determination, the lesser of (a) $30,000,000 or (b) the amount to which
the Maximum Revolving Credit Amount may have been reduced pursuant to
Section 2.10 hereof; provided that if the obligation of the Lenders to
make further Revolving Credit Advances is terminated upon the
occurrence of an Event of Default, the Maximum Revolving Credit Amount
as of any date of determination thereafter shall be deemed to be $0.
"Tweeter Trust Loans" shall mean loans made from time to time
by Tweeter Trust to New England Audio and NEA Delaware.
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"Tweeter Trust Subordination Agreement" shall mean the Tweeter
Trust Subordination Agreement of even date herewith substantially in
the form of Exhibit J hereto.
"1997 Financial Statements" shall mean the Consolidated
Balance Sheet of New England Audio and its Subsidiaries as of September
30, 1997 and the related Consolidated Statements of Income,
Shareholders' Equity and Cash Flow for the year then ended and the
notes to such financial statements.
"Notice of Revolving Credit Borrowing" -- See Section 2.2(a)
"Pension Plan" shall mean an employee benefit plan or other
plan maintained for the employees of New England Audio or any
Subsidiary as described in Section 4021(a) of ERISA.
"Permitted Acquisitions" shall mean acquisitions by Tweeter or
any Subsidiary of all of the stock or all or substantially all of the
assets or a line of business of another Person, provided that the
following terms and conditions are met:
(a) The Person to be acquired or whose assets are to
be acquired shall be a United States company in substantially
the same line of business as New England Audio.
(b) The Board of Directors or the requisite number of
shareholders of the Person to be acquired shall have approved
such acquisition.
(c) The Person to be acquired shall have had positive
four-quarter Target EBITDA for the most recently completed
four fiscal quarters.
(d) The Borrower shall have received the written
consent of the Agent and the Majority Lenders for any
acquisition with an aggregate proposed purchase price in
excess of $10,000,000.
(e) No Default or Event of Default shall exist at the
time of or after giving effect to each such acquisition on a
pro forma basis.
(f) Perfected first security interests shall be
granted to the Agent in all of the target company's assets
subject to no other liens or encumbrances except as permitted
by the terms of Section 9.2 hereof and in accordance with the
terms of Section 8.10 hereof.
(g) Appraisals, phase one environmental surveys,
title insurance and evidence of proper zoning reasonably
satisfactory to the Agent shall be provided if the target
company owns any real estate.
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(h) The Borrower shall have provided the Agent notice
of each proposed acquisition in accordance with the terms of
Section 6.11 hereof.
"Person" shall mean an individual, corporation, partnership,
joint venture, association, estate, joint stock company, trust,
organization, business, or a government or agency or political
subdivision thereof.
"Pledge Agreements" shall mean (a) the Amended and Restated
Stock Pledge Agreement of even date herewith from New England Audio to
the Agent substantially in the form of Exhibit E-1 hereto and (b) the
Tweeter Stock Pledge Agreement of even date herewith from Tweeter to
the Agent substantially in the form of Exhibit E-2 hereto, pursuant to
which New England Audio and Tweeter, respectively, have pledged to the
Agent all of the capital stock or other equity interests in their
Subsidiaries, except the stock of the Real Estate Subsidiary to secure
the Lender Obligations, as the same may be modified, amended or
supplemented from time to time.
"Pricing Schedule" shall mean Pricing Schedule attached hereto
as Schedule 2.
"Real Estate Subsidiary" See Section 8.9
"Reportable Event" shall mean an event reportable to the
Pension Benefit Guaranty Corporation under Section 4043 of Title IV of
ERISA.
"Reserve Requirement" shall mean the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other
reserves) which is imposed under Regulation D of the Federal Reserve
Board on the Lenders against "Euro-currency Liabilities" as defined in
said Regulation D.
"Restricted Payments" shall mean (a) any payment of principal
of, interest on, fees or other amounts with respect to any Subordinated
Indebtedness, (b) any payment on account of the redemption, retirement,
purchase (including repurchase) or other acquisition, direct or
indirect, of any shares of any class of capital stock or other equity
interest of Tweeter or any of its Subsidiaries, or of any warrants,
rights or options to acquire any such shares, except to the extent the
consideration therefor consists of shares of common stock of Tweeter
and (c) any setting apart or allocating any sum for the payment of any
dividend or distribution, or for the purchase, redemption or retirement
of any shares of capital stock of Tweeter or any of its Subsidiaries.
"Revolving Credit Advance" shall mean any loan or advance from
any Lender to the Borrowers pursuant to Section 2.1 of this Agreement.
"Revolving Credit Notes" shall mean the Revolving Credit Notes
substantially in the form of Exhibit A hereto executed by the Borrowers
in favor of each Lender to
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evidence the Revolving Credit Advances to be made by the Lenders from
time to time hereunder.
"Revolving Credit Termination Date" shall mean July 31, 2001.
"Security Agreements" shall mean (a) the Amended and Restated
Security Agreements of even date herewith from the Borrowers to the
Agent substantially in the form of Exhibit F-1 hereto and (b) the
Tweeter Security Agreement of even date herewith from the Guarantors to
the Agent substantially in the form of Exhibit F-2 hereto, pursuant to
which the Borrowers and the Guarantors have granted liens on and
security interests in their assets in favor of the Agent to secure the
Lender Obligations, as the same may be modified, amended or
supplemented from time to time.
"Security Documents" shall mean, collectively, the Pledge
Agreements, the Security Agreements, and all other agreements,
instruments or contracts under or in respect of which the Agent or any
of its agents or representatives shall have, at such time, any rights
or interests as security for the payment or performance of all or any
part of the Lender Obligations.
"Subordinated Indebtedness" shall mean Indebtedness of any
Loan Party which is subordinated to the Indebtedness of the Loan
Parties hereunder and under the Revolving Credit Notes and to all other
Lender Obligations, on terms and conditions approved in writing by the
Agent.
"Subsidiary" shall mean any Person of which Tweeter or other
specified parent shall now or hereafter at the time own, directly or
indirectly through one or more Subsidiaries or otherwise, sufficient
voting stock (or other beneficial interest) to entitle it to elect at
least a majority of the board of directors or trustees or similar
managing body.
"Target EBITDA" shall mean for the most recently completed
four fiscal quarters, (a) net income or (loss) determined in accordance
with generally accepted accounting principles without giving effect to
extraordinary gains and losses from sales, exchanges and other
dispositions of property not in the ordinary course of business, and
nonrecurring items, plus, to the extent deducted in calculating net
income, (b) the sum of (i) depreciation and amortization expense, (ii)
interest expense and (iii) tax expense.
"Taxes" shall mean, any and all taxes (including, without
limitation, income, receipts, franchise, ad valorem or excise taxes,
transfer or gains taxes or fees, use taxes, withholding, payroll or
minimum taxes) imposed on, or otherwise payable by, or for which
responsibility for payment, withholding or collection lies with,
Tweeter or any of its Subsidiaries by any governmental authority,
federal, state or otherwise, including any taxes imposed on any
Affiliates for which Tweeter or any of its Subsidiaries may be liable
under applicable law or by agreement to which Tweeter or
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any of its Subsidiaries is a party or by which any of them is bound or
subject to, and including, but not limited to, any interest, penalties
or additions to tax with respect thereto.
"Tweeter IPO" shall mean the initial public offering of
2,710,000 shares of Tweeter's common stock pursuant to the Tweeter
Registration Statement.
"Tweeter Registration Statement" shall mean Registration
Statement on Form S-1(No. 333-51015) as amended, as filed with the
Securities and Exchange Commission.
"UCC" shall mean the Massachusetts Uniform Commercial Code,
Massachusetts General Laws chapter 106, as amended from time to time.
"Uniform Customs and Practice" shall mean the Uniform Customs
and Practice for Documentary Credits (1993 Revision) International
Chamber of Commerce
publication No. 500.
Section 1.2. Accounting Terms. All accounting terms used and not
defined in this Agreement shall be construed in accordance with generally
accepted accounting principles consistently applied, and all financial data
required to be delivered hereunder shall be prepared in accordance with such
principles.
ARTICLE 2. THE REVOLVING CREDIT
Section 2.1. The Revolving Credit.
(a) Subject to the terms and conditions of this Agreement and
so long as there exists no Default, at any time prior to the Revolving Credit
Termination Date, each Lender, severally and not jointly, shall make such
Revolving Credit Advances to the Borrowers as the Borrowers may from time to
time request, by notice to the Agent in accordance with Section 2.2, in an
aggregate amount (i) as to each Lender, not to exceed at any time such Lender's
Commitment Percentage of the Maximum Revolving Credit Amount, and (ii) as to all
Lenders, not to exceed the Maximum Revolving Credit Amount minus (B) the amount
available to be drawn under all Letters of Credit. The outstanding principal
amount of the Revolving Credit Advances, together with all accrued interest and
other fees and charges related thereto, shall be repaid in full on the Revolving
Credit Termination Date. On the Closing Date, the Borrowers, jointly and
severally, shall execute and deliver to each Lender a Revolving Credit Note to
evidence the Revolving Credit Advances from time to time made by such Lender to
the Borrower hereunder.
(b) Subject to the foregoing limitations and the provisions of
Section 4.2, the Borrowers shall have the right to make prepayments reducing the
outstanding balance of
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Revolving Credit Advances and to request further Revolving Credit Advances, all
in accordance with Section 2.2, without other restrictions hereunder; provided
that the Lenders shall have the absolute right to refuse to make any Revolving
Credit Advances for so long as there exists any Default or any other condition
which would constitute a Default upon the making of such a Revolving Credit
Advance.
(c) Notwithstanding anything to the contrary contained herein
or in any of the Security Documents, upon the occurrence and during the
continuance of any Event of Default, Tweeter and its Subsidiaries will hold in
trust for the Agent all checks, drafts, cash and other remittances that are
proceeds of the Collateral and will deliver the same to the Agent in the form
received, together with the proper endorsement thereon. The Agent will credit
all such payments (conditional upon final collection) against interest accrued
on or principal of the Revolving Credit Advances outstanding hereunder. The
order and method of application shall be in the Agent's sole discretion and
proceeds which in the Agent's discretion are not so applied shall be credited to
Tweeter's deposit accounts with the Agent. So long as any Default exists, the
Agent will at all times have the right to require Tweeter and its Subsidiaries
to enter into one or more blocked account and lockbox arrangements with the
Agent for the collection of such remittances and payments.
(d) Notwithstanding anything to the contrary contained herein
or in any of the Security Documents, the Agent may (i) at any time, in its own
name or in the name of others, communicate with account debtors in order to
verify with them, to the Agent's satisfaction, the existence, amount and terms
of any Accounts Receivable and the absence of any reductions, discounts,
defenses or offsets with respect thereto, provided, however, that prior to the
occurrence of an Event of Default, the Agent shall communicate with such account
debtors only in the name of others and not in its own name and (ii) so long as
any Default exists, notify account debtors that Collateral has been assigned to
the Agent and that payments by such debtors shall be made directly to the Agent.
At the Agent's request, so long as any Default exists, Tweeter and its
Subsidiaries will notify any or all such debtors of such assignment, give
instructions and/or indicate on billings to such debtors that their Accounts
Receivable shall be paid to the Agent.
Section 2.2. Making of Revolving Credit Advances.
(a) Each Revolving Credit Advance shall be made on notice
given by New England Audio to the Agent not later than 12:00 noon (Boston time)
on the date of the proposed Borrowing (a "Notice of Revolving Credit
Borrowing"); provided, however that if the Borrowers elect a Eurodollar Pricing
Option with respect to any Revolving Credit Advance in accordance with Section
2.4 hereof, such Notice of Revolving Credit Borrowing shall be given by New
England Audio contemporaneously with a Eurodollar Pricing Notice in the manner
and within the time specified in Section 2.4. The Agent shall give the Lenders
notice of each Notice of Revolving Credit Borrowing in accordance with the
Agent's customary practice. Each such Notice of Revolving Credit Borrowing shall
be by telephone or telecopy, in each case confirmed immediately in writing by
New England Audio in substantially the form
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of Exhibit B hereto, specifying therein (i) the requested date of such Revolving
Credit Advance and (ii) the amount of such Revolving Credit Advance (which must
be a minimum of $100,000). The Borrowers, jointly and severally, agree to
indemnify and hold the Lenders harmless for any action, including the making of
any Revolving Credit Advances hereunder, or loss or expense, taken or incurred
by the Agent and the Lenders in good faith reliance upon such telephone request.
At the time of the initial request for a Revolving Credit Advance made under
this Section 2.2, the Borrowers shall have provided the Agent with a Compliance
Certificate. The Borrowers, jointly and severally, hereby agree (A) that the
Lenders shall be entitled to rely upon the Compliance Certificate most recently
delivered to the Agent until it is superseded by a more recent Compliance
Certificate and (B) that each request for a Revolving Credit Advance, whether by
telephone or in writing or otherwise, shall constitute a confirmation of the
representations and warranties contained in the most recent Compliance
Certificate then in the Agent's possession.
(b) Subject to the terms and conditions of this Agreement,
each Lender shall make available on or before 2:00 p.m., Boston time, on the
date of each proposed Revolving Credit Advance, to the Agent at the Agent's
address and in immediately available funds, such Lender's Commitment Percentage
of such Revolving Credit Advance. After the Agent's receipt of such funds and
upon fulfillment of the applicable conditions set forth in Article 3, the Agent
will credit such funds to New England Audio's account on the date of the
proposed Revolving Credit Advance.
(c) Unless the Agent shall have received notice from a Lender
prior to the date of any Revolving Credit Advance that such Lender will not make
available to the Agent such Lender's Commitment Percentage of such Revolving
Credit Advance, the Agent may assume that such Lender has made such amount
available to the Agent on the date of such Revolving Credit Advance in
accordance with and as provided in this Section 2.2 and the Agent may, in
reliance upon such assumption, make available on such date a corresponding
amount to the Borrowers. If and to the extent such Lender shall not have so made
its Commitment Percentage of such Revolving Credit Advance available to the
Agent and the Agent shall have made available such corresponding amount to the
Borrowers, such Lender agrees to pay to the Agent forthwith on demand, and the
Borrowers, jointly and severally, agree to repay to the Agent within two
Business Days after demand (but only after demand for payment has first been
made to such Lender and such Lender has failed to make such payment), an amount
equal to such corresponding amount together with interest thereon for each day
from the date the Agent shall make such amount available to the Borrowers until
the date such amount is paid or repaid to the Agent, at an interest rate equal
to the interest rate applicable at the time to such Revolving Credit Advances.
If such Lender shall pay to the Agent such corresponding amount, such amount so
paid shall constitute such Lender's Revolving Credit Advance for purposes of
this Agreement. If the Borrowers make a repayment required by the foregoing
provisions of this Section 2.2(c) and thereafter the applicable Lender or
Lenders make the payments to the Agent required by this Section 2.2(c), the
Agent shall promptly refund the amount of the Borrowers' payment.
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(d) The failure of any Lender to make the Revolving Credit
Advance to be made by it on any date shall not relieve any other Lender of its
obligation, if any, hereunder to make its Revolving Credit Advance on such date,
but no Lender shall be responsible for the failure of any other Lender to make
the Revolving Credit Advance to be made by such other Lender.
Section 2.3. Interest on Revolving Credit Advances. Subject to the
terms of Section 2.4 relating to Eurodollar Pricing Options, the Borrowers,
jointly and severally, shall pay interest on the unpaid balance of the Revolving
Credit Advances from time to time outstanding at a per annum rate equal to the
Applicable Base Rate. Interest on the Revolving Credit Advances shall be payable
quarterly in arrears on the first day of each January, April, July and October,
commencing July 1, 1998 and continuing until all of the Indebtedness of the
Borrower to the Lenders under the Revolving Credit Notes shall have been paid in
full. Interest accrued under the 1997 Credit Agreement to the date hereof shall
be paid on the date or dates for such payment set forth in the 1997 Credit
Agreement.
Section 2.4. Election of Eurodollar Pricing Options.
(a) Subject to all the terms and conditions hereof and so long
as there exists no Default, New England Audio may, by delivering a notice (each
a "Eurodollar Pricing Notice") to the Agent received at or before 10:00 a.m.
Boston time on the date three Business Days prior to the commencement of the
Interest Period selected in such Eurodollar Pricing Notice, elect to have all or
a portion of the outstanding Revolving Credit Advances, as New England Audio may
specify in such Eurodollar Pricing Notice, accrue and bear daily interest during
the Interest Period so selected at a per annum rate equal to the Applicable
Eurodollar Rate for such Interest Period; provided, however, that any such
election made with respect to the Revolving Credit Advances shall be in an
amount not less than $500,000 and in increments of $100,000; and provided
further that no such election will be made if it would result in there being
more than eight (8) Eurodollar Pricing Options in the aggregate outstanding at
any one time. Interest on Loans bearing interest at the Applicable Eurodollar
Rate shall be paid for the applicable Interest Period on the last day thereof,
at intervals of three months after the first day of any Interest Period which is
longer than three months, and when such Loan is due (whether at maturity, by
reason of acceleration or otherwise).
(b) Each Eurodollar Pricing Notice shall be substantially in
the form of Exhibit D attached hereto and shall specify: (i) the selection of a
Eurodollar Pricing Option, (ii) the effective date and amount of Revolving
Credit Advances subject to such Eurodollar Pricing Option, subject to the
limitations set forth herein, and (iii) the duration of the applicable Interest
Period. Each Eurodollar Pricing Notice shall be irrevocable.
(c) The Agent will promptly inform each Lender of a Eurodollar
Pricing Notice and the Interest Period specified by New England Audio therein.
Upon determination by the Agent of the Applicable Eurodollar Rate for any
Interest Period selected by New England Audio, the Agent will promptly inform
New England Audio and each Lender of such
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Applicable Eurodollar Rate so determined or, if applicable, the reason why New
England Audio's election will not become effective. The Applicable Eurodollar
Rate shall become effective on the first day of the Applicable Interest Period
provided no Default exists at such time.
Section 2.5. Additional Payments. During the continuance of any Event
of Default under Section 10.1(a) hereof or resulting from a violation of any
covenant contained in Article 7 or 9 hereof, the Borrowers shall, jointly and
severally, on demand, pay to the Agent for the account of the Lenders, interest
on the unpaid principal balance of the Revolving Credit Advances and, to the
extent permitted by law, on any overdue installments of interest, at a rate per
annum equal to the lesser of (i) the stated interest rates applicable thereto
plus 2% per annum and (ii) the maximum rate of interest permitted to be charged
under applicable law.
Section 2.6. Computation of Interest, Etc. Interest hereunder and under
the Revolving Credit Advances shall be computed on the basis of a 360-day year
for the number of days actually elapsed. Any increase or decrease in the
interest rate on the Revolving Credit Advances resulting from a change in the
Base Rate shall be effective immediately from the date of such change. No
interest payment or interest rate charged hereunder shall exceed the maximum
rate authorized from time to time by applicable law. The outstanding balance of
the Revolving Credit Notes as reflected on the Agent's records from time to
time, if made in good faith, shall be considered correct and binding on the
Borrowers and the Lenders (absent manifest error) unless within ninety (90) days
after receipt of any notice by the Agent or any Lender of such outstanding
amount, New England Audio or a Lender notifies the Agent to the contrary.
Section 2.7. Fees
(a) The Borrowers, jointly and severally, shall pay to the
Agent, for the accounts of the Lenders in accordance with their respective
Commitment Percentages, a commitment fee (the "Revolving Commitment Fee")
computed at a rate equal to the Applicable Commitment Fee on the average daily
unused amount of the Maximum Revolving Credit Amount from time to time in effect
from the date hereof to and including the Revolving Credit Termination Date. The
Revolving Commitment Fee shall be payable quarterly in arrears on the first day
of each January, April, July and October, commencing July 1, 1998, for the
quarter then ended. Commitment fees accrued under the 1997 Credit Agreement to
the date hereof shall be paid on July 1, 1998.
(b) The Borrowers, jointly and severally, shall pay to the
Agent, for the Agent's own account, such closing and agency fees as are provided
in a letter agreement dated May 30, 1997 between the Borrowers and the Agent (as
supplemented on June 23, 1998 and as such letter agreement may from time to time
be amended or further supplemented, the "Fee Letter").
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Section 2.8. Set-Off. To the extent not prohibited by applicable law,
each Loan Party hereby authorizes the Agent and each Lender, without notice to
any Loan Party, if and to the extent payment is not promptly made when due
pursuant to the Revolving Credit Notes or pursuant to any provision hereof or of
any other Lender Agreement, to charge against any account of such Loan Party
with the Agent or such Lender, an amount equal to the accrued interest and
principal and other amounts from time to time then due and payable to the Agent
and the Lenders hereunder and under all other Lender Agreements.
Section 2.9. Sharing of Payments. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Loans made by it in excess of its
ratable share (according to the then outstanding principal amount of the Loans)
of payments on account of the Loans obtained by all the Lenders, such Lender
shall purchase from the other Lenders such participations in the Loans held by
such other Lenders as shall cause such purchasing Lender to share such payment
ratably according to the then outstanding principal amount of the Loans with
each of such other Lenders; provided, however, that if all or any portion of
such payment is thereafter recovered from such purchasing Lender, the purchase
shall be rescinded and the purchase price restored to the extent of such
recovery, with interest at an interest rate per annum equal to the Applicable
Base Rate. The Borrowers agree that any Lender so purchasing a participation in
the Loans from another Lender pursuant to this Section 2.9 may, to the fullest
extent permitted by law, exercise all its rights of payment with respect to such
participation as fully as if such Lender were the direct creditor of each
Borrower in the amount of such participation.
Section 2.10. Reduction of Commitment by the Borrowers. New England
Audio, as agent for the Borrowers, at its option may, at any time and from time
to time, irrevocably reduce in part (in an amount not less than $1,000,000 and
in integral multiples of $1,000,000) the unused portion of the Maximum Revolving
Credit Amount on not less than seven (7) days' prior written notice to the
Agent. No such reduction, may be reinstated by the Borrowers.
Section 2.11. Letters of Credit.
(a) Subject to the terms and conditions hereof, including
satisfaction of the conditions set forth in Sections 3.1 and 3.2 hereof, and
provided no Default exists and that the Issuing Bank is then generally issuing
letters of credit for its banking customers, the Issuing Bank shall at any time
prior to the Revolving Credit Termination Date, upon the request of New England
Audio pursuant to paragraph (b) below, issue Letters of Credit for the account
of New England Audio, provided that the aggregate face amount of all outstanding
Letters of Credit shall not at any time exceed $5,000,000.
(b) New England Audio may request that the Issuing Bank issue
a Letter of Credit by written notice (the "Letter of Credit Notice") given by
New England Audio to the Issuing Bank not less than five (5) Business Days prior
to the proposed date of issuance of such Letter of Credit. The Letter of Credit
Notice shall (i) specify the proposed date of issuance,
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the beneficiary and amount of such Letter of Credit and (ii) be accompanied by a
completed letter of credit application furnished by the Issuing Bank.
(c) The Borrowers hereby agree, jointly and severally, to pay
to the Issuing Bank on the date on which the Issuing Bank shall be required to
pay any draft presented under any Letter of Credit, a sum (the "Reimbursement
Amount") equal to: (i) the amount so paid under such Letter of Credit, plus (ii)
interest on any amount remaining unpaid by the Borrower to the Issuing Bank
under clause (i) from and including the date on which such amount becomes
payable pursuant to clause (i) until payment in full, payable on demand, at a
per annum rate of interest equal to the rate applicable to the Revolving Credit
Advances under Section 2.3. If the Borrowers shall fail to pay to the Issuing
Bank the Reimbursement Amount on the date on which the Issuing Bank shall be
required to pay any draft presented under any Letter of Credit, the Issuing Bank
shall, to the extent the Borrowers have availability to request a Revolving
Credit Advance, consider such failure to be a request for a Revolving Credit
Advance in the amount of the unpaid Reimbursement Amount (which request shall be
deemed a confirmation that the conditions set forth in Section 3.2 have been
satisfied), and the Agent shall apply the proceeds of such Revolving Credit
Advance to reimburse the Issuing Bank for the Reimbursement Amount.
(d) The Borrowers shall, jointly and severally, pay a fee (in
each case, a "Letter of Credit Fee") to the Agent in respect of each Letter of
Credit outstanding in an amount per annum equal to the then applicable
Eurodollar Rate Margin multiplied by the average daily amount available to be
drawn under such Letter of Credit payable on the first day of each January,
April, July and October, for the calendar quarter or portion thereof ending
immediately prior thereto. The Agent shall, in turn, remit to each Lender its
pro rata portion of such Letter of Credit Fee. In addition, if there is more
than one Lender hereunder, the Borrowers, jointly and severally, shall pay to
the Issuing Bank, for its own account, on the date of issuance, or any extension
or renewal of any Letter of Credit and at such other time or times as such
charges are customarily made by the Issuing Bank, a fronting fee equal to
one-eighth percent (1/8%) of the face amount of such Letter of Credit and, from
time to time, the Issuing Bank's standard issuance, processing, negotiation,
amendment and administrative fees, determined in accordance with customary fees
and charges for similar facilities.
(e) Each payment by the Borrowers under this Section 2.11
shall be made to the Issuing Bank at the Issuing Bank's head office in
immediately available funds. Interest on any and all amounts remaining unpaid by
the Borrowers under this Section 2.11 at any time from the date such amounts
become due and payable (whether as stated in this Section 2.11, by acceleration
or otherwise) until payment in full (whether before or after judgment) shall be
payable to the Issuing Bank on demand at the rate specified in Section 2.5(a)
for the overdue principal on the Loans.
(f) The obligations of the Borrowers with respect to the
Letters of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms
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of this Agreement under all circumstances, including, without limitation, the
following circumstances:
(i) any lack of validity or enforceability of the Letters of
Credit;
(ii) any amendment or waiver of or any consent to or actual
departure from this Agreement;
(iii) the existence of any claim, set-off, defense or other
right which the Borrowers may have at any time against any beneficiary
or any transferee of a Letter of Credit (or any Persons or entities for
which any such beneficiary or any such transferee may be acting), the
Issuing Bank or any other Person or entity, whether in connection with
this Agreement, the transactions contemplated herein or in any other
agreements or any unrelated transaction;
(iv) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of Credit
against presentation by the beneficiary thereof of a draft or
certificate which does not comply with the terms of such Letter of
Credit; or
(vi) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing.
(g) The Uniform Customs and Practice shall be binding on the Borrowers,
the Lenders and the Issuing Bank. The Borrowers assume all risks of the acts or
omissions of the beneficiary of each Letter of Credit with respect to such
Letter of Credit. In furtherance of, and not in limitation of the Issuing Bank's
rights and powers under the Uniform Customs and Practice, but subject to all
other provisions of this paragraph (g), it is understood and agreed that the
Issuing Bank shall not have any liability for, and that the Borrowers assume all
responsibility for: (i) the genuineness of any signature; (ii) the form,
correctness, validity, sufficiency, genuineness, falsification and legal effect
of any draft, certification or other document required by a Letter of Credit or
the authority of the Person signing the same; (iii) the failure of any
instrument to bear any reference or adequate reference to a Letter of Credit or
the failure of any Persons to note the amount of any instrument on the reverse
of a Letter of Credit or to surrender a Letter of Credit or otherwise to comply
with the terms and condition of a Letter of Credit; (iv) the good faith or acts
of any Person other than the Issuing Bank and its agents and employees; (v) the
existence, form or sufficiency or breach or default under any agreement or
instrument of any nature whatsoever; (vi) any delay in giving or failure to give
any notice, demand or protest; and (vii) any error, omission, delay in or
nondelivery of any notice or other communication, however sent. The
determination as to whether the required
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documents are presented prior to the expiration of a Letter of Credit and
whether such other documents are in proper and sufficient form for compliance
with a Letter of Credit shall be made by the Issuing Bank in its discretion in
accordance with the Uniform Customs and Practice, which determination shall be
conclusive and binding upon the Borrower absent manifest error. It is agreed
that the Issuing Bank may honor, as complying with the terms of a Letter of
Credit and this Agreement, any documents otherwise in order and signed or issued
by the beneficiary thereof. Any action, inaction or omission on the part of the
Issuing Bank under or in connection with the Letters of Credit or any related
instruments or documents, if in good faith and in conformity with such laws,
regulations or commercial or banking customs as the Issuing Bank may reasonably
deem to be applicable, shall be binding upon the Borrowers, shall not place the
Issuing Bank under any liability to the Borrowers, and shall not affect, impair
or prevent the vesting of any of the Issuing Bank's rights or powers hereunder
or the Borrowers' obligation to make full reimbursement of amounts drawn under
the Letters of Credit.
(h) If New England Audio, either in writing or orally,
requests or consents to any modification or extension of a Letter of Credit or
waives failure of any draft, certificate or other documents to comply with the
terms of a Letter of Credit, the Issuing Bank shall be entitled to rely and
shall be deemed to have relied on such request, consent or waiver with respect
to any action taken or omitted by the Issuing Bank pursuant to any such request,
consent or waiver, and such extension, modification or waiver shall be binding
upon the Borrowers.
(i) Each Lender severally agrees that it shall be absolutely
liable, without regard to the occurrence of any Default or Event of Default or
any other condition precedent whatsoever, to the extent of such Lender's
Commitment Percentage, to reimburse the Issuing Bank on demand for the amount of
each draft paid by the Issuing Bank under each Letter of Credit to the extent
that such amount is not reimbursed by the Borrowers pursuant to paragraph (c)
above (such agreement for a Lender being called herein the "Letter of Credit
Participation" of such Lender).
(j) If any draft shall be presented or other demand for
payment shall be made under any Letter of Credit, the Issuing Bank shall notify
New England Audio of the date and amount of the draft presented or demand for
payment and of the date and time when it expects to pay such draft or honor such
demand for payment. If the Borrowers fail to reimburse the Issuing Bank as
provided in paragraph (c) above on or before the date that such draft is paid or
other payment is made by the Issuing Bank, the Issuing Bank may at any time
thereafter notify the Lenders of the amount of any such unpaid Reimbursement
Amount. No later than 3:00 p.m. (Boston time) on the Business Day next following
the receipt of such notice, each Lender shall make available to the Issuing
Bank, at its head office located at 100 Federal Street, Boston, Massachusetts,
in immediately available funds, such Lender's Commitment Percentage of such
unpaid Reimbursement Amount, together with an amount equal to the product of (i)
the average, computed for the period referred to in clause (iii) below, of the
weighted average interest rate paid by the Issuing Bank for federal funds
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acquired by the Issuing Bank during each day included in such period, times (ii)
the amount equal to such Lender's Commitment Percentage of such unpaid
Reimbursement Amount, times (iii) a fraction, the numerator of which is the
number of days that elapse from and including the date the Issuing Bank paid the
draft presented for honor or otherwise made payment to the date on which such
Lender's Commitment Percentage of such unpaid Reimbursement Amount shall become
immediately available to the Issuing Bank, and the denominator of which is 360.
(k) Neither the Issuing Bank nor any of its officers,
directors or employees shall be liable or responsible for: (i) the use which may
be made of any Letter of Credit or any acts or omissions of any beneficiary or
transferee in connection therewith; (ii) the validity, sufficiency or
genuineness of documents, or of any endorsement thereon, even if such documents
should prove to be in any or all respects invalid, insufficient, fraudulent or
forged; (iii) payment by the Issuing Bank against presentation of documents
which do not comply with the terms of a Letter of Credit, including failure of
any documents to bear any reference or adequate reference to a Letter of Credit;
or (iv) any other circumstances whatsoever in making or failure to make payment
under a Letter of Credit; provided, that, notwithstanding anything in this
Section 2.11 to the contrary, New England Audio shall have a claim against the
Issuing Bank, and the Issuing Bank shall be liable to New England Audio, to the
extent, but only to the extent, of any direct, as opposed to consequential,
damages suffered by New England Audio which were caused by the Issuing Bank's
failure to conform to the standards of the Uniform Customs and Practice. In
furtherance and not in limitation of the foregoing, the Issuing Bank may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.
Section 2.12. Increased Costs, Etc.
(a) Anything herein to the contrary notwithstanding, if any
changes in present or future applicable law (which term "applicable law," as
used in this Agreement, includes statutes and rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time heretofore or hereafter made upon or otherwise issued
to any Lender by any central bank or other fiscal, monetary or other authority,
whether or not having the force of law), including without limitation any change
according to a prescribed schedule of increasing requirements, whether or not
known or in effect as of the date hereof, shall (i) subject such Lender to any
tax, levy, impost, duty, charge, fee, deduction or withholding of any nature
with respect to this Agreement or the payment to such Lender of any amounts due
to it hereunder, or (ii) materially change the basis of taxation of payments to
such Lender of the principal of or the interest on the Revolving Credit Advances
or any other amounts payable to such Lender hereunder, or (iii) impose or
increase or render applicable any special or supplemental deposit or reserve or
similar requirements or assessment against assets held by, or deposits in or for
the account of, or any liabilities of, or loans by an office of such Lender in
respect of the transactions contemplated herein, or (iv) impose on such Lender
any other condition or requirement with respect to this Agreement, any Revolving
Credit Advance or any
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Letter of Credit, and the result of any of the foregoing is (A) to increase the
cost to such Lender of making, funding or maintaining all or any part of the
Revolving Credit Advances, the Letters of Credit or its commitments hereunder,
or (B) to reduce the amount of principal, interest or other amount payable to
such Lender hereunder, or (C) to require such Lender to make any payment or to
forego any interest or other sum payable hereunder, the amount of which payment
or foregone interest or other sum is calculated by reference to the gross amount
of any sum receivable or deemed received by such Lender from the Borrowers
hereunder, then, and in each such case not otherwise provided for hereunder, the
Borrowers, jointly and severally, will upon demand made by such Lender promptly
following such Lender's receipt of notice pertaining to such matters accompanied
by calculations thereof in reasonable detail, pay to such Lender such additional
amounts as will be sufficient to compensate such Lender for such additional
cost, reduction, payment or foregone interest or other sum; provided that the
foregoing provisions of this sentence shall not apply in the case of any
additional cost, reduction, payment or foregone interest or other sum resulting
from any taxes charged upon or by reference to the overall net income, profits
or gains of any Lender. In determining the additional amounts payable hereunder,
the Lenders may use any reasonable method of averaging, allocating or
attributing such additional costs, reductions, payments, foregone interest or
other sums among their respective customers.
(b) Anything herein to the contrary notwithstanding, if, after
the date hereof, any Lender shall have determined that any present or future
applicable law, rule, regulation, guideline, directive or request (whether or
not having force of law), including without limitation any change according to a
prescribed schedule of increasing requirements, whether or not known or in
effect as of the date hereof, regarding capital requirements for banks or bank
holding companies generally, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Lender with any of the foregoing, either imposes a requirement upon such
Lender to allocate additional capital resources or increases such Lender's
requirement to allocate capital resources or such Lender's commitment to make,
or to such Lender's maintenance of, the Revolving Credit Advances or the Letters
of Credit hereunder, which has or would have the effect of reducing the return
on such Lender's capital to a level below that which such Lender could have
achieved (taking into consideration such Lender's then existing policies with
respect to capital adequacy and assuming full utilization of such Lender's
capital) but for such applicability, change, interpretation, administration or
compliance, by any amount deemed by such Lender to be material, such Lender
shall promptly after its determination of such occurrence give notice thereof to
the Borrowers. The Borrowers and such Lender shall thereafter attempt to
negotiate in good faith an adjustment to the compensation payable hereunder
which will adequately compensate such Lender for such reduction. If the
Borrowers and such Lender are unable to agree to such adjustment within thirty
(30) days of the day on which the Borrowers receive such notice, then commencing
on the date of such notice (but not earlier than the effective date of any such
applicability, change, interpretation, administration or compliance), the fees
payable hereunder shall increase by an amount which will, in such Lender's
reasonable determination, evidenced by calculations in reasonable detail
furnished to the Borrowers,
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compensate such Lender for such reduction, such Lender's determination of such
amount, if made in good faith, to be conclusive and binding upon the Borrowers,
absent manifest error. In determining such amount, such Lender may use any
reasonable methods of averaging, allocating or attributing such reduction among
its customers.
Section 2.13. Changed Circumstances. In the event that:
(a) on any date on which the Applicable Eurodollar Rate would
otherwise be set, the Agent shall have determined in good faith (which
determination shall be final and conclusive) that adequate and fair means do not
exist for ascertaining the Eurodollar Rate, as applicable; or
(b) at any time the Agent shall have determined in good faith
(which determination shall be final and conclusive) that
(i) the implementation of the Eurodollar Pricing
Option has been made impracticable or unlawful by (A) the occurrence of
a contingency that materially and adversely affects the London
interbank market or (B) compliance by any Lender in good faith with any
applicable law or governmental regulation, guideline or order or
interpretation or change thereof by any governmental authority charged
with the interpretation or administration thereof or with any request
or directive of any such governmental authority (whether or not having
the force of law); or
(ii) the Eurodollar Rate shall no longer represent
the effective cost to the Lenders for U.S. dollar deposits in the
London interbank market, as applicable for deposits in which they
regularly participate;
then, and in such event, the Agent shall forthwith so notify the Borrowers
thereof. Until the Agent notifies the Borrowers that the circumstances giving
rise to such notice no longer apply, the obligation of the Lenders and the Agent
to allow election by the Borrowers of a Eurodollar Pricing Option shall be
suspended. If at the time the Agent so notifies the Borrowers, New England Audio
has previously given the Agent a Eurodollar Pricing Notice with respect to a
Eurodollar Pricing Option, but the Eurodollar Pricing Option requested therein
has not yet gone into effect, such Eurodollar Pricing Notice shall automatically
be deemed to be withdrawn and be of no force or effect. Upon such date as shall
be specified in such notice (which shall not be earlier than the date such
notice is given), the Eurodollar Pricing Option with respect to all Eurodollar
Rate Loans shall be terminated and the Borrowers, jointly and severally, shall
pay all interest due on such Eurodollar Rate Loans and any amounts required to
be paid pursuant to Section 4.3.
Section 2.14. Use of Proceeds. The proceeds of all Revolving Credit
Advances shall be used by the Borrowers for general working capital and other
corporate purposes including capital expenditures and Permitted Acquisitions
permitted hereunder. The Borrowers will not, directly or indirectly, use any
part of such proceeds for the purpose of purchasing or carrying
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any margin stock within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System or to extend credit to any Person for the purpose of
purchasing or carrying any such margin stock.
Section 2.15. Guaranty. The Guarantors, jointly and severally, hereby
unconditionally guaranty to the Agent and the Lenders the full and punctual
payment when due (whether at maturity, by acceleration or otherwise), and the
performance of (a) all liabilities, agreements, obligations and Indebtedness,
direct or indirect, matured or unmatured, primary or secondary, certain or
contingent, secured or unsecured of the Borrowers to the Agent and the Lenders
(including without limitation, costs and expenses incurred by the Agent and the
Lenders in attempting to collect or enforce any of the foregoing), including
without limitation the Lender Obligations, accrued in each case to the date of
payment and (b) the performance of all other agreements, covenants and
conditions of the Borrowers with respect thereto set forth in this Agreement and
all other Lender Agreements. The responsibilities and obligations of the
Borrowers to the Agent and the Lenders described in the preceding sentence are
hereinafter referred to collectively as the "Guaranteed Obligations." The
guaranty pursuant to this Section 2.17 is an absolute, unconditional, joint and
several, and continuing guaranty of the full and punctual payment and
performance by the Borrowers of the Guaranteed Obligations and not of
collectability of the Guaranteed Obligations, and is in no way conditioned upon
any requirement that the Agent or the Lenders first attempt to collect any of
the Guaranteed Obligations from the Borrowers or resort to any security or other
means of obtaining payment of any of the Guaranteed Obligations which the Agent
or the Lenders now has or may acquire after the date hereof, or upon any other
contingency whatsoever. Upon any default by the Borrowers in respect of the full
and punctual payment and performance of the Guaranteed Obligations which
constitutes an Event of Default, the liabilities and obligations of each
Guarantor hereunder shall, at the option of the Agent, become forthwith due and
payable to the Agent and the Lenders without demand or notice of any nature, all
of which are expressly waived by each Guarantor. Payments by each Guarantor
under this Section 2.15 may be required by the Agent or the Lenders on any
number of occasions. Each Guarantor waives presentment, demand, protest, notice
of acceptance, notice of Guaranteed Obligations incurred and all other notices
of any kind, all defenses which may be available by virtue of any valuation,
stay, moratorium law or other similar law now or hereafter in effect, any right
to require the marshaling of assets of the Borrowers and all suretyship defenses
generally. Without limiting the generality of the foregoing, each Guarantor
agrees to the provisions of any instrument evidencing, securing or otherwise
executed in connection with any Guaranteed Obligations and agrees that the
obligations of each Guarantor hereunder shall not be released or discharged, in
whole or in part, or otherwise affected by any rescissions, waivers, amendments
or modifications of any of the terms or provisions of any agreement evidencing
securing or otherwise executed in connection with any Guaranteed Obligation.
Until the payment and performance in full of all Guaranteed Obligations and any
and all obligations of the Borrowers to any affiliate of the Agent or the
Lenders, no Guarantor shall exercise any rights against the Borrowers arising as
a result of payment by any Guarantor hereunder, by way of subrogation or
otherwise. The payment of any amounts due with respect to any
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indebtedness of the Borrowers now or hereafter held by each Guarantor is hereby
subordinated to the prior payment in full of the Guaranteed Obligations.
ARTICLE 3. CONDITIONS TO LOANS AND ADVANCES
Section 3.1. Conditions to First Revolving Credit Advance. The Lenders'
obligations to make the first Revolving Credit Advance shall be subject to
compliance by the Loan Parties with their agreements contained in this
Agreement, and to the condition precedent that the Lenders shall have received
each of the following, in form and substance satisfactory to the Agent and its
counsel or in the form attached hereto as an Exhibit, as the case may be:
(a) Notes. The Revolving Credit Notes duly executed by the
Borrowers.
(b) Security Documents. Each of the Security Documents duly
executed by the Loan Party thereto and, accompanying the Pledge Agreements, the
certificates representing all of the capital stock or other equity interests of
all Subsidiaries together with stock powers executed in blank.
(c) Resolutions. Copies of the resolutions of the Boards of
Directors of the Loan Parties authorizing the execution, delivery and
performance of this Agreement, the Revolving Credit Notes, the Security
Documents and the other Lender Agreements to which any Loan Party is a party,
certified by the Secretary or an Assistant Secretary (or Clerk or Assistant
Clerk or in the case of the Tweeter Trust, trustee) of each Loan Party (which
certificate shall state that such resolutions are in full force and effect).
(d) Incumbency. Certificates of the Secretary or an Assistant
Secretary (or Clerk or Assistant Clerk or in the case of the Tweeter Trust,
trustee) of each Loan Party certifying the name and signatures of the officers
of the Borrowers authorized to sign this Agreement, the Revolving Credit Notes,
the Security Documents and the other Lender Agreements to which any Loan Party
is a party and the other documents to be delivered by any Loan Party hereunder.
(e) Existence, Qualification and Good Standing Certificates.
Certificates of legal existence, foreign qualification and corporate good
standing, as applicable, for each Loan Party of recent date issued by the
appropriate Delaware, Georgia, Maryland, Massachusetts, New Jersey and
Pennsylvania governmental authorities.
(f) Consummation of Initial Public Offering. Evidence that the
Tweeter IPO has been completed in accordance with the terms and provisions of
the Tweeter Registration Statement and Tweeter has received net proceeds from
the Tweeter IPO of not less than $25,000,000.
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(g) Prepayment and Cancellation of Indebtedness. Evidence that
the Subordinated Indebtedness of Tweeter described on Schedule 3.1 has been paid
in full and canceled.
(h) Cancellation of Preferred Stock. Evidence that all issued
and outstanding preferred stock of Tweeter has been canceled in accordance with
the plan of reorganization dated June 5, 1998.
(i) Key Man Life Insurance. The Borrowers shall have assigned
collaterally to the Agent one or more life insurance policies on the life of
Jeffrey Stone representing total coverage of $5,000,000, together with the
consent of the insurer to such assignment, all in form and issued by an insurer
reasonably acceptable to the Agent.
(j) UCC Financing Statements. Receipt by the Agent of evidence
that Uniform Commercial Code financing statements naming the Loan Parties as
debtor and Agent as secured party have been filed in all locations where any of
the Loan Parties' assets are located.
(k) Landlord Waivers. Receipt by the Agent of acknowledgments
by the landlords of each location in which any of the Loan Parties' assets are
located, substantially in the form of Exhibit G hereto.
(l) Insurance Certificates. Receipt by the Agent of
certificates of insurance naming the Agent as loss payee and evidencing the Loan
Parties' compliance with the requirements of this Agreement and the Security
Documents to maintain insurance coverage.
(m) Opinion of Counsel. The opinion of Goulston & Storrs, a
professional corporation, counsel to the Loan Parties, dated the date of
execution of this Agreement, in substantially the form of Exhibit H attached
hereto.
(n) Closing Certificate. Certificates of duly authorized
officers (or in the case of the Tweeter Trust, the trustee) of the Loan Parties,
dated the date of the first Revolving Credit Advances, to the effect that all
conditions precedent on the part of the Loan Parties to the execution and
delivery hereof and the making of the first Revolving Credit Advances have been
satisfied.
(o) Fees and Expenses. Payment of all fees and expenses of the
Agent and the Lenders then due and payable.
(p) Tweeter Trust Loans. Tweeter Trust shall have entered into
the Tweeter Trust Subordination Agreement.
(q) Sony Intercreditor Subordination Agreement. Sony shall
have entered into an intercreditor subordination agreement, substantially in the
form of Exhibit K.
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(r) Other Conditions. Such other documents, certificates and
opinions as the Agent or the Lenders may reasonably request.
Section 3.2. Conditions to All Revolving Credit Advances. The Lenders'
obligations to make any Revolving Credit Advance pursuant to this Agreement
shall be subject to compliance by the Loan Parties with their agreements
contained in this Agreement and each other Lender Agreement, and to the
satisfaction, at or before the making of each Revolving Credit Advance, of all
of the following conditions precedent:
(a) The representations and warranties herein and those made
by or on behalf of the Loan Parties in any other Lender Agreement shall be
correct as of the date on which any Revolving Credit Advance is made, with the
same effect as if made at and as of such time (except as to transactions
permitted hereunder and described in a Compliance Certificate previously
delivered to the Agent and except that the references in Article 5 to the 1997
Financial Statements shall be deemed to refer to the most recent annual audited
consolidated financial statements of Tweeter and its Subsidiaries furnished to
the Agent).
(b) On the date of any Revolving Credit Advances hereunder,
there shall exist no Default.
(c) The making of the requested Revolving Credit Advances
shall not be prohibited by any law or governmental order or regulation
applicable to the Lenders or to the Borrowers, and all necessary consents,
approvals and authorizations of any Person for any such Revolving Credit
Advances shall have been obtained.
ARTICLE 4. PAYMENT AND REPAYMENT
Section 4.1. Mandatory Prepayment.
(a) If at any time the aggregate outstanding principal balance
of all Revolving Credit Advances made hereunder exceeds the Maximum Revolving
Credit Amount, the Borrowers, jointly and severally, shall immediately repay to
the Agent for the ratable accounts of the Lenders an amount equal to such
excess.
(b) The Borrowers, jointly and severally, shall repay all
outstanding Revolving Credit Advances on the Revolving Credit Termination Date.
Section 4.2. Voluntary Prepayments.
(a) The Borrowers, jointly and severally, may make prepayments
to the Agent for the ratable accounts of the Lenders of any outstanding
principal amount of the Revolving Credit Advances equal to $50,000 or an
integral multiple thereof which are Base
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Rate Loans in accordance with Section 4.3 at any time prior to 12:00 noon
(Boston time) on any Business Day without premium or penalty.
(b) The Borrowers, jointly and severally, may make prepayments
to the Agent for the ratable accounts of the Lenders of any Revolving Credit
Advances equal to $500,000 or any integral multiple of $100,000 thereof which
are Eurodollar Rate Loans in accordance with Section 4.3 at any time prior to
12:00 noon (Boston time) on any Business Day subject, however, to the premiums
and penalties set forth in Section 4.6.
Section 4.3. Payment and Interest Cutoff. Notice of each prepayment
pursuant to Section 4.2 shall be given to the Agent (a) in the case of
prepayment of Base Rate Loans, not later than 12:00 noon (Boston time) on the
date of payment and (b) in the case of prepayment of Eurodollar Rate Loans on
any day other than the last day of the Interest Period applicable thereto, not
later than 12:00 noon (Boston time) two (2) Business Days prior to the proposed
date of payment, and, in each case, shall specify the total principal amount of
the Revolving Credit Advances to be paid on such date. Notice of prepayment
having been given in compliance with this Section 4.3, the amount specified to
be prepaid shall become due and payable on the date specified for prepayment and
from and after said date (unless the Borrowers shall default in the payment
thereof) interest thereon shall cease to accrue. Unpaid interest on the
principal amount of any Revolving Credit Advances so prepaid accrued to the date
of prepayment shall be due on the date of prepayment.
Section 4.4. Payment or Other Actions on Non-Business Days. Whenever
any payment to be made hereunder shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of interest or fees, as the case may be. In the case of any other action
the last day for performance of which shall be a day other than a Business Day,
the date for performance shall be extended to the next succeeding Business Day.
Section 4.5. Method and Timing of Payments.
(a) All payments required to be made pursuant to the
provisions of this Agreement and any other Lender Agreement, and all prepayments
pursuant to Section 4.1, may be charged by the Agent against any Borrower's
accounts with the Agent. Each Borrower hereby authorizes the Agent and the
Lenders, without notice to such Borrower, to charge against any account of such
Borrower with the Agent or such Lender an amount equal to the accrued interest,
principal and other amounts from time to time due and payable to the Agent and
the Lenders hereunder and under all other Lender Agreements.
(b) The Borrowers shall make each payment to be made by it
hereunder not later than 12:00 noon (Boston time) on the day when due in lawful
money of the United States to the Agent at its address set forth in Section 14.1
in immediately available funds. The Agent will, after its receipt thereof,
distribute like funds relating to the payment of principal, interest
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or any other amounts payable hereunder ratably to the Lenders in accordance with
their respective Commitment Percentages. Any payment made by the Borrowers to
the Agent under this Agreement or under the Notes in the manner provided in this
Agreement shall be deemed to be a payment to each of the respective Lenders,
unless the provisions of this Agreement expressly provide that any such payment
shall be solely for the account of the Agent or any specific Lender.
Section 4.6. Payments Not at End of Interest Period. If the Borrowers
for any reason make any payment of principal with respect to any Eurodollar Rate
Loan on any day other than the last day of the Interest Period applicable to
such Eurodollar Rate Loan, including, without limitation, by reason of
acceleration, or fail to borrow a Eurodollar Rate Loan after electing a
Eurodollar Pricing Option with respect thereto pursuant to Section 2.1(a) or
2.5, the Borrowers, jointly and severally, shall pay to the Agent, for the
ratable account of the Lenders, any amounts required to compensate the Lenders
for any additional losses, costs or expenses which they may reasonably incur as
a result of such payment or failure to borrow, including without limitation, any
loss, including lost profits, costs or expenses incurred by reason of the
liquidation, reutilization or reemployment of deposits or other funds acquired
by the Lenders to fund or maintain such Revolving Credit Advances. Such
compensation may include, without limitation, an amount equal to (a) the amount
of interest which would have accrued on the amount so paid or not borrowed, for
the period from the date of such payment or failure to borrow, to the last day
of the then current Interest Period for such Revolving Credit Advance (or, in
the case of a failure to borrow, to the last day of the Interest Period for the
Revolving Credit Advance which would have commenced on the date of such failure
to borrow), at the applicable rate of interest for such Revolving Credit Advance
provided for herein minus (b) the amount of interest (as reasonably determined
by the Agent), which would accrue and become payable to the Lenders during such
period on the principal repaid or not borrowed if the Lenders, following such
repayment or failure to borrow, were to reinvest such principal in U.S. Treasury
securities selected by the Agent in an amount equal (as nearly as may be) to the
principal so repaid or not borrowed and having a term equal (as near as may be)
to such period. The Borrowers shall pay such amount upon presentation by the
Agent of a statement setting forth the amount and the Agent's calculation
thereof pursuant hereto, which statement shall, if made in good faith, be deemed
true and correct absent manifest error.
Section 4.7. Currency. All payments and prepayments provided for under
this Agreement shall be made in lawful currency of the United States of America
in immediately available funds.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this
Agreement and to induce the Lenders to make the Revolving Credit Advances as
contemplated hereby, the Loan Parties hereby make the following representations
and warranties:
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Section 5.1. Corporate Existence, Charter Documents, Etc.
(a) Tweeter and each Subsidiary which is a corporation is a corporation
validly organized, legally existing and in good standing under the laws of the
jurisdiction in which it is organized and has corporate power to own its
properties and conduct its business as now conducted and as proposed to be
conducted by it. Certified copies of the charter documents and By-Laws of
Tweeter and each such Subsidiary have been delivered to the Lenders and are
true, accurate and complete as of the date hereof.
(b) Each Subsidiary which is a Massachusetts business trust is a
Massachusetts business trust validly organized, legally existing and in good
standing under the laws of the jurisdiction in which it is organized and has
power as a Massachusetts business trust to own its properties and conduct its
business as now conducted and as proposed to be conducted by it. Certified
copies of the declaration of trust and each such Subsidiary have been delivered
to the Lenders and are true, accurate and complete as of the date hereof.
Section 5.2. Principal Place of Business; Location of Records. The
chief executive office and principal place of business of Tweeter and each
Subsidiary is located at 40 Hudson Road, Shawmut Park, Canton, Massachusetts
02021, and except as disclosed on Schedule 5.2, Tweeter and its Subsidiaries
have had no other principal place of business during the last six months. All of
the books and records or true and complete copies thereof relating to the
accounts and contracts of Tweeter and each Subsidiary are and will be kept at
their chief executive office.
Section 5.3. Qualification. Tweeter and each Subsidiary is duly
qualified, licensed and authorized to do business and is in good standing as a
foreign corporation (or Massachusetts business trust as the case may be) in each
jurisdiction where its failure to be so qualified would have a Material Adverse
Effect.
Section 5.4. Subsidiaries. Tweeter has no Subsidiaries except for
Tweeter Trust, New England Audio and NEA Delaware. All of the issued and
outstanding capital stock or other equity interests of such Subsidiaries is
owned of record and beneficially as described on Schedule 5.11 hereto.
Section 5.5. Corporate Power. The execution, delivery and performance
of this Agreement, the Revolving Credit Notes, the Security Documents and all
other Lender Agreements and other documents delivered or to be delivered by
Tweeter or any Subsidiary to the Agent or the Lenders, and the incurrence of
Indebtedness to the Lenders hereunder or thereunder, now or hereafter owing:
(a) are within the corporate powers of Tweeter and each
Subsidiary, as the case may be, having been duly authorized by its Board of
Directors or other similar governing body, and, if required by law, by its
charter documents or by its By-Laws, by its stockholders;
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(b) do not require any approval or consent of, or filing with,
any governmental agency or other Person (or such approvals and consents have
been obtained and delivered to the Lenders) and are not in contravention of law
or the terms of the charter documents or By-Laws of Tweeter and each Subsidiary
or any amendment thereof;
(c) do not and will not
(i) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which Tweeter or any Subsidiary is a party or by
which Tweeter, any Subsidiary or any of their respective properties are
bound or affected,
(ii) result in, or require, the creation or
imposition of any mortgage, deed of trust, pledge, lien, security
interest or other charge or encumbrance of any nature on any property
now owned or hereafter acquired by Tweeter or any Subsidiary, except as
provided in the Lender Agreements, or
(iii) result in a violation of or default under any
law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award having applicability to Tweeter or any
Subsidiary, or to any of their respective properties.
Section 5.6. Valid and Binding Obligations. This Agreement, the
Revolving Credit Notes, the Security Documents and all the other Lender
Agreements executed in connection herewith and therewith constitute, or will
constitute when delivered, the valid and binding obligations of Tweeter and its
Subsidiaries, as the case may be, enforceable in accordance with their
respective terms, except as the enforceability thereof may be subject to
bankruptcy, insolvency, moratorium and other laws affecting the rights and
remedies of creditors and secured parties and to the exercise of judicial
discretion in accordance with general equitable principles.
Section 5.7. Other Agreements. Neither Tweeter nor any Subsidiary is a
party to any indenture, loan or credit agreement, or any lease or other
agreement or instrument, or subject to any charter or corporate restriction,
which the Borrower reasonably believes will have a Material Adverse Effect, or
which restricts the ability of Tweeter or any Subsidiary to carry out any of the
provisions of this Agreement, the Revolving Credit Notes, the Security Documents
or any of the Lender Agreements executed in connection herewith and therewith.
Section 5.8. Payment of Taxes. Tweeter and its Subsidiaries have filed
all tax returns which are required to be filed by them and have paid, or made
adequate provision for the payment of, all taxes which have or may become due
pursuant to said returns or to assessments received. All federal tax returns of
New England Audio and its Subsidiaries through their fiscal year ended in 1989
have been audited by the Internal Revenue Service or taxes for such periods are
not subject to a valid action for collection by reason of the expiration of the
applicable statute of limitation, and the results of such audits are fully
reflected in the balance
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sheet contained in the 1997 Financial Statements. Tweeter knows of no material
additional assessments since such date for which adequate reserves appearing in
the balance sheet contained in the 1997 Financial Statements have not been
established. Tweeter and its Subsidiaries have made adequate provision for all
current taxes, and to the best of Tweeter's knowledge there will not be any
additional assessments for any fiscal periods prior to and including that which
ended on the date of said balance sheet in excess of the amounts reserved
therefor.
Section 5.9. Financial Statements. All balance sheets, statements and
other financial information furnished to the Lenders in connection with this
Agreement and the transactions contemplated hereby (each of which is listed on
Schedule 5.9), including, without limitation, the 1997 Financial Statements,
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except for normal year-end
adjustments and for the absence of footnotes with interim statements) and
present fairly the consolidated financial condition of Tweeter and its
Subsidiaries and all such information so furnished was true, correct and
complete as of the date thereof (it being recognized by the Lenders that
projections as to future results are not to be viewed as facts and that the
actual results for the period or periods covered by the projections may differ
from the projected results).
Section 5.10. Other Materials Furnished. No written information,
exhibits, memoranda or reports furnished to the Lenders by or on behalf of
Tweeter or any Subsidiary in connection with the negotiation of this Agreement
contains any material misstatement of fact or omits to state a material fact
necessary to make the statements contained therein not misleading.
Section 5.11. Stock. There are presently issued by Tweeter and its
Subsidiaries and outstanding the shares of capital stock or other equity
interests indicated on Schedule 5.11. Tweeter and its Subsidiaries have received
the consideration for which such stock was authorized to be issued and have
otherwise complied with all legal requirements relating to the authorization and
issuance of shares of stock and all such shares are validly issued, fully paid
and non-assessable. Tweeter and its Subsidiaries have no other capital stock of
any class outstanding.
Section 5.12. Changes in Condition. Since the date of the balance sheet
contained in the 1997 Financial Statements and except as described on Schedule
5.12, there has been no material adverse change in the business or assets or in
the condition, financial or otherwise, of Tweeter or any Subsidiary, and neither
Tweeter nor any Subsidiary has entered into any transaction outside of the
ordinary course of business which is material to Tweeter or any Subsidiary.
Neither Tweeter nor any Subsidiary has any contingent liabilities of any
material amount which are not referred to in the 1997 Financial Statements.
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Section 5.13. Assets, Licenses, Patents, Trademarks, Etc.
(a) Tweeter and its Subsidiaries have good and marketable
title to, or valid leasehold interests in, all of their material assets, real
and personal, including the assets carried on their books and reflected in the
1997 Financial Statements, subject to no liens, charges or encumbrances, except
for (i) liens, charges and encumbrances described in Schedule 5.16 and permitted
by Section 9.2 hereof, (ii) assets sold, abandoned or otherwise disposed of in
the ordinary course of business and (iii) insubstantial and immaterial defects
in title.
(b) Except as disclosed on Schedule 5.13, Tweeter and its
Subsidiaries own all material licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, and trade names
necessary to continue to conduct their business as heretofore conducted by them,
now conducted by them and proposed to be conducted by them, each of which is
listed, together with Patent and Trademark Office application or registration
numbers, where applicable, on Schedule 5.13 hereto. Tweeter and its Subsidiaries
conduct their respective businesses without infringement or claim of
infringement of any material license, patent, copyright, service mark,
trademark, trade name, trade secret or other intellectual property right of
others. To the best knowledge of Tweeter, there is no infringement or claim of
infringement by others of any material license, patent, copyright, service mark,
trademark, trade name, trade secret or other intellectual property right of
Tweeter and its Subsidiaries.
Section 5.14. Litigation. Except as set forth in Schedule 5.14, there
is no litigation, at law or in equity, or any proceeding before any federal,
state, provincial or municipal board or other governmental or administrative
agency pending or, to the knowledge of Tweeter, threatened, or any basis
therefor, which involves a risk of any judgment or liability which, if adversely
determined, would have a Material Adverse Effect, and no judgment, decree, or
order of any federal, state, provincial or municipal court, board or other
governmental or administrative agency has been issued against Tweeter or any
Subsidiary which has or may have a Material Adverse Effect.
Section 5.15. Pension Plans. No employee benefit plan established or
maintained by Tweeter or any Subsidiary or any other Person a member of the same
"control group," as the Borrower (a "Pension Affiliate"), within the meaning of
Section 302(f)(6)(b) of ERISA, (including any multi-employer plan to which
Tweeter or any Subsidiary contributes) which is subject to Part 3 of Subtitle B
of Title I of the ERISA, had a material accumulated funding deficiency (as such
term is defined in Section 302 of ERISA) as of the last day of the most recent
fiscal year of such plan ended prior to the date hereof, or would have had an
accumulated funding deficiency (as so defined) on such day if such year were the
first year of such plan to which Part 3 of Subtitle B of Title I of ERISA
applied, and no material liability under Title IV of ERISA has been, or is
expected by Tweeter or any Subsidiary to be, incurred with respect to any such
plan by Tweeter or any Subsidiary or any Pension Affiliate. The execution,
delivery and performance by Tweeter of this Agreement and the other Lender
Agreements executed on the date hereof will not involve any prohibited
transaction within the
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meaning of ERISA or Section 4975 of the Internal Revenue Code. Tweeter and its
Subsidiaries have no Pension Plan other than those described on Schedule 5.15.
Section 5.16. Outstanding Indebtedness. The outstanding amount of
Indebtedness for borrowed money, including Capitalized Lease Obligations and
Guaranties of borrowed money, of Tweeter and its Subsidiaries as of the date
hereof, is correctly set forth in Schedule 5.16 hereto, and said Schedule
correctly describes the credit agreements, guaranties, leases and other
instruments pursuant to which such Indebtedness has been incurred and all liens,
charges and encumbrances securing such Indebtedness. Said schedule also
describes all agreements and other arrangements pursuant to which Tweeter or any
Subsidiary may borrow any money.
Section 5.17. Environmental Matters. Except as set forth in the
documents described in Schedule 5.17, copies of which have been provided to the
Agent:
(a) None of Tweeter, any Subsidiary or any operator of any of
their respective properties is in violation, or to the knowledge of Tweeter is
in alleged violation, of any Environmental Law, which violation would have a
Material Adverse Effect.
(b) None of Tweeter, any Subsidiary or any operator of any of
their respective properties has received written notice from any third party,
including, without limitation, any federal, state, county, or local governmental
authority, (i) that it has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 as amended ("CERCLA") or any equivalent state law, with respect to any
site or location; (ii) that any hazardous waste, as defined in 42 U.S.C.
Section 6903(5), any hazardous substances, as defined in 42 U.S.C.
Section 9601(14), any pollutant or contaminant, as defined in 42 U.S.C.
Section 9601(33), or any toxic substance, oil or hazardous materials or other
chemicals or substances regulated by any Environmental Laws ("Hazardous
Substances") which it has generated, transported or disposed of, has been found
at any site at which a federal, state, county, or local agency or other third
party has conducted or has ordered Tweeter, any Subsidiary or another third
party or parties (e.g. a committee of potentially responsible parties) to
conduct a remedial investigation, removal or other response action pursuant to
any Environmental Law; or (iii) that it is or shall be a named party to any
claim, action, cause of action, complaint (contingent or otherwise) or legal or
administrative proceeding arising out of any actual or alleged release or
threatened release of Hazardous Substances. For purposes of this Agreement,
"release" means any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping of Hazardous Substances into the environment.
(c) (i) Tweeter, each Subsidiary and each operator of any real
property owned or operated by Tweeter is in compliance, in all material
respects, with all provisions of the Environmental Laws relating to the
handling, manufacturing, processing, generation, storage or disposal of any
Hazardous Substances; (ii) to the best knowledge of Tweeter, no portion of
property owned, operated or controlled by Tweeter or any Subsidiary has been
used for the handling, manufacturing, processing, generation, storage or
disposal of Hazardous
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Substances except in the course of normal day-to-day operations and in
accordance with applicable Environmental Laws; (iii) to the best knowledge of
Tweeter, there have been no releases or threatened releases of Hazardous
Substances on, upon, into or from any property owned, operated or controlled by
Tweeter or any Subsidiary, which releases could have a Material Adverse Effect;
(iv) to the best knowledge of Tweeter, there have been no releases of Hazardous
Substances on, upon, from or into any real property in the vicinity of the real
properties owned, operated or controlled by Tweeter or any Subsidiary which,
through soil or groundwater contamination, may have come to be located on the
properties of Tweeter or any Subsidiary; (v) to the best knowledge of Tweeter,
there have been no releases of Hazardous Substances on, upon, from or into any
real property formerly but no longer owned, operated or controlled by Tweeter or
any Subsidiary.
(d) None of the properties owned or leased by Tweeter or any
Subsidiary is or shall be subject to any applicable environmental cleanup
responsibility law or environmental restrictive transfer law or regulation by
virtue of the transactions set forth herein and contemplated hereby.
Section 5.18. Governmental Regulations. None of Tweeter, any Subsidiary
or any other Affiliate of Tweeter is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Investment
Company Act of 1940, or is a common carrier under the Interstate Commerce Act,
or is engaged in a business or activity subject to any statute or regulation
which regulates the incurring by the Borrowers of Indebtedness for borrowed
money, including statutes or regulations relating to common or contract carriers
or to the sale of electricity, gas, steam, water, telephone or telegraph or
other public utility services.
Section 5.19. Margin Stock. Neither Tweeter nor any Subsidiary owns any
"margin stock" within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System, or any regulations, interpretations or rulings
thereunder, nor is Tweeter or any Subsidiary engaged principally or as one of
its important activities in extending credit which is used for the purpose of
purchasing or carrying margin stock.
Section 5.20. Consummation of Tweeter IPO. The Tweeter IPO has been
consummated in accordance with the terms of the Tweeter Registration Statement,
and Tweeter has received net proceeds therefrom of not less than $25,000,000,
and such proceeds have been applied as described on Schedule 5.20 hereto.
Section 5.21. Repurchase and Cancellation of Subordinated Notes and
Preferred Stock. The Subordinated Indebtedness described on Schedule 3.1 has
been paid in full and all preferred stock of Tweeter has been canceled.
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ARTICLE 6. REPORTS AND INFORMATION
Section 6.1. Interim Financial Statements and Reports.
(a) As soon as available, and in any event within forty-five
(45) days after the end of each of the first three quarters of each fiscal year
of Tweeter, Tweeter shall furnish to the Agent: (i) consolidated and
consolidating balance sheets of Tweeter and its Subsidiaries as of the end of
such quarter and consolidated and consolidating statements of income,
shareholders' equity and cash flow of Tweeter and its Subsidiaries for such
quarter and for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the preceding
fiscal year, all in reasonable detail and (ii) a Compliance Certificate.
(b) Concurrently with each delivery of financial statements
pursuant to subsections (a) above, Tweeter will deliver a management report,
certified by its chief financial officer, (i) describing the operations and
financial condition of Tweeter and its Subsidiaries for the month or quarter
then ended and the portion of the current fiscal year then elapsed (or for the
fiscal year then ended in the case of year-end financials), (ii) setting forth
in comparative form the corresponding figures for the corresponding periods of
the previous fiscal year and the corresponding figures from the most recent
projections for the current fiscal year, (iii) discussing the reasons for any
significant variations, (iv) stating that such officer has no knowledge of any
Default or Event of Default except as specified in such certificate and (v)
setting forth in reasonable detail information sufficient to show that Tweeter
and its Subsidiaries are in compliance with the financial maintenance covenants
referred to in Article 7.
Section 6.2. Annual Financial Statements and Budgets.
(a) As soon as available, but in any event within ninety (90)
days after the end of each fiscal year of Tweeter, Tweeter shall furnish to the
Agent and each Lender: (a) consolidated and consolidating balance sheets of
Tweeter and its Subsidiaries as of the end of such fiscal year and consolidated
and consolidating statements of income, shareholders' equity and cash flow of
Tweeter and its Subsidiaries for such fiscal year, in each case (other than the
consolidating statements) reported on by Deloitte & Touche LLP (or another "big
six" accounting firm), or other independent certified public accountants of
recognized national standing acceptable to the Lenders, which report shall
express, without reliance upon others, a positive opinion regarding the fairness
of the presentation of such financial statements in accordance with generally
accepted accounting principles consistently applied, said report to be without
qualification, except in cases of unresolved litigation and accounting changes
with which such accountants concur, together with the statement of such
accountants that they have caused the provisions of this Agreement to be
reviewed and that nothing has come to their attention to lead them to believe
that any Default exists hereunder or specifying any Default and the nature
thereof and (b) a Compliance Certificate.
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(b) As soon as available, but in any event prior to the
commencement of each fiscal year, beginning with the fiscal year commencing
October 1, 1998, Tweeter shall furnish to the Agent a copy of the income
statement budget, the cash flow budget and the projected balance sheets of
Tweeter and its Subsidiaries for the succeeding fiscal year, prepared by month
and in accordance with GAAP (to the extent such budgets and projections may be
prepared in accordance with GAAP), and detailing the assumptions upon which such
projections have been made, such projections to be accompanied by a certificate
of the chief financial officer to the effect that such projections have been
prepared on the basis of sound financial planning practice, and that the chief
financial officer has no reason to believe they are incorrect or misleading in
any material respect. Such items shall be delivered prior to their final
approval by Tweeter's Board of Directors and in sufficient time for the Lenders
to comment on them before Board approval is obtained, and copies of such items
as finally approved by the Board shall also be delivered to the Lenders.
Section 6.3. Notice of Defaults, Etc. As soon as possible, and in any
event within five (5) days after obtaining knowledge of the occurrence of each
Default, Tweeter shall furnish to the Agent the statement of its chief executive
officer or chief financial officer setting forth details of such Default and the
action which Tweeter and its Subsidiaries have taken or propose to take with
respect thereto. Promptly after becoming aware thereof, Tweeter shall give the
Agent notice of any event or condition which is likely to have a Material
Adverse Effect.
Section 6.4. Notice of Litigation. Promptly after obtaining knowledge
of the commencement thereof, Tweeter shall furnish to the Agent written notice
of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting Tweeter or any Subsidiary, which, if adversely determined,
would have a Material Adverse Effect.
Section 6.5. Communications with Others. At all times that the stock of
Tweeter is or is proposed to be traded publicly, Tweeter shall furnish to the
Agent copies of all regular, periodic and special reports and all registration
statements which Tweeter files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefor, or with any
national or regional securities exchange.
Section 6.6. Reportable Events. At any time that Tweeter or any
Subsidiary has a Pension Plan, Tweeter shall furnish to the Agent, as soon as
possible, but in any event within thirty (30) days after Tweeter or any
Subsidiary obtains knowledge that any Reportable Event with respect to any
Pension Plan has occurred, the statement of its chief executive officer or chief
financial officer setting forth the details of such Reportable Event and the
action which Tweeter or any Subsidiary has taken or proposes to take with
respect thereto, together with a copy of the notice of such Reportable Event to
the Pension Benefit Guaranty Corporation.
Section 6.7. Reports to other Creditors. Promptly after filing the
same, Tweeter shall furnish to the Agent copies of any compliance certificate
and other information furnished to
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any other holder of the securities (including debt obligations) of Tweeter or
any Subsidiary pursuant to the terms of any indenture, loan or credit or similar
agreement and not otherwise required to be furnished to the Agent or the Lenders
pursuant to any other provision of this Agreement.
Section 6.8. Communications with Independent Public Accountants. At any
reasonable time and from time to time, Tweeter shall use its best efforts to
provide the Agent and the Lenders and any agents or representatives of the
Lenders access to the independent public accountants of Tweeter to discuss the
financial condition of Tweeter and its Subsidiaries, including, without
limitation, any recommendations of such independent public accountants
concerning the management, finances, financial controls or operations of Tweeter
and its Subsidiaries. Promptly after the receipt thereof, Tweeter shall furnish
to the Agent copies of any management letter or other written recommendations
concerning the management, finances, financial controls, or operations of
Tweeter or any Subsidiary received from Tweeter's independent public
accountants.
Section 6.9. Environmental Reports. Tweeter shall furnish to the Agent
and each Lender: (a) not later than seven (7) days after notice thereof, notice
of any enforcement actions, or, to the knowledge of Tweeter, threatened
enforcement actions affecting Tweeter or any Subsidiary by any Governmental
Agency related to Environmental Laws; (b) copies, within seven (7) days after
they are received, of all orders, notices of responsibility, notices of
violation, notices of enforcement actions, and assessments, and other written
communications pertaining to any such orders, notices, claims and assessments
received by Tweeter or any Subsidiary from any Governmental Agency; (c) not
later than seven (7) days after notice thereof, notice of any civil claims or
threatened civil claims affecting Tweeter or any Subsidiary by any third party
alleging any violation of Environmental Laws or harm to human health or the
environment; and (d) copies of all cleanup plans, site assessment reports,
response plans, remedial proposals, or other submissions of Tweeter or any
Subsidiary, submitted to a Governmental Agency in response to any communication
referenced in subsections (a) and (b) herein simultaneously with their
submission to such Governmental Agency.
Section 6.10. Notice of Permitted Acquisitions. At least fifteen (15)
Business Days prior to the consummation of any Permitted Acquisition, Tweeter
shall furnish to the Agent (a) copies of the most recent audited and, if later,
or, if audited statements are not available, unaudited financial statements of
the Person which is the subject of such Permitted Acquisition, (b) a description
of such proposed Permitted Acquisition in such detail as the Agent may
reasonably request, including copies of letters of intent and draft purchase
agreements or other acquisition documents executed or to be executed by Tweeter
or any of its Subsidiaries in connection with the Permitted Acquisition, (c) an
unaudited pro forma consolidated balance sheet and income statement of the
Tweeter and its Subsidiaries as at the end of the most recent fiscal quarter but
prepared as though the closing of such Permitted Acquisition had occurred on or
prior to such date and related pro forma calculations, based on trailing
four-quarter operating performance, pro forma debt and pro forma debt service
based on scheduled
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principal payments and pro forma interest on total debt at then prevailing
borrowing rates, indicating compliance on a pro forma basis as at such date and
for the periods then ended with the financial covenants set forth in Section 7
and (d) unaudited projections of balance sheets and income statements and
related calculations for the following four quarters, assuming the Permitted
Acquisition has closed and indicating compliance, on a projected basis, for such
periods with the financial covenants set forth in Section 7.
Section 6.11. Miscellaneous. Tweeter shall provide the Agent and the
Lenders with such other information as the Agent or the Lenders may from time to
time reasonably request, including Borrowing Base Reports and other information
respecting the business, properties, prospects, condition or operations,
financial or otherwise, of Tweeter and its Subsidiaries.
ARTICLE 7. FINANCIAL COVENANTS
On and after the date hereof, until all of the Lender Obligations shall
have been paid in full and the Lenders shall have no commitment hereunder,
Tweeter and its Subsidiaries shall observe the following covenants:
Section 7.1. Ratio of Consolidated Total Funded Debt to Consolidated
EBITDA. Tweeter and its Subsidiaries shall not permit the ratio of Consolidated
Total Funded Debt, as of the end of any fiscal quarter, to Consolidated EBITDA
for the four-quarter period ending on such date, commencing with the quarter
ending June 30, 1998, to be greater than (a) 3.50-to- 1.00 through September 29,
1999, (b) 3.25-to-1.00 from September 30, 1999 through September 29, 2000, and
(c) 3.00-to-1.00 thereafter.
Section 7.2. Ratio of Consolidated Operating Cash Flow to Consolidated
Debt Service. Tweeter and its Subsidiaries shall not permit, for any period of
four consecutive fiscal quarters, the ratio of Consolidated Operating Cash Flow
to Consolidated Debt Service, commencing with the four-quarter period ending
June 30, 1998, to be less than (a) 1.40-to-1.00 through September 29, 1999 and
(b) 1.50-to-1.00 as of September 30, 1999 and thereafter; provided, however,
that for purposes of this Section 7.2, Tweeter may add to Consolidated Cash Flow
for the applicable periods the amount of the net cash proceeds received by New
England Audio on or before December 31, 1998 from the long-term mortgage
financing of the Canton Facility described in Section 8.9.
Section 7.3. Consolidated Net Worth. Tweeter and its Subsidiaries
shall, at all times, maintain a Consolidated Net Worth equal to or greater than
the sum of (a) Eighteen Million Dollars ($18,000,000) plus (b) 50% of cumulative
Consolidated Net Income (without deduction for any losses) after the date hereof
plus (c) all amounts received by Tweeter and its Subsidiaries after March 31,
1997 from the issuance of equity interests including without limitation amounts
received from the Tweeter IPO.
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Section 7.4. Ratio of Consolidated EBIT to Consolidated Interest
Expense. Tweeter and its Subsidiaries shall not permit, for any period of four
consecutive fiscal quarters, commencing with the four-quarter period ending June
30, 1998, the ratio of Consolidated EBIT to Consolidated Interest Expense to be
less than (a) 3.00-to-1.00 through September 29, 1999 and (b) 3.50-to-1.00 as of
September 30, 1999 and thereafter.
Section 7.5. Consolidated Capital Expenditures. Tweeter and its
Subsidiaries shall not make or incur any expenditure for fixed or capital
assets, including assets financed under Capitalized Leases, but excluding
capital expenditures incurred in Permitted Acquisitions, if, after giving effect
thereto, the aggregate of all such expenditures made by Tweeter and its
Subsidiaries would exceed the amounts set forth below for the corresponding
fiscal years:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING CONSOLIDATED CAPITAL EXPENDITURES
------------------ ---------------------------------
<S> <C>
September 30, 1998 $10,500,000
September 30, 1999 $13,000,000
September 30, 2000 $14,000,000
Thereafter $15,000,000
</TABLE>
Notwithstanding the foregoing, if Tweeter and its Subsidiaries do not
expend the entire permitted Capital Expenditures in any fiscal year, Tweeter and
its Subsidiaries may carry forward to the immediately succeeding fiscal year
100% of the unutilized portion of the permitted Capital Expenditures. All
Capital Expenditures made by Tweeter and its Subsidiaries in such succeeding
fiscal year shall first be applied to reduce the permitted Capital Expenditures
for such succeeding fiscal year and then to reduce the carry forward from the
previous fiscal year, if any.
ARTICLE 8. AFFIRMATIVE COVENANTS
On and after the date hereof, until all of the Lender Obligations shall
have been paid in full and the Lenders shall have no commitment hereunder, the
Loan Parties covenant that Tweeter will, and will cause each of its Subsidiaries
to, comply with the following covenants and provisions:
Section 8.1. Existence and Business. Tweeter and each Subsidiary will
(a) subject to Section 9.6, preserve and maintain its corporate existence and
qualify and remain qualified as a foreign corporation in each jurisdiction in
which the failure to maintain such qualification would, individually or in the
aggregate, have a Material Adverse Effect, (b) preserve and maintain in full
force and effect all material rights, licenses, patents and franchises, (c)
comply in all material respects with all valid and applicable statutes, rules
and regulations necessary for the conduct of business and (d) engage only in the
businesses which it is conducting on the date of this Agreement.
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Section 8.2. Taxes and Other Obligations. Tweeter and each Subsidiary
(a) will duly pay and discharge, or cause to be paid and discharged, before the
same shall become in arrears, all material taxes, assessments and other
governmental charges, imposed upon it and its properties, sales and activities,
or upon the income or profits therefrom, as well as the claims for labor,
materials, or supplies which if unpaid might by law result in a lien or charge
upon any of its properties; provided, however, that Tweeter and any Subsidiary
may contest any such charges or claims in good faith so long as (i) an adequate
reserve therefor has been established and is maintained if and as required by
generally accepted accounting principles and (ii) no action to foreclose any
such lien has been commenced and (b) will promptly pay or cause to be paid when
due, or in conformance with customary trade terms (but not later than sixty (60)
days from the due date in the case of trade debt), all material lease
obligations, trade debt and all other material Indebtedness incident to its
operations. Tweeter and each Subsidiary shall cause all applicable tax returns
and all amounts due thereunder to be filed and paid (except to the extent
contested in accordance with the terms of Section 8.2), as the case may be, in
order to maintain its good standing with the Internal Revenue Service and state,
local and foreign tax authorities.
Section 8.3. Maintenance of Properties and Leases. Tweeter and each
Subsidiary shall maintain, keep and preserve all of its properties (tangible and
intangible) in good repair and working order, ordinary wear and tear excepted.
Tweeter and each Subsidiary shall replace and improve its properties as
necessary for the conduct of its business. Tweeter and each Subsidiary shall
comply in all material respects with all leases naming it as lessee.
Section 8.4. Insurance. Tweeter and each Subsidiary (a) will keep its
principal assets which are of an insurable character insured by financially
sound and reputable insurers against loss or damage by fire, explosion or
hazards, by extended coverage in an amount sufficient to avoid co-insurance
liability and (b) will maintain with financially sound and reputable insurers
insurance against other hazards and risks and liability to persons and property
to the extent and in a manner reasonably satisfactory to the Lenders, and in any
event as customary for companies in similar businesses similarly situated;
provided, however, that on prior notice to the Agent it may effect workmen's
compensation insurance through an insurance fund operated by such state or
jurisdiction and may also be a self-insurer with respect to workmen's
compensation and with respect to group medical benefits under any medical
benefit plan. The provisions of the Security Documents relating to insurance
shall not be limited by the provisions of this Section 8.4. On request of the
Agent from time to time, Tweeter will render to the Agent a statement in
reasonable detail as to all insurance coverage required by this Section 8.4. A
description of the material elements of insurance coverage of Tweeter and its
Subsidiaries as of the date hereof is set forth on Schedule 8.4.
Section 8.5. Records, Accounts and Places of Business. Tweeter and each
Subsidiary shall maintain comprehensive and accurate records and accounts in
accordance with generally accepted accounting principles consistently applied.
Tweeter and each Subsidiary shall maintain adequate and proper reserves. Tweeter
and its Subsidiaries shall not change their method of accounting with respect to
any aspects of their business unless required due to a
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change in GAAP. Tweeter and its Subsidiaries shall not change their fiscal year
without the prior written consent of the Agent, which will not be unreasonably
withheld. Tweeter and each Subsidiary shall promptly notify the Agent of (a) any
changes in the places of business of Tweeter or its Subsidiaries and (b) any
additional places of business which may arise hereafter.
Section 8.6. Inspection. At any reasonable time and from time to time,
and unless a Default exists upon reasonable prior notice and only during normal
business hours, the Loan Parties shall permit the Agent and the Lenders and any
of the Lenders' agents or representatives to examine and make copies of and
abstracts from the records and books of account of, and visit the properties of,
Tweeter and its Subsidiaries and to discuss the affairs, finances and accounts
of Tweeter and its Subsidiaries with any of their officers or directors and with
Tweeter's independent accountants. Additionally, Tweeter at its own expense,
shall permit the Agent and any of the Agent's agents or representatives (a) to
conduct field exams once each year and (b) to perform inventory appraisals once
a year; provided, however that if an Event of Default exists, there shall be no
restriction as to the frequency of such exams and appraisals. Information
obtained pursuant to this Section 8.6 shall be subject to the provisions of
Section 14.6.
Section 8.7. Maintenance of Accounts. Tweeter and its Subsidiaries
shall maintain all of their operating, concentration and disbursement accounts
with the Agent. No less frequently than once each week, Tweeter and its
Subsidiaries will cause all deposits in other depository accounts to be
transferred and deposited in the concentration account maintained with the
Agent. From time to time upon request of the Agent, Tweeter and its Subsidiaries
will cause each institution in which it maintains deposits to enter into a
blocked account agreement reasonably acceptable to the Agent.
Section 8.8. Formation and Acquisition of Subsidiaries. Upon the
acquisition of a Subsidiary in connection with a Permitted Acquisition or upon
the consummation of any other Permitted Acquisition, Tweeter shall execute and
deliver or cause to be executed and delivered to the Agent (a) a pledge
amendment with respect to the pledge of all of the capital stock of such new
Subsidiary, in form and substance reasonably satisfactory to the Agent, together
with evidence in form and substance reasonably satisfactory to the Agent that
all deliveries, filings, recordings, registrations and other actions, including,
without limitation, the delivery of any certificates representing such capital
stock, together, in the case of stock certificates, with an undated transfer
power, in form and substance reasonably satisfactory to the Agent, for each such
certificate executed in blank by a duly authorized officer of the pledgor
thereof, and evidence of the filing of duly executed financing statements on
form UCC-1, necessary or, in the reasonable opinion of the Agent, desirable to
perfect the liens created by such pledge amendment, (b) a guaranty of all Lender
Obligations by such Subsidiary and a security agreement of such Subsidiary, and
legal opinions reasonably satisfactory to the Agent relating to such Subsidiary
and the Permitted Acquisition, all in form and substance reasonably satisfactory
to the Agent, together with evidence of the filing of duly executed financing
statements on form UCC-1, necessary or, in the reasonable opinion of the Agent,
desirable to perfect the liens created by such security agreement or the liens
on the assets so acquired in
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connection with such Permitted Acquisition, (c) if the Permitted Acquisition
includes any real property and if requested by the Agent, a mortgage of such
real property and a title insurance policy insuring the lien of such mortgage in
form and substance reasonably satisfactory to the Agent, and (d) such other
documents, certificates and legal opinions with respect to such Subsidiary, the
Permitted Acquisition, pledge amendment, guaranty, security agreement and
related matters as the Agent may reasonably request.
Section 8.9 Covenants Relating to Canton Mortgage Financing. On or
before December 31, 1998 New England Audio directly or through a Subsidiary to
which title to the Canton Facility is conveyed (the "Real Estate Subsidiary")
shall refinance the acquisition cost of the Canton Facility through long-term
conventional mortgage financing, with recourse only to the Canton Facility
including any rental payments thereon and not to any other asset of New England
Audio, Tweeter or any Subsidiary, and on such other terms and conditions
reasonably acceptable to the Agent and shall apply the proceeds of such
financing to repay Revolving Credit Advances. At the time of such refinancing
and so long as no Default is outstanding hereunder, the Agent will release the
lien granted pursuant to the Canton Mortgage upon payment of outstanding
Revolving Credit Advances with the proceeds from such long-term conventional
mortgage financing so long as such long-term conventional mortgage financing is
entered into with a mortgagee other than the Agent; provided that (a) the
mortgagee has entered into a Subordination, Non-Disturbance and Attornment
Agreement with Tweeter and New England Audio and an agreement with the Agent
regarding waivers of liens against Collateral and granting the Agent access to
its Collateral all on terms and conditions reasonably acceptable to the Agent
and (b) the terms of the lease with Tweeter and New England Audio is on terms
and conditions reasonably approved by the Agent. In the event New England Audio
elects to secure such financing through the Real Estate Subsidiary, New England
Audio may make an Investment in the Real Estate Subsidiary by contributing the
Canton Facility to it, the Real Estate Subsidiary shall own no other assets and
conduct no other business, and no pledge of the Real Estate Subsidiary's stock
shall be required as security for the Lender Obligation. Borrowers acknowledge
and agree that Agent is under no obligation, either as Agent or as Lender, to
provide Borrowers or its Subsidiaries with long-term conventional mortgage
financing as described in Section 8.9. In the event Agent, in its sole
discretion, determines that it will provide Borrowers or its Subsidiaries with
said long-term conventional financing, such financing shall be on the terms and
conditions that Agent shall determine in its sole discretion.
ARTICLE 9. NEGATIVE COVENANTS
On and after the date hereof, until all of the Lender Obligations shall
have been paid in full and the Lenders shall have no commitments, the Borrowers
covenant that neither Tweeter nor any of its Subsidiaries will:
Section 9.1. Restrictions on Indebtedness. Create, incur, suffer or
permit to exist, or assume or guarantee, either directly or indirectly, or
otherwise become or remain liable with respect to, any Indebtedness, except the
following:
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(a) Indebtedness outstanding at the date of this Agreement as
set forth on Schedule 5.16 but no refinancings thereof.
(b) Indebtedness on account of Consolidated Current
Liabilities (other than for money borrowed) incurred in the normal and ordinary
course of business.
(c) Indebtedness in respect of (i) taxes, assessments,
governmental charges or levies and claims for labor, materials and supplies to
the extent that payment thereof shall not at the time be required to be made in
accordance with the provisions of Section 8.2 hereof, (ii) judgments or awards
which have been in force for less than the applicable appeal period so long as
execution is not levied thereunder or in respect of which Tweeter or any
Subsidiary shall at the time in good faith be prosecuting an appeal or
proceedings for review in a manner reasonably satisfactory to the Lenders and in
respect of which a stay of execution shall have been obtained pending such
appeal or review and for which adequate reserves have been established in
accordance with generally accepted accounting principles and (iii) endorsements
made in connection with the deposit of items for credit or collection in the
ordinary course of business.
(d) Indebtedness in an amount not to exceed $1,000,000 in
respect of purchase money security interests permitted under Section 9.2(b)
hereof.
(e) Indebtedness to the Lenders.
(f) Unsecured Indebtedness in addition to the Indebtedness
otherwise permitted hereunder not to exceed $500,000 in the aggregate.
(g) Indebtedness in an amount not to exceed $5,000,000 in
connection with the long-term mortgage financing including any refinancing
thereof for the acquisition cost of the Canton Facility with recourse only to
the Canton Facility and not to any other asset of New England Audio, Tweeter or
any Subsidiary, and on such other terms and conditions reasonably approved by
the Agent.
(h) The Tweeter Trust Loans so long as the obligations of the
Borrowers thereunder are subordinated to the Lender Obligations pursuant to the
Tweeter Trust Subordination Agreement.
Section 9.2. Restriction on Liens. Create or incur or suffer to be
created or incurred or to exist any encumbrance, mortgage, pledge, lien, charge
or other security interest of any kind upon any of its property or assets of any
character, whether now owned or hereafter acquired, or transfer any of such
property or assets for the purposes of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors, or acquire or agree or have an option to acquire any
property or assets upon conditional sale or other title retention agreement,
device or arrangement (including Capitalized Leases) or suffer to exist for a
period of more than thirty (30) days after the same
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shall have been incurred any Indebtedness against it which if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over the claims of its general creditors, or sell, assign, pledge or
otherwise transfer for security any of its accounts, contract rights, general
intangibles, or chattel paper (as those terms are defined in the UCC) with or
without recourse (collectively, "Encumbrances"); provided, however, that Tweeter
or any Subsidiary may create or incur or suffer to be created or incurred or to
exist:
(a) Existing liens and security interests described in
Schedule 5.16 securing presently outstanding Indebtedness permitted by Section
9.1(a).
(b) Purchase money security interests (which term shall
include mortgages, conditional sale contracts, Capitalized Leases and all other
title retention or deferred purchase devices) to secure the purchase price of
property acquired hereafter by Tweeter or a Subsidiary, or to secure
Indebtedness incurred solely for the purpose of financing such acquisitions;
provided, however, that no such purchase money security interests shall extend
to or cover any property other than the property the purchase price of which is
secured by it, and that the principal amount of Indebtedness (whether or not
assumed) with respect to each item of property subject to such a security
interest shall not exceed the fair value of such item on the date of its
acquisition.
(c) Deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age pensions or
other social security; liens in respect of judgments or awards to the extent
such judgments or awards are permitted as Indebtedness by the provisions of
Section 9.1(c); and liens for taxes, assessments or governmental charges or
levies and liens to secure claims for labor, material or supplies to the extent
that payment thereof shall not at the time be required to be made in accordance
with Section 8.2.
(d) Encumbrances in the nature of zoning restrictions,
easements, and rights or restrictions of record on the use of real property
which do not materially detract from the value of such property or impair its
use in the business of Tweeter and its Subsidiaries.
(e) Liens (other than judgments and awards) created by or
resulting from any litigation or legal proceeding, provided the execution or
other enforcement thereof is effectively stayed and the claims secured thereby
are being actively contested in good faith by appropriate proceedings reasonably
satisfactory to the Agent.
(f) Liens arising by operation of law to secure landlords,
lessors or renters under leases or rental agreements made in the ordinary course
of business and confined to the premises or property rented.
(g) Liens in favor of the Agent for the benefit of the
Lenders.
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(h) The mortgage of the Canton Facility in favor of the Agent
or a replacement mortgagee as provided in Section 8.9.
Nothing contained in this Section 9.2 shall permit Tweeter to incur any
Indebtedness or take any other action or permit to exist any other condition
which would be in contravention of any other provision of this Agreement.
Section 9.3. Investments. Have outstanding or hold or acquire or make
or commit itself to acquire or make any Investment except the following:
(a) Investments having a maturity of less than one year from
the date thereof by the Borrower in: (i) obligations of the Agent or any of the
Lenders; (ii) obligations of the United States of America or any agency or
instrumentality thereof; (iii) repurchase agreements involving securities
described in clauses (i) and (ii) with the Agent or any of the Lenders; and (iv)
commercial paper which is rated not less than prime-one or A-1 or their
equivalents by Moody's Investor Service, Inc. or Standard & Poor's Corporation,
respectively, or their successors.
(b) Existing Investments of Tweeter in its Subsidiaries, as
described on Schedule 9.3, and Investments in wholly-owned Subsidiaries pursuant
to Permitted Acquisitions.
(c) Investments consisting of normal travel and similar
advances to employees of Tweeter and its Subsidiaries not exceeding $200,000 in
the aggregate at any one time outstanding.
(d) Investments in addition to the Investments otherwise
permitted hereunder not to exceed $500,000 in the aggregate at any time.
(e) Investments permitted under Section 9.6.
(f) Investments consisting of Tweeter Trust Loans.
(g) The contribution of the Canton Facility by New England
Audio to the Real Estate Subsidiary as provided in Section 8.9.
Section 9.4. Dispositions of Assets. Sell, lease or otherwise dispose
of any assets except for the sale, lease or other disposition of inventory or
other property (not including receivables) in the ordinary course of business;
provided that from and after the date hereof, Tweeter and its Subsidiaries may
sell, lease or otherwise dispose of fixed assets no longer necessary for the
Borrowers' business and having fair market value, in the aggregate, of not more
than $250,000; and provided further that New England Audio may contribute the
Canton Facility to the Real Estate Subsidiary as provided in Section 8.9.
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Section 9.5. Assumptions, Guaranties, Etc. of Indebtedness of Other
Persons. Assume, guarantee, endorse or otherwise be or become directly or
contingently liable (including, without limitation, by way of agreement,
contingent or otherwise, to purchase, provide funds for payment, supply funds to
or otherwise invest in any Person or otherwise assure the creditors of any such
Person against loss) in connection with any Indebtedness of any other Person,
except for (a) Guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business, (b)
contingent liabilities under surety bonds or similar instruments incurred in the
ordinary course of business in connection with the construction or improvement
of stores in an aggregate amount not to exceed $2,000,000 and (c) Guaranties by
Tweeter of the obligations of any Subsidiary, and guaranties by any Subsidiary
of the obligations of any other Subsidiary or Tweeter, in each case to the
extent such primary obligations are permitted hereunder.
Section 9.6. Mergers, Etc. Enter into any merger or consolidation with
or acquire all or substantially all of the assets of any Person, or sell,
assign, lease or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person, except that (a) any Subsidiary may merge into
Tweeter or any other Subsidiary and (b) Tweeter and its Subsidiaries may
undertake Permitted Acquisitions.
Section 9.7. ERISA. At any time while Tweeter or any Subsidiary has a
Pension Plan, permit any accumulated funding deficiency to occur with respect to
any Pension Plan or other employee benefit plans established or maintained by
Tweeter or any Subsidiary or to which contributions are made by Tweeter or any
Subsidiary (the "Plans"), and which are subject to the "Pension Reform Act" and
the rules and regulations thereunder or to Section 412 of the Internal Revenue
Code, and at all times comply in all material respects with the provisions of
the Pension Reform Act and Internal Revenue Code which are applicable to the
Plans. Tweeter will not permit the Pension Benefit Guaranty Corporation to cause
the termination of any Pension Plan under circumstances which would cause the
lien provided for in Section 4068 of the Pension Reform Act to attach to the
assets of Tweeter or any Subsidiary.
Section 9.8. Restricted Payments. Directly or indirectly (through any
Affiliate or otherwise), declare, pay or make any Restricted Payment, other than
(a) payments to be made to employees or directors of Tweeter upon termination of
their employment pursuant to Tweeter's Stock Option Plan (and agreements entered
into thereunder), provided that such payments under this clause (a) do not
exceed $400,000 in the aggregate in any given fiscal year and (b) payments not
to exceed $75,000 in any fiscal year to be made to repurchase shares of Tweeter
capital stock from employees in connection with termination of their employment
with Tweeter; or (b) payments of principal and interest on the Tweeter Trust
Loan to the extent permitted under the Tweeter Trust Subordination Agreement.
Section 9.9. Sale and Leaseback. Sell or transfer any of its properties
other than the transfer of the Canton Facility to the Real Estate Subsidiary in
accordance with Section 8.9
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with the intention of taking back a lease of the same property or leasing other
property for substantially the same use as the property being sold or
transferred.
Section 9.10. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate, except that (a) Tweeter and its
Subsidiaries may pay salaries, fees and bonuses to its directors, officers and
employees as are usual and customary in Tweeter's or its Subsidiaries' business
(b) Tweeter Trust, New England Audio and NEA Delaware may enter into and perform
their obligations under the Tweeter Trust Loans, (c) Tweeter may make a capital
contribution to Tweeter Trust from all or any portion of the proceeds of the
Tweeter IPO, (d) Tweeter and its Subsidiaries may enter into licensing agreement
with NEA Delaware for the licensing and use of intellectual property and (e)
Tweeter and its Subsidiaries may enter into other transactions with Affiliates
on terms that are no less favorable to Tweeter or any Subsidiary than those
which could be obtained at the time from Persons who are not Affiliates.
Section 9.11. Preferred Stock. No Loan Party shall, without the Agent's
prior consent, issue any preferred stock except in accordance with the
Shareholders' Rights Agreement between Tweeter Home Entertainment Group, Inc.
and BankBoston, N.A. to be effective immediately prior to the closing of the
Tweeter IPO.
ARTICLE 10. EVENTS OF DEFAULT AND REMEDIES
Section 10.1. Events of Default. Each of the following events shall be
deemed to be Events of Default hereunder:
(a) The Loan Parties shall fail to make any payment in respect
of (i) the principal of any of the Lender Obligations as the same shall become
due, whether at the stated payment dates, required prepayment or by
acceleration, demand or otherwise or (ii) interest or commitment fees on or in
respect of any of the Lender Obligations as the same shall become due, and such
failure shall continue for a period of five (5) days.
(b) Tweeter or any Subsidiary shall fail to perform or observe
any of the terms, covenants, conditions or provisions of Section 6.1, 6.2 or
6.3, Article 7 or Article 9 (excluding Sections 9.7 and 9.10 and excluding
failure to perform or observe the provisions of Section 9.5 if the aggregate
principal amount of the Indebtedness involved is less than $50,000) hereof.
(c) Tweeter or any Subsidiary shall fail to perform or observe
any other term, covenant, condition or provision not described in clauses (a) or
(b) above to be performed or observed by Tweeter or such Subsidiary under this
Agreement or any other Lender Agreement, and such failure shall not be rectified
or cured to the Agent's satisfaction within thirty (30) days after the earlier
of the date on which Tweeter or any Subsidiary shall have first known of such
failure or the Agent shall have first notified Tweeter of such failure.
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(d) Any representation or warranty of Tweeter or any
Subsidiary herein or in any other Lender Agreement or any amendment to any
thereof shall have been materially false or misleading at the time made or
intended to be effective.
(e) Tweeter or any Subsidiary shall fail to make any payment
of principal of or interest on Indebtedness for money borrowed by it or any
Guaranty of money borrowed, in either case an outstanding principal amount
greater than $250,000, when such payment is due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) or shall fail to perform
or observe any provision of any agreement or instrument relating to such
Indebtedness, and such failure shall permit the holder thereof to accelerate
such Indebtedness.
(f) Tweeter or any Subsidiary shall be involved in financial
difficulties as evidenced:
(i) by its commencement of a voluntary case under
Title 11 of the United States Code as from time to time in effect, or
by its authorizing, by appropriate proceedings of its board of
directors or other governing body, the commencement of such a voluntary
case;
(ii) by its filing an answer or other pleading
admitting or failing to deny the material allegations of a petition
filed against it commencing an involuntary case under said Title 11, or
seeking, consenting to or acquiescing in the relief therein provided,
or by its failing to controvert timely the material allegations of any
such petition;
(iii) by the entry of an order for relief in any
involuntary case commenced under said Title 11 and such order shall not
have been vacated or stayed on appeal or otherwise stayed within 90
days;
(iv) by its seeking relief as a debtor under any
applicable law, other than said Title 11, of any jurisdiction relating
to the liquidation or reorganization of debtors or to the modification
or alteration of the rights of creditors, or by its consenting to or
acquiescing in such relief;
(v) by the entry of an order by a court of competent
jurisdiction (A) by finding it to be bankrupt or insolvent, (B)
ordering or approving its liquidation, reorganization or any
modification or alteration of the rights of its creditors or (C)
assuming custody of, or appointing a receiver or other custodian for
all or a substantial part of its property and such order shall not be
vacated or stayed on appeal or otherwise stayed within 90 days;
(vi) by the filing of a petition against Tweeter or
any Subsidiary said Title 11 which shall not be vacated within 90 days;
or
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(vii) by its making an assignment for the benefit of,
or entering into a composition with, its creditors, or appointing or
consenting to the appointment of a receiver or other custodian for all
or a substantial part of its property.
(g) There shall have occurred a judgment against Tweeter or
any Subsidiary in any court (i) for an amount in excess of $250,000 not covered
by insurance, and from which no appeal has been taken or with respect to which
all appeal periods have expired, or (ii) which shall have a materially adverse
effect upon the assets, properties or condition, financial or otherwise, of
Tweeter and its Subsidiaries on a consolidated basis.
(h) A Change of Control shall have occurred.
(i) Any "Event of Default" under any other Lender Agreement
shall have occurred.
Section 10.2. Remedies. Upon the occurrence of an Event of Default, in
each and every case, the Agent may, and upon the request of the Majority
Lenders, shall proceed to protect and enforce the rights of the Agent and the
Lenders by suit in equity, action at law and/or other appropriate proceeding
either for specific performance of any covenant or condition contained in this
Agreement or any other Lender Agreement or in any instrument delivered to the
Agent or the Lenders pursuant hereto or thereto, or in aid of the exercise of
any power granted in this Agreement, any Lender Agreement or any such
instrument, and (unless there shall have occurred an Event of Default under
Section 10.1(f), in which case the unpaid balance of Lender Obligations shall
automatically become due and payable without notice or demand) by notice in
writing to the Borrowers declare (a) the obligations of the Lenders to make
Revolving Credit Advances to be terminated, whereupon such obligations shall be
terminated, and (b) all or any part of the unpaid balance of the Lender
Obligations then outstanding to be forthwith due and payable, whereupon such
unpaid balance or part thereof shall become so due and payable without
presentation, protest or further demand or notice of any kind, all of which are
hereby expressly waived, and the Agent may proceed to enforce payment of such
balance or part thereof in such manner as the Agent may elect, and the Agent and
each Lender may offset and apply toward the payment of such balance or part
thereof any Indebtedness of the Agent or any Lender to any Loan Party or to any
Subsidiary, or to any obligor of the Lender Obligations, including any
Indebtedness represented by deposits in any general or special account
maintained with the Agent or any Lender or with any other Person controlling,
controlled by or under common control with the Agent or any Lender.
Section 10.3. Distribution of Proceeds. Notwithstanding anything to the
contrary contained herein, in the event that following the occurrence or during
the continuance of any Event of Default, the Agent or any Lender receives any
monies on account of the Lender Obligations from any Loan Party or otherwise,
such monies shall be distributed for application as follows:
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(a) First, to the payment of or the reimbursement of, the
Agent for or in respect of all costs, expenses, disbursements and losses which
shall have been incurred or sustained by the Agent in connection with the
collection of such monies by the Agent, or in connection with the exercise,
protection or enforcement by the Agent of all or any of the rights, remedies,
powers and privileges of the Agent or the Lenders under this Agreement or any
other Lender Agreement;
(b) Second, to the payment of all interest, including interest
on overdue amounts, and late charges, then due and payable with respect to the
Loans, allocated among the Lenders in proportion to their respective Commitment
Percentages;
(c) Third, to the payment of the outstanding principal balance
of the Loans, allocated among the Lenders in proportion to their respective
Commitment Percentages;
(d) Fourth, to any other outstanding Lender Obligations,
allocated among the Lenders in proportion to their respective Commitment
Percentages; and
(e) Fifth, the excess, if any, shall be returned to the Loan
Parties or to such other Persons as are entitled thereto.
ARTICLE 11. CONSENTS; AMENDMENTS; WAIVERS; REMEDIES
Section 11.1. Actions by Lenders. Except as otherwise expressly set
forth in any particular provision of this Agreement, any consent or approval
required or permitted by this Agreement to be given by the Lenders, including
without limitation under Section 11.2, may be given, and any term of this
Agreement or of any other instrument related hereto or mentioned herein may be
amended, and the performance or observance by the Loan Parties of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) with, but only with, the written consent
of the Loan Parties and the Majority Lenders; provided, however, that without
the written consent of all Lenders:
(a) no reduction in the interest rates on or any fees relating
to the Revolving Credit Advances shall be made;
(b) no extension or postponement shall be made of the stated
time of payment of the principal amount of, interest on, or fees payable to the
Lenders relating to the Revolving Credit Advances;
(c) no increase in the Maximum Revolving Credit Amount, or
extension of the Revolving Credit Termination Date shall be made;
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(d) no release of all or substantially all of the collateral
security for, or any guarantor of, the Lender Obligations shall be made;
(e) no change in the definition of the term "Majority Lenders"
shall be made; and
(f) no change in the provisions of this Section 11.1 shall be
made.
Section 11.2. Actions by Borrowers. No delay or omission on the Agent's
or the Lenders' part in exercising their rights and remedies against the Loan
Parties or any other interested party shall constitute a waiver. A breach by the
Loan Parties of their obligations under this Agreement may be waived only by a
written waiver executed by the Agent and the Lenders in accordance with Section
11.1. The Agent's and the Lenders' waiver of the Loan Parties' breach in one or
more instances shall not constitute or otherwise be an implicit waiver of
subsequent breaches. To the extent permitted by applicable law, the Loan Parties
hereby agree to waive, and do hereby absolutely and irrevocably waive (a) all
presentments, demands for performance, notices of protest and notices of
dishonor in connection with any of the Indebtedness evidenced by the Revolving
Credit Notes, (b) any requirement of diligence or promptness on the Agent's or
the Lenders' part in the enforcement of its rights under the provisions of this
Agreement or any Lender Agreement and (c) any and all notices of every kind and
description which may be required to be given by any statute or rule of law with
respect to its liability (i) under this Agreement or in respect of the
Indebtedness evidenced by the Revolving Credit Notes or any other Lender
Obligation or (ii) under any other Lender Agreement. No course of dealing
between the Loan Parties and the Agent or the Lenders shall operate as a waiver
of any of the Agent's or the Lenders' rights under this Agreement or any Lender
Agreement or with respect to any of the Lender Obligations. This Agreement shall
be amended only by a written instrument executed by the Agent and the Lenders in
accordance with Section 11.1 making explicit reference to this Agreement. The
Agent's and the Lenders' rights and remedies under this Agreement and under all
subsequent agreements between the Agent, the Lenders and the Loan Parties shall
be cumulative and any rights and remedies expressly set forth herein shall be in
addition to, and not in limitation of, any other rights and remedies which may
be applicable to the Agent and the Lenders in law or at equity.
ARTICLE 12. SUCCESSORS AND ASSIGNS
Section 12.1. General. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
(which shall include in the case of the Agent or any Lender any entity resulting
from a merger or consolidation) and assigns, except that (a) the Loan Parties
may not assign their rights or obligations under this Agreement and (b) each
Lender may assign its rights in this Agreement only as set forth below in this
Article 12.
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Section 12.2. Assignments.
(a) Assignments. In compliance with applicable laws with
respect to such assignment and with the consent of Tweeter (provided that if
there shall exist a Default, the consent of Tweeter shall not be required for
any such assignment) and the Agent (which consents in all cases shall not be
unreasonably withheld), a Lender may assign to one or more financial
institutions (each a "Successor Lender") a proportionate part of its rights and
obligations in connection with this Agreement, its Revolving Credit Note and the
related Lender Agreements and each such Successor Lender shall assume such
rights and obligations pursuant to an Assignment and Acceptance Agreement
("Assignment and Acceptance Agreement") duly executed by such Successor Lender
and such assigning Lender and acknowledged and consented to by the Loan Parties
and the Agent, substantially in the form of Exhibit N attached hereto. Any
assignment under this Section 12.2(a) shall be in a minimum amount of $5,000,000
with respect to the Commitment Percentage of the Maximum Revolving Credit
Amount. In connection with any assignment under this Section 12.2(a) there shall
be paid to the Agent by the assigning Lender or the Successor Lender an
administrative processing fee in the amount of $2,500. The Lenders recognize
that the proposed assignment hereunder to a foreign bank that would trigger any
tax withholding requirement pertaining to payments to be made to such foreign
bank shall constitute a reasonable ground for New England Audio or its
Subsidiaries to withhold consent to the proposed assignment pursuant to this
Section 12.2.
(b) Assignment Procedures. In the event of an assignment in
accordance with Section 12.2(a), upon execution and delivery of such an
assignment at least five (5) Business Days prior to the proposed assignment
date, and payment by such Successor Lender to the assigning Lender of an amount
equal to the purchase price agreed between such assigning Lender and such
Successor Lender, such Successor Lender shall become party to this Agreement as
a signatory hereto and shall have all the rights and obligations of a Lender
under this Agreement and the other Lender Agreements with an interest therein as
set forth in such assignment, and such assignor making such assignment shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any such assignment, the assigning Lender, the Successor Lender and the
Borrowers shall make appropriate arrangements so that, if required, a new
Revolving Credit Note is issued to the Successor Lender and a replacement
Revolving Credit Note is issued to the assigning Lender in principal amounts
reflecting their respective revised interests.
(c) Register. The Agent shall maintain a register (the
"Register") for the recordation of (i) the names and addresses of all Successor
Lenders that enter into Assignment and Acceptance Agreements, (ii) the interests
of each Lender and (iii) the amounts of the Revolving Credit Advances owing to
each Lender from time to time. The entries in the Register shall, if made in
good faith, be conclusive, in the absence of manifest error, and the Loan
Parties, the Agent and the Lenders may treat each Person whose name is
registered therein for all purposes as a party to this Agreement. The Register
shall be available for
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inspection by the Loan Parties or any Lender at any reasonable time and from
time to time upon reasonable prior notice.
(d) Further Assurances. The Loan Parties shall sign such
documents and take such other actions from time to time reasonably requested by
the Agent or a Lender to enable any Successor Lender to share in the benefits
and rights created by the Lender Agreements.
(e) Assignments to Federal Reserve Bank. Any Lender at any
time may assign all or any portion of its rights under this Agreement and its
Revolving Credit Note to a Federal Reserve Bank. No such assignment shall
release the transferor Lender from its obligations hereunder.
Section 12.3. Participations. Any Lender may, without the consent of
the Loan Parties or the Agent, at any time grant or offer to grant to one or
more financial institutions ("Credit Participants") participating interests in
such Lender's rights and obligations in this Agreement, its Revolving Credit
Note and the related Lender Agreements, and each such Credit Participant shall
acquire such participation subject to the terms set forth below.
(a) Amount. Each such participation shall be in a minimum
amount of at least $2,500,000.
(b) Procedure. Each Lender granting such participation shall
comply with all applicable laws with respect to such transfer and shall remain
responsible for the performance of its obligations hereunder and under the other
Lender Agreements and shall retain the sole right and responsibility to exercise
its rights and to enforce the obligations of the Borrowers hereunder and under
the other Lender Agreements, including the right to consent to any amendment,
modification or waiver of any provision of any Lender Agreement, except for
those matters referred to in Section 11.1 which require the consent of all
Lenders and which may also require the consent of each Credit Participant.
(c) Dealing with Lenders. The Loan Parties shall continue to
deal solely and directly with the Lenders in connection with their rights and
obligations under this Agreement and the other Lender Agreements.
(d) Rights of Credit Participants. The Loan Parties agree that
each Credit Participant shall, to the extent provided in its participation
instrument, be entitled to the benefits of Sections 2.7, 2.8, 2.9, 2.11, 2.12
and 14.5, and the set-off rights in Section 10.2 with respect to its
participating interest; provided, however, that no Credit Participant shall be
entitled to receive any greater payment under such Sections than the Lender
granting such participation would have been entitled to receive with respect to
the interests transferred.
(e) Notice. At the time of granting any participation, the
Lender granting such participation shall notify the Agent.
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ARTICLE 13. THE AGENT
Section 13.1. Authorization and Action. Each Lender hereby appoints and
authorizes the Agent to take such action on its behalf and to exercise such
powers under this Agreement and the other Lender Agreements as are delegated to
the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement and the other Lender Agreements (including, without limitation,
enforcement or collection of the Revolving Credit Notes), the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon all Lenders; provided, however, that the
Agent shall not be required to take any action which exposes the Agent to
liability or which is contrary to this Agreement or the other Lender Agreements
or applicable law. Subject to the foregoing provisions and to the other
provisions of this Article 13, the Agent shall, on behalf of the Lenders: (a)
execute any documents on behalf of the Lenders providing collateral for or
guarantees of the Lender Obligations; (b) hold and apply any collateral for the
Lender Obligations, and the proceeds thereof, at any time received by it, in
accordance with the provisions of this Agreement and the other Lender
Agreements; (c) exercise any and all rights, powers and remedies of the Lenders
under this Agreement or any of the other Lender Agreements, including the giving
of any consent or waiver or the entering into of any amendment, subject to the
provisions of Section 11.1; (d) at the direction of the Lenders, execute,
deliver and file UCC financing statements, mortgages, deeds of trust, lease
assignments and such other agreements in respect of any collateral for the
Lender Obligations, and possess instruments included in the collateral on behalf
of the Lenders; and (e) in the event of acceleration of the Borrowers'
Indebtedness hereunder, act at the direction of the Majority Lenders to exercise
the rights of the Lenders hereunder and under the other Lender Agreements.
Section 13.2. Agent's Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the Lenders for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement or the other Lender Agreements, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Agent: (a) may treat the payee of any Revolving Credit Note as
the holder thereof until the Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form required under Article 12
hereof; (b) may consult with legal counsel, independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (c) makes no warranty or representations to any
Lender and shall not be responsible to any Lender for any statements, warranties
or representations made in or in connection with this Agreement or the other
Lender Agreements; (d) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions of
this Agreement or the other Lender Agreements on the part of the Loan Parties or
any other Person or to inspect the property
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(including the books and records) of the Loan Parties or any other Person; (e)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Lender Agreements or any other instrument or document furnished
pursuant hereto or thereto; and (f) shall incur no liability under or in respect
of this Agreement or the other Lender Agreements by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopy or
telegram) believed by the Agent to be genuine and signed or sent by the proper
party or parties.
Section 13.3. Agent as a Lender. With respect to its Revolving Credit
Commitment Percentage of the Revolving Credit Advances hereunder, BankBoston,
N.A. shall have the same rights and powers under this Agreement and the other
Lender Agreements as any other Lender and may exercise the same as though it
were not the Agent; and the term "Lender" or "Lender(s)" shall, unless otherwise
expressly indicated, include BankBoston, N.A. in its individual capacity.
BankBoston, N.A. and its affiliates may lend money to, and generally engage in
any kind of business with, the Loan Parties, any of the Loan Parties' Affiliates
and any Person who may do business with or own securities of the Loan Parties or
any such Affiliate of the Loan Parties, all as if BankBoston, N.A. were not the
Agent and without any duty to account therefor to the Lenders.
Section 13.4. Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based on the financial statements referred to in Section 5.9 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
Section 13.5. Indemnification of Agent. Each Lender agrees to indemnify
the Agent and its directors, officers, employees and agents (to the extent that
the Agent is not reimbursed by the Loan Parties), ratably according to each
Lender's Commitment Percentage, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent or its directors, officers,
employees or agents in any way relating to or arising out of this Agreement or
any other Lender Agreement or any action taken or omitted by the Agent in such
capacity under this Agreement; provided that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or wilful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including counsel fees) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
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responsibilities under, this Agreement and each other Lender Agreement, to the
extent that the Agent is not reimbursed for such expenses by the Loan Parties.
Section 13.6. Successor Agent. Except as provided below, the Agent may
resign at any time by giving written notice thereof to the Lenders and the
Borrower. Upon any such resignation, the Lenders shall have the right to appoint
a successor Agent which shall be reasonably acceptable to Tweeter. If no
successor Agent shall have been so appointed by the Lenders (other than the
resigning Agent), and shall have accepted such appointment, within thirty (30)
days after the retiring Agent's giving notice of resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a
commercial bank or financial institution organized under the laws of the United
States of America or of any state thereof and having a combined capital and
surplus of at least $50,000,000 and which shall be reasonably acceptable to
Tweeter. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement and the other Lender Agreements. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article 13 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement and the other Lender Agreements.
Section 13.7. Amendment of Article 13. The Loan Parties hereby agree
that the foregoing provisions of this Article 13 constitute an agreement among
the Agent and the Lenders (and the Agent and the Lenders acknowledge that except
for the provisions of Section 13.6, the Loan Parties are not parties to or bound
by such foregoing provisions) and that any and all of the provisions of this
Article 13 may be amended at any time by the Lenders without the consent or
approval of, or notice to, the Loan Parties (other than the requirement of
notice to the Tweeter of the resignation of the Agent and the appointment of a
successor Agent).
ARTICLE 14. MISCELLANEOUS
Section 14.1. Notices. All notices and other communications made or
required to be given pursuant to this Agreement shall be in writing and shall be
mailed by United States mail, postage prepaid, or sent by hand, by telecopy or
by nationally-recognized overnight carrier service, addressed as follows:
(a) If to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, Telecopier No. (617) 434-8102, Attention: Mr. Christopher
S. Allen, Director, with a copy to: Goodwin, Procter & Hoar LLP, Exchange Place,
Boston, MA 02109, Telecopier No. 617-523-1231, Attention: Edward Matson Sibble,
Jr., P.C., or at such other address(es) or to the attention of such other
Person(s) as the Agent shall from time to time designate in writing to Tweeter
and the Lenders.
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(b) If to any of the Loan Parties, c/o Tweeter Home
Entertainment Group, Inc. at 40 Hudson Road, Shawmut Park, Canton, Massachusetts
02021, Telecopier No. (617) 821-9956, Attention: Joseph McGuire, Chief Financial
Officer, with a copy to Goulston & Storrs, P.C., 400 Atlantic Avenue, Boston, MA
02110-3333, Telecopier No. (617) 574-4112, Attention: Kitt Sawitsky, Esq. and
Daniel Avery, Esq., or at such other address(es) or to the attention of such
other Person(s) as New England Audio shall from time to time designate in
writing to the Agent and the Lenders.
(c) If to any Lender, at the address(es) and to the attention
of the Person(s) specified below such Lender's name on the execution page of
this Agreement (or in the case of a Successor Lender, at the address(es) and to
the attention of the Person(s) specified in the Assignment and Acceptance
Agreement executed by such Successor Lender), or at such other address(es) and
to the attention of such other Person(s) as any Lender shall from time to time
designate in writing to the Agent and the Borrowers.
Any notice so addressed and mailed by registered or certified mail
shall be deemed to have been given three (3) days after deposit in the mails.
Any notice so addressed and sent by hand, by telecopy or by overnight carrier
service shall be deemed to have been given when received.
A notice from the Agent stating that it has been given on behalf of the
Lenders shall be relied upon by the Borrowers as having been given by the
Lenders.
Section 14.2. Merger. This Agreement and the other Lender Agreements
and documents contemplated hereby constitute the entire agreement of the Loan
Parties and the Agent and the Lenders and express their entire understanding
with respect to credit advanced or to be advanced by the Lenders to the Loan
Parties.
Section 14.3. Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by and construed and enforced under the laws of The
Commonwealth of Massachusetts without regard to principles governing choice of
law. Each Loan Party and each Subsidiary hereby irrevocably submits itself to
the non-exclusive jurisdiction of the courts of The Commonwealth of
Massachusetts and to the non-exclusive jurisdiction of any Federal court of the
United States located in the District of Massachusetts for the purpose of any
suit, action or other proceeding arising out of this Agreement or any other
Lender Agreement or any of the transactions contemplated hereby or thereby.
Section 14.4. Counterparts. This Agreement and all amendments to this
Agreement may be executed in several counterparts, each of which shall be an
original. The several counterparts shall constitute a single Agreement.
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Section 14.5. Expenses and Indemnification.
(a) The Loan Parties, jointly and severally, agree to pay, on
demand, all of the Agent's reasonable expenses in preparing, executing,
delivering and administering this Agreement, the Lender Agreements and all
related instruments and documents, including, without limitation, the reasonable
fees and out-of-pocket expenses of the Agent's special counsel, Goodwin, Procter
& Hoar LLP, and the Agent's expenses in connection with periodic audits, field
exams and inventory appraisals of the Loan Parties. The Loan Parties, jointly
and severally, also agree to pay, on demand, all reasonable out-of-pocket
expenses incurred by the Agent and the Lenders, including, without limitation,
reasonable legal and accounting fees, in connection with the collection of
amounts due hereunder and under all other Lender Agreements upon the occurrence
of an Event of Default hereunder, the revision, protection or enforcement of any
of the Agent's or the Lenders' rights against the Loan Parties under this
Agreement, the Revolving Credit Notes and all other Lender Agreements and the
administration of special problems that may arise under this Agreement or any
other Lender Agreement. The Loan Parties also agree to pay all stamp and other
taxes in connection with the execution and delivery of this Agreement and
related instruments and documents.
(b) Without limitation of any other obligation or liability of
the Loan Parties or right or remedy of the Agent or the Lenders contained
herein, the Loan Parties hereby covenant and agree, jointly and severally, to
indemnify and hold the Agent, the Lenders, and the directors, officers,
subsidiaries, shareholders, agents, affiliates and Persons controlling the Agent
and the Lenders, harmless from and against any and all damages, losses,
settlement payments, obligations, liabilities, claims, including, without
limitation, claims for finder's or broker's fees, actions or causes of action,
and reasonable costs and expenses incurred, suffered, sustained or required to
be paid by any such indemnified party in each case by reason of or resulting
from any claim relating to the transactions contemplated hereby, other than any
such claims which are determined by a final, non-appealable judgment or order of
a court of competent jurisdiction to be the result of the gross negligence or
willful misconduct of such indemnified party. Promptly upon receipt by any
indemnified party hereunder of notice of the commencement of any action against
such indemnified party for which a claim is to be made against the Loan Parties
hereunder, such indemnified party shall notify the Loan Parties in writing of
the commencement thereof, although the failure to provide such notice shall not
affect the indemnification rights of any such indemnified party hereunder unless
and only to the extent the Loan Parties demonstrate to the reasonable
satisfaction of such party that such failure to provide notice prejudiced the
Loan Parties in their defense of such claim. The Loan Parties shall have the
right, at their option upon notice to the indemnified parties, to defend any
such matter at their own expense and with their own counsel, except as provided
below, which counsel must be reasonably acceptable to the indemnified parties.
The indemnified party shall cooperate with the Loan Parties in the defense of
such matter. The indemnified party shall have the right to employ separate
counsel and to participate in the defense of such matter at its own expense. In
the event that (a) the employment of separate counsel by an indemnified party
has been authorized in writing by the Loan Parties, (b) the Loan Parties have
failed to assume the defense of such matter within fifteen (15) days of notice
thereof from the
60
<PAGE> 66
indemnified party, or (c) the named parties to any such action (including
impleaded parties) include any indemnified party who has been advised by counsel
that there may be one or more legal defenses available to it or prospective
bases for liability against it, which are different from those available to or
against the Loan Parties, then the Loan Parties shall not have the right to
assume the defense of such matter with respect to such indemnified party. The
Loan Parties shall not compromise or settle any such matter against an
indemnified party without the written consent of the indemnified party, which
consent may not be unreasonably withheld or delayed.
Section 14.6. Confidentiality. The Agent and the Lenders agree to use,
and to cause their officers, directors and employees to use, commercially
reasonable efforts to keep in confidence all financial data and other
information relative to the affairs of Tweeter and its Subsidiaries heretofore
furnished or which may hereafter be furnished to them pursuant to the provisions
of this Agreement; provided, however, that this Section 14.6 shall not be
applicable to information otherwise disseminated to the public by Tweeter or any
of its Affiliates; and provided further, that such obligation of the Agent and
the Lenders shall be subject to the Agent's or the Lenders', as the case may be,
(a) obligation to disclose such information pursuant to a request or order under
applicable laws and regulations or pursuant to a subpoena or other legal
process, (b) right to disclose any such information to bank examiners,
affiliates, auditors, accountants and counsel who agree to keep such information
confidential and (c) right to disclose any such information (i) in connection
with the transactions set forth herein including assignments or the sale of
participation interests pursuant to Article 12, so long as such potential
assignees or participants shall agree in writing to be bound by the terms of
this Section 14.6 or (ii) in connection with any litigation or dispute involving
the Agent or any transfer or other disposition by the Agent or the Lenders, as
the case may be, of any of the Lender Obligations; provided that information
disclosed pursuant to this provision shall be so disclosed subject to such
procedures as are reasonably calculated to maintain the confidentiality thereof.
Section 14.7. Reliance on Representations and Actions of Tweeter. The
Loan Parties hereby appoint New England Audio as the Loan Parties' agent to
execute, deliver and perform, on behalf of the Loan Parties, any and all
notices, certificates, documents and actions to be executed, delivered or
performed hereunder or under any of the other Lender Agreements, and the Loan
Parties hereby agree that the Agent and the Lenders may rely upon any
representation, warranty, certificate, notice, document or telephone request
which purports to be executed or made or which the Agent or the Lenders in good
faith believe to have been executed or made by New England Audio or Tweeter on
its behalf or any of their executive officers, and the Loan Parties hereby
further, jointly and severally, agree to indemnify and hold the Agent and the
Lenders harmless for any action, including the making of Revolving Credit
Advances hereunder, and any loss or expense, taken or incurred by any of them as
a result of their good faith reliance upon any such representation, warranty,
certificate, notice, document or telephone request.
61
<PAGE> 67
Section 14.8. Joint and Several Obligations. All obligations of any
Borrowers hereunder, under the Revolving Credit Notes and under all other Lender
Agreements shall be joint and several obligations of the Borrowers, and all
obligations of the Guarantors hereunder and under all other Lender Agreements
shall be joint and several obligations of the Guarantors.
Section 14.9. WAIVER OF JURY TRIAL. THE AGENT, THE LENDERS AND THE LOAN
PARTIES AGREE THAT NONE OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED
UPON OR ARISING OUT OF, THIS AGREEMENT, THE REVOLVING CREDIT NOTES, ANY LENDER
AGREEMENT, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG ANY OF THEM OR (B) SEEK TO CONSOLIDATE ANY SUCH
ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY EACH OF
THE AGENT, THE LENDERS AND THE LOAN PARTIES WITH THEIR RESPECTIVE COUNSEL, AND
THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NONE OF THE AGENT, THE
LENDERS OR THE LOAN PARTIES HAS AGREED WITH OR REPRESENTED TO ANY OTHER PARTY
THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
62
<PAGE> 68
Schedule 1
Successor Lender's and Assignor's Interest
The Successor Lender's interest under the Credit Agreement on and after the
Assignment Date shall be as follows:
<TABLE>
<S> <C>
Commitment Percentage ________%
Principal Amount of Revolving Credit Note $________
</TABLE>
The Assignor's interest under the Credit Agreement on and after the Assignment
Date shall be as follows:
<TABLE>
<S> <C>
Commitment Percentage _________%
Principal Amount of Revolving Credit Note $_________
</TABLE>
<PAGE> 69
Schedule 2
Lenders' Commitment Percentages
After giving effect to the assignment on the Assignment Date, the
Lenders' respective Commitment Percentages under the Credit Agreement shall be
as follows:
<TABLE>
<CAPTION>
Commitment Maximum Amount
Lender Percentage of Revolving Credit Advances
------ ---------- ----------------------------
<S> <C> <C>
__________________ ____.__% $ __________.__
__________________ ____.__% $ __________.__
__________________ ____.__% $ __________.__
TOTALS 100.00 % $ __________.00
</TABLE>
<PAGE> 70
IN WITNESS WHEREOF, the Loan Parties, the Agent and the Lenders have
caused this Credit Agreement to be executed by their duly authorized officers as
of the date set forth above.
NEW ENGLAND AUDIO CO., INC.
By:/s/ Jeffrey S. Stone
------------------------------------
Name: Jeffrey S. Stone
Title: President
NEA DELAWARE, INC.
By:/s/ Jeffrey S. Stone
------------------------------------
Name: Jeffrey S. Stone
Title: President
TWEETER HOME ENTERTAINMENT
GROUP, INC.
By:/s/ Jeffrey S. Stone
------------------------------------
Name: Jeffrey S. Stone
Title: President
TWEETER HOME ENTERTAINMENT
GROUP FINANCING COMPANY
TRUST
/s/ Jeffrey S. Stone
---------------------------------------
Trustee
<PAGE> 71
BANKBOSTON, N.A., as Agent
By:/s/ Christopher S. Allen
------------------------------------
Name:
Title: Director
BANKBOSTON, N.A.
By:/s/ Christopher S. Allen
------------------------------------
Name:
Title: Director
<PAGE> 72
EXHIBIT A
FORM OF REVOLVING CREDIT NOTE
$_____________ [Date]
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned, NEW ENGLAND AUDIO CO., INC., a
Massachusetts corporation, and NEA DELAWARE, INC., a Delaware corporation (the
"Borrowers"), jointly and severally, HEREBY PROMISE TO PAY to the order of
______________________________________ (the "Lender") the principal sum of
[___________________________________] DOLLARS ($____________) (or, if less, the
aggregate unpaid principal amount of all Revolving Credit Advances made by the
Lender to the Borrower pursuant to the Credit Agreement as hereinafter defined),
together with interest on the unpaid principal from time to time outstanding at
the rate or rates and computed and payable at the times as described in the
Credit Agreement. The entire balance of outstanding principal and accrued and
unpaid interest shall be paid in full on the Revolving Credit Termination Date
(as defined in the Credit Agreement).
This note represents indebtedness for one or more Revolving Credit
Advances made by the Lender to the Borrower under the Amended and Restated
Credit Agreement dated as of July 20, 1998 (as the same may be amended, modified
or supplemented from time to time, the "Credit Agreement") by and among the
Borrowers, the Guarantors, the Lenders from time to time parties thereto and
BankBoston, N.A., as Agent for the Lenders (the "Agent"). Capitalized terms used
herein and not otherwise defined shall have the meaning set forth in the Credit
Agreement.
The Borrowers shall have the right, at any time, to voluntarily prepay
all or any part of the outstanding principal amount of this note subject to the
provisions of the Credit Agreement.
In addition to the payment of interest as provided above, the Borrowers
shall, jointly and severally, on demand, pay interest on any overdue
installments of principal and, to the extent permitted by applicable law, on
overdue installments of interest at the rate set forth in the Credit Agreement.
The holder of this note is entitled to all the benefits and rights of a
Lender under the Credit Agreement to which reference is hereby made for a
statement of the terms and conditions under which the entire unpaid balance of
this note, or any portion hereof, shall become immediately due and payable. Any
capitalized term used in this note which is not otherwise expressly defined
herein shall have the meaning ascribed thereto in the Credit Agreement.
<PAGE> 73
The Borrowers hereby waive presentment, demand, notice, protest and
other demands and notices in connection with the delivery, acceptance or
enforcement of this note.
No delay or omission on the part of the holder of this note in
exercising any right hereunder shall operate as a waiver of such right or of any
other right under this note, and a waiver, delay or omission on any one occasion
shall not be construed as a bar to or waiver of any such right on any future
occasion.
The Borrowers, jointly and severally, hereby agree to pay on demand all
reasonable costs and expenses, including, without limitation, reasonable
attorneys' fees and legal expenses, incurred or paid by the holder of this note
in enforcing this note on default.
THE LENDER AND THE BORROWERS AGREE THAT NEITHER OF THEM NOR ANY OF
THEIR ASSIGNEES OR SUCCESSORS SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON OR ARISING OUT OF, THIS
NOTE, THE CREDIT AGREEMENT, ANY LENDER AGREEMENT, ANY DOCUMENT, INSTRUMENT OR
AGREEMENT EXECUTED IN CONNECTION WITH ANY OF THE FOREGOING, ANY COLLATERAL
SECURING ALL OR ANY PART OF THE LENDER OBLIGATIONS OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG ANY OF THEM OR (B) SEEK TO CONSOLIDATE ANY SUCH
ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY EACH OF
THE LENDER AND THE BORROWERS WITH THEIR RESPECTIVE COUNSEL, AND THESE PROVISIONS
SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR ANY BORROWER HAS
AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH
WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
<PAGE> 74
This note shall be deemed to be under seal, and all rights and
obligations hereunder shall be governed by the laws of The Commonwealth of
Massachusetts (without giving effect to any conflicts of law provisions
contained therein).
NEW ENGLAND AUDIO CO., INC.
By:
-----------------------------------
Name:
Title:
NEA DELAWARE, INC.
By:
-----------------------------------
Name:
Title:
<PAGE> 75
EXHIBIT B
FORM OF NOTICE OF REVOLVING CREDIT BORROWING
_____________, ____
BankBoston, N.A., as Agent
100 Federal Street, Boston, Massachusetts 02110
Attention: Mr. Christopher S. Allen
Re: Amended and Restated Credit Agreement dated as of July 20,
1998 by and among New England Audio Co., Inc., NEA Delaware,
Inc., the Guarantors party thereto, the Lenders party thereto
and BankBoston, N.A., as Agent (the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to Section 2.1 of the Credit Agreement, the undersigned hereby
requests that the Lenders make Revolving Credit Advances to the Borrowers in the
aggregate amount of $________ on ____________, ____.
The representations and warranties contained or referred to in Article
5 of the Credit Agreement are true and accurate on and as of the effective date
of the requested Revolving Credit Advances as though made at and as of such date
(except as to representations and warranties made as of a certain date, which
shall be true and correct as of such date, except as to transactions permitted
by the Credit Agreement, and except that the references in the Agreement to the
1997 Financial Statements are deemed to refer to the most recent annual
financial statements furnished to the Agent and the Lenders pursuant to Section
6.2 of the Credit Agreement); and no Default has occurred and is continuing or
will result from the requested Revolving Credit Advances.
NEW ENGLAND AUDIO CO., INC.
(for itself and as agent for NEA Delaware, Inc.)
By:
_________________________________________
Name:
Title:
<PAGE> 76
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
_____________, ____
BankBoston, N.A., as Agent
100 Federal Street, Boston, Massachusetts 02110
Attention: Mr. Christopher S. Allen
Re: Amended and Restated Credit Agreement dated as of July 20,
1998 by and among New England Audio Co., Inc., NEA Delaware,
Inc., the Guarantors party thereto, the Lenders party thereto
and BankBoston, N.A., as Agent (the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to the provisions of Section 6.1(b) or 6.2 of the Credit
Agreement, the undersigned hereby certifies on behalf of Tweeter Home
Entertainment Group, Inc. and its Subsidiaries as follows:
<TABLE>
<S> <C>
(A) Revolving Credit Advances and
stated amount of Letters of Credit $__________
(B) Maximum Revolving Credit Amount............. $30,000,000
(C) Amount available for Revolving Credit
Advances under the Credit Agreement
(line B minus line A)....................... $__________
</TABLE>
(C) (1) The representations and warranties made by or on
behalf of the Loan Parties in the Credit Agreement
and in all other Lender Agreements are true and
correct in all material respects on and as of the
date hereof, with the same effect as if made at and
as of the date hereof (except as to representations
and warranties made as of a certain date, which shall
be true and correct only as of such date, except as
to transactions permitted under the terms of the
Credit Agreement, and except that the references in
the Agreement to the 1997 Financial Statements are
deemed to refer to the most recent annual financial
statements furnished to the Agent and the Lenders
pursuant to Section 6.2 of the Credit Agreement).
<PAGE> 77
(2) Since the end of the last fiscal year, neither the
business nor assets, nor the condition, financial or
otherwise, of Tweeter Home Entertainment Group, Inc.
and its Subsidiaries, taken as a whole, has been
subject to any Material Adverse Effect.
(3) Except as set forth in the certificates attached
hereto and except as heretofore disclosed to the
Agent in a previous Compliance Certificate, there has
been no change (i) in the charter documents or
By-Laws of the Loan Parties heretofore certified to
the Agent or (ii) in the incumbency of the officers
of the Loan Parties whose signatures have heretofore
been certified to the Agent.
(4) The financial statements attached hereto as Schedule
1 are in compliance with the applicable provisions of
Section 6.1(b) or 6.2 of the Credit Agreement, as the
case may be.
(5) The undersigned has caused the provisions of the
Credit Agreement to be reviewed and there is no
Default thereunder, and no condition which, with the
passage of time or giving of notice or both, would
constitute a Default thereunder, other than as set
forth on Schedule 2 attached hereto.
(D) Attached hereto as Schedule 3 are calculations demonstrating
that, based upon the consolidated financial statements of
Tweeter Home Entertainment Group, Inc. and its Subsidiaries
attached hereto as Schedule 1, the Loan Parties are in
compliance with all financial restrictions set forth in the
Credit Agreement.
Terms defined in the Credit Agreement and not otherwise expressly
defined herein are used herein with the meanings so defined in the Credit
Agreement.
IN WITNESS WHEREOF, the undersigned has caused an authorized officer to
execute this Certificate on this _____ day of ____________, 199_.
TWEETER HOME ENTERTAINMENT
GROUP, INC.
By:
_____________________________
Name:
Title:
<PAGE> 78
SCHEDULE 2
to Compliance Certificate
Defaults - Action Being Taken
<PAGE> 79
SCHEDULE 3
to Compliance Certificate
For purposes of computing the ratios and limitations comprising the financial
restrictions that follow, terms that are capitalized and not defined herein will
be given the meanings ascribed to such terms in the Credit Agreement.
[*]
* Detailed calculations of each financial covenant should follow.
<PAGE> 80
EXHIBIT D
FORM OF EURODOLLAR PRICING NOTICE
________________, ____
BankBoston, N.A., as Agent
100 Federal Street
Boston, Massachusetts 02110
Attention: Mr. Christopher S. Allen
Re: Amended and Restated Credit Agreement dated as of July 20,
1998 by and among New England Audio Co., Inc., NEA Delaware,
Inc., the Guarantors party thereto, the Lenders party thereto
and BankBoston, N.A., as Agent (the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to Section 2.4 of the Credit Agreement, the undersigned hereby
confirms its request made on _______________, for a Eurodollar Rate Loan in the
amount of $__________ comprising all or a portion of outstanding Revolving
Credit Advances, effective __________.
The Interest Period applicable to said Eurodollar Rate Loan will be
[one][two][three][six] months.
Said Eurodollar Rate Loan represents a [conversion/continuation] of the
[Base] [Eurodollar] Rate Loan in the same amount made on __________.
NEW ENGLAND AUDIO CO., INC.
(for itself and as agent for NEA Delaware,
Inc.)
By:
______________________________________
Name:
Title:
<PAGE> 81
EXHIBIT E-1
FORM OF AMENDED AND RESTATED STOCK PLEDGE AGREEMENT
AMENDED AND RESTATED STOCK PLEDGE AGREEMENT, dated as of July 20, 1998,
between NEW ENGLAND AUDIO CO., INC., a Massachusetts corporation (the "Pledgor")
and BANKBOSTON, N.A., a national banking association, as Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the Pledgor is the record and beneficial owner of the shares of
Stock described on Schedule I hereto (the "Pledged Shares") issued by the
corporations named therein; and
WHEREAS, the Pledgor has entered into an Amended and Restated Credit
Agreement, dated as of July 20, 1998 (as at any time amended, modified or
supplemented, the "Credit Agreement") with NEA Delaware, Inc., a Delaware
corporation ("NEA Delaware"), Tweeter Home Entertainment Group, Inc. ("Tweeter")
and Tweeter Home Entertainment Group Financing Company Trust ("Tweeter Trust"),
the Agent and the other lenders parties thereto (the "Lenders"), pursuant to
which the Lenders have agreed to make Revolving Credit Advances (as defined in
the Credit Agreement) to the Pledgor and NEA Delaware; and
WHEREAS, in connection with the granting of the credits under the Credit
Agreement and as security for all of the Lender Obligations of the Pledgor under
the Credit Agreement, the Agent is requiring that the Pledgor execute and
deliver this Stock Pledge Agreement and grant the security interest contemplated
hereby; and
WHEREAS, the Debtors and the Agent are parties to a Pledge Agreement dated
as of May 30, 1997 (the "Pledge Agreement") and desire to amend and restate the
Pledge Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Lenders to grant the credits under the
Credit Agreement, the parties hereby amend and restate the Pledge Agreement and
agree as follows:
Section 1. Definitions. Unless otherwise defined herein, terms defined in
the Credit Agreement are used herein as therein defined, and the following shall
have the following respective meanings (such meanings being equally applicable
to both the singular and plural form of the terms defined):
"Act" shall have the meaning assigned to such term in Section 8(d) hereof.
"Agreement" shall mean this Amended and Restated Stock Pledge Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any
<PAGE> 82
of the foregoing, and shall refer to the Agreement as the same may be in effect
at the time such reference becomes operative.
"Pledged Collateral" shall have the meaning assigned to such term in
Section 2 hereof.
"Pledged Shares" shall have the meaning assigned to such term in the first
recital hereof.
"Secured Obligations" shall have the meaning assigned to such term in
Section 3 hereof.
"Termination Date" shall mean the date on which all Lender Obligations
have been paid in full and the Lenders shall have no further commitments to or
for the account of the Pledgor or any of its Subsidiaries under any Lender
Agreement.
Section 2. Pledge. The Pledgor hereby pledges and grants to the Agent a
first priority security interest in all of the following (the "Pledged
Collateral"), except as otherwise provided in Section 7(b):
(a) the Pledged Shares and the certificates representing the Pledged
Shares, and all dividends, cash, instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares;
(b) all additional shares of Stock of any issuer of the Pledged
Shares from time to time acquired by the Pledgor in any manner (which shares
shall be deemed to be part of the Pledged Shares) and the certificates
representing such shares, and all dividends, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares; and
(c) all shares owned by the Pledgor of any Person other than the
Real Estate Subsidiary, if any, who, after the date of this Agreement, becomes,
as a result of any occurrence, a directly owned Subsidiary of the Pledgor (which
shares shall be deemed to be part of the Pledged Shares) and the certificates
representing such shares, and all dividends, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares.
Section 3. Security for Lender Obligations. This Agreement secures, and
the Pledged Collateral is security for, the prompt payment in full when due,
whether at stated maturity, by acceleration or otherwise, and performance of the
Lender Obligations, whether for principal, premium, interest, fees, costs and
expenses, and all obligations of the Pledgor now or hereafter existing under
this Agreement and under the Credit Agreement, and all other Indebtedness,
liabilities and obligations of the Pledgor to the Agent under any Lender
2
<PAGE> 83
Agreement, whether now existing or hereafter incurred, whether arising under the
Credit Agreement or otherwise (collectively, the "Secured Obligations").
Section 4. Delivery of Pledged Collateral. All certificates representing
or evidencing the Pledged Shares shall be delivered to and held by or on behalf
of the Agent pursuant hereto and shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
reasonably satisfactory to the Agent. If any Event of Default shall occur and be
continuing, subject to Section 7 hereof, the Agent shall have the right, at any
time in its discretion and without notice to the Pledgor, to transfer to or to
register in the name of the Agent or any of its nominees any or all of the
Pledged Shares. In addition, also subject to Section 7 hereof, the Agent shall
have the right at any time to exchange certificates or instruments representing
or evidencing Pledged Shares for certificates or instruments of smaller or
larger denominations.
Section 5. Representations and Warranties. The Pledgor represents and
warrants to the Agent that:
(a) The Pledgor is, and at the time of delivery of the Pledged
Shares to the Agent pursuant to Section 4 hereof will be, the sole holder of
record and the sole beneficial owner of the Pledged Collateral free and clear of
any Lien thereon or affecting the title thereto except for the Lien created by
this Agreement.
(b) All of the Pledged Shares have been duly authorized and validly
issued and are fully paid and non-assessable.
(c) The Pledgor has the right and requisite corporate authority to
pledge, assign, transfer, deliver, deposit and set over the Pledged Collateral
to the Agent, as provided herein.
(d) None of the Pledged Shares has been issued or transferred in
violation of the securities registration, securities disclosure or similar laws
of any jurisdiction to which such issuance or transfer may be subject.
(e) The authorized Stock of each of the issuers listed on Schedule I
hereto consists of the number of shares of Stock, with the number of shares
issued and outstanding, that are described on Schedule I hereto. As of the date
hereof, there are no existing options, warrants, calls or commitments of any
character whatsoever relating to any Stock of any of such issuers.
(f) No consent, approval, authorization or other order of any Person
and no consent, authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required either
(i) for the pledge of the Pledged Collateral pursuant to this Agreement or for
the execution, delivery or performance of this Agreement by the Pledgor or (ii)
for the exercise by the Agent of the voting or other rights
3
<PAGE> 84
provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement including any disposition thereof, except
as may be required in connection with such disposition by laws affecting the
offering and sale of securities generally.
(g) The pledge, assignment and delivery of the Pledged Collateral
pursuant to this Agreement will create a valid first priority Lien on and a
first priority perfected security interest in the Pledged Collateral, and the
proceeds thereof, securing the payment of the Secured Obligations.
(h) This Agreement has been duly authorized, executed and delivered
by the Pledgor and constitutes a legal, valid and binding obligation of the
Pledgor enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally, and except as the remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
(i) The Pledged Shares constitute one hundred percent (100%) of the
issued and outstanding shares of Stock of the issuers thereof.
(j) The Subsidiaries listed on Schedule III hereto are the only
Subsidiaries of the Pledgor.
The representations and warranties set forth in this Section 5 shall
survive the execution and delivery of this Agreement.
Section 6. Covenants. The Pledgor covenants and agrees that until the
Termination Date:
(a) Without the prior written consent of the Agent, the Pledgor will
not sell, assign, transfer, pledge, grant a Lien with respect to or otherwise
encumber any of its rights in or to the Pledged Collateral or any unpaid
dividends or other distributions or payments with respect thereto except as
otherwise permitted by the Credit Agreement.
(b) The Pledgor will, at its expense, promptly execute, acknowledge
and deliver all such instruments and take all such action as the Agent from time
to time may reasonably request in order to ensure to the Agent the benefits of
the Liens in and to the Pledged Collateral intended to be created by this
Agreement.
(c) The Pledgor will defend the title to the Pledged Collateral and
the Liens of the Agent thereon against the claim of any other Person and will
maintain and preserve such Liens until the Termination Date.
(d) The Pledgor will, upon obtaining any additional shares of any
Subsidiaries other than the Real Estate Subsidiary, if any, which shares are not
already Pledged Collateral,
4
<PAGE> 85
promptly (and in any event within three (3) Business Days) deliver to the Agent
a Pledge Amendment, duly executed by the Pledgor, in substantially the form of
Schedule II hereto (a "Pledge Amendment"), in respect of the additional Pledged
Shares which are to be pledged pursuant to this Agreement. The Pledgor hereby
authorizes the Agent to attach each such Pledge Amendment to this Agreement and
agrees that all Pledged Shares listed on any Pledge Amendment delivered to the
Agent shall for all purposes hereunder be considered Pledged Collateral.
Section 7. Pledgor's Rights. As long as no Default or Event of Default
shall have occurred and be continuing:
(a) The Pledgor shall have the right, from time to time, to vote and
give consents with respect to the Pledged Collateral or any part thereof for all
purposes not inconsistent with the provisions of this Agreement, the Credit
Agreement and any other Lender Agreement; provided, however, that no vote shall
be cast, and no consent shall be given or action taken, which would have the
effect of impairing the position or interest of the Agent in respect of the
Pledged Collateral or which would authorize or effect (except as and to the
extent expressly permitted by the Credit Agreement) (i) the dissolution or
liquidation, in whole or in part, of any of the Subsidiaries, (ii) the
consolidation or merger of any of the Subsidiaries with any other Person, (iii)
the sale, disposition or encumbrance of all or substantially all of the assets
of any of the Subsidiaries, (iv) any change in the authorized number of shares,
the stated capital or the authorized share capital of any of the Subsidiaries or
the issuance of any additional shares of its Stock, or (v) the alteration of the
voting rights with respect to the Stock of any of the Subsidiaries.
(b) (i) the Pledgor shall be entitled, from time to time, to collect
and receive for its own use all cash dividends paid in respect of the
Pledged Shares to the extent not in violation of the Credit Agreement
other than any and all (A) dividends paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral, (B) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or total
liquidation or dissolution and (C) cash paid, payable or otherwise
distributed in redemption of, or in exchange for, any Pledged Collateral;
provided, however, that until actually paid all rights to such dividends
shall remain subject to the Lien created by this Agreement; and
(ii) all dividends (other than such cash dividends as are
permitted to be paid to the Pledgor in accordance with clause (i) above)
and all other distributions in respect of any of the Pledged Shares,
whenever paid or made, shall be delivered to the Agent to hold as Pledged
Collateral and shall, if received by the Pledgor, be received in trust for
the benefit of the Agent, be segregated from the other property or funds
of the Pledgor, and be forthwith delivered to the Agent as Pledged
Collateral in the same form as so received (with any necessary
endorsement).
5
<PAGE> 86
Section 8. Defaults and Remedies.
(a) Upon the occurrence and during the continuance of an Event of
Default (provided that such Event of Default is not waived in accordance with
the terms of the Credit Agreement), the Agent (personally or through an agent)
is hereby authorized and empowered, to transfer and register in its name or in
the name of its nominee the whole or any part of the Pledged Collateral, to
exercise the voting rights with respect thereto, to collect and receive all cash
dividends and other distributions made thereon, to sell in one or more sales
after ten (10) days' notice of the time and place of any public sale or of the
time after which a private sale is to take place (which notice the Pledgor
agrees is commercially reasonable), but without any previous notice or
advertisement, the whole or any part of the Pledged Collateral and to otherwise
act and to exercise any and all rights with respect to the Pledged Collateral as
though the Agent was the outright owner thereof, the Pledgor hereby irrevocably
constituting and appointing the Agent as the proxy and attorney-in-fact of the
Pledgor, with full power of substitution to do so; provided, however, that the
Agent shall not have any duty to exercise any such right or to preserve the same
and shall not be liable for any failure to do so or for any delay in doing so.
Any sale shall be made at a public or private sale at the Agent's place of
business, or at any public building in the City of Boston, Massachusetts or
elsewhere to be named in the notice of sale, either for cash or upon credit or
for future delivery at such price as the Agent may deem fair, and the Agent may
be the purchaser of the whole or any part of the Pledged Collateral so sold and
hold the same thereafter in its own right free from any claim of the Pledgor or
any right of redemption. Each sale shall be made to the highest bidder, but the
Agent reserves the right to reject any and all bids at such sale which, in its
discretion, it shall reasonably deem inadequate. Demands of performance, except
as otherwise herein specifically provided for, notices of sale, advertisements
and the presence of property at sale are hereby waived and any sale hereunder
may be conducted by an auctioneer or any officer or agent of the Agent.
(b) If, at the original time or times appointed for the sale of the
whole or any part of the Pledged Collateral, the highest bid, if there be but
one sale, shall be inadequate to discharge in full all the Secured Obligations,
or if the Pledged Collateral be offered for sale in lots, if at any of such
sales, the highest bid for the lot offered for sale would indicate to the Agent,
in its reasonable discretion, the unlikelihood of the proceeds of the sales of
the whole of the Pledged Collateral being sufficient to discharge all the
Secured Obligations, the Agent may, on one or more occasions and in its
reasonable discretion, postpone any of said sales by public announcement at the
time of sale or the time of previous postponement of sale, and no other notice
of such postponement or postponements of sale need be given, any other notice
being hereby waived; provided, however, that any sale or sales made after such
postponement shall be after ten (10) days' notice to the Pledgor.
(c) In the event of any sales hereunder, the Agent shall, after
deducting all reasonable costs or expenses of every kind (including reasonable
attorneys' fees and disbursements) for care, safekeeping, collection, sale,
delivery or otherwise, apply the residue of the proceeds of the sales to the
payment or reduction, either in whole or in part, of the
6
<PAGE> 87
Secured Obligations in accordance with the agreements and instruments governing
and evidencing the Secured Obligations, returning the surplus, if any, to the
Pledgor.
(d) If, at any time when the Agent in its reasonable discretion
determines, following the occurrence and during the continuance, of an Event of
Default, that, in connection with any actual or contemplated exercise of its
rights (when permitted under this Section 8) to sell the whole or any part of
the Pledged Collateral hereunder, it is necessary or advisable to effect a
public registration of all or part of the Pledged Collateral pursuant to the
Securities Act of 1933, as amended (or any similar statute then in effect) (the
"Act"), the Pledgor shall, in an expeditious manner, cause each of its
Subsidiaries other than the Real Estate Subsidiary, if any, to:
(i) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to the
Pledged Collateral and use its best efforts to cause such registration
statement to become and remain effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Act with
respect to the sale or other disposition of the Pledged Collateral covered
by such registration statement whenever the Agent shall desire to sell or
otherwise dispose of the Pledged Collateral;
(iii) furnish to the Agent such numbers of copies of a
prospectus and a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as the Agent may
reasonably request in order to facilitate the public sale or other
disposition of the Pledged Collateral by the Agent;
(iv) use its best efforts to register or qualify the Pledged
Collateral covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States
as the Agent shall reasonably request, and do such other reasonable acts
and things as may be required of it to enable the Agent to consummate the
public sale or other disposition in such jurisdictions of the Pledged
Collateral by the Agent;
(v) use its best efforts to furnish, at the reasonable
request of the Agent, on the date that shares of the Pledged Collateral
are delivered to the underwriters for sale pursuant to such registration
or, if the security is not being sold through underwriters, on the date
that the registration statement with respect to such shares of the Pledged
Collateral becomes effective, (A) an opinion, dated such date, of the
outside counsel representing such registrant for the purposes of such
registration, addressed to the underwriters, if any, and in the event the
Pledged Collateral is not being sold through underwriters, then to the
Agent, stating that such registration statement has become effective under
the Act and that (1) to the best knowledge of such
7
<PAGE> 88
counsel, no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are
pending or threatened under the Act, (2) the registration statement, the
related prospectus, and each amendment or supplement thereto, comply as to
form in all material respects with the requirements of the Act and the
applicable rules and regulations of the Commission thereunder (except that
such counsel need express no opinion as to financial statements or other
financial or statistical data contained therein), (3) such counsel has no
reason to believe that either the registration statement or the
prospectus, or any amendment or supplement thereto, contains any untrue
statement of a material fact or omits a material fact required to be
stated therein or necessary to make the statements therein not misleading,
(4) the descriptions in the registration statement or the prospectus, or
any amendment or supplement thereto, of all legal matters and contracts
and other legal documents or instruments are accurate in all material
respects and fairly present the information required to be shown and (5)
such counsel does not know of any legal or governmental proceedings,
pending or threatened, required to be described in the registration
statement or prospectus, or any amendment or supplement thereto, or to be
filed as exhibits to the registration statement which are not described
and filed or incorporated by reference as required; and (B) a letter,
dated such date, from the independent certified public accountants of such
registrant, addressed to the underwriters, if any, and in the event the
Pledged Collateral is not being sold through underwriters, then to the
Agent, stating that they are independent certified public accountants
within the meaning of the Act and that, in the opinion of such
accountants, the financial statements and other financial data of such
registrant included in the registration statement or the prospectus, or
any amendment or supplement thereto, comply as to form in all material
respects with the applicable accounting requirements of the Act. The
opinion of counsel referred to above shall additionally cover such other
legal matters with respect to the registration in respect of which such
opinion is being given as the Agent may reasonably request. The letter
referred to above from the independent certified public accountants shall
additionally cover such other financial matters (including information as
to the period ending not more than five (5) Business Days prior to the
date of such letter) with respect to the registration in respect of which
such letter is being given as the Agent may reasonably request; and
(vi) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and not later than 18
months after the effective date of the registration statement, make
available to the Agent an earnings statement (which need not be audited)
covering a period of at least 12 months beginning the first full month
after the effective date of such registration statement which earnings
statement shall satisfy the provisions of Rule 158 promulgated under the
Act.
(e) All expenses incurred in complying with Section 8(d) hereof,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities Dealers,
Inc.), printing expenses, fees and disbursements of counsel for the registrant,
the reasonable fees and expenses of counsel for the Agent,
8
<PAGE> 89
expenses of the independent certified public accountants (including any special
audits incident to or required by any such registration) and expenses of
complying with the securities or blue sky laws or any jurisdictions, shall be
paid by the Pledgor.
(f) If, at any time when the Agent shall determine to exercise its
rights to sell the whole or any part of the Pledged Collateral hereunder, such
Pledged Collateral or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Act, the Agent may, in its
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as the Agent may deem necessary or advisable, but subject to the
other requirements of this Section 8, and shall not be required to effect such
registration or to cause the same to be effected. Without limiting the
generality of the foregoing, in any such event the Agent in its discretion (i)
may, in accordance with applicable securities laws, proceed to make such private
sale notwithstanding that a registration statement for the purpose of
registering such Pledged Collateral or part thereof could be or shall have been
filed under the Act (or similar statute), (ii) may approach and negotiate with a
single possible purchaser to effect such sale and (iii) may restrict such sale
to a purchaser who will represent and agree that such purchaser is purchasing
for its own account, for investment and not with a view to the distribution or
sale of such Pledged Collateral or part thereof. In addition to a private sale
as provided above in this Section 8, if any of the Pledged Collateral shall not
be freely distributable to the public without registration under the Act (or
similar statute) at the time of any proposed sale pursuant to this Section 8,
then the Agent shall not be required to effect such registration or cause the
same to be effected but, in its discretion (subject only to applicable
requirements of law), may require that any sale hereunder (including a sale at
auction) be conducted subject to restrictions (A) as to the financial
sophistication and ability of any Person permitted to bid or purchase at any
such sale, (B) as to the content of legends to be placed upon any certificates
representing the Pledged Collateral sold in such sale, including restrictions on
future transfer thereof, (C) as to the representations required to be made by
each Person bidding or purchasing at such sale relating to that Person's access
to financial information about the Pledgor and such Person's intentions as to
the holding of the Pledged Collateral so sold for investment, for its own
account, and not with a view of the distribution thereof and (D) as to such
other matters as the Agent may, in its discretion, deem necessary or appropriate
in order that such sale (notwithstanding any failure so to register) may be
effected in compliance with the Uniform Commercial Code and other laws affecting
the enforcement of creditors' rights and the Act and all applicable state
securities laws.
(g) The Pledgor acknowledges that notwithstanding the legal
availability of a private sale or a sale subject to the restrictions described
above in paragraph (f), the Agent may, in its discretion, elect to register any
or all the Pledged Collateral under the Act (or any applicable state securities
law) in accordance with its rights hereunder. The Pledgor, however, recognizes
that the Agent may be unable to effect a public sale of any or all the Pledged
Collateral and may be compelled to resort to one or more private sales thereof.
The Pledgor also acknowledges any such private sale (conducted in a commercially
reasonable manner for private sales) may result in prices and other terms less
favorable to the seller than if such sale
9
<PAGE> 90
were a public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner. The Agent shall be under no obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to permit the registrant to
register such securities for public sale under the Act, or under applicable
state securities laws, even if the Pledgor or issuer of the Pledged Collateral
would agree to do so.
(h) The Pledgor agrees that following the occurrence an Event of
Default, it will not at any time plead, claim or take the benefit of any
appraisal, valuation, stay, extension, moratorium or redemption law now or
hereafter in force in order to prevent or delay the enforcement of this
Agreement, or the absolute sale of the whole or any part of the Pledged
Collateral or the possession thereof by any purchaser at any sale hereunder in
accordance with the terms hereof, and the Pledgor waives the benefit of all such
laws to the extent it lawfully may do so. The Pledgor agrees that it will not
interfere with any right, power and remedy of the Agent provided for in this
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise, or the exercise or beginning of the exercise by the Agent of any one
or more of such rights, powers, or remedies. No failure or delay on the part of
the Agent to exercise any such right, power or remedy and no notice or demand
which may be given to or made upon the Pledgor by the Agent with respect to any
such remedies shall operate as a waiver thereof, or limit or impair the Agent's
right to take any action or to exercise any power or remedy hereunder, without
notice or demand, or prejudice its rights as against the Pledgor in any respect.
(i) The Pledgor further agrees that a breach of any of the covenants
contained in this Section 8 will cause irreparable injury to the Agent, that the
Agent has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this Section 8
shall be specifically enforceable against the Pledgor.
(j) Without in any way limiting the provisions of this Section 8,
upon the occurrence and during the continuance of an Event of Default, the Agent
may exercise in addition to all other rights and remedies granted to it in this
Agreement and in the Credit Agreement, all rights and remedies of a secured
party under the Uniform Commercial Code.
Section 9. Application of Proceeds. Any cash held by the Agent as Pledged
Collateral and all cash proceeds received by the Agent in respect of any sale
of, liquidation of, or other realization upon all or any part of the Pledged
Collateral shall be applied by the Agent as follows:
(a) First, to the payment of the costs and expenses of such sale,
liquidation or other realization, including reasonable compensation to the Agent
and its agents and counsel, and all expenses, liabilities and advances made or
incurred by the Agent in connection therewith;
(b) Next, to the payment of the Secured Obligations; and
10
<PAGE> 91
(c) Finally, after payment in full of all Secured Obligations, to
the payment to the Pledgor, or its successors or assigns, or to whomsoever may
be lawfully entitled to receive the same or as a court of competent jurisdiction
may direct, of any surplus then remaining from such proceeds.
Section 10. Waiver. No delay on the Agent's part in exercising any power
of sale, Lien, option or other right hereunder, and no notice or demand which
may be given to or made upon the Pledgor by the Agent with respect to any power
of sale, Lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair the Agent's right to take any action or to exercise
any power of sale, Lien, option, or any other right hereunder, without notice or
demand, or prejudice the Agent's rights as against the Pledgor in any respect.
Section 11. Assignment. The Agent may assign, endorse or transfer any
instrument evidencing all or any part of the Secured Obligations as provided in,
and in accordance with, the Credit Agreement, and the holder of such instrument
shall be entitled to the benefits of this Agreement.
Section 12. Termination. Immediately following the Termination Date, the
Agent shall deliver to the Pledgor the Pledged Collateral subject to this
Agreement and all instruments of assignment executed in connection therewith,
free and clear of the Liens hereof, and any assignment required to be executed
by the Agent to effect such redelivery and, except as otherwise provided herein,
all of the Pledgor's obligations hereunder shall at such time terminate.
Section 13. Lien Absolute. All rights of the Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Credit Agreement,
the Revolving Credit Notes, any other Lender Agreement or any other agreement or
instrument governing or evidencing any Secured Obligations;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any part of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, the Revolving Credit Notes, any other Lender Agreement or any other
agreement or instrument governing or evidencing any Secured Obligations;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor.
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<PAGE> 92
Section 14. Release. The Pledgor consents and agrees that the Agent may at
any time, or from time to time, in its discretion (a) renew, extend or change
the time of payment, and/or the manner, place or terms of payment of all or any
part of the Secured Obligations and (b) exchange, release and/or surrender all
or any of the Pledged Collateral, or any part thereof, by whomsoever deposited,
which is now or may hereafter be held by the Agent in connection with all or any
of the Secured Obligations; all in such manner and upon such terms as the Agent
may deem proper, and without notice to or further assent from the Pledgor, it
being hereby agreed that the Pledgor shall be and remain bound upon this
Agreement, irrespective of the existence, value or condition of any of the
Pledged Collateral, and notwithstanding any such change, exchange, settlement,
compromise, surrender, release, renewal or extension, and notwithstanding also
that the Secured Obligations may, at any time exceed the aggregate principal
amount thereof set forth in the Credit Agreement, or any other agreement
governing any Secured Obligations. The Pledgor hereby waives notice of
acceptance of this Agreement, and also presentment, demand, protest and notice
of dishonor of any and all of the Secured Obligations, and promptness in
commencing suit against any party hereto or liable hereon, and in giving any
notice to or of making any claim or demand hereunder upon the Pledgor. No act or
omission of any kind on the Agent's part shall in any event affect or impair
this Agreement.
Section 15. Indemnification. The Pledgor agrees to indemnify the Agent and
its respective directors, officers, employees and agents and hold the Agent and
each such Person harmless from and against any and all losses, taxes,
liabilities, claims and damages, including reasonable attorneys' fees and
disbursements, and other expenses incurred or arising by reason of the taking or
the failure to take action by the Agent, in good faith, in respect of any
transaction effected under this Agreement, or in connection with the Lien
provided for herein, including, without limitation, any taxes payable in
connection with the delivery or registration of any of the Pledged Collateral as
provided herein (collectively "Indemnified Claims") or in connection with any
litigation, investigation or proceedings related to any of the foregoing.
Whether or not the transactions contemplated by this Agreement shall be
consummated, the Pledgor agrees to pay to the Agent all reasonable out-of-pocket
costs and expenses incurred in connection with this Agreement and all reasonable
fees, expenses and disbursements, and the reasonable fees of the Agent's agents
or representatives, incurred in connection with the execution and delivery of
this Agreement and the performance by the Agent of the provisions of this
Agreement and of any transactions effected in connection with this Agreement.
The obligations of the Pledgor under this Section 15 shall survive the
termination of this Agreement. The foregoing notwithstanding, the indemnity
provided for herein shall not apply to any Indemnified Claim of the Agent if a
court of competent jurisdiction determines that such Indemnified Claim is the
result of the gross negligence or willful misconduct of the Agent.
Section 16. Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
the Pledgor for liquidation or reorganization, should the Pledgor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of the
Pledgor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is,
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<PAGE> 93
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned, and in any such case, the Secured Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
Section 17. Miscellaneous.
(a) The Agent may execute any of its duties hereunder by or through
agents or employees and shall be entitled to advice of counsel concerning all
matters pertaining to its duties hereunder.
(b) The Pledgor agrees to promptly reimburse the Agent for actual
and reasonable out-of-pocket expenses, including, without limitation, reasonable
counsel fees, incurred by the Agent in connection with the administration and
enforcement of this Agreement.
(c) Neither the Agent nor any of its officers, directors, employees,
agents or counsel shall be liable for any action lawfully taken or omitted to be
taken by it or them hereunder or in connection herewith, except for its or their
own gross negligence or willful misconduct.
(d) This Agreement shall be binding upon the Pledgor and its
successors and assigns, and shall inure to the benefit of, and be enforceable
by, the Agent and its respective successors and assigns, and shall be governed
by, and construed and enforced in accordance with, the internal laws in effect
in the Commonwealth of Massachusetts without giving effect to principles of
choice of law, and none of the terms or provisions of this Agreement may be
waived, altered, modified or amended except in writing duly signed for and on
behalf of the Agent and the Pledgor.
(e) At any time and from time to time, upon written request of the
Agent, and at the sole expense of the Pledgor, the Pledgor shall promptly and
duly execute and deliver any and all such further instruments and documents and
take such further action as the Agent may reasonably deem desirable to obtain
the full benefits of this Agreement and of the rights and powers herein granted.
Section 18. Severability. If for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of or effect those portions of
this Agreement which are valid.
Section 19. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other a communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration
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<PAGE> 94
or other communication shall be in writing and either shall be delivered in
accordance with the provisions of Section 14.1 of the Credit Agreement,
addressed as follows:
(a) If to the Agent, at:
100 Federal Street
Boston, MA 02110
Attention: Christopher S. Allen, Director
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: Edward Matson Sibble, Jr., P.C.
(b) If to the Pledgor, at:
40 Hudson Road
Shawmut Park
Canton, MA 02021
Attention: Chief Financial Officer
with a copy to:
Goulston & Storrs, P.C.
400 Atlantic Avenue
Boston, MA 02110-3333
Attention: Kitt Sawitsky, Esq. or
Daniel Avery, Esq.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, on the date of telecopy transmission or three (3)
Business Days after the same shall have been deposited in the United States
mail, postage prepaid. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to the
persons designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
Section 20. Section Titles. The Section titles contained in this Agreement
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
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<PAGE> 95
Section 21. Counterparts. This Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one
agreement.
Section 22. Conflict of Terms. Except as otherwise explicitly provided in
this Agreement, if any provision contained in this Agreement is in conflict with
or inconsistent with any provision in the Credit Agreement, the provision
contained in the Credit Agreement shall govern and control, to the extent of
such conflict or inconsistency.
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<PAGE> 96
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Stock Pledge Agreement to be duly executed as of the date first written
above.
NEW ENGLAND AUDIO CO., INC.
By:
------------------------------
Name:
Title:
The undersigned hereby joins in the above Agreement for the sole purpose
of consenting to and being bound by the provisions of Sections 6, 7 and 8
thereof, the undersigned hereby agreeing to cooperate fully and in good faith
with the Agent and the Pledgor in carrying out such provisions.
NEA DELAWARE, INC.
By:
------------------------------
Name:
Title:
Accepted and Acknowledged by:
BANKBOSTON, N.A., as Agent
By:
--------------------------
Name:
Title:
16
<PAGE> 97
SCHEDULE I
to the Stock Pledge Agreement
Attached to and forming a part of that certain Stock Pledge Agreement
dated as of July __, 1998 by New England Audio Co., Inc. to BankBoston, N.A.
<TABLE>
<CAPTION>
Class of Certificate Number of
Issuer Stock No(s). Shares
------ -------- ----------- ---------
<S> <C> <C> <C>
</TABLE>
<PAGE> 98
SCHEDULE II
to the Stock Pledge Agreement
PLEDGE AMENDMENT
This Pledge Amendment, dated _______, is delivered pursuant to Section
6(d) of the Stock Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to that certain Stock Pledge
Agreement, dated as of July __, 1998 by the undersigned, as Pledgor, to
BankBoston, N.A., and that the Pledged Shares listed on this Pledge Amendment
shall be and become a part of the Pledged Collateral referred to in said Stock
Pledge Agreement and shall secure all Secured Obligations referred to in said
Stock Pledge Agreement.
NEW ENGLAND AUDIO CO., INC.
By:
------------------------------
Name:
Title:
<TABLE>
<CAPTION>
Class of Certificate Number of
Issuer Stock No(s). Shares
------ -------- ----------- ---------
<S> <C> <C> <C>
</TABLE>
<PAGE> 99
SCHEDULE III
to the Stock Pledge Agreement
SUBSIDIARIES OF PLEDGOR
<PAGE> 100
EXHIBIT E-2
FORM OF TWEETER STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of July 20, 1998, between TWEETER HOME
ENTERTAINMENT GROUP, INC., a Delaware corporation (the "Pledgor") and
BANKBOSTON, N.A., a national banking association, as Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the Pledgor is the record and beneficial owner of the shares
of stock and other equity and beneficial interests described on Schedule I
hereto (the "Pledged Shares") issued by the corporations and trusts named
therein; and
WHEREAS, the Pledgor, as guarantor, has entered into a Amended and
Restated Credit Agreement, dated as of July 20, 1998 (as at any time amended,
modified or supplemented, the "Credit Agreement") with New England Audio, Co.
Inc., a Massachusetts corporation ("New England Audio"), NEA Delaware, Inc., a
Delaware corporation ("NEA Delaware"), Tweeter Home Entertainment Group
Financing Company Trust, a Massachusetts business trust ("Tweeter Trust"), the
Agent and the other lenders parties thereto (the "Lenders"), pursuant to which
the Lenders have agreed to make Revolving Credit Advances (as defined in the
Credit Agreement) to New England Audio and NEA Delaware; and
WHEREAS, in connection with the granting of the credits under the
Credit Agreement and as security for all of the Lender Obligations of the
Pledgor under the Credit Agreement, the Agent is requiring that the Pledgor
execute and deliver this Stock Pledge Agreement and grant the security interest
contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Lenders to grant the credits under the
Credit Agreement, it is agreed as follows:
Section 1. Definitions. Unless otherwise defined herein, terms defined
in the Credit Agreement are used herein as therein defined, and the following
shall have the following respective meanings (such meanings being equally
applicable to both the singular and plural form of the terms defined):
"Act" shall have the meaning assigned to such term in Section 8(d)
hereof.
"Agreement" shall mean this Stock Pledge Agreement, including all
amendments, modifications and supplements and any exhibits or schedules to any
of the foregoing, and shall refer to the Agreement as the same may be in effect
at the time such reference becomes operative.
"Pledged Collateral" shall have the meaning assigned to such term in
Section 2 hereof.
<PAGE> 101
"Pledged Shares" shall have the meaning assigned to such term in the
first recital hereof.
"Secured Obligations" shall have the meaning assigned to such term in
Section 3 hereof.
"Termination Date" shall mean the date on which all Lender Obligations
have been paid in full and the Lenders shall have no further commitments to or
for the account of the Pledgor or any of its Subsidiaries under any Lender
Agreement.
Section 2. Pledge. The Pledgor hereby pledges and grants to the Agent a
first priority security interest in all of the following (the "Pledged
Collateral"), except as otherwise provided in Section 7(b):
(a) the Pledged Shares and the certificates representing the
Pledged Shares, and all dividends, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares;
(b) all additional shares of stock or other equity and
beneficial interests of any issuer of the Pledged Shares from time to time
acquired by the Pledgor in any manner (which shares shall be deemed to be part
of the Pledged Shares) and the certificates representing such shares, and all
dividends, cash, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such shares; and
(c) all shares of stock or other equity and beneficial
interests owned by the Pledgor of any Person other than the Real Estate
Subsidiary, if any, who, after the date of this Agreement, becomes, as a result
of any occurrence, a directly owned Subsidiary of the Pledgor (which shares
shall be deemed to be part of the Pledged Shares) and the certificates
representing such shares, and all dividends, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares.
Section 3. Security for Lender Obligations. This Agreement secures, and
the Pledged Collateral is security for, the prompt payment in full when due,
whether at stated maturity, by acceleration or otherwise, and performance of the
Lender Obligations, whether for principal, premium, interest, fees, costs and
expenses, and all obligations of the Pledgor now or hereafter existing under
this Agreement and under the Credit Agreement, and all other Indebtedness,
liabilities and obligations of the Pledgor to the Agent under any Lender
Agreement, whether now existing or hereafter incurred, whether arising under the
Credit Agreement or otherwise (collectively, the "Secured Obligations").
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Section 4. Delivery of Pledged Collateral. All certificates
representing or evidencing the Pledged Shares shall be delivered to and held by
or on behalf of the Agent pursuant hereto and shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to the Agent. If any Event of Default shall
occur and be continuing, subject to Section 7 hereof, the Agent shall have the
right, at any time in its discretion and without notice to the Pledgor, to
transfer to or to register in the name of the Agent or any of its nominees any
or all of the Pledged Shares. In addition, also subject to Section 7 hereof, the
Agent shall have the right at any time to exchange certificates or instruments
representing or evidencing Pledged Shares for certificates or instruments of
smaller or larger denominations.
Section 5. Representations and Warranties. The Pledgor represents and
warrants to the Agent that:
(a) The Pledgor is, and at the time of delivery of the Pledged
Shares to the Agent pursuant to Section 4 hereof will be, the sole holder of
record and the sole beneficial owner of the Pledged Collateral free and clear of
any Lien thereon or affecting the title thereto except for the Lien created by
this Agreement.
(b) All of the Pledged Shares have been duly authorized and
validly issued and all of the Pledged Shares representing shares of stock of
corporations are fully paid and non-assessable.
(c) The Pledgor has the right and requisite corporate authority
to pledge, assign, transfer, deliver, deposit and set over the Pledged
Collateral to the Agent, as provided herein.
(d) None of the Pledged Shares has been issued or transferred
in violation of the securities registration, securities disclosure or similar
laws of any jurisdiction to which such issuance or transfer may be subject.
(e) The authorized stock and other equity and beneficial
interests of each of the issuers listed on Schedule I hereto consists of the
number of shares of stock, with the number of shares issued and outstanding,
that are described on Schedule I hereto. As of the date hereof, there are no
existing options, warrants, calls or commitments of any character whatsoever
relating to any stock or other equity and beneficial interests of any of such
issuers.
(f) No consent, approval, authorization or other order of any
Person and no consent, authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required either (i) for the pledge of the Pledged Collateral pursuant to this
Agreement or for the execution, delivery or performance of this Agreement by the
Pledgor or (ii) for the exercise by the Agent of the voting or other rights
provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to
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<PAGE> 103
this Agreement including any disposition thereof, except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally.
(g) The pledge, assignment and delivery of the Pledged
Collateral pursuant to this Agreement will create a valid first priority Lien on
and a first priority perfected security interest in the Pledged Collateral, and
the proceeds thereof, securing the payment of the Secured Obligations.
(h) This Agreement has been duly authorized, executed and
delivered by the Pledgor and constitutes a legal, valid and binding obligation
of the Pledgor enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally, and except as the remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
(i) The Pledged Shares constitute one hundred percent (100%) of
the issued and outstanding shares of stock or other equity and beneficial
interests of the issuers thereof.
(j) The Subsidiaries listed on Schedule III hereto are the only
Subsidiaries of the Pledgor.
The representations and warranties set forth in this Section 5 shall
survive the execution and delivery of this Agreement.
Section 6. Covenants. The Pledgor covenants and agrees that until the
Termination Date:
(a) Without the prior written consent of the Agent, the Pledgor
will not sell, assign, transfer, pledge, grant a Lien with respect to or
otherwise encumber any of its rights in or to the Pledged Collateral or any
unpaid dividends or other distributions or payments with respect thereto except
as otherwise permitted by the Credit Agreement.
(b) The Pledgor will, at its expense, promptly execute,
acknowledge and deliver all such instruments and take all such action as the
Agent from time to time may reasonably request in order to ensure to the Agent
the benefits of the Liens in and to the Pledged Collateral intended to be
created by this Agreement.
(c) The Pledgor will defend the title to the Pledged Collateral
and the Liens of the Agent thereon against the claim of any other Person and
will maintain and preserve such Liens until the Termination Date.
(d) The Pledgor will, upon obtaining any additional shares of
any Subsidiaries other than the Real Estate Subsidiary, if any, which shares are
not already Pledged Collateral, promptly (and in any event within three (3)
Business Days) deliver to the Agent a Pledge
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<PAGE> 104
Amendment, duly executed by the Pledgor, in substantially the form of Schedule
II hereto (a "Pledge Amendment"), in respect of the additional Pledged Shares
which are to be pledged pursuant to this Agreement. The Pledgor hereby
authorizes the Agent to attach each such Pledge Amendment to this Agreement and
agrees that all Pledged Shares listed on any Pledge Amendment delivered to the
Agent shall for all purposes hereunder be considered Pledged Collateral.
Section 7. Pledgor's Rights. As long as no Default or Event of Default
shall have occurred and be continuing:
(a) The Pledgor shall have the right, from time to time, to
vote and give consents with respect to the Pledged Collateral or any part
thereof for all purposes not inconsistent with the provisions of this Agreement,
the Credit Agreement and any other Lender Agreement; provided, however, that no
vote shall be cast, and no consent shall be given or action taken, which would
have the effect of impairing the position or interest of the Agent in respect of
the Pledged Collateral or which would authorize or effect (except as and to the
extent expressly permitted by the Credit Agreement) (i) the dissolution or
liquidation, in whole or in part, of any of the Subsidiaries, (ii) the
consolidation or merger of any of the Subsidiaries with any other Person, (iii)
the sale, disposition or encumbrance of all or substantially all of the assets
of any of the Subsidiaries, (iv) any change in the authorized number of shares,
the stated capital or the authorized share capital of any of the Subsidiaries or
the issuance of any additional shares of its stock, or (v) the alteration of the
voting rights with respect to the stock of any of the Subsidiaries.
(b) (i) the Pledgor shall be entitled, from time to time, to
collect and receive for its own use all cash dividends paid in respect
of the Pledged Shares to the extent not in violation of the Credit
Agreement other than any and all (A) dividends paid or payable other
than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral, (B) dividends and other
distributions paid or payable in cash in respect of any Pledged
Collateral in connection with a partial or total liquidation or
dissolution and (C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral; provided,
however, that until actually paid all rights to such dividends shall
remain subject to the Lien created by this Agreement; and
(ii) all dividends (other than such cash dividends as are
permitted to be paid to the Pledgor in accordance with clause (i)
above) and all other distributions in respect of any of the Pledged
Shares, whenever paid or made, shall be delivered to the Agent to hold
as Pledged Collateral and shall, if received by the Pledgor, be
received in trust for the benefit of the Agent, be segregated from the
other property or funds of the Pledgor, and be forthwith delivered to
the Agent as Pledged Collateral in the same form as so received (with
any necessary endorsement).
Section 8. Defaults and Remedies.
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<PAGE> 105
(a) Upon the occurrence and during the continuance of an Event
of Default (provided that such Event of Default is not waived in accordance with
the terms of the Credit Agreement), the Agent (personally or through an agent)
is hereby authorized and empowered, to transfer and register in its name or in
the name of its nominee the whole or any part of the Pledged Collateral, to
exercise the voting rights with respect thereto, to collect and receive all cash
dividends and other distributions made thereon, to sell in one or more sales
after ten (10) days' notice of the time and place of any public sale or of the
time after which a private sale is to take place (which notice the Pledgor
agrees is commercially reasonable), but without any previous notice or
advertisement, the whole or any part of the Pledged Collateral and to otherwise
act and to exercise any and all rights with respect to the Pledged Collateral as
though the Agent was the outright owner thereof, the Pledgor hereby irrevocably
constituting and appointing the Agent as the proxy and attorney-in-fact of the
Pledgor, with full power of substitution to do so; provided, however, that the
Agent shall not have any duty to exercise any such right or to preserve the same
and shall not be liable for any failure to do so or for any delay in doing so.
Any sale shall be made at a public or private sale at the Agent's place of
business, or at any public building in the City of Boston, Massachusetts or
elsewhere to be named in the notice of sale, either for cash or upon credit or
for future delivery at such price as the Agent may deem fair, and the Agent may
be the purchaser of the whole or any part of the Pledged Collateral so sold and
hold the same thereafter in its own right free from any claim of the Pledgor or
any right of redemption. Each sale shall be made to the highest bidder, but the
Agent reserves the right to reject any and all bids at such sale which, in its
discretion, it shall reasonably deem inadequate. Demands of performance, except
as otherwise herein specifically provided for, notices of sale, advertisements
and the presence of property at sale are hereby waived and any sale hereunder
may be conducted by an auctioneer or any officer or agent of the Agent.
(b) If, at the original time or times appointed for the sale
of the whole or any part of the Pledged Collateral, the highest bid, if there be
but one sale, shall be inadequate to discharge in full all the Secured
Obligations, or if the Pledged Collateral be offered for sale in lots, if at any
of such sales, the highest bid for the lot offered for sale would indicate to
the Agent, in its reasonable discretion, the unlikelihood of the proceeds of the
sales of the whole of the Pledged Collateral being sufficient to discharge all
the Secured Obligations, the Agent may, on one or more occasions and in its
reasonable discretion, postpone any of said sales by public announcement at the
time of sale or the time of previous postponement of sale, and no other notice
of such postponement or postponements of sale need be given, any other notice
being hereby waived; provided, however, that any sale or sales made after such
postponement shall be after ten (10) days' notice to the Pledgor.
(c) In the event of any sales hereunder, the Agent shall,
after deducting all reasonable costs or expenses of every kind (including
reasonable attorneys' fees and disbursements) for care, safekeeping, collection,
sale, delivery or otherwise, apply the residue of the proceeds of the sales to
the payment or reduction, either in whole or in part, of the Secured Obligations
in accordance with the agreements and instruments governing and evidencing the
Secured Obligations, returning the surplus, if any, to the Pledgor.
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<PAGE> 106
(d) If, at any time when the Agent in its reasonable
discretion determines, following the occurrence and during the continuance, of
an Event of Default, that, in connection with any actual or contemplated
exercise of its rights (when permitted under this Section 8) to sell the whole
or any part of the Pledged Collateral hereunder, it is necessary or advisable to
effect a public registration of all or part of the Pledged Collateral pursuant
to the Securities Act of 1933, as amended (or any similar statute then in
effect) (the "Act"), the Pledgor shall, in an expeditious manner, cause each of
its Subsidiaries other than the Real Estate Subsidiary, if any, to:
(i) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to
the Pledged Collateral and use its best efforts to cause such
registration statement to become and remain effective;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Act with
respect to the sale or other disposition of the Pledged Collateral
covered by such registration statement whenever the Agent shall desire
to sell or otherwise dispose of the Pledged Collateral;
(iii) furnish to the Agent such numbers of copies of a
prospectus and a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as the Agent may
reasonably request in order to facilitate the public sale or other
disposition of the Pledged Collateral by the Agent;
(iv) use its best efforts to register or qualify the
Pledged Collateral covered by such registration statement under such
other securities or blue sky laws of such jurisdictions within the
United States as the Agent shall reasonably request, and do such other
reasonable acts and things as may be required of it to enable the Agent
to consummate the public sale or other disposition in such
jurisdictions of the Pledged Collateral by the Agent;
(v) use its best efforts to furnish, at the reasonable
request of the Agent, on the date that shares of the Pledged Collateral
are delivered to the underwriters for sale pursuant to such
registration or, if the security is not being sold through
underwriters, on the date that the registration statement with respect
to such shares of the Pledged Collateral becomes effective, (A) an
opinion, dated such date, of the outside counsel representing such
registrant for the purposes of such registration, addressed to the
underwriters, if any, and in the event the Pledged Collateral is not
being sold through underwriters, then to the Agent, stating that such
registration statement has become effective under the Act and that (1)
to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Act, (2) the registration statement, the related prospectus, and each
amendment or
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supplement thereto, comply as to form in all material respects with the
requirements of the Act and the applicable rules and regulations of the
Commission thereunder (except that such counsel need express no opinion
as to financial statements or other financial or statistical data
contained therein), (3) such counsel has no reason to believe that
either the registration statement or the prospectus, or any amendment
or supplement thereto, contains any untrue statement of a material fact
or omits a material fact required to be stated therein or necessary to
make the statements therein not misleading, (4) the descriptions in the
registration statement or the prospectus, or any amendment or
supplement thereto, of all legal matters and contracts and other legal
documents or instruments are accurate in all material respects and
fairly present the information required to be shown and (5) such
counsel does not know of any legal or governmental proceedings, pending
or threatened, required to be described in the registration statement
or prospectus, or any amendment or supplement thereto, or to be filed
as exhibits to the registration statement which are not described and
filed or incorporated by reference as required; and (B) a letter, dated
such date, from the independent certified public accountants of such
registrant, addressed to the underwriters, if any, and in the event the
Pledged Collateral is not being sold through underwriters, then to the
Agent, stating that they are independent certified public accountants
within the meaning of the Act and that, in the opinion of such
accountants, the financial statements and other financial data of such
registrant included in the registration statement or the prospectus, or
any amendment or supplement thereto, comply as to form in all material
respects with the applicable accounting requirements of the Act. The
opinion of counsel referred to above shall additionally cover such
other legal matters with respect to the registration in respect of
which such opinion is being given as the Agent may reasonably request.
The letter referred to above from the independent certified public
accountants shall additionally cover such other financial matters
(including information as to the period ending not more than five (5)
Business Days prior to the date of such letter) with respect to the
registration in respect of which such letter is being given as the
Agent may reasonably request; and
(vi) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and not later than
18 months after the effective date of the registration statement, make
available to the Agent an earnings statement (which need not be
audited) covering a period of at least 12 months beginning the first
full month after the effective date of such registration statement
which earnings statement shall satisfy the provisions of Rule 158
promulgated under the Act.
(e) All expenses incurred in complying with Section 8(d)
hereof, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National Association of
Securities Dealers, Inc.), printing expenses, fees and disbursements of counsel
for the registrant, the reasonable fees and expenses of counsel for the Agent,
expenses of the independent certified public accountants (including any special
audits incident to or required by any such registration) and expenses of
complying with the securities or blue sky laws or any jurisdictions, shall be
paid by the Pledgor.
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(f) If, at any time when the Agent shall determine to exercise
its rights to sell the whole or any part of the Pledged Collateral hereunder,
such Pledged Collateral or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Act, the Agent may, in its
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as the Agent may deem necessary or advisable, but subject to the
other requirements of this Section 8, and shall not be required to effect such
registration or to cause the same to be effected. Without limiting the
generality of the foregoing, in any such event the Agent in its discretion (i)
may, in accordance with applicable securities laws, proceed to make such private
sale notwithstanding that a registration statement for the purpose of
registering such Pledged Collateral or part thereof could be or shall have been
filed under the Act (or similar statute), (ii) may approach and negotiate with a
single possible purchaser to effect such sale and (iii) may restrict such sale
to a purchaser who will represent and agree that such purchaser is purchasing
for its own account, for investment and not with a view to the distribution or
sale of such Pledged Collateral or part thereof. In addition to a private sale
as provided above in this Section 8, if any of the Pledged Collateral shall not
be freely distributable to the public without registration under the Act (or
similar statute) at the time of any proposed sale pursuant to this Section 8,
then the Agent shall not be required to effect such registration or cause the
same to be effected but, in its discretion (subject only to applicable
requirements of law), may require that any sale hereunder (including a sale at
auction) be conducted subject to restrictions (A) as to the financial
sophistication and ability of any Person permitted to bid or purchase at any
such sale, (B) as to the content of legends to be placed upon any certificates
representing the Pledged Collateral sold in such sale, including restrictions on
future transfer thereof, (C) as to the representations required to be made by
each Person bidding or purchasing at such sale relating to that Person's access
to financial information about the Pledgor and such Person's intentions as to
the holding of the Pledged Collateral so sold for investment, for its own
account, and not with a view of the distribution thereof and (D) as to such
other matters as the Agent may, in its discretion, deem necessary or appropriate
in order that such sale (notwithstanding any failure so to register) may be
effected in compliance with the Uniform Commercial Code and other laws affecting
the enforcement of creditors' rights and the Act and all applicable state
securities laws.
(g) The Pledgor acknowledges that notwithstanding the legal
availability of a private sale or a sale subject to the restrictions described
above in paragraph (f), the Agent may, in its discretion, elect to register any
or all the Pledged Collateral under the Act (or any applicable state securities
law) in accordance with its rights hereunder. The Pledgor, however, recognizes
that the Agent may be unable to effect a public sale of any or all the Pledged
Collateral and may be compelled to resort to one or more private sales thereof.
The Pledgor also acknowledges any such private sale (conducted in a commercially
reasonable manner for private sales) may result in prices and other terms less
favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Agent shall be
under no obligation to delay a sale of any of the Pledged Collateral for the
period of time necessary to permit the registrant to register such securities
for public sale under the Act, or
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under applicable state securities laws, even if the Pledgor or issuer of the
Pledged Collateral would agree to do so.
(h) The Pledgor agrees that following the occurrence an Event
of Default, it will not at any time plead, claim or take the benefit of any
appraisal, valuation, stay, extension, moratorium or redemption law now or
hereafter in force in order to prevent or delay the enforcement of this
Agreement, or the absolute sale of the whole or any part of the Pledged
Collateral or the possession thereof by any purchaser at any sale hereunder in
accordance with the terms hereof, and the Pledgor waives the benefit of all such
laws to the extent it lawfully may do so. The Pledgor agrees that it will not
interfere with any right, power and remedy of the Agent provided for in this
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise, or the exercise or beginning of the exercise by the Agent of any one
or more of such rights, powers, or remedies. No failure or delay on the part of
the Agent to exercise any such right, power or remedy and no notice or demand
which may be given to or made upon the Pledgor by the Agent with respect to any
such remedies shall operate as a waiver thereof, or limit or impair the Agent's
right to take any action or to exercise any power or remedy hereunder, without
notice or demand, or prejudice its rights as against the Pledgor in any respect.
(i) The Pledgor further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to the
Agent, that the Agent has no adequate remedy at law in respect of such breach
and, as a consequence, agrees that each and every covenant contained in this
Section 8 shall be specifically enforceable against the Pledgor.
(j) Without in any way limiting the provisions of this Section
8, upon the occurrence and during the continuance of an Event of Default, the
Agent may exercise in addition to all other rights and remedies granted to it in
this Agreement and in the Credit Agreement, all rights and remedies of a secured
party under the Uniform Commercial Code.
Section 9. Application of Proceeds. Any cash held by the Agent as
Pledged Collateral and all cash proceeds received by the Agent in respect of any
sale of, liquidation of, or other realization upon all or any part of the
Pledged Collateral shall be applied by the Agent as follows:
(a) First, to the payment of the costs and expenses of such
sale, liquidation or other realization, including reasonable compensation to the
Agent and its agents and counsel, and all expenses, liabilities and advances
made or incurred by the Agent in connection therewith;
(b) Next, to the payment of the Secured Obligations; and
(c) Finally, after payment in full of all Secured Obligations,
to the payment to the Pledgor, or its successors or assigns, or to whomsoever
may be lawfully entitled to receive
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the same or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
Section 10. Waiver. No delay on the Agent's part in exercising any
power of sale, Lien, option or other right hereunder, and no notice or demand
which may be given to or made upon the Pledgor by the Agent with respect to any
power of sale, Lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair the Agent's right to take any action or to exercise
any power of sale, Lien, option, or any other right hereunder, without notice or
demand, or prejudice the Agent's rights as against the Pledgor in any respect.
Section 11. Assignment. The Agent may assign, endorse or transfer any
instrument evidencing all or any part of the Secured Obligations as provided in,
and in accordance with, the Credit Agreement, and the holder of such instrument
shall be entitled to the benefits of this Agreement.
Section 12. Termination. Immediately following the Termination Date,
the Agent shall deliver to the Pledgor the Pledged Collateral subject to this
Agreement and all instruments of assignment executed in connection therewith,
free and clear of the Liens hereof, and any assignment required to be executed
by the Agent to effect such redelivery and, except as otherwise provided herein,
all of the Pledgor's obligations hereunder shall at such time terminate.
Section 13. Lien Absolute. All rights of the Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Credit
Agreement, the Revolving Credit Notes, any other Lender Agreement or any other
agreement or instrument governing or evidencing any Secured Obligations;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any part of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, the Revolving Credit Notes, any other Lender Agreement or any other
agreement or instrument governing or evidencing any Secured Obligations;
(c) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor.
Section 14. Release. The Pledgor consents and agrees that the Agent may
at any time, or from time to time, in its discretion (a) renew, extend or change
the time of payment,
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and/or the manner, place or terms of payment of all or any part of the Secured
Obligations and (b) exchange, release and/or surrender all or any of the Pledged
Collateral, or any part thereof, by whomsoever deposited, which is now or may
hereafter be held by the Agent in connection with all or any of the Secured
Obligations; all in such manner and upon such terms as the Agent may deem
proper, and without notice to or further assent from the Pledgor, it being
hereby agreed that the Pledgor shall be and remain bound upon this Agreement,
irrespective of the existence, value or condition of any of the Pledged
Collateral, and notwithstanding any such change, exchange, settlement,
compromise, surrender, release, renewal or extension, and notwithstanding also
that the Secured Obligations may, at any time exceed the aggregate principal
amount thereof set forth in the Credit Agreement, or any other agreement
governing any Secured Obligations. The Pledgor hereby waives notice of
acceptance of this Agreement, and also presentment, demand, protest and notice
of dishonor of any and all of the Secured Obligations, and promptness in
commencing suit against any party hereto or liable hereon, and in giving any
notice to or of making any claim or demand hereunder upon the Pledgor. No act or
omission of any kind on the Agent's part shall in any event affect or impair
this Agreement.
Section 15. Indemnification. The Pledgor agrees to indemnify the Agent
and its respective directors, officers, employees and agents and hold the Agent
and each such Person harmless from and against any and all losses, taxes,
liabilities, claims and damages, including reasonable attorneys' fees and
disbursements, and other expenses incurred or arising by reason of the taking or
the failure to take action by the Agent, in good faith, in respect of any
transaction effected under this Agreement, or in connection with the Lien
provided for herein, including, without limitation, any taxes payable in
connection with the delivery or registration of any of the Pledged Collateral as
provided herein (collectively "Indemnified Claims") or in connection with any
litigation, investigation or proceedings related to any of the foregoing.
Whether or not the transactions contemplated by this Agreement shall be
consummated, the Pledgor agrees to pay to the Agent all reasonable out-of-pocket
costs and expenses incurred in connection with this Agreement and all reasonable
fees, expenses and disbursements, and the reasonable fees of the Agent's agents
or representatives, incurred in connection with the execution and delivery of
this Agreement and the performance by the Agent of the provisions of this
Agreement and of any transactions effected in connection with this Agreement.
The obligations of the Pledgor under this Section 15 shall survive the
termination of this Agreement. The foregoing notwithstanding, the indemnity
provided for herein shall not apply to any Indemnified Claim of the Agent if a
court of competent jurisdiction determines that such Indemnified Claim is the
result of the gross negligence or willful misconduct of the Agent.
Section 16. Reinstatement. This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against the Pledgor for liquidation or reorganization, should the Pledgor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of the
Pledgor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or
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returned, and in any such case, the Secured Obligations shall be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.
Section 17. Miscellaneous.
(a) The Agent may execute any of its duties hereunder by or
through agents or employees and shall be entitled to advice of counsel
concerning all matters pertaining to its duties hereunder.
(b) The Pledgor agrees to promptly reimburse the Agent for
actual and reasonable out-of-pocket expenses, including, without limitation,
reasonable counsel fees, incurred by the Agent in connection with the
administration and enforcement of this Agreement.
(c) Neither the Agent nor any of its officers, directors,
employees, agents or counsel shall be liable for any action lawfully taken or
omitted to be taken by it or them hereunder or in connection herewith, except
for its or their own gross negligence or willful misconduct.
(d) This Agreement shall be binding upon the Pledgor and its
successors and assigns, and shall inure to the benefit of, and be enforceable
by, the Agent and its respective successors and assigns, and shall be governed
by, and construed and enforced in accordance with, the internal laws in effect
in the Commonwealth of Massachusetts without giving effect to principles of
choice of law, and none of the terms or provisions of this Agreement may be
waived, altered, modified or amended except in writing duly signed for and on
behalf of the Agent and the Pledgor.
(e) At any time and from time to time, upon written request of
the Agent, and at the sole expense of the Pledgor, the Pledgor shall promptly
and duly execute and deliver any and all such further instruments and documents
and take such further action as the Agent may reasonably deem desirable to
obtain the full benefits of this Agreement and of the rights and powers herein
granted.
Section 18. Severability. If for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of or effect those portions of
this Agreement which are valid.
Section 19. Notices. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give or serve upon any other a communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in accordance
with the provisions of Section 14.1 of the Credit Agreement, addressed as
follows:
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(a) If to the Agent, at:
100 Federal Street
Boston, MA 02110
Attention: Christopher S. Allen, Director
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: Edward Matson Sibble, Jr., P.C.
(b) If to the Pledgor, at:
40 Hudson Road
Shawmut Park
Canton, MA 02021
Attention: Chief Financial Officer
with a copy to:
Goulston & Storrs, P.C.
400 Atlantic Avenue
Boston, MA 02110-3333
Attention: Kitt Sawitsky, Esq. or
Daniel Avery, Esq.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, on the date of telecopy transmission or three (3)
Business Days after the same shall have been deposited in the United States
mail, postage prepaid. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to the
persons designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
Section 20. Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
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<PAGE> 114
Section 21. Counterparts. This Agreement may be executed in any number
of counterparts, which shall, collectively and separately, constitute one
agreement.
Section 22. Conflict of Terms. Except as otherwise explicitly provided
in this Agreement, if any provision contained in this Agreement is in conflict
with or inconsistent with any provision in the Credit Agreement, the provision
contained in the Credit Agreement shall govern and control, to the extent of
such conflict or inconsistency.
[INTENTIONALLY LEFT BLANK]
15
<PAGE> 115
IN WITNESS WHEREOF, the parties hereto have caused this Stock Pledge
Agreement to be duly executed as of the date first written above.
TWEETER HOME ENTERTAINMENT
GROUP, INC.
By:
--------------------------------
Name:
Title:
The undersigned hereby join in the above Agreement for the sole purpose
of consenting to and being bound by the provisions of Sections 6, 7 and 8
thereof, the undersigned hereby agreeing to cooperate fully and in good faith
with the Agent and the Pledgor in carrying out such provisions.
NEW ENGLAND AUDIO CO., INC. TWEETER HOME ENTERTAINMENT
GROUP FINANCING COMPANY
TRUST
By: By:
------------------------- -------------------------------
Name: Trustee:
Title:
Accepted and Acknowledged by:
BANKBOSTON, N.A.
By:
--------------------------
Name:
Title:
16
<PAGE> 116
SCHEDULE I
to the Stock Pledge Agreement
Attached to and forming a part of that certain Stock Pledge Agreement
dated as of July __, 1998 by Tweeter Home Entertainment Group, Inc. to
BankBoston, N.A.
Class of Certificate Number of
Issuer Stock No(s). Shares
------ ----- ------ ------
<PAGE> 117
SCHEDULE II
to the Stock Pledge Agreement
PLEDGE AMENDMENT
This Pledge Amendment, dated _______, is delivered pursuant to Section
6(d) of the Stock Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to that certain Stock Pledge
Agreement, dated as of July __, 1998 by the undersigned, as Pledgor, to
BankBoston, N.A., and that the Pledged Shares listed on this Pledge Amendment
shall be and become a part of the Pledged Collateral referred to in said Stock
Pledge Agreement and shall secure all Secured Obligations referred to in said
Stock Pledge Agreement.
TWEETER HOME ENTERTAINMENT
GROUP, INC.
By:___________________________
Name:
Title:
Class of Certificate Number of
Issuer Stock No(s). Shares
------ ----- ------ ------
<PAGE> 118
SCHEDULE III
to the Stock Pledge Agreement
SUBSIDIARIES OF PLEDGOR
<PAGE> 119
EXHIBIT F-1
FORM OF AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT dated as of July 20, 1998
between NEW ENGLAND AUDIO CO., INC., a Massachusetts corporation ("New England
Audio"), NEA DELAWARE, INC., a Delaware corporation ("NEA Delaware") (each of
New England Audio and NEA Delaware is referred to herein individually, as a
"Debtor" and collectively, as the "Debtors") and BANKBOSTON, N.A., a national
banking association, as agent (the "Agent") for itself and the other lenders
which are, or may in the future become, parties to the Credit Agreement (as
hereinafter defined).
Recitals
WHEREAS, the Debtors have entered into an Amended and Restated Credit
Agreement, dated as of July 20, 1998 (as amended, modified or supplemented from
time to time, the "Credit Agreement") with the Agent and the other lenders
parties thereto (the "Lenders"), pursuant to which the Lenders have agreed to
make Revolving Credit Advances (as defined in the Credit Agreement) to the
Debtors, upon the terms and subject to the conditions contained therein; and
WHEREAS, in connection with the granting of the credits under the
Credit Agreement and as security for all of the Obligations, including without
limitation the obligations of the Debtors under the Credit Agreement, the Agent
is requiring the Debtors to execute and deliver this Security Agreement and
grant the security interest contemplated hereby.
WHEREAS, the Debtors and the Agent are parties to a Security Agreement
dated as of May 30, 1997 (the "Security Agreement") and desire to amend and
restate the Security Agreement in connection with the Credit Agreement.
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby amend and restate the
Security Agreement and agree as follows:
ARTICLE 1. GRANT OF SECURITY
Section 1.1 Grant of Security. Each Debtor hereby grants to the Agent a
continuing security interest ("Security Interest") in and to all personal
property and fixtures of each Debtor, whether now or hereafter existing or now
or hereafter acquired and wherever located, including all equipment, accounts,
inventory and general intangibles, all as more fully described as follows (the
"Collateral"):
(a) All money, cash, bank accounts, deposit accounts, goods,
inventory, equipment, computer hardware and software, instruments, securities,
documents, documents of title, chattel paper, accounts, accounts receivable,
lease receivables and leases including but
<PAGE> 120
not limited to, rights to rentals thereunder and each Debtor's reversionary
interest in property leased thereunder and any equity rights in leases sold to
third parties, contract rights, licenses, general intangibles, copyrights,
patents and patents pending, trademarks and goodwill, Trade Secrets, credits,
claims, demands and all other property of the Debtors (including but not limited
to leasehold improvements);
(b) All equipment, including without limitation all fixtures,
machinery, equipment, molds, dies, motor vehicles, and other goods whether now
owned or hereafter acquired by any Debtor, wherever located, all replacements,
substitutions and all parts thereof and all accessions thereto, as well as all
of each Debtor's right, title and interest in and to any such goods now or
hereafter held or used by any Debtor under any lease, lease-purchase,
conditional sales, use or other agreements under which any Debtor is entitled to
the use and possession thereof, with any other rights and benefits flowing from
such agreements, all as may be used or useful in connection with each Debtor's
business as now or hereafter carried on, any operations incidental to or
associated with the same, or for any other purpose (any and all such equipment,
machinery and fixtures, parts and accessions being the "Equipment");
(c) All inventory in all of its forms, wherever located, now
or hereafter existing including, but not limited to (i) raw materials and work
in process therefor, finished goods thereof and (ii) goods which are returned to
or repossessed by any Debtor and all accessions thereto and products thereof
(any and all such inventory, accessions and products being the "Inventory");
(d) All accounts receivable, including without limitation
accounts, contracts (but only to the extent assignable without causing a Default
under the Credit Agreement), contract rights, chattel paper, instruments,
licenses and other obligations of any kind whether now existing or hereafter
arising, including without limitation all rights now or hereafter existing in
and to all security agreements, leases, and other contracts securing or
otherwise relating to any such accounts, contract rights, chattel paper,
instruments, general intangibles or obligations (any and all such accounts,
contract rights, chattel paper, instruments, general intangibles and obligations
being the "Receivables," and any and all such leases, security agreements and
other contracts being the "Contracts");
(e) All general intangibles including without limitation,
tradenames, trademarks, service marks, tax refunds, the corporate name and all
product names; and
(f) All products and proceeds of any and all of the foregoing
Collateral and, to the extent not otherwise included, all payments under
insurance (whether or not the Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.
Section 1.2 Security for Obligations. This Agreement and the Security
Interest shall secure the payment and performance of the Obligations.
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ARTICLE 2
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Debtor represents, warrants and covenants, which representations,
warranties and covenants shall survive execution and delivery of this Agreement,
as follows:
Section 2.1 Necessary Filings. All filings, registrations and
recordings necessary or appropriate to create, preserve and perfect the security
interest granted by each Debtor to the Agent hereby in respect of the Collateral
have been accomplished and the security interest granted to the Agent pursuant
to this Agreement in and to the Collateral constitutes, upon satisfaction of
such filings, registrations and recordings, a perfected security interest
therein (to the extent that the same can be perfected by filing, registration or
recording) prior to the rights of all other Persons therein (other than any such
rights pursuant to Liens permitted by Section 9.2 of the Credit Agreement
("Permitted Liens")) and subject to no other Liens (other than Permitted Liens)
and is entitled to all the rights, priorities and benefits afforded by the
Uniform Commercial Code to perfected security interests.
Section 2.2 No Liens. Each Debtor is, and as to Collateral acquired by
it from time to time after the date hereof each such Debtor will be, the owner
of all Collateral pledged by it hereunder free from any Lien, security interest,
encumbrance or other right, title or interest of any Person (other than
Permitted Liens), and each such Debtor shall defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any interest
therein (other than in connection with Permitted Liens) adverse to the Agent.
Section 2.3 Other Financing Statements. As of the date hereof, there is
no financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral (other than financing statements filed in respect of
Permitted Liens), and so long as any Lender Obligations or commitments with
respect thereto are outstanding, no Debtor will execute or authorize to be filed
in any public office any financing statement (or similar statement or instrument
of registration under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in respect of and
covering the security interests granted hereby by such Debtors or in connection
with Permitted Liens.
Section 2.4 Chief Executive Office; Records. As of the date hereof, the
chief executive office of each such Debtor is located at the address indicated
on Exhibit A hereto. No Debtor will move its chief executive office except to
such new location as any Debtor may establish in accordance with the last
sentence of this Section 2.4. A complete set of books of account and records of
each Debtor relating to the Receivables and the Contract Rights are, and will
continue to be, kept at such chief executive office, at one or more of the other
record locations set forth on Exhibit A hereto for each such Debtor or at such
new locations as each Debtor may establish in accordance with the last sentence
of this Section 2.4. All Receivables
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<PAGE> 122
and Contract Rights of each Debtor are, and will continue to be, maintained at,
and controlled and directed (including, without limitation, for general
accounting purposes) from, the office locations described above or such new
location established in accordance with the last sentence of this Section 2.4.
No Debtor shall establish new locations for such offices until (a) it shall have
given to the Agent not less than ten (10) days' prior written notice of its
intention to do so, clearly describing such new location and providing such
other information in connection therewith as the Agent may reasonably request
and (b) with respect to such new location, it shall have taken all action
reasonably satisfactory to the Agent, to maintain the security interest of the
Agent in the Collateral intended to be granted hereby at all times fully
perfected and in full force and effect.
Section 2.5 Location of Inventory and Equipment. As of the date hereof,
all Inventory and Equipment held by each Debtor is located at one of the
locations shown on Exhibit B hereto for each Debtor. Each Debtor agrees that all
Inventory and Equipment now held or subsequently acquired by it shall be kept at
(or shall be in transport to) any one of the locations shown on Exhibit B
hereto, or such new location as any Debtor may establish in accordance with the
last sentence of this Section 2.5. A Debtor may establish a new location for
Inventory and Equipment only if (a) it shall have given to the Agent not less
than ten (10) days' prior written notice of its intention so to do, clearly
describing such new location and providing such other information in connection
therewith as the Agent may reasonably request and (b) with respect to such new
location, it shall have taken all action reasonably satisfactory to the Agent to
maintain the security interest of the Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect.
Section 2.6 Recourse. This Agreement is made with full recourse to each
Debtor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of each Debtor contained herein, in the other Lender
Agreements and otherwise in writing in connection herewith or therewith.
Section 2.7 Trade Names; Change of Name. As of the date hereof, no
Debtor operates in any jurisdiction under, or in the preceding 12 months has not
operated in any jurisdiction under, any trade names, fictitious names or other
names except its legal name and except as disclosed on Exhibit F hereto. No
Debtor shall change its legal name or assume or operate in any jurisdiction
under any trade, fictitious or other name except as established in accordance
with the last sentence of this Section 2.7. Each Debtor shall not assume or
operate in any jurisdiction under any new trade, fictitious or other name until
(a) it shall have given to the Agent ten (10) days' prior written notice of its
intention so to do, clearly describing such new name and the jurisdictions in
which such new name shall be used and providing such other information in
connection therewith as the Agent may reasonably request and (b) with respect to
such new name, it shall have taken all action reasonably requested by the Agent,
to maintain the security interest of the Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect.
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Section 2.8 Collateral in Maryland. The value of the Debtors' taxable
Collateral in Maryland shall not at any time exceed $1,000,000 without the
Agent's consent not to be unreasonably withheld.
ARTICLE 3
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
Section 3.1 Additional Representations and Warranties. As of the time
when each of its Receivables arises, each Debtor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto, are what they purport to be in all material
respects, and that such Receivable will, to the best knowledge of each Debtor,
evidence true and valid obligations of the account debtor named therein.
Section 3.2 Maintenance of Records. Each Debtor will keep and maintain
at its own cost and expense, records of its Receivables and Contracts and each
Debtor will make the same available on Debtor's premises to the Agent for
inspection, at the Debtor's own cost and expense, at any and all reasonable
times upon reasonable prior notice to the Debtor. Each Debtor shall affix to
each writing constituting chattel paper, and if the Agent so directs to all
other Receivables and Contracts, as well as books, records and documents of each
Debtor evidencing or pertaining to such Receivables and Contracts, an
appropriate reference, in form and manner satisfactory to the Agent, to the fact
that such chattel paper, Receivables and Contracts have been assigned to the
Agent and that the Agent has a security interest therein. Upon the occurrence
and during the continuance of an Event of Default, and at the reasonable request
of the Agent, each Debtor shall, at its own cost and expense, deliver all
tangible evidence of its Receivables and Contract Rights (including, without
limitation, all documents evidencing the Receivables and all Contracts and each
specific writing constituting chattel paper) and such books and records to the
Agent or to its representatives (copies of which evidence and books and records
may be retained by each Debtor).
Section 3.3 Direction to Account Debtors; Contracting Parties; Etc.
Upon the occurrence and during the continuance of an Event of Default, and if
the Agent so directs, each Debtor agrees (a) to cause all payments on account of
the Receivables and Contracts to be made directly to the Cash Collateral
Account, (b) that the Agent may, at its option, directly notify the obligors
with respect to any Receivables and/or under any Contracts to make payments with
respect thereto as provided in preceding clause (a) and (c) that the Agent may
enforce collection of any such Receivables and Contracts and may adjust, settle
or compromise the amount of payment thereof, in the same manner and to the same
extent as such Debtors. Without notice to or assent by the Debtors, upon the
occurrence and during the continuance of an Event of Default, the Agent may
apply any or all amounts then in, or thereafter deposited in, the Cash
Collateral Account which application shall be effected in the manner provided in
Section 7.4 of this Agreement. The reasonable costs and expenses (including
reasonable
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<PAGE> 124
attorneys' fees) of collection, whether incurred by any Debtor or the Agent,
shall be borne by the Debtors. The Agent shall deliver a copy of each notice
referred to in the preceding clause (b) to the Debtors; provided, that the
failure by the Agent to so notify any Debtor shall not affect the effectiveness
of such notice or the other rights of the Agent created by this Section 3.3.
Section 3.4 Modification of Terms; Etc. No Debtor may rescind or cancel
any indebtedness evidenced by any Receivable or under any Contract, or modify
any term thereof or make any adjustment with respect thereto in a manner adverse
to the Agent, or extend or renew the same, or compromise or settle any material
dispute, claim, suit or legal proceeding relating thereto in a manner adverse to
the Agent, or sell any Receivable or Contract, or interest therein, without the
prior written consent of the Agent, except in accordance with the Debtor's
reasonable business practices.
Section 3.5 Collection. Each Debtor shall endeavor, in accordance with
reasonable business practices, to cause to be collected from the account debtor
named in each of its Receivables or obligor under any Contract, as and when due
(including, without limitation, amounts which are delinquent, such amounts to be
collected in accordance with generally accepted lawful collection procedures)
any and all amounts owing under or on account of such Receivable or Contract,
and apply forthwith upon receipt thereof all such amounts as are so collected to
the outstanding balance of such Receivable or under such Contract. The
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees) of collection, if incurred by any Debtor or the Agent, shall be
borne by the Debtors.
Section 3.6 Instruments. If any Debtor owns or acquires any Instrument
constituting Collateral, the Debtor will within 10 Business Days notify the
Agent thereof, and upon request by the Agent, will promptly deliver such
Instrument to the Agent appropriately endorsed to the order of the Agent as
further security hereunder.
ARTICLE 4
SPECIAL PROVISIONS CONCERNING TRADEMARKS
Section 4.1 Additional Representations and Warranties. Except as set
forth on Schedule 5.16 to the Credit Agreement, each Debtor represents and
warrants that: (i) as of the date hereof, it is the true and lawful owner of all
right, title and interest to, or otherwise has the right to use, the registered
Marks listed on Exhibit C hereto for each Debtor and that, as of the date
hereof, said listed Marks constitute all the marks and applications for marks
registered in the United States Patent and Trademark Office that each Debtor
presently owns or uses in connection with its business; (ii) it owns, is
licensed to use or otherwise has the right to use all Marks that it uses; (iii)
it has no knowledge of any third party claim that any aspect of the Debtor's
present or contemplated business operations infringe or will infringe any
trademark, service mark or trade name in any respect which could reasonably be
expected to have a
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<PAGE> 125
Material Adverse Effect on each Debtor and its Subsidiaries taken as a whole;
and (iv) except as listed on Exhibit C, as of the date hereof, it is the
beneficial and record owner of all trademark registrations and applications
listed on Exhibit C hereto for each Debtor and that said registrations are valid
and subsisting, and that no Debtor is aware of any third-party claim that any of
said registrations in respect of any Mark is invalid or unenforceable. Each
Debtor hereby grants to the Agent an absolute power of attorney to sign, upon
the occurrence and during the continuance of an Event of Default, any document
which may be required by the United States Patent and Trademark Office in order
to effect an absolute assignment of all right, title and interest in each Mark,
and record the same.
Section 4.2 Infringements. Each Debtor agrees, promptly upon learning
thereof, to notify the Agent in writing of the name and address of, and to
furnish such pertinent information that may be available with respect to, any
party who the Debtor believes is infringing or diluting or otherwise violating
in any material respect any of the Debtor's rights in and to any Mark, or with
respect to any party claiming that the Debtor's use of any Mark violates in any
material respect any property right of that party. Each Debtor further agrees to
prosecute any Person infringing any Mark in accordance with reasonable business
practices.
Section 4.3 Preservation of Marks. Each Debtor agrees to use its Marks
as required in each of the applicable jurisdictions during the time in which
this Agreement is in effect, sufficiently to preserve such Marks (and any
registrations thereto) as trademarks or service marks under the laws of the
United States and any other applicable law; provided, that, prior to any
Default, no Debtor shall be obligated to preserve any Mark in the event the
Debtor determines, in its reasonable business judgment, that the preservation of
such Mark is no longer desirable in the conduct of its business.
Section 4.4 Maintenance of Registration. Each Debtor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. Sections 1051 et seq. to maintain trademark registrations,
including but not limited to affidavits of use and applications for renewals of
registration in the United States Patent and Trademark Office for all of its
registered Marks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065,
and shall pay all fees and disbursements in connection therewith and shall not
abandon any such filing of affidavit of use or any such application of renewal
prior to the exhaustion of all administrative and judicial remedies without
prior written consent of the Agent (which consent shall not be unreasonably
withheld); provided, that, prior to any Default, no Debtor shall be obligated to
maintain any Mark in the event that the Debtor determines, in its reasonable
business judgment, that the maintenance of such Mark is no longer necessary or
desirable in the conduct of its business.
Section 4.5 Future Registered Marks. If any Mark registration issues
hereafter to any Debtor as a result of any application now or hereafter pending
before the United States Patent and Trademark Office, within sixty (60) days of
receipt of such certificate, such Debtor shall deliver to the Agent a copy of
such certificate, and an assignment for security in such Mark, to the Agent and
at the expense of such Debtor, confirming the assignment for security
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in such Mark to the Agent hereunder, the form of such security to be
substantially the same as the form hereof or in such other form as may be
reasonably satisfactory to the Agent.
Section 4.6 Remedies. Upon the occurrence and during the continuance of
an Event of Default, the Agent may take any or all of the following actions: (a)
declare the entire right, title and interest of any Debtor in and to each of the
Marks, together with all trademark rights and rights of protection to the same,
vested in the Agent, for the benefit of the Lenders, in which event such rights,
title and interest shall immediately vest in the Agent, for the benefit of the
Lenders, and the Agent shall be entitled to exercise the power of attorney
referred to in Section 4.1 hereof to execute, cause to be acknowledged and
notarized and to record said absolute assignment with the applicable agency; (b)
take and use or sell the Marks and the goodwill of such Debtor's business
symbolized by the Marks or carry on the business and use the assets of such
Debtor which have been used in connection with the Marks; and (c) direct the
Debtor to refrain, in which event the Debtor shall refrain, from using the Marks
in any manner whatsoever, directly or indirectly, and, if requested by the
Agent, change the Debtor's corporate name to eliminate therefrom any use of any
Mark and execute such other and further documents that the Agent may request to
further confirm this and to transfer ownership of the Marks and registrations
and any pending trademark application in the United States Patent and Trademark
Office to the Agent.
Section 4.7 Collateral Assignment. In addition to, and not in
limitation of, the grant of the security interest in Article 1 above, each
Debtor hereby grants, assigns, transfers, conveys and sets over to the Agent,
for the benefit of the Lenders, effective upon the occurrence and during the
continuance of an Event of Default, each Debtor's entire right, title and
interest in and to the Marks, the goodwill of the business symbolized by the
Marks and Proceeds. Each Debtor has delivered to the Agent an Assignment of
Trademarks (the "Assignment") and upon the occurrence and during the continuance
of an Event of Default, the Agent is hereby authorized to file such Assignment
with the United States Patent and Trademark Office. Upon payment in full of all
Obligations, the Agent will assign the Marks to the Debtor.
ARTICLE 5
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
Section 5.1 Additional Representations and Warranties. Except as set
forth on Schedule 5.16 to the Credit Agreement, each Debtor represents and
warrants that, as of the date hereof, it is the true and lawful owner of all
rights in (a) all Trade Secrets and Proprietary Information necessary to operate
its business, (b) the Patents listed on Exhibit D hereto for each Debtor, said
Patents constituting all the patents and applications for patents that each
Debtor owns on the date hereof and (c) the Copyrights listed on Exhibit E hereto
for each Debtor, said Copyrights constituting all registrations of copyrights
and applications for
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copyright registrations that each such Debtor owns on the date hereof. Each
Debtor further warrants that it has no knowledge of any third party claim that
any aspect of its present or contemplated business operations infringe or will
infringe any patent or any copyright or that it has misappropriated any Trade
Secret or Proprietary Information, in each case in any respect which could
reasonably be expected to have a Material Adverse Effect on such Debtor and its
Subsidiaries taken as a whole. Each Debtor hereby grants to the Agent an
absolute power of attorney to sign, upon the occurrence and during the
continuance of an Event of Default, any document which may be required by the
United States Patent and Trademark Office or the United States Copyright Office
in order to effect an absolute assignment of all right, title and interest in
each Patent and Copyright, and to record the same.
Section 5.2 Infringements. Each Debtor agrees, promptly upon learning
thereof, to furnish to the Agent in writing all pertinent information available
to such Debtor with respect to any infringement, contributing infringement or
active inducement to infringe in any material respect any Patent or Copyright or
to any claim that the practice of any Patent or the use of any Copyright
violates in any material respect any property right of a third party, or with
respect to any misappropriation of any Trade Secret right or any claim that
practice of any material Trade Secret right violates in any material respect any
property right of a third party. Each Debtor further agrees, to the extent
consistent with reasonable business practices, to prosecute any Person
infringing any Patent or Copyright or any Person misappropriating any Trade
Secret right.
Section 5.3 Maintenance of Patents. At its own expense, each Debtor
shall make timely payment of all post-issuance fees required pursuant to 35
U.S.C. Section 41 to maintain in force rights under each Patent, absent prior
written consent of the Agent; provided, that no Debtor shall be obligated to
maintain any Patent in the event the Debtor determines, in its reasonable
business judgment, that the maintenance of such Patent is no longer necessary or
desirable in the conduct of its business.
Section 5.4 Prosecution of Patent Application. At its own expense, such
Debtor shall diligently prosecute all applications for Patents for such Debtor
and shall not abandon any such application prior to exhaustion of all
administrative and judicial remedies, absent written consent of the Agent (which
consent shall not be unreasonably withheld); provided, that no Debtor shall be
obligated to prosecute any application in the event the Debtor determines, in
its reasonable business judgment, that the prosecuting of such application is no
longer necessary or desirable in the conduct of its business.
Section 5.5 Other Patents and Copyrights. Within sixty (60) days of the
acquisition or issuance of a Patent, registration of a Copyright, or acquisition
of a registered copyright, the Debtor shall deliver to the Agent a copy of said
Copyright or certificate or registration of said patents, as the case may be,
with an assignment for security as to such Patent or Copyright, as the case may
be, to the Agent and at the expense of the Debtor, confirming the assignment for
security, the form of such assignment for security to be substantially the same
as the form hereof or in such other form as may be reasonably satisfactory to
the Agent.
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Section 5.6 Remedies. Upon the occurrence and during the continuance of
an Event of Default, the Agent may take any or all of the following actions: (a)
declare the entire right, title, and interest of any Debtor in each of the
Patents and Copyrights vested in the Agent, for the benefit of the Lenders, in
which event such right, title, and interest shall immediately vest in the Agent,
for the benefit of the Lenders, and in which case the Agent shall be entitled to
exercise the power of attorney referred to in Section 5.1 hereof to execute,
cause to be acknowledged and notarized and to record said absolute assignment
with the applicable agency; (b) take and practice, use or sell the Patents and
Copyrights; and (c) direct such Debtor to refrain, in which event such Debtor
shall refrain, from practicing the Patents and using the Copyrights, directly or
indirectly, and such Debtor shall execute such other and further documents as
the Agent may request further to confirm this and to transfer ownership of the
Patents and Copyrights to the Agent, for the benefit of the Lenders.
ARTICLE 6
PROVISIONS CONCERNING ALL COLLATERAL
Section 6.1 Protection of Agent's Security. Each Debtor will at all
times keep its Inventory and Equipment insured in favor of the Agent, at each
such Debtor's own expense to the extent and in the manner provided in the Lender
Agreements; all policies or certificates with respect to such insurance (and any
other insurance maintained by the Debtor) (a) shall be endorsed to the Agent's
reasonable satisfaction for the benefit of the Agent (including, without
limitation, by naming the Agent as additional insured and loss payee) and (b)
shall state that such insurance policies shall not be canceled without thirty
(30) days' prior written notice thereof by the insurer to the Agent; and
certified copies of such policies or certificates with respect thereto shall be
deposited with the Agent. If any Debtor shall fail to insure its Inventory and
Equipment in accordance with the preceding sentence, or if any Debtor shall fail
to so endorse and deposit all policies or certificates with respect thereto, the
Agent shall have the right (but shall be under no obligation), upon prior
written notice to any such Debtor, to procure such insurance and such Debtor
agrees to promptly reimburse the Agent for all costs and expenses of procuring
such insurance. The Agent shall, at the time any proceeds of such insurance are
distributed to the Lenders, apply such proceeds in accordance with Section 7.4
hereof except as otherwise provided by the Credit Agreement. Each Debtor assumes
all liability and responsibility in connection with the Collateral acquired by
it and the liability of each Debtor to pay the Obligations shall in no way be
affected or diminished by reason of the fact that such Collateral may be lost,
destroyed, stolen, damaged or for any reason whatsoever unavailable to the
Debtor.
Section 6.2 Further Actions. Each Debtor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Agent from time
to time such lists, descriptions and designations of its Collateral, warehouse
receipts, receipts in the nature of warehouse receipts, bills of lading,
documents of title, vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers
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of attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Agent reasonably
requests in order to perfect, preserve or protect its security interest in the
Collateral.
Section 6.3 Financing Statements. Each Debtor agrees to execute and
deliver to the Agent such financing statements, in form reasonably acceptable to
the Agent, as the Agent may from time to time reasonably request, to establish
and maintain a valid, enforceable, first priority perfected security interest in
the Collateral as provided herein and the other rights and security contemplated
hereby all in accordance with the UCC as enacted in any and all relevant
jurisdictions or any other relevant law. Each Debtor will pay any applicable
filing fees, recordation taxes and related expenses relating to its Collateral.
Each Debtor hereby authorizes the Agent upon the occurrence and during the
continuance of an Event of Default to file any such financing statements without
its signature where permitted by law.
ARTICLE 7
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
Section 7.1 Remedies; Obtaining the Collateral Upon Default. Each
Debtor agrees that upon the occurrence of an Event of Default, the Agent, in
addition to any rights now or hereafter existing under applicable law, shall
have all rights as a secured creditor under the UCC in all relevant
jurisdictions and may:
(a) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Debtor or any other
Person who then has possession of any part thereof, with or without notice or
process of law, and for that purpose may enter upon the Debtor's premises where
any of the Collateral is located and remove the same and use in connection with
such removal any and all services, supplies, aids and other facilities of the
Debtor;
(b) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation, the Receivables
and the Contracts) constituting the Collateral to make any payment required by
the terms of such agreement, instrument or other obligation directly to the
Agent;
(c) withdraw all monies, securities and instruments in the
Cash Collateral Account and/or in any other cash collateral account for
application to the Obligations in accordance with Section 7.4 hereof;
(d) sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof in accordance with Section 7.2 hereof, or direct
the Debtor to sell, assign or otherwise
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liquidate any or all of the Collateral or any part thereof, and, in each case,
take possession of the proceeds of any such sale or liquidation;
(e) take possession of the Collateral or any part thereof, by
directing the relevant Debtor in writing to deliver the same to the Agent at any
place or places reasonably designated by the Agent, in which event such Debtor
shall at its own expense:
(i) forthwith cause the same to be moved to the place or
places so designated by the Agent and there delivered to the Agent;
(ii) store and keep any Collateral so delivered to the
Agent at such place or places pending further action by the Agent as
provided in Section 7.2 hereof; and
(iii) while the Collateral shall be so stored and kept,
provide such guards and maintenance services as shall be necessary to
protect the same and to preserve and maintain them in good condition;
and
(f) license or sublicense, whether on an exclusive or
nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral
for such term and on such conditions and in such manner as the Agent shall in
its reasonable judgment determine;
it being understood that each Debtor's obligation to deliver the Collateral is
of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Agent shall be entitled to a decree
requiring specific performance by any such Debtor of said obligation. The
Lenders agree that this Agreement may be enforced only by the action of the
Agent acting upon the instructions of the Majority Lenders and that no other
Lender shall have any right individually to seek to enforce this Agreement or to
realize upon the security to be granted hereby, it being understood and agreed
that such rights and remedies may be exercised by the Agent for the benefit of
the Lenders upon the terms of this Agreement.
Section 7.2 Remedies: Disposition of the Collateral. Any Collateral
repossessed by the Agent under or pursuant to Section 7.1 hereof and any other
Collateral whether or not so repossessed by the Agent, may be sold, assigned,
leased or otherwise disposed of under one or more contracts or as an entirety,
and without the necessity of gathering at the place of sale the property to be
sold, and in general in such manner, at such time or times, at such place or
places and on such terms as the Agent may, in compliance with any mandatory
requirements of applicable law, determine to be commercially reasonable. Any of
the Collateral may be sold, leased or otherwise disposed of, in the condition in
which the same existed when taken by the Agent or after any overhaul or repair
at the expense of the Debtor which the Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceeding permitted by such requirements shall be made upon not less than ten
(10) days' written notice to the Debtor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for
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the ten (10) days after the giving of such notice, to the right of the Debtor or
any nominee of the Debtor to acquire the Collateral involved at a price or for
such other consideration at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than ten (10) days'
written notice to the Debtor specifying the time and place of such sale and, in
the absence of applicable requirements of law, shall be by public auction (which
may, at the Agent's option, be subject to reserve), after publication of notice
of such auction not less than ten (10) days prior thereto in two newspapers in
general circulation in Boston, Massachusetts. To the extent permitted by any
such requirement of law, the Agent may bid for and become the purchaser of the
Collateral or any item thereof offered for sale in accordance with this Section
without accountability to the Debtor. If, under mandatory requirements of
applicable law, the Agent shall be required to make disposition of the
Collateral within a period of time which does not permit the giving of notice to
the Debtor as hereinabove specified, the Agent need give the Debtor only such
notice of disposition as shall be reasonably practicable in view of such
mandatory requirements of applicable law.
Section 7.3 Waiver of Claims. Except as otherwise provided in this
Agreement, (a) EACH DEBTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE AGENT'S TAKING
POSSESSION OR THE AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH EACH DEBTOR WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and
(b) each Debtor hereby further waives, to the extent permitted by law:
(i) all damages occasioned by such taking of possession
except any damages which are determined by a final, non-appealable
court order to have been caused by the Agent's gross negligence or
willful misconduct; and
(ii) all other requirements as to the time, place and
terms of sale or other requirements with respect to the enforcement of
the Agent's rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law in
order to prevent or delay the enforcement of this Agreement or the absolute sale
of the Collateral or any portion thereof, and each Debtor, for itself and all
who may claim under it, insofar as it or they now or hereafter lawfully may,
hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the Debtor therein and thereto, and shall
be a perpetual bar both at law and in equity against
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the Debtor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under the Debtor.
Section 7.4 Application of Proceeds. All moneys collected by the Agent
upon any sale or other disposition of the Collateral, together with all other
moneys received by the Agent hereunder, shall be applied as provided in Section
10.3 of the Credit Agreement. It is understood and agreed that each Debtor shall
remain liable to the extent of any deficiency between the amount of the proceeds
of the Collateral hereunder and the aggregate amount of the Obligations.
Section 7.5 Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Agent shall be in addition to every other
right, power and remedy specifically given under this Agreement, the other
Lender Agreements or now or hereafter existing at law, in equity or by statute
and each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Agent. All such
rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Agent in the exercise
of any such right, power or remedy and no renewal or extension of any of the
Obligations shall impair any such right, power or remedy or shall be construed
to be a waiver of any Default or Event of Default or an acquiescence therein. No
notice to or demand on any Debtor in any case shall entitle it to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Agent to any other or further action in any
circumstances without notice or demand. In the event that the Agent shall bring
any suit to enforce any of its rights hereunder and shall be entitled to
judgment, then in such suit the Agent may recover reasonable expenses, including
reasonable attorneys' fees, and the amounts thereof shall be included in such
judgment.
Section 7.6 Discontinuance of Proceedings. In case the Agent shall have
instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Agent, then and in every such case each Debtor, the Agent and
each holder of any of the Obligations shall be restored to their former
positions and rights hereunder with respect to the Collateral subject to the
security interest created under this Agreement, and all rights, remedies and
powers of the Agent shall continue as if no such proceeding had been instituted.
ARTICLE 8
MISCELLANEOUS
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Section 8.1 Notices. All notices and other communications made or
required to be given pursuant to this Agreement shall be in writing and shall be
mailed by United States mail, postage prepaid, or sent by hand, by telecopy or
by nationally-recognized overnight carrier service, addressed as follows:
(a) If to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, Telecopier No. (617) 434-8102, Attention: Mr.
Christopher S. Allen, Director, with a copy to: Goodwin, Procter & Hoar
LLP, Exchange Place, Boston, MA 02109, Telecopier No. 617-523-1231,
Attention: Edward Matson Sibble, Jr., P.C., or at such other
address(es) or to the attention of such other Person(s) as the Agent
shall from time to time designate in writing to the Debtors and the
Lenders.
(b) If to the Debtors, c/o New England Audio Co., Inc. at 40
Hudson Road, Shawmut Park, Canton, Massachusetts 02021, Telecopier No.
(617) 821-9956, Attention: Joseph McGuire, Chief Financial Officer,
with a copy to Goulston & Storrs, P.C., 400 Atlantic Avenue, Boston, MA
02110-3333, Telecopier No. (617) 574-4112, Attention: Kitt Sawitsky,
Esq. and Daniel Avery, Esq., or at such other address(es) or to the
attention of such other Person(s) as New England Audio shall from time
to time designate in writing to the Agent and the Lenders.
(c) If to any Lender, at the address(es) and to the attention
of the Person(s) specified below such Lender's name on the execution
page of this Agreement (or in the case of a Successor Lender, at the
address(es) and to the attention of the Person(s) specified in the
Assignment and Acceptance Agreement executed by such Successor Lender),
or at such other address(es) and to the attention of such other
Person(s) as any Lender shall from time to time designate in writing to
the Agent and the Debtors.
Any notice so addressed and mailed by registered or certified mail
shall be deemed to have been given three (3) days after deposit in the mails.
Any notice so addressed and sent by hand, by telecopy or by overnight carrier
service shall be deemed to have been given when received.
A notice from the Agent stating that it has been given on behalf of the
Lenders shall be relied upon by the Debtors as having been given by the Lenders.
Section 8.2 Waiver; Amendment. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Debtor directly affected thereby and the
Agent (with the consent of the Majority Lenders or, to the extent required by
Section 11.1 of the Credit Agreement, all of the Lenders).
Section 8.3 Obligations Absolute. The obligations of each Debtor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation
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or the like of any Debtor; (b) any exercise or non-exercise, or any waiver of,
any right, remedy, power or privilege under or in respect of this Agreement or
any other Lender Agreement; or (c) any amendment to or modification of any other
Lender Agreement or any security for any of the Obligations whether or not the
Debtors shall have notice or knowledge of any of the foregoing.
Section 8.4 Successors and Assigns. This Agreement shall be binding
upon each Debtor and its successors and assigns and shall inure to the benefit
of the Agent and the Lenders and their respective successors and assigns. All
agreements, statements, representations and warranties made by each Debtor
herein or in any certificate or other instrument delivered by any Debtor or on
its behalf under this Agreement shall be considered to have been relied upon by
the Lenders and shall survive the execution and delivery of this Agreement and
the other Lender Agreements regardless of any investigation made by the Agent or
the Lenders or on their behalf.
Section 8.5 Headings Descriptive. The headings of the several sections
of this Agreement are inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this Agreement.
Section 8.6 Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT REGARD TO IT
PRINCIPLES RELATING TO CHOICE OF LAW.
Section 8.7 Debtors' Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Debtor shall remain liable
to perform all of the obligations, if any, assumed by it with respect to the
Collateral and the Agent shall not have any obligations or liabilities with
respect to any Collateral other than an obligation to act in a commercially
reasonable manner, by reason of or arising out of this Agreement, nor shall the
Agent be required or obligated in any manner to perform or fulfill any of the
obligations of any Debtor under or with respect to any Collateral.
Section 8.8 Termination; Release. After the Termination Date, this
Agreement shall terminate (provided that all indemnities set forth in the Credit
Agreement shall survive such termination) and the Agent, at the request and
expense of the Debtors, will promptly execute and deliver to each Debtor a
proper instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to each Debtor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Agent and has not theretofore been sold or
otherwise applied or released pursuant to this Agreement.
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Section 8.9 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with each Debtor
and the Agent.
Section 8.10 The Agent. The Agent will hold in accordance with this
Agreement all items of the Collateral at any time received under this Agreement.
It is expressly understood and agreed that the obligations of the Agent as
holder of the Collateral and interests therein and with respect to the
disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Agent shall act hereunder on the
terms and conditions set forth in this Agreement and in Section 13 of the Credit
Agreement.
ARTICLE 9
DEFINITIONS
Unless otherwise defined herein, terms defined in the Credit Agreement
are used herein as therein defined and the following terms shall have the
following respective meanings (such meanings being equally applicable to the
singular and plural forms of the terms defined):
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Cash Collateral Account" shall mean a non-interest bearing lockbox
account or such other account so designated by the Agent.
"Chattel Paper" and "chattel paper" shall have the meaning provided in
the Uniform Commercial Code as in effect on the date hereof in the Commonwealth
of Massachusetts.
"Contract Rights" shall mean all rights of any Debtor (including,
without limitation, all rights to payment) under each Contract.
"Copyrights" shall mean any United States copyright owned (or subject
to the rights of ownership) by any Debtor, including any registrations of any
copyright in the United States Copyright Office, as well as any application for
a copyright registration now or hereafter made with the United States Copyright
Office by any Debtor.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Documents" and "documents" shall have the meaning provided in the
Uniform Commercial Code as in effect on the date hereof in the Commonwealth of
Massachusetts.
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"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"General Intangibles" and "general intangibles" shall have the meaning
provided in the Uniform Commercial Code as in effect on the date hereof in the
Commonwealth of Massachusetts.
"Goods" and "goods" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the Commonwealth of
Massachusetts.
"Instrument" or "instrument" shall have the meaning provided in the
Uniform Commercial Code as in effect on the date hereof in the Commonwealth of
Massachusetts.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on any Debtor's property.
"Marks" shall mean any United States trademarks, service marks and
trade names now owned, subject to a right of ownership or hereafter acquired by
any Debtor, including any registration of, or application for, any trademarks
and service marks in the United States Patent and Trademark Office, and any
trade dress including logos and/or designs used by any Debtor in the United
States.
"Obligations" shall mean (a) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations and liabilities of each Debtor now existing or hereafter incurred
under, arising out of or in connection with any Lender Agreement to which each
such Debtor is a party and the due performance and compliance by each Debtor
with the terms of each such Lender Agreement; (b) any and all sums advanced by
the Agent in order to preserve the Collateral or preserve its security interest
in the Collateral; (c) in the event of any proceeding for the collection or
enforcement of any obligations or liabilities referred to in clause (a), upon
the occurrence and during the continuance of an Event of Default, the reasonable
expenses of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Collateral, or of any exercise by the
Agent of its rights hereunder, together with reasonable attorneys' fees and
court costs; (d) all amounts paid by any Indemnitee as to which such Indemnitee
has the right to reimbursement under Section 14.5 of the Credit Agreement; and
(e) all other Lender Obligations.
"Patents" shall mean any United States patent owned, subject to a right
of ownership by or hereafter acquired by any Debtor and any divisions,
continuations, reissues, reexaminations, extensions or renewals thereof, as well
as any application for a United States patent now or hereafter made by the
Debtor or subject to a right of ownership in the Debtor.
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"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the Commonwealth of Massachusetts on the date hereof or
under other relevant law and, in any event, shall include, but not be limited
to, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Agent or any Debtor from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due and
payable to any Debtor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any person acting under color of
governmental authority) and (c) any and all other amounts from time to time paid
or payable under or in connection with any of the Collateral.
"Proprietary Information" means all information and know-how worldwide,
including, without limitation, technical data, manufacturing data, research and
development data, data relating to compositions, processes and formulations,
manufacturing and production know-how and experience, management know-how,
training programs, manufacturing, engineering and other drawings,
specifications, performance criteria, operating instructions, maintenance
manuals, technology, technical information, software, engineering and computer
data and databases, design and engineering specifications, catalogs, promotional
literature and financial, business and marketing plans, inventions and invention
disclosures.
"Termination Date" shall mean the date on which all Obligations are
paid in full and the Lenders shall have no further commitments to or for the
account of the Debtors.
"Trade Secrets" means any secretly held existing engineering and other
data, information, production procedures and other know-how relating to the
design, manufacture, assembly, installation, use, operation, marketing, sale and
servicing of any products or business of any Debtor worldwide whether written or
not written.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
DEBTORS:
NEW ENGLAND AUDIO CO., INC.
By: ___________________________________
Name:
Title:
NEA DELAWARE, INC.
By: ____________________________________
Name:
Title:
AGENT:
BANKBOSTON, N.A., as Agent
By: __________________________________
Name:
Title:
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EXHIBIT F-2
FORM OF TWEETER SECURITY AGREEMENT
SECURITY AGREEMENT dated as of July 20, 1998 between TWEETER HOME
ENTERTAINMENT GROUP, INC., a Delaware corporation ("Tweeter"), TWEETER HOME
ENTERTAINMENT GROUP FINANCING COMPANY TRUST, a Massachusetts business trust
("Tweeter Trust") (each of Tweeter and Tweeter Trust is referred to herein
individually, as a "Debtor" and collectively, as the "Debtors") and BANKBOSTON,
N.A., a national banking association, as agent (the "Agent") for itself and the
other lenders which are, or may in the future become, parties to the Credit
Agreement (as hereinafter defined).
Recitals
WHEREAS, the Debtors, as guarantors, have entered into an Amended and
Restated Credit Agreement, dated as of July 20, 1998 (as amended, modified or
supplemented from time to time, the "Credit Agreement") with the Agent and the
other lenders parties thereto (the "Lenders"), pursuant to which the Lenders
have agreed to make Revolving Credit Advances (as defined in the Credit
Agreement) to wholly-owned subsidiaries or affiliates of the Debtors, upon the
terms and subject to the conditions contained therein; and
WHEREAS, in connection with the granting of the credits under the
Credit Agreement and as security for all of the Obligations, including without
limitation the obligations of the Debtors, as guarantors, under the Credit
Agreement, the Agent is requiring the Debtors to execute and deliver this
Security Agreement and grant the security interest contemplated hereby.
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1. GRANT OF SECURITY
Section 1.1 Grant of Security. Each Debtor hereby grants to the Agent a
continuing security interest ("Security Interest") in and to all personal
property and fixtures of each Debtor, whether now or hereafter existing or now
or hereafter acquired and wherever located, including all equipment, accounts,
inventory and general intangibles, all as more fully described as follows (the
"Collateral"):
(a) All money, cash, bank accounts, deposit accounts, goods,
inventory, equipment, computer hardware and software, instruments, securities,
documents, documents of title, chattel paper, accounts, accounts receivable,
lease receivables and leases including but not limited to, rights to rentals
thereunder and each Debtor's reversionary interest in property leased thereunder
and any equity rights in leases sold to third parties, contract rights,
licenses, general intangibles, copyrights, patents and patents pending,
trademarks and goodwill, Trade
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Secrets, credits, claims, demands and all other property of the Debtors
(including but not limited to leasehold improvements);
(b) All equipment, including without limitation all fixtures,
machinery, equipment, molds, dies, motor vehicles, and other goods whether now
owned or hereafter acquired by any Debtor, wherever located, all replacements,
substitutions and all parts thereof and all accessions thereto, as well as all
of each Debtor's right, title and interest in and to any such goods now or
hereafter held or used by any Debtor under any lease, lease-purchase,
conditional sales, use or other agreements under which any Debtor is entitled to
the use and possession thereof, with any other rights and benefits flowing from
such agreements, all as may be used or useful in connection with each Debtor's
business as now or hereafter carried on, any operations incidental to or
associated with the same, or for any other purpose (any and all such equipment,
machinery and fixtures, parts and accessions being the "Equipment");
(c) All inventory in all of its forms, wherever located, now
or hereafter existing including, but not limited to (i) raw materials and work
in process therefor, finished goods thereof and (ii) goods which are returned to
or repossessed by any Debtor and all accessions thereto and products thereof
(any and all such inventory, accessions and products being the "Inventory");
(d) All accounts receivable, including without limitation
accounts, contracts (but only to the extent assignable without causing a Default
under the Credit Agreement), contract rights, chattel paper, instruments,
licenses and other obligations of any kind whether now existing or hereafter
arising, including without limitation all rights now or hereafter existing in
and to all security agreements, leases, and other contracts securing or
otherwise relating to any such accounts, contract rights, chattel paper,
instruments, general intangibles or obligations (any and all such accounts,
contract rights, chattel paper, instruments, general intangibles and obligations
being the "Receivables," and any and all such leases, security agreements and
other contracts being the "Contracts");
(e) All general intangibles including without limitation,
tradenames, trademarks, service marks, tax refunds, the corporate name and all
product names; and
(f) All products and proceeds of any and all of the foregoing
Collateral and, to the extent not otherwise included, all payments under
insurance (whether or not the Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.
Section 1.2 Security for Obligations. This Agreement and the Security
Interest shall secure the payment and performance of the Obligations.
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ARTICLE 2
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Debtor represents, warrants and covenants, which representations,
warranties and covenants shall survive execution and delivery of this Agreement,
as follows:
Section 2.1 Necessary Filings. All filings, registrations and
recordings necessary or appropriate to create, preserve and perfect the security
interest granted by each Debtor to the Agent hereby in respect of the Collateral
have been accomplished and the security interest granted to the Agent pursuant
to this Agreement in and to the Collateral constitutes, upon satisfaction of
such filings, registrations and recordings, a perfected security interest
therein (to the extent that the same can be perfected by filing, registration or
recording) prior to the rights of all other Persons therein (other than any such
rights pursuant to Liens permitted by Section 9.2 of the Credit Agreement
("Permitted Liens")) and subject to no other Liens (other than Permitted Liens)
and is entitled to all the rights, priorities and benefits afforded by the
Uniform Commercial Code to perfected security interests.
Section 2.2 No Liens. Each Debtor is, and as to Collateral acquired by
it from time to time after the date hereof each such Debtor will be, the owner
of all Collateral pledged by it hereunder free from any Lien, security interest,
encumbrance or other right, title or interest of any Person (other than
Permitted Liens), and each such Debtor shall defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any interest
therein (other than in connection with Permitted Liens) adverse to the Agent.
Section 2.3 Other Financing Statements. As of the date hereof, there is
no financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral (other than financing statements filed in respect of
Permitted Liens), and so long as any Lender Obligations or commitments with
respect thereto are outstanding, no Debtor will execute or authorize to be filed
in any public office any financing statement (or similar statement or instrument
of registration under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in respect of and
covering the security interests granted hereby by such Debtors or in connection
with Permitted Liens.
Section 2.4 Chief Executive Office; Records. As of the date hereof, the
chief executive office of each such Debtor is located at the address indicated
on Exhibit A hereto. No Debtor will move its chief executive office except to
such new location as any Debtor may establish in accordance with the last
sentence of this Section 2.4. A complete set of books of account and records of
each Debtor relating to the Receivables and the Contract Rights are, and will
continue to be, kept at such chief executive office, at one or more of the other
record locations set forth on Exhibit A hereto for each such Debtor or at such
new locations as each Debtor may establish in accordance with the last sentence
of this Section 2.4. All Receivables and Contract Rights of each Debtor are, and
will continue to be, maintained at, and controlled
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and directed (including, without limitation, for general accounting purposes)
from, the office locations described above or such new location established in
accordance with the last sentence of this Section 2.4. No Debtor shall establish
new locations for such offices until (a) it shall have given to the Agent not
less than ten (10) days' prior written notice of its intention to do so, clearly
describing such new location and providing such other information in connection
therewith as the Agent may reasonably request and (b) with respect to such new
location, it shall have taken all action reasonably satisfactory to the Agent,
to maintain the security interest of the Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect.
Section 2.5 Location of Inventory and Equipment. As of the date hereof,
all Inventory and Equipment held by each Debtor is located at one of the
locations shown on Exhibit B hereto for each Debtor. Each Debtor agrees that all
Inventory and Equipment now held or subsequently acquired by it shall be kept at
(or shall be in transport to) any one of the locations shown on Exhibit B
hereto, or such new location as any Debtor may establish in accordance with the
last sentence of this Section 2.5. A Debtor may establish a new location for
Inventory and Equipment only if (a) it shall have given to the Agent not less
than ten (10) days' prior written notice of its intention so to do, clearly
describing such new location and providing such other information in connection
therewith as the Agent may reasonably request and (b) with respect to such new
location, it shall have taken all action reasonably satisfactory to the Agent to
maintain the security interest of the Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect.
Section 2.6 Recourse. This Agreement is made with full recourse to each
Debtor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of each Debtor contained herein, in the other Lender
Agreements and otherwise in writing in connection herewith or therewith.
Section 2.7 Trade Names; Change of Name. As of the date hereof, no
Debtor operates in any jurisdiction under, or in the preceding 12 months has not
operated in any jurisdiction under, any trade names, fictitious names or other
names except its legal name and except as disclosed on Exhibit F hereto. No
Debtor shall change its legal name or assume or operate in any jurisdiction
under any trade, fictitious or other name except as established in accordance
with the last sentence of this Section 2.7. Each Debtor shall not assume or
operate in any jurisdiction under any new trade, fictitious or other name until
(a) it shall have given to the Agent ten (10) days' prior written notice of its
intention so to do, clearly describing such new name and the jurisdictions in
which such new name shall be used and providing such other information in
connection therewith as the Agent may reasonably request and (b) with respect to
such new name, it shall have taken all action reasonably requested by the Agent,
to maintain the security interest of the Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect.
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Section 2.8 Collateral in Maryland. The value of the Debtors' taxable
Collateral in Maryland shall not at any time exceed $1,000,000 without the
Agent's consent not to be unreasonably withheld.
ARTICLE 3
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
Section 3.1 Additional Representations and Warranties. As of the time
when each of its Receivables arises, each Debtor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto, are what they purport to be in all material
respects, and that such Receivable will, to the best knowledge of each Debtor,
evidence true and valid obligations of the account debtor named therein.
Section 3.2 Maintenance of Records. Each Debtor will keep and maintain
at its own cost and expense, records of its Receivables and Contracts and each
Debtor will make the same available on Debtor's premises to the Agent for
inspection, at the Debtor's own cost and expense, at any and all reasonable
times upon reasonable prior notice to the Debtor. Each Debtor shall affix to
each writing constituting chattel paper, and if the Agent so directs to all
other Receivables and Contracts, as well as books, records and documents of each
Debtor evidencing or pertaining to such Receivables and Contracts, an
appropriate reference, in form and manner satisfactory to the Agent, to the fact
that such chattel paper, Receivables and Contracts have been assigned to the
Agent and that the Agent has a security interest therein. Upon the occurrence
and during the continuance of an Event of Default, and at the reasonable request
of the Agent, each Debtor shall, at its own cost and expense, deliver all
tangible evidence of its Receivables and Contract Rights (including, without
limitation, all documents evidencing the Receivables and all Contracts and each
specific writing constituting chattel paper) and such books and records to the
Agent or to its representatives (copies of which evidence and books and records
may be retained by each Debtor).
Section 3.3 Direction to Account Debtors; Contracting Parties; Etc.
Upon the occurrence and during the continuance of an Event of Default, and if
the Agent so directs, each Debtor agrees (a) to cause all payments on account of
the Receivables and Contracts to be made directly to the Cash Collateral
Account, (b) that the Agent may, at its option, directly notify the obligors
with respect to any Receivables and/or under any Contracts to make payments with
respect thereto as provided in preceding clause (a) and (c) that the Agent may
enforce collection of any such Receivables and Contracts and may adjust, settle
or compromise the amount of payment thereof, in the same manner and to the same
extent as such Debtors. Without notice to or assent by the Debtors, upon the
occurrence and during the continuance of an Event of Default, the Agent may
apply any or all amounts then in, or thereafter deposited in, the Cash
Collateral Account which application shall be effected in the manner provided in
Section 7.4 of this Agreement. The reasonable costs and expenses (including
reasonable attorneys' fees) of collection, whether incurred by any Debtor or the
Agent, shall be borne by
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the Debtors. The Agent shall deliver a copy of each notice referred to in the
preceding clause (b) to the Debtors; provided, that the failure by the Agent to
so notify any Debtor shall not affect the effectiveness of such notice or the
other rights of the Agent created by this Section 3.3.
Section 3.4 Modification of Terms; Etc. No Debtor may rescind or cancel
any indebtedness evidenced by any Receivable or under any Contract, or modify
any term thereof or make any adjustment with respect thereto in a manner adverse
to the Agent, or extend or renew the same, or compromise or settle any material
dispute, claim, suit or legal proceeding relating thereto in a manner adverse to
the Agent, or sell any Receivable or Contract, or interest therein, without the
prior written consent of the Agent, except in accordance with the Debtor's
reasonable business practices.
Section 3.5 Collection. Each Debtor shall endeavor, in accordance with
reasonable business practices, to cause to be collected from the account debtor
named in each of its Receivables or obligor under any Contract, as and when due
(including, without limitation, amounts which are delinquent, such amounts to be
collected in accordance with generally accepted lawful collection procedures)
any and all amounts owing under or on account of such Receivable or Contract,
and apply forthwith upon receipt thereof all such amounts as are so collected to
the outstanding balance of such Receivable or under such Contract. The
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees) of collection, if incurred by any Debtor or the Agent, shall be
borne by the Debtors.
Section 3.6 Instruments. If any Debtor owns or acquires any Instrument
constituting Collateral, the Debtor will within 10 Business Days notify the
Agent thereof, and upon request by the Agent, will promptly deliver such
Instrument to the Agent appropriately endorsed to the order of the Agent as
further security hereunder.
ARTICLE 4
SPECIAL PROVISIONS CONCERNING TRADEMARKS
Section 4.1 Additional Representations and Warranties. Except as set
forth on Schedule 5.16 to the Credit Agreement, each Debtor represents and
warrants that: (i) as of the date hereof, it is the true and lawful owner of all
right, title and interest to, or otherwise has the right to use, the registered
Marks listed on Exhibit C hereto for each Debtor and that, as of the date
hereof, said listed Marks constitute all the marks and applications for marks
registered in the United States Patent and Trademark Office that each Debtor
presently owns or uses in connection with its business; (ii) it owns, is
licensed to use or otherwise has the right to use all Marks that it uses; (iii)
it has no knowledge of any third party claim that any aspect of the Debtor's
present or contemplated business operations infringe or will infringe any
trademark, service mark or trade name in any respect which could reasonably be
expected to have a Material Adverse Effect on each Debtor and its Subsidiaries
taken as a whole; and (iv) except
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as listed on Exhibit C, as of the date hereof, it is the beneficial and record
owner of all trademark registrations and applications listed on Exhibit C hereto
for each Debtor and that said registrations are valid and subsisting, and that
no Debtor is aware of any third-party claim that any of said registrations in
respect of any Mark is invalid or unenforceable. Each Debtor hereby grants to
the Agent an absolute power of attorney to sign, upon the occurrence and during
the continuance of an Event of Default, any document which may be required by
the United States Patent and Trademark Office in order to effect an absolute
assignment of all right, title and interest in each Mark, and record the same.
Section 4.2 Infringements. Each Debtor agrees, promptly upon learning
thereof, to notify the Agent in writing of the name and address of, and to
furnish such pertinent information that may be available with respect to, any
party who the Debtor believes is infringing or diluting or otherwise violating
in any material respect any of the Debtor's rights in and to any Mark, or with
respect to any party claiming that the Debtor's use of any Mark violates in any
material respect any property right of that party. Each Debtor further agrees to
prosecute any Person infringing any Mark in accordance with reasonable business
practices.
Section 4.3 Preservation of Marks. Each Debtor agrees to use its Marks
as required in each of the applicable jurisdictions during the time in which
this Agreement is in effect, sufficiently to preserve such Marks (and any
registrations thereto) as trademarks or service marks under the laws of the
United States and any other applicable law; provided, that, prior to any
Default, no Debtor shall be obligated to preserve any Mark in the event the
Debtor determines, in its reasonable business judgment, that the preservation of
such Mark is no longer desirable in the conduct of its business.
Section 4.4 Maintenance of Registration. Each Debtor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. Sections 1051 et seq. to maintain trademark registrations,
including but not limited to affidavits of use and applications for renewals of
registration in the United States Patent and Trademark Office for all of its
registered Marks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065,
and shall pay all fees and disbursements in connection therewith and shall not
abandon any such filing of affidavit of use or any such application of renewal
prior to the exhaustion of all administrative and judicial remedies without
prior written consent of the Agent (which consent shall not be unreasonably
withheld); provided, that, prior to any Default, no Debtor shall be obligated to
maintain any Mark in the event that the Debtor determines, in its reasonable
business judgment, that the maintenance of such Mark is no longer necessary or
desirable in the conduct of its business.
Section 4.5 Future Registered Marks. If any Mark registration issues
hereafter to any Debtor as a result of any application now or hereafter pending
before the United States Patent and Trademark Office, within sixty (60) days of
receipt of such certificate, such Debtor shall deliver to the Agent a copy of
such certificate, and an assignment for security in such Mark, to the Agent and
at the expense of such Debtor, confirming the assignment for security
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in such Mark to the Agent hereunder, the form of such security to be
substantially the same as the form hereof or in such other form as may be
reasonably satisfactory to the Agent.
Section 4.6 Remedies. Upon the occurrence and during the continuance of
an Event of Default, the Agent may take any or all of the following actions: (a)
declare the entire right, title and interest of any Debtor in and to each of the
Marks, together with all trademark rights and rights of protection to the same,
vested in the Agent, for the benefit of the Lenders, in which event such rights,
title and interest shall immediately vest in the Agent, for the benefit of the
Lenders, and the Agent shall be entitled to exercise the power of attorney
referred to in Section 4.1 hereof to execute, cause to be acknowledged and
notarized and to record said absolute assignment with the applicable agency; (b)
take and use or sell the Marks and the goodwill of such Debtor's business
symbolized by the Marks or carry on the business and use the assets of such
Debtor which have been used in connection with the Marks; and (c) direct the
Debtor to refrain, in which event the Debtor shall refrain, from using the Marks
in any manner whatsoever, directly or indirectly, and, if requested by the
Agent, change the Debtor's corporate name to eliminate therefrom any use of any
Mark and execute such other and further documents that the Agent may request to
further confirm this and to transfer ownership of the Marks and registrations
and any pending trademark application in the United States Patent and Trademark
Office to the Agent.
Section 4.7 Collateral Assignment. In addition to, and not in
limitation of, the grant of the security interest in Article 1 above, each
Debtor hereby grants, assigns, transfers, conveys and sets over to the Agent,
for the benefit of the Lenders, effective upon the occurrence and during the
continuance of an Event of Default, each Debtor's entire right, title and
interest in and to the Marks, the goodwill of the business symbolized by the
Marks and Proceeds. Each Debtor has delivered to the Agent an Assignment of
Trademarks (the "Assignment") and upon the occurrence and during the continuance
of an Event of Default, the Agent is hereby authorized to file such Assignment
with the United States Patent and Trademark Office. Upon payment in full of all
Obligations, the Agent will assign the Marks to the Debtor.
ARTICLE 5
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
Section 5.1 Additional Representations and Warranties. Except as set
forth on Schedule 5.16 to the Credit Agreement, each Debtor represents and
warrants that, as of the date hereof, it is the true and lawful owner of all
rights in (a) all Trade Secrets and Proprietary Information necessary to operate
its business, (b) the Patents listed on Exhibit D hereto for each Debtor, said
Patents constituting all the patents and applications for patents that each
Debtor owns on the date hereof and (c) the Copyrights listed on Exhibit E hereto
for each Debtor, said Copyrights constituting all registrations of copyrights
and applications for
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copyright registrations that each such Debtor owns on the date hereof. Each
Debtor further warrants that it has no knowledge of any third party claim that
any aspect of its present or contemplated business operations infringe or will
infringe any patent or any copyright or that it has misappropriated any Trade
Secret or Proprietary Information, in each case in any respect which could
reasonably be expected to have a Material Adverse Effect on such Debtor and its
Subsidiaries taken as a whole. Each Debtor hereby grants to the Agent an
absolute power of attorney to sign, upon the occurrence and during the
continuance of an Event of Default, any document which may be required by the
United States Patent and Trademark Office or the United States Copyright Office
in order to effect an absolute assignment of all right, title and interest in
each Patent and Copyright, and to record the same.
Section 5.2 Infringements. Each Debtor agrees, promptly upon learning
thereof, to furnish to the Agent in writing all pertinent information available
to such Debtor with respect to any infringement, contributing infringement or
active inducement to infringe in any material respect any Patent or Copyright or
to any claim that the practice of any Patent or the use of any Copyright
violates in any material respect any property right of a third party, or with
respect to any misappropriation of any Trade Secret right or any claim that
practice of any material Trade Secret right violates in any material respect any
property right of a third party. Each Debtor further agrees, to the extent
consistent with reasonable business practices, to prosecute any Person
infringing any Patent or Copyright or any Person misappropriating any Trade
Secret right.
Section 5.3 Maintenance of Patents. At its own expense, each Debtor
shall make timely payment of all post-issuance fees required pursuant to 35
U.S.C. Section 41 to maintain in force rights under each Patent, absent prior
written consent of the Agent; provided, that no Debtor shall be obligated to
maintain any Patent in the event the Debtor determines, in its reasonable
business judgment, that the maintenance of such Patent is no longer necessary or
desirable in the conduct of its business.
Section 5.4 Prosecution of Patent Application. At its own expense, such
Debtor shall diligently prosecute all applications for Patents for such Debtor
and shall not abandon any such application prior to exhaustion of all
administrative and judicial remedies, absent written consent of the Agent (which
consent shall not be unreasonably withheld); provided, that no Debtor shall be
obligated to prosecute any application in the event the Debtor determines, in
its reasonable business judgment, that the prosecuting of such application is no
longer necessary or desirable in the conduct of its business.
Section 5.5 Other Patents and Copyrights. Within sixty (60) days of the
acquisition or issuance of a Patent, registration of a Copyright, or acquisition
of a registered copyright, the Debtor shall deliver to the Agent a copy of said
Copyright or certificate or registration of said patents, as the case may be,
with an assignment for security as to such Patent or Copyright, as the case may
be, to the Agent and at the expense of the Debtor, confirming the assignment for
security, the form of such assignment for security to be substantially the same
as the form hereof or in such other form as may be reasonably satisfactory to
the Agent.
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Section 5.6 Remedies. Upon the occurrence and during the continuance of
an Event of Default, the Agent may take any or all of the following actions: (a)
declare the entire right, title, and interest of any Debtor in each of the
Patents and Copyrights vested in the Agent, for the benefit of the Lenders, in
which event such right, title, and interest shall immediately vest in the Agent,
for the benefit of the Lenders, and in which case the Agent shall be entitled to
exercise the power of attorney referred to in Section 5.1 hereof to execute,
cause to be acknowledged and notarized and to record said absolute assignment
with the applicable agency; (b) take and practice, use or sell the Patents and
Copyrights; and (c) direct such Debtor to refrain, in which event such Debtor
shall refrain, from practicing the Patents and using the Copyrights, directly or
indirectly, and such Debtor shall execute such other and further documents as
the Agent may request further to confirm this and to transfer ownership of the
Patents and Copyrights to the Agent, for the benefit of the Lenders.
ARTICLE 6
PROVISIONS CONCERNING ALL COLLATERAL
Section 6.1 Protection of Agent's Security. Each Debtor will at all
times keep its Inventory and Equipment insured in favor of the Agent, at each
such Debtor's own expense to the extent and in the manner provided in the Lender
Agreements; all policies or certificates with respect to such insurance (and any
other insurance maintained by the Debtor) (a) shall be endorsed to the Agent's
reasonable satisfaction for the benefit of the Agent (including, without
limitation, by naming the Agent as additional insured and loss payee) and (b)
shall state that such insurance policies shall not be canceled without thirty
(30) days' prior written notice thereof by the insurer to the Agent; and
certified copies of such policies or certificates with respect thereto shall be
deposited with the Agent. If any Debtor shall fail to insure its Inventory and
Equipment in accordance with the preceding sentence, or if any Debtor shall fail
to so endorse and deposit all policies or certificates with respect thereto, the
Agent shall have the right (but shall be under no obligation), upon prior
written notice to any such Debtor, to procure such insurance and such Debtor
agrees to promptly reimburse the Agent for all costs and expenses of procuring
such insurance. The Agent shall, at the time any proceeds of such insurance are
distributed to the Lenders, apply such proceeds in accordance with Section 7.4
hereof except as otherwise provided by the Credit Agreement. Each Debtor assumes
all liability and responsibility in connection with the Collateral acquired by
it and the liability of each Debtor to pay the Obligations shall in no way be
affected or diminished by reason of the fact that such Collateral may be lost,
destroyed, stolen, damaged or for any reason whatsoever unavailable to the
Debtor.
Section 6.2 Further Actions. Each Debtor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Agent from time
to time such lists, descriptions and designations of its Collateral, warehouse
receipts, receipts in the nature of warehouse receipts, bills of lading,
documents of title, vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers
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of attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Agent reasonably
requests in order to perfect, preserve or protect its security interest in the
Collateral.
Section 6.3 Financing Statements. Each Debtor agrees to execute and
deliver to the Agent such financing statements, in form reasonably acceptable to
the Agent, as the Agent may from time to time reasonably request, to establish
and maintain a valid, enforceable, first priority perfected security interest in
the Collateral as provided herein and the other rights and security contemplated
hereby all in accordance with the UCC as enacted in any and all relevant
jurisdictions or any other relevant law. Each Debtor will pay any applicable
filing fees, recordation taxes and related expenses relating to its Collateral.
Each Debtor hereby authorizes the Agent upon the occurrence and during the
continuance of an Event of Default to file any such financing statements without
its signature where permitted by law.
ARTICLE 7
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
Section 7.1 Remedies; Obtaining the Collateral Upon Default. Each
Debtor agrees that upon the occurrence of an Event of Default, the Agent, in
addition to any rights now or hereafter existing under applicable law, shall
have all rights as a secured creditor under the UCC in all relevant
jurisdictions and may:
(a) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Debtor or any other
Person who then has possession of any part thereof, with or without notice or
process of law, and for that purpose may enter upon the Debtor's premises where
any of the Collateral is located and remove the same and use in connection with
such removal any and all services, supplies, aids and other facilities of the
Debtor;
(b) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation, the Receivables
and the Contracts) constituting the Collateral to make any payment required by
the terms of such agreement, instrument or other obligation directly to the
Agent;
(c) withdraw all monies, securities and instruments in the
Cash Collateral Account and/or in any other cash collateral account for
application to the Obligations in accordance with Section 7.4 hereof;
(d) sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof in accordance with Section 7.2 hereof, or direct
the Debtor to sell, assign or otherwise
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liquidate any or all of the Collateral or any part thereof, and, in each case,
take possession of the proceeds of any such sale or liquidation;
(e) take possession of the Collateral or any part thereof, by directing
the relevant Debtor in writing to deliver the same to the Agent at any place or
places reasonably designated by the Agent, in which event such Debtor shall at
its own expense:
(i) forthwith cause the same to be moved to the place or
places so designated by the Agent and there delivered to the Agent;
(ii) store and keep any Collateral so delivered to the Agent
at such place or places pending further action by the Agent as provided
in Section 7.2 hereof; and
(iii) while the Collateral shall be so stored and kept,
provide such guards and maintenance services as shall be necessary to
protect the same and to preserve and maintain them in good condition;
and
(f) license or sublicense, whether on an exclusive or nonexclusive
basis, any Marks, Patents or Copyrights included in the Collateral for such term
and on such conditions and in such manner as the Agent shall in its reasonable
judgment determine;
it being understood that each Debtor's obligation to deliver the Collateral is
of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Agent shall be entitled to a decree
requiring specific performance by any such Debtor of said obligation. The
Lenders agree that this Agreement may be enforced only by the action of the
Agent acting upon the instructions of the Majority Lenders and that no other
Lender shall have any right individually to seek to enforce this Agreement or to
realize upon the security to be granted hereby, it being understood and agreed
that such rights and remedies may be exercised by the Agent for the benefit of
the Lenders upon the terms of this Agreement.
Section 7.2 Remedies: Disposition of the Collateral. Any Collateral
repossessed by the Agent under or pursuant to Section 7.1 hereof and any other
Collateral whether or not so repossessed by the Agent, may be sold, assigned,
leased or otherwise disposed of under one or more contracts or as an entirety,
and without the necessity of gathering at the place of sale the property to be
sold, and in general in such manner, at such time or times, at such place or
places and on such terms as the Agent may, in compliance with any mandatory
requirements of applicable law, determine to be commercially reasonable. Any of
the Collateral may be sold, leased or otherwise disposed of, in the condition in
which the same existed when taken by the Agent or after any overhaul or repair
at the expense of the Debtor which the Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceeding permitted by such requirements shall be made upon not less than ten
(10) days' written notice to the Debtor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for
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the ten (10) days after the giving of such notice, to the right of the Debtor or
any nominee of the Debtor to acquire the Collateral involved at a price or for
such other consideration at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than ten (10) days'
written notice to the Debtor specifying the time and place of such sale and, in
the absence of applicable requirements of law, shall be by public auction (which
may, at the Agent's option, be subject to reserve), after publication of notice
of such auction not less than ten (10) days prior thereto in two newspapers in
general circulation in Boston, Massachusetts. To the extent permitted by any
such requirement of law, the Agent may bid for and become the purchaser of the
Collateral or any item thereof offered for sale in accordance with this Section
without accountability to the Debtor. If, under mandatory requirements of
applicable law, the Agent shall be required to make disposition of the
Collateral within a period of time which does not permit the giving of notice to
the Debtor as hereinabove specified, the Agent need give the Debtor only such
notice of disposition as shall be reasonably practicable in view of such
mandatory requirements of applicable law.
Section 7.3 Waiver of Claims. Except as otherwise provided in this
Agreement, (a) EACH DEBTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE AGENT'S TAKING
POSSESSION OR THE AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH EACH DEBTOR WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and
(b) each Debtor hereby further waives, to the extent permitted by law:
(i) all damages occasioned by such taking of possession except
any damages which are determined by a final, non-appealable court order
to have been caused by the Agent's gross negligence or willful
misconduct; and
(ii) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of the
Agent's rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law in
order to prevent or delay the enforcement of this Agreement or the absolute sale
of the Collateral or any portion thereof, and each Debtor, for itself and all
who may claim under it, insofar as it or they now or hereafter lawfully may,
hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the Debtor therein and thereto, and shall
be a perpetual bar both at law and in equity against
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the Debtor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under the Debtor.
Section 7.4 Application of Proceeds. All moneys collected by the Agent
upon any sale or other disposition of the Collateral, together with all other
moneys received by the Agent hereunder, shall be applied as provided in Section
10.3 of the Credit Agreement. It is understood and agreed that each Debtor shall
remain liable to the extent of any deficiency between the amount of the proceeds
of the Collateral hereunder and the aggregate amount of the Obligations.
Section 7.5 Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Agent shall be in addition to every other
right, power and remedy specifically given under this Agreement, the other
Lender Agreements or now or hereafter existing at law, in equity or by statute
and each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Agent. All such
rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Agent in the exercise
of any such right, power or remedy and no renewal or extension of any of the
Obligations shall impair any such right, power or remedy or shall be construed
to be a waiver of any Default or Event of Default or an acquiescence therein. No
notice to or demand on any Debtor in any case shall entitle it to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Agent to any other or further action in any
circumstances without notice or demand. In the event that the Agent shall bring
any suit to enforce any of its rights hereunder and shall be entitled to
judgment, then in such suit the Agent may recover reasonable expenses, including
reasonable attorneys' fees, and the amounts thereof shall be included in such
judgment.
Section 7.6 Discontinuance of Proceedings. In case the Agent shall have
instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Agent, then and in every such case each Debtor, the Agent and
each holder of any of the Obligations shall be restored to their former
positions and rights hereunder with respect to the Collateral subject to the
security interest created under this Agreement, and all rights, remedies and
powers of the Agent shall continue as if no such proceeding had been instituted.
ARTICLE 8
MISCELLANEOUS
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Section 8.1 Notices. All notices and other communications made or
required to be given pursuant to this Agreement shall be in writing and shall be
mailed by United States mail, postage prepaid, or sent by hand, by telecopy or
by nationally-recognized overnight carrier service, addressed as follows:
(a) If to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, Telecopier No. (617) 434-8102, Attention: Mr.
Christopher S. Allen, Director, with a copy to: Goodwin, Procter & Hoar
LLP, Exchange Place, Boston, MA 02109, Telecopier No. 617-523-1231,
Attention: Edward Matson Sibble, Jr., P.C., or at such other
address(es) or to the attention of such other Person(s) as the Agent
shall from time to time designate in writing to the Debtors and the
Lenders.
(b) If to the Debtors, c/o Tweeter Home Entertainment Group,
Inc. at 40 Hudson Road, Shawmut Park, Canton, Massachusetts 02021,
Telecopier No. (617) 821-9956, Attention: Joseph McGuire, Chief
Financial Officer, with a copy to Goulston & Storrs, P.C., 400 Atlantic
Avenue, Boston, MA 02110-3333, Telecopier No. (617) 574-4112,
Attention: Kitt Sawitsky, Esq. and Daniel Avery, Esq., or at such other
address(es) or to the attention of such other Person(s) as Tweeter
shall from time to time designate in writing to the Agent and the
Lenders.
(c) If to any Lender, at the address(es) and to the attention
of the Person(s) specified below such Lender's name on the execution
page of this Agreement (or in the case of a Successor Lender, at the
address(es) and to the attention of the Person(s) specified in the
Assignment and Acceptance Agreement executed by such Successor Lender),
or at such other address(es) and to the attention of such other
Person(s) as any Lender shall from time to time designate in writing to
the Agent and the Debtors.
Any notice so addressed and mailed by registered or certified mail
shall be deemed to have been given three (3) days after deposit in the mails.
Any notice so addressed and sent by hand, by telecopy or by overnight carrier
service shall be deemed to have been given when received.
A notice from the Agent stating that it has been given on behalf of the
Lenders shall be relied upon by the Debtors as having been given by the Lenders.
Section 8.2 Waiver; Amendment. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Debtor directly affected thereby and the
Agent (with the consent of the Majority Lenders or, to the extent required by
Section 11.1 of the Credit Agreement, all of the Lenders).
Section 8.3 Obligations Absolute. The obligations of each Debtor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation
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or the like of any Debtor; (b) any exercise or non-exercise, or any waiver of,
any right, remedy, power or privilege under or in respect of this Agreement or
any other Lender Agreement; or (c) any amendment to or modification of any other
Lender Agreement or any security for any of the Obligations whether or not the
Debtors shall have notice or knowledge of any of the foregoing.
Section 8.4 Successors and Assigns. This Agreement shall be binding
upon each Debtor and its successors and assigns and shall inure to the benefit
of the Agent and the Lenders and their respective successors and assigns. All
agreements, statements, representations and warranties made by each Debtor
herein or in any certificate or other instrument delivered by any Debtor or on
its behalf under this Agreement shall be considered to have been relied upon by
the Lenders and shall survive the execution and delivery of this Agreement and
the other Lender Agreements regardless of any investigation made by the Agent or
the Lenders or on their behalf.
Section 8.5 Headings Descriptive. The headings of the several sections
of this Agreement are inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this Agreement.
Section 8.6 Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT REGARD TO IT
PRINCIPLES RELATING TO CHOICE OF LAW.
Section 8.7 Debtors' Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Debtor shall remain liable
to perform all of the obligations, if any, assumed by it with respect to the
Collateral and the Agent shall not have any obligations or liabilities with
respect to any Collateral other than an obligation to act in a commercially
reasonable manner, by reason of or arising out of this Agreement, nor shall the
Agent be required or obligated in any manner to perform or fulfill any of the
obligations of any Debtor under or with respect to any Collateral.
Section 8.8 Termination; Release. After the Termination Date, this
Agreement shall terminate (provided that all indemnities set forth in the Credit
Agreement shall survive such termination) and the Agent, at the request and
expense of the Debtors, will promptly execute and deliver to each Debtor a
proper instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to each Debtor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Agent and has not theretofore been sold or
otherwise applied or released pursuant to this Agreement.
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<PAGE> 155
Section 8.9 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with each Debtor
and the Agent.
Section 8.10 The Agent. The Agent will hold in accordance with this
Agreement all items of the Collateral at any time received under this Agreement.
It is expressly understood and agreed that the obligations of the Agent as
holder of the Collateral and interests therein and with respect to the
disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Agent shall act hereunder on the
terms and conditions set forth in this Agreement and in Section 13 of the Credit
Agreement.
ARTICLE 9
DEFINITIONS
Unless otherwise defined herein, terms defined in the Credit Agreement
are used herein as therein defined and the following terms shall have the
following respective meanings (such meanings being equally applicable to the
singular and plural forms of the terms defined):
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Cash Collateral Account" shall mean a non-interest bearing lockbox
account or such other account so designated by the Agent.
"Chattel Paper" and "chattel paper" shall have the meaning provided in
the Uniform Commercial Code as in effect on the date hereof in the Commonwealth
of Massachusetts.
"Contract Rights" shall mean all rights of any Debtor (including,
without limitation, all rights to payment) under each Contract.
"Copyrights" shall mean any United States copyright owned (or subject
to the rights of ownership) by any Debtor, including any registrations of any
copyright in the United States Copyright Office, as well as any application for
a copyright registration now or hereafter made with the United States Copyright
Office by any Debtor.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Documents" and "documents" shall have the meaning provided in the
Uniform Commercial Code as in effect on the date hereof in the Commonwealth of
Massachusetts.
17
<PAGE> 156
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"General Intangibles" and "general intangibles" shall have the meaning
provided in the Uniform Commercial Code as in effect on the date hereof in the
Commonwealth of Massachusetts.
"Goods" and "goods" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the Commonwealth of
Massachusetts.
"Instrument" or "instrument" shall have the meaning provided in the
Uniform Commercial Code as in effect on the date hereof in the Commonwealth of
Massachusetts.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on any Debtor's property.
"Marks" shall mean any United States trademarks, service marks and
trade names now owned, subject to a right of ownership or hereafter acquired by
any Debtor, including any registration of, or application for, any trademarks
and service marks in the United States Patent and Trademark Office, and any
trade dress including logos and/or designs used by any Debtor in the United
States.
"Obligations" shall mean (a) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations and liabilities of each Debtor now existing or hereafter incurred
under, arising out of or in connection with any Lender Agreement to which each
such Debtor is a party and the due performance and compliance by each Debtor
with the terms of each such Lender Agreement; (b) any and all sums advanced by
the Agent in order to preserve the Collateral or preserve its security interest
in the Collateral; (c) in the event of any proceeding for the collection or
enforcement of any obligations or liabilities referred to in clause (a), upon
the occurrence and during the continuance of an Event of Default, the reasonable
expenses of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Collateral, or of any exercise by the
Agent of its rights hereunder, together with reasonable attorneys' fees and
court costs; (d) all amounts paid by any Indemnitee as to which such Indemnitee
has the right to reimbursement under Section 14.5 of the Credit Agreement; and
(e) all other Lender Obligations.
"Patents" shall mean any United States patent owned, subject to a right
of ownership by or hereafter acquired by any Debtor and any divisions,
continuations, reissues, reexaminations, extensions or renewals thereof, as well
as any application for a United States patent now or hereafter made by the
Debtor or subject to a right of ownership in the Debtor.
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<PAGE> 157
"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the Commonwealth of Massachusetts on the date hereof or
under other relevant law and, in any event, shall include, but not be limited
to, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Agent or any Debtor from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due and
payable to any Debtor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any person acting under color of
governmental authority) and (c) any and all other amounts from time to time paid
or payable under or in connection with any of the Collateral.
"Proprietary Information" means all information and know-how worldwide,
including, without limitation, technical data, manufacturing data, research and
development data, data relating to compositions, processes and formulations,
manufacturing and production know-how and experience, management know-how,
training programs, manufacturing, engineering and other drawings,
specifications, performance criteria, operating instructions, maintenance
manuals, technology, technical information, software, engineering and computer
data and databases, design and engineering specifications, catalogs, promotional
literature and financial, business and marketing plans, inventions and invention
disclosures.
"Termination Date" shall mean the date on which all Obligations are
paid in full and the Lenders shall have no further commitments to or for the
account of the Debtors.
"Trade Secrets" means any secretly held existing engineering and other
data, information, production procedures and other know-how relating to the
design, manufacture, assembly, installation, use, operation, marketing, sale and
servicing of any products or business of any Debtor worldwide whether written or
not written.
[INTENTIONALLY LEFT BLANK]
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<PAGE> 158
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
DEBTORS:
TWEETER HOME ENTERTAINMENT GROUP,
INC.
By: ___________________________________
Name:
Title:
TWEETER HOME ENTERTAINMENT GROUP
FINANCING COMPANY TRUST
By: ____________________________________
Name:
Title:
AGENT:
BANKBOSTON, N.A., as Agent
By: __________________________________
Name:
Title:
20
<PAGE> 159
EXHIBIT A
to Security Agreement
See Schedule 5.2 to the Credit Agreement
<PAGE> 160
EXHIBIT B
to Security Agreement
See Schedule 5.2 to the Credit Agreement
<PAGE> 161
EXHIBIT C
to Security Agreement
See Schedule 5.13 to the Credit Agreement
<PAGE> 162
EXHIBIT D
to Security Agreement
See Schedule 5.13 to the Credit Agreement
<PAGE> 163
EXHIBIT E
to Security Agreement
See Schedule 5.13 to the Credit Agreement
<PAGE> 164
EXHIBIT F
to Security Agreement
See Schedule 5.13 to the Credit Agreement
<PAGE> 165
EXHIBIT G
FORM OF LANDLORD WAIVER
____________________ (the "Lessor") being the lessor of certain premises (the
"Premises") commonly known as ____________________ leased to___________________
(the "Lessee") under the lease of the Premises dated __________ as the same may
be amended from time to time, including any renewal, extension or substitution
thereof or therefor, (the "Lease"), for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the Lessor, does
hereby:
1. Acknowledge that Lessor has been advised that New England Audio Co.,
Inc. has granted or will grant to BankBoston, N.A., individually and/or as
agent, (the "Secured Party") security interests in inventory, equipment,
removable trade fixtures and all other personal property now owned or hereafter
acquired by the Assignee (the "Collateral"), all as more fully described in a
Security Agreement from Assignee to the Secured Party (as the same may be
amended from time to time, the "Security Agreement").
2. Waive, relinquish and release, solely during the term of the Security
Agreement, any and all rights of distraint, lien, levy or execution against or
upon the Collateral for any rent or other sum now or hereafter due the Lessor
under the Lease or otherwise, and all claims and demands of every kind and
nature against the Collateral.
3. Agree to use reasonable efforts to provide the Secured Party with a
copy of any notice given by the Lessor to the Assignee of the Assignee's default
under or termination of the Lease or of any material amendment thereof.
4. Agree, both before and after termination of the Lease, upon reasonable
notice to Lessor, to provide the Secured Party with access to the Premises to
effect removal or sale of the Collateral, and the Secured Party hereby agrees
(i) to repair any damage directly caused by such removal or sale, and to
indemnify the Lessor for any liability directly resulting from such removal or
sale and (ii) to remove or sell said Collateral within 30 days after entry upon
the Premises (and, if the Lease has been terminated, the Secured Party shall be
responsible to the Lessor for per diem rent and other charges accruing under the
Lease during the period the period of such removal or sale).
<PAGE> 166
IN WITNESS WHEREOF, the Lessor has executed this Landlord's Waiver as of
_____ day of _________, 199_.
LESSOR:
By: _______________________________
Its President
Hereunto duly authorized
AGREED:
BANKBOSTON, N.A.
By:___________________________
100 Federal Street
Boston, MA 02110
Attn: Mr. Christopher S. Allen
RE: New England Audio Co., Inc.
<PAGE> 167
[GOULSTON & STORRS LETTERHEAD]
July 20, 1998
BankBoston, N.A., as Agent
100 Federal Street
Boston, MA 02110
Re: Amended and Restated Credit Agreement with New England Audio Co., Inc.
Ladies and Gentlemen:
We have acted as special counsel to New England Audio Co., Inc., a
Massachusetts corporation (the "Company"), and NEA Delaware, Inc., a Delaware
corporation (the "Subsidiary"), and the other "Loan Parties" (as hereinafter
defined), in connection with the Amended and Restated Credit Agreement (the
"Agreement") dated as of July 20, 1998 by and among the Company and the
Subsidiary, as Borrowers, Tweeter Home Entertainment Group, Inc., a Delaware
corporation (the "Parent") and Tweeter Home Entertainment Group Financing
Company Trust, a Massachusetts business trust (the "Business Trust"), as
Guarantors, and BankBoston, N.A., as Agent for the Lenders under and as defined
in the Agreement (the "Agent"). The Borrowers and the Guarantors are
collectively referred to herein as the "Loan Parties".
Capitalized terms defined in the Agreement and not otherwise defined
herein are used herein with the meanings so defined.
This opinion letter is furnished to you pursuant to Section 3.1 (m) of
the Agreement.
We have examined executed copies of the following documents, all dated as
of the date hereof (the "Documents"):
(a) the Agreement;
(b) the Revolving Credit Note issued by the Company and the
Subsidiary to BankBoston, N.A. in the original principal
amount of $30,000,000.00;
<PAGE> 168
BankBoston, N.A., as Agent
July 20, 1998
Page -2-
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(c) the Amended and Restated Security Agreement by and among the
Company and the Subsidiary as Debtors, and the Agent as
Secured Party, (the "Security Agreement");
(d) the Security Agreement by and among the Parent and the Trust
as Debtors and the Agent as Secured Party, (the "Guarantors
Security Agreement");
(e) the Amended and Restated Pledge Agreement by and among the
Company, as Pledgor, and the Agent as Pledgee, (the "Pledge
Agreement") and the stock certificate and executed stock
powers delivered in connection therewith;
(f) the Pledge Agreement by and among the Parent, as Pledgor, and
the Agent, as Pledgee, (the "Parent Pledge Agreement"), and
the stock certificates and executed stock powers delivered in
connection therewith;
(g) the Subordination Agreement by and among the Business Trust
and the Agent (the "Subordination Agreement");
(h) the UCC-1 Financing Statements prepared by your legal counsel
in connection with the transactions contemplated by the
Documents (the "Financing Statements"); and
(i) the various agreements listed on Schedule 1 hereto (the
"Material Agreements") described in the Parents's Registration
Statement to which the Parent, either Borrower or any
Subsidiary is a party.
In connection with this opinion letter, we have examined and relied solely
upon the following (except as otherwise noted herein) and we have made no other
investigation or documentary review whatsoever:
(a) executed copies of the Documents;
(b) with respect to the Company:
(i) the Articles of Organization of the Company, certified
by the Clerk of the Company as of the date hereof;
(ii) the By-laws of the Company, certified by the Clerk of
the Company as of the date hereof;
<PAGE> 169
BankBoston, N.A., as Agent
July 20, 1998
Page -3-
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(iii) a Certificate regarding the legal existence and
corporate good standing of the Company issued by the
Secretary of State of the Commonwealth of Massachusetts
on July 7, 1998 (the "Company Legal Existence and Good
Standing Certificate");
(iv) the stock record books of the Company in the form
provided to us by the Clerk of the Company;
(c) with respect to the Subsidiary:
(i) the Certificate of Incorporation of the Subsidiary,
certified by the Secretary of the Subsidiary as of the
date hereof;
(ii) the By-laws of the Subsidiary, certified by the
Secretary of the Subsidiary as of the date hereof;
(iii) a Certificate regarding the legal existence and
corporate good standing of the Subsidiary issued by the
Secretary of State of the State of Delaware on July 6,
1998 (the "Subsidiary Legal Existence and Good Standing
Certificate");
(d) with respect to the Parent:
(i) the Certificate of Incorporation of the Parent,
certified by the Secretary of the Parent as of the date
hereof;
(ii) the By-laws of the Parent, certified by the Secretary of
the Parent as of the date hereof;
(iii) a Certificate regarding the legal existence and
corporate good standing of the Parent issued by the
Secretary of State of the State of Delaware on July 6,
1998 (the "Parent Legal Existence and Good Standing
Certificate");
(iv) the stock record books of the Parent in the form
provided to us by the Secretary of the Parent;
(e) with respect to the Business Trust:
<PAGE> 170
BankBoston, N.A., as Agent
July 20, 1998
Page -4-
- --------------------------------------------------------------------------------
(i) the Declaration of Trust of the Business Trust,
certified by the Trustee of the Business Trust, as of
the date hereof;
(ii) a Certificate regarding the due authorization of the
Business Trust issued by the Secretary of State of the
Commonwealth of Massachusetts on July 10, 1998 (the
"Business Trust Legal Existence Certificate");
(iii) the stock record books of the Business Trust in the form
provided to us by the Trustees of the Business Trust;
(f) the representations and warranties as to matters of fact (and
the covenants as to the application of the proceeds of the
Revolving Loans made pursuant to the Agreement) contained in
the Documents and in the certificates delivered to you at the
Closing in connection therewith;
(g) the certificates delivered to you at the Closing as to the
incumbency and signatures of the officers or Trustees of, and
adoption of authorizing resolutions by, the Loan Parties; and
(h) statements as to certain factual matters certified to us by
the Loan Parties.
In addition, we have reviewed such provisions of the laws of the
Commonwealth of Massachusetts and of the United States of America, and the
General Corporation Law of the State of Delaware, as we have deemed necessary in
order to express the opinions hereinafter set forth.
Based on the foregoing, and subject to the limitations and
qualifications set forth below, we are of the opinion that:
1. Based upon the Company Legal Existence and Good Standing Certificate
referred to in item (b)(iii) above, the Company is (as of the date of such
certificate) a corporation legally existing and in corporate good standing under
the laws of the Commonwealth of Massachusetts. The Company has adequate
corporate power and authority to own its properties to enter into and perform
the Documents to which it is a party, and, to our knowledge, to conduct its
business as currently conducted.
2. The execution and delivery of the Documents to which it is a party
have been duly authorized by all necessary corporate action of the Company, such
Documents have been duly executed and delivered by the Company, and such
Documents (other than the
<PAGE> 171
BankBoston, N.A., as Agent
July 20, 1998
Page -5-
- --------------------------------------------------------------------------------
Financing Statements, the stock powers and the stock certificate) constitute the
valid, binding and enforceable obligations of the Company.
3. The execution and delivery by the Company of the Documents to which
it is a party and the performance by the Company of such Documents (other than
the Financing Statements, the stock powers and the stock certificate) will not
violate (i) the Company's existing Articles of Organization or By-laws, (ii) any
provision of existing law applicable and material to the Company or any of its
properties or (iii) any of the Material Agreements.
4. The execution and delivery of the Documents to which it is a party
by the Company, and the consummation by the Company of the transactions
contemplated thereby, do not to our knowledge require under existing law any
consent or approval of or filings with any federal or state governmental body or
regulatory authority other than as set forth in the Documents or in paragraph
number 5 below.
5. The provisions of the Security Agreement are sufficient to create in
favor of the Agent a valid, binding and enforceable security interest in all
right, title and interest of the Company in such of the Collateral described
therein in which a security interest may be created under Article 9 of the
Massachusetts Uniform Commercial Code (the "Code"). Upon the due execution and
filing of the Financing Statement noted to be filed in the office of the
Secretary of State of the Commonwealth of Massachusetts, the Agent will have a
perfected security interest in all right, title and interest of the Company in
such of the Collateral described in such financing statements and located in the
Commonwealth of Massachusetts with respect to which a security interest may be
perfected in the Commonwealth of Massachusetts by a filing under Article 9 of
the Code.
6. The provisions of the Pledge Agreement are sufficient to create in
favor of the Agent a valid, binding and enforceable security interest in all the
right, title and interest of the Company in the shares of the Subsidiary pledged
thereunder, and upon delivery to the Agent of the stock certificates and the
stock powers endorsed to the Agent or in blank or in registered form issued to
the Agent, the Agent will have a perfected security interest in all the right,
title and interest of the Company in the Subsidiary shares pledged.
7. Based upon the Subsidiary Legal Existence and Good Standing
Certificate referred to in item (c)(iii) above, the Subsidiary is (as of the
date of such certificate) a corporation legally existing and in corporate good
standing under the laws of the State of Delaware. The Subsidiary has adequate
corporate power and authority to own its properties, to enter into and perform
the Documents to which it is a party, and, to our knowledge, to conduct its
business as currently conducted.
8. The execution and delivery of the Documents to which it is a party
have been duly authorized by all necessary corporate action of the Subsidiary,
and such Documents
<PAGE> 172
BankBoston, N.A., as Agent
July 20, 1998
Page -6-
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have been duly executed and delivered by the Subsidiary, and such Documents
(other than the Financing Statements) constitute the valid, binding and
enforceable obligation of the Subsidiary.
9. The execution and delivery by the Subsidiary of the Documents to
which it is a party and the performance by the Subsidiary of such Documents
(other than the Financing Statements) will not violate the Subsidiary's existing
Certificate of Incorporation or By-laws or any provision of existing law
applicable and material to the Subsidiary or any of its properties.
10. The execution and delivery of the Documents to which it is a party
by the Subsidiary, and the consummation by the Subsidiary of the transactions
contemplated thereby, do not to our knowledge require under existing law any
consent or approval of or filings with any federal or state governmental body or
regulatory authority other than the filing of appropriate Financing Statements.
11. Based upon the Parent Legal Existence and Good Standing Certificate
referred to in item (d)(iii) above, the Parent is (as of the date of such
certificate) a corporation legally existing and in corporate good standing under
the laws of the State of Delaware. The Parent has adequate corporate power and
authority to own its properties, to enter into and perform the Documents to
which it is a party, and to our knowledge, to conduct its business as currently
conducted.
12. The execution and delivery of the Documents to which it is a party
have been duly authorized by all necessary corporate action of the Parent, such
Documents have been duly executed and delivered by the Parent, and such
Documents (other than the Financing Statements, the stock powers and the stock
certificates) constitute the valid, binding and enforceable obligations of the
Parent.
13. The execution and delivery by the Parent of the Documents to which
it is a party and the performance by the Parent of such Documents (other than
the Financing Statements, the stock powers and the stock certificates) will not
violate (i) the Parent's existing Certificate of Incorporation or By-laws, (ii)
any provision of existing law applicable and material to the Parent or any of
its properties or (iii) any of the Material Agreements.
14. The execution and delivery of the Documents to which it is a party
by the Parent, and the consummation by the Parent of the transactions
contemplated thereby, do not to our knowledge require under existing law any
consent or approval of or filings with any federal or state governmental body or
regulatory authority other than as set forth in paragraph number 15 below.
<PAGE> 173
BankBoston, N.A., as Agent
July 20, 1998
Page -7-
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15. The provisions of the Guarantors Security Agreement are sufficient
to create in favor of the Agent a valid, binding and enforceable security
interest in all right, title and interest of the Parent in such of the
Collateral described therein in which a security interest may be created under
Article 9 of the Massachusetts Uniform Commercial Code (the "Code"). Upon the
due execution and filing of the Financing Statements executed by the Parent
noted to be filed in the offices of the Secretary of State of the Commonwealth
of Massachusetts, the Agent will have a perfected security interest in all
right, title and interest of the Parent in such of the Collateral described in
such financing statements and located in the Commonwealth of Massachusetts with
respect to which a security interest may be perfected in the Commonwealth of
Massachusetts by a filing under Article 9 of the Code.
16. The provisions of the Parent Pledge Agreement are sufficient to
create in favor of the Agent a valid, binding and enforceable security interest
in all the right, title and interest of the Parent in the shares of the Company
and the Business Trust pledged thereunder, which, according to the stock record
books referred to in items (b)(iv) and (e)(iii) above, constitute all of the
outstanding capital stock of the Company and all of the outstanding beneficial
interests of the Business Trust, and upon delivery to the Agent of the stock
certificates for one hundred (100) shares of the stock of the Company and one
hundred (100) shares of the beneficial interests of the Business Trust, and the
stock powers endorsed to the Agent or in blank or in registered form issued to
the Agent, the Agent will have a perfected security interest in all the right,
title and interest of the Parent in the Company and Business Trust shares
pledged.
17. Based upon the Business Trust Legal Existence Certificate referred
to in item (e)(ii) above, the Business Trust is (as of the date of such
certificate) a Massachusetts business trust duly authorized to transact business
in the Commonwealth of Massachusetts. The Business Trust has adequate power and
authority as a Massachusetts business trust to own its properties, to enter into
and perform the Documents to which it is a party and, to our knowledge, to
conduct its business as currently conducted.
18. The execution and delivery of the Documents to which it is a party
have been duly authorized by all necessary trust action of the Business Trust,
such Documents have been duly executed and delivered by the Business Trust, and
such Documents (other than the Financing Statements) constitute the valid,
binding and enforceable obligations of the Business Trust.
19. The execution and delivery by the Business Trust of the Documents
to which it is a party and the performance by the Business Trust of such
Documents (other than the Financing Statements) will not violate the Business
Trust's existing Declaration of Trust or any provision of existing law
applicable and material to the Business Trust or any of its properties.
<PAGE> 174
BankBoston, N.A., as Agent
July 20, 1998
Page -8-
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20. The execution and delivery of the Documents to which it is a party
by the Business Trust, and the consummation by the Business Trust of the
transactions contemplated thereby, do not to our knowledge require under
existing law any consent or approval of or filings with any federal or state
governmental body or regulatory authority other than as set forth in paragraph
number 21 below.
21. The provisions of the Guarantors Security Agreement are sufficient
to create in favor of the Agent a valid, binding and enforceable security
interest in all right, title and interest of the Business Trust in such of the
Collateral described therein in which a security interest may be created under
Article 9 of the Massachusetts Uniform Commercial Code (the "Code"). Upon the
due execution and filing of the Financing Statement executed by the Business
Trust, noted to be filed in the office of the Secretary of State of the
Commonwealth of Massachusetts, the Agent will have a perfected security interest
in all right, title and interest of the Business Trust in such of the Collateral
described in such financing statements and located in the Commonwealth of
Massachusetts with respect to which a security interest may be perfected in the
Commonwealth of Massachusetts by a filing under Article 9 of the Code.
22. The provisions of M.G.L. c. 271 Section 49 do not apply to the
Agent.
23. According to the stock record books of the Parent referred to in
item d(iv) above, there are no issued and outstanding shares of preferred stock
of the Parent as of the date hereof.
Our opinions set forth herein are subject to the following limitations
and qualifications:
A. In our examination and in rendering this opinion letter, we
have assumed the genuineness of all signatures, the legal
capacity of natural persons, the power and authority of all
natural persons (other than officers or Trustees of the Loan
Parties acting in such capacities), the authenticity and
completeness of all documents submitted to us as originals,
the conformity to original documents of all documents
submitted to us as copies and the authenticity of the
originals of such latter documents.
B. In rendering this opinion letter, we have also assumed that
the Agent is a "Agent subject to control, regulation or
examination by any state or federal regulatory agency" within
the meaning of M.G.L. c. 271 Section 49(e). We have also
assumed that each person or entity (other than the Loan
Parties) which is a party to any Document (a "Signatory") has
all requisite power and authority and has taken all necessary
corporate or other action to authorize it to execute, deliver
and perform such of the Documents and other related documents
as
<PAGE> 175
BankBoston, N.A., as Agent
July 20, 1998
Page -9-
- --------------------------------------------------------------------------------
may be executed in connection therewith to which it is a party
and to effect the transactions contemplated thereby; that such
Signatory has executed and delivered the Documents and such
other related documents; that the same constitute legal, valid
and binding obligations of such Signatory enforceable against
it; and that the consideration to be received by the Borrower
pursuant to the Amended and Restated Credit Agreement has been
or will be delivered to or for the benefit of such Loan Party,
respectively, on the date hereof. Our opinion does not take
account of, and we express no opinion with respect to, (i) any
requirement of law which may be applicable to the Loan Parties
or any Signatory by reason of the legal or regulatory status
of such Signatory or by reason of any other facts particularly
pertaining to such Signatory, or (ii) any approval or consent
arising out of any contract or agreement (other than the
Documents) to which any Signatory is a party or by which it is
bound.
C. Our opinions set forth herein as to the validity, binding
effect and enforceability of the Documents and the perfection
of the security interests granted by the Loan Parties are
specifically qualified to the extent that the validity,
binding effect or enforceability of any obligations of the
Loan Parties under any of the Documents, the availability or
enforceability of any of the remedies provided therein or such
perfection may be subject to or limited by (i) applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other statutory or decisional laws, heretofore
or hereafter enacted or in effect, affecting the rights of
creditors generally, (ii) the exercise of judicial or
administrative discretion, (iii) the application by courts of
competent jurisdiction of laws containing provisions
determined to have a paramount public interest, (iv) the
Agent's implied duty of good faith and, with respect to any of
the Agent's rights concerning collateral security, its
overriding duty to act, as to every aspect of any disposition
thereof or realization thereon, in a commercially reasonable
manner, and (v) the availability or enforceability of
particular remedies, of exculpatory provisions and of waivers
contained in the Documents, which particular remedies,
exculpatory provisions and waivers of rights may be limited by
equitable principles or applicable laws, rules, regulations,
court decisions and constitutional requirements. In connection
with our opinions in Paragraphs 12 and 18 as to the validity,
binding effect and enforceability of the Documents entered
into by the Guarantors, we have assumed and have relied in
part on our understanding that the Agent is relying on and
would not extend the credit to the Borrowers were it not for
the execution and delivery of such Documents by the
Guarantors.
D. No opinion is expressed herein with respect to title to
property (real or personal), the priority of any security
interest or lien, the applicability of or
<PAGE> 176
BankBoston, N.A., as Agent
July 20, 1998
Page -10-
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compliance with zoning by-laws, subdivision control laws,
environmental laws or state or federal securities laws, or the
enforceability of provisions of the Documents to the extent
such enforceability is predicated upon any of the foregoing.
E. In rendering this opinion letter, we have assumed that each of
the Loan Parties has rights in its respective Collateral
described in the Security Agreement and the Guarantors
Security Agreement.
F. This opinion letter is limited to the legal matters explicitly
addressed herein and does not extend, by implication or
otherwise, to any other matter. Without limiting the
generality of the foregoing, no opinion is expressed herein
with respect to any state or federal anti-trust law or, except
as provided in paragraph 22 above, as to whether the Revolving
Loans to be made pursuant to the Agreement could be determined
to be usurious under any state or federal law. This opinion is
not subject to, and shall not be governed by or interpreted in
accordance with, the Third-Party Legal Opinion Report
(including the Legal Opinion Accord and the "guidelines" set
forth therein) of the ABA Section of Business Law (1991).
G. We are not passing upon and do not assume any responsibility
for the accuracy, sufficiency, completeness or fairness of any
statements, representations, warranties, descriptions,
information or financial data supplied to the Agent with
respect to the Documents, or the transactions contemplated
thereby, or for the fairness of such transactions themselves,
and we make no representation that we have independently
verified the accuracy, sufficiency, completeness or fairness
of any of the foregoing.
H. With respect to references herein to "our knowledge" or words
of similar import, such references mean the knowledge of the
following attorneys presently employed by Goulston & Storrs:
Kitt Sawitsky, Jeffrey S. Wolfson, Timothy B. Bancroft, Daniel
R. Avery, Connie L. Kolb and Shannon M. Quinlan. Nothing has
come to our attention which has caused us to believe that the
statements made herein "to our knowledge" are untrue or
incorrect. However, we have not made any independent review or
investigation of any factual matter contained in any written
material reviewed or provided orally by any representative of
the Loan Parties.
I. All opinions rendered herein are limited to the existing laws
of the Commonwealth of Massachusetts as applied by courts
located in Massachusetts, the existing General Corporation Law
of the State of Delaware and existing laws of the United
States of America, all as in effect on the date
<PAGE> 177
BankBoston, N.A., as Agent
July 20, 1998
Page -11-
- --------------------------------------------------------------------------------
hereof, and we express no opinion as to choice of laws or as
to the laws of any other jurisdiction.
J. Our opinions in Paragraphs 3, 9, 13 and 19 as to no violation
of existing law are based upon a review of those statutes,
rules and regulations which, in our experience, are normally
applicable to transactions of the type contemplated by the
Documents. Our opinions in Paragraphs 4, 14 and 20 relate only
to consents and approvals and filings and registrations which
in our experience are normally applicable to the transactions
of the type contemplated by the Documents.
This opinion letter is furnished to you exclusively for the purpose of
satisfying the conditions set forth in Section 3.1(m) of the Agreement and shall
not, without our prior written consent, be relied upon by any other person
(except for the Lenders from time to time under the Amended and Restated Credit
Agreement) or used for any other purpose.
Very truly yours,
/s/ Goulston & Storrs
JSW/DRA
<PAGE> 178
[GOULSTON & STORRS LETTERHEAD]
SCHEDULE A
MATERIAL AGREEMENTS
(a) EXHIBITS TO REGISTRATION STATEMENT:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1.1 -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of the Company
3.2 -- Amended and Restated Certificate of Incorporation of the
Company.
3.3 -- Articles of Organization of New England Audio Co., Inc.,
as amended.
3.4 -- By-Laws of the Company.
3.5 -- Amended and Restated By-Laws of the Company.
3.6 -- By-Laws of New England Audio Co., Inc.
3.7 -- Form of Amended and Restated Certificate of Incorporation
of the Company, to be effective immediately prior to the
closing of the Offering.
3.8 -- Form of Amended and Restated By-Laws of the Company, to be
effective immediately prior to the closing of the
Offering.
4.2 -- Form of Shareholders' Rights Agreement to be effective
immediately prior to the closing of the Offering.
10.1 -- Amended and Restated Registration Rights Agreement, dated
as of May 30, 1997, as amended, among the Company and the
shareholders and warrantholders listed therein, as
amended.
10.2 -- Warrant Purchase Agreement among the Company, PNC Capital
Corp., Seacoast Capital Partners, L.P. and Exeter Venture
Lenders, L.P., dated as of May 30, 1997, as amended.
10.3 -- Stock Purchase Warrant issued to PNC Capital Corp. dated
June 5, 1998 for 209,855 shares of Common Stock of the
Company.
10.4 -- Stock Purchase Warrant issued to Seacoast Capital
Partners, L.P. dated June 5, 1998 for 209,855 shares of
Common Stock of the Company.
10.5 -- Stock Purchase Warrant issued to Exeter Venture Lenders,
L.P. dated as of June 5, 1998 for 104,928 shares of Common
Stock of the Company.
<PAGE> 179
BankBoston, N.A., as Agent
July 20, 1998
Page -13-
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10.6 -- Stock Purchase Warrant issued to Exeter Equity Partners,
L.P. dated as of June 5, 1998 for 104,928 shares of Common
Stock of the Company.
10.7 -- Common Stock Warrant issued to HiFi Buys Incorporated
dated June 5, 1998 for 104,960 shares of Common Stock of
the Company.
10.8 -- Form of Common Stock Purchase Warrant dated June 5, 1998
issued by the Company pursuant to the Warrant and
Debenture Commitment.
10.11 -- Lease from James M. Salah of Boca Raton, Florida, as
Trustee of JMS Realty Trust, to the Company for premises
at 40 Hudson Road, Canton, Massachusetts, dated June 11,
1991.
10.15 -- Employment Agreement between the Company and Samuel
Bloomberg to be effective upon the Offering.
10.16 -- Employment Agreement between the Company and Jeffrey Stone
to be effective upon the Offering.
10.17 -- Employment Agreement between the Company and Joseph
McGuire to be effective upon the Offering.
10.18 -- Employment Agreement between the Company and Fred Lokoff,
dated as of May 13, 1996 and amended as of April 23, 1997.
10.19 -- Employment Agreement between the Company and David
Ginsburg, dated as of June 1, 1997.
10.20 -- Asset Purchase Agreement, dated as of May 30, 1997,
between the Company and HiFi Buys Incorporated.
10.21 -- Purchase and Sale Agreement between Chadwick-Miller Inc.
and New England Audio Co., Inc. for premises at 10 Pequot
Way, Canton, MA, dated March 31, 1998.
<PAGE> 180
EXHIBIT I
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
Assignment and Acceptance Agreement dated as of _______, ____, by
and between __________ (the "Assignor") and __________ (the "Successor Lender").
WHEREAS, the Assignor is one of the Lenders party to the Credit
Agreement referred to below; and
WHEREAS, the Assignor desires to sell and the Successor Lender
desires to purchase, all or a portion of the outstanding loans, advances of
credit and commitments of Assignor under the Credit Agreement and the other
documents, instruments and agreements related thereto.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties agree as follows:
Reference is made to the Amended and Restated Credit Agreement dated
as of July 20, 1998 (as amended or supplemented and as from time to time in
effect, the "Credit Agreement"), by and among New England Audio Co., Inc. and
NEA Delaware, Inc. (the "Borrowers"), the Guarantors party thereto, the lenders
party thereto (the "Lenders") and BankBoston, N.A., as agent for the Lenders
(the "Agent"). Terms defined in the Credit Agreement and not otherwise defined
herein are used herein with the meanings so defined.
1. Assignment and Acceptance. Pursuant to Section 12.2 of the Credit
Agreement, as of the close of business on __________________ (the "Assignment
Date"), the Assignor hereby assigns to the Successor Lender, $________ of its
$____________ current interest in the outstanding Revolving Credit Advances and
a ____% interest in its Commitment Percentage.
The foregoing assignment which constitutes a ___% Commitment
Percentage under the Credit Agreement, is made together with the concomitant
proportionate amount of the undersigned's other rights and obligations under the
Credit Agreement and the other Lender Agreements, and the Successor Lender
hereby accepts and assumes such rights and obligations completely. After giving
effect to this assignment, the Assignor and the Successor Lender shall have the
interests in the Revolving Credit Notes and the Commitment Percentages set forth
on Schedule 1 attached hereto, and the Commitment Percentages of all of the
Lenders under the Credit Agreement shall be as set forth on Schedule 2 attached
hereto.
<PAGE> 181
2. Representations and Warranties.
(a) Other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned hereby free and clear
of any adverse claim, the Assignor makes no representation or warranty and
assumes no responsibility with respect to (i) the execution, delivery,
effectiveness, enforceability, genuineness, validity or adequacy of the Credit
Agreement, the Revolving Credit Notes or any other Lender Agreement, (ii) any
recital, representation, warranty, document, certificate, report or statement
in, provided for in, received under or in connection with, the Credit Agreement
or any other Lender Agreement or (iii) the existence, validity, enforceability,
perfection, recordation, priority, adequacy or value, now or hereafter, of any
lien or other direct or indirect security afforded or purported to be afforded
by any of the Lender Agreements or otherwise from time to time.
(b) The Assignor makes no representation or warranty and assumes
no responsibility with respect to (i) the performance or observance of any of
the terms or conditions of the Credit Agreement or any other Lender Agreement on
the part of the Borrower, (ii) the business, operations, condition (financial or
otherwise) or prospects of the Borrower or any other Person or (iii) the
existence of any Default.
(c) The Successor Lender confirms that it has received a copy of
the Credit Agreement and each of the other Lender Agreements, together with
copies of the most recent financial statements delivered pursuant to Sections
6.1 and 6.2 of the Credit Agreement, and such other documents and information as
it has deemed appropriate to make its own credit and legal analysis and decision
to enter into this Assignment and Acceptance Agreement. The Successor Lender
confirms that it has made such analysis and decision independently and without
reliance upon the Agent, the Assignor or any other Lender.
(d) The Successor Lender, independently and without reliance upon
the Agent, the Assignor or any other Lender, and based on such documents and
information as it shall be deem appropriate at the time, will make its own
decisions to take or not take action under or in connection with the Credit
Agreement or any other Lender Agreement.
(e) The Successor Lender irrevocably appoints the Agent to act as
Agent for the Successor Lender under the Credit Agreement and the other Lender
Agreements, all in accordance with Article 13 of the Agreement and the other
provisions of the Credit Agreement and each other Lender Agreement.
(f) The Successor Lender agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement and the other Lender Agreements are required to be performed by
it as a Lender.
(g) Except as to paragraph (a) above, the foregoing assignment is
made without any representation, warranty or recourse of any kind by the
Assignor.
<PAGE> 182
3. Party to the Agreement, etc. Upon (a) the execution and delivery
hereof by the parties hereto at least five (5) Business Days prior to the
Assignment Date, (b) the payment by the Successor Lender to Assignor of an
amount equal to the purchase price agreed between the Successor Lender and the
Assignor, and (c) payment to the Agent of the fee required to be paid pursuant
to Section 12.2(a) of the Credit Agreement, the Successor Lender shall
automatically become party to the Credit Agreement as a signatory thereto. As of
the Assignment Date, the Successor Lender shall have all the rights and
obligations of a Lender under the Credit Agreement and the other Lender
Agreements as and to the extent set forth on Schedule 1 and Schedule 2 attached
hereto. Copies of all notices and other information required to be delivered to
the Lenders under the Credit Agreement shall be delivered to the Successor
Lender at the address(es) and to attention of the Person(s) specified below the
Successor Lender's name on the execution page of this Assignment and Acceptance
Agreement. As of the Assignment Date, the Assignor shall be released from its
obligations under the Credit Agreement to a corresponding extent, and no further
consent or action by any party shall be required.
4. Miscellaneous. This Assignment and Acceptance Agreement may be
executed in any number of counterparts, which together shall constitute one
instrument, shall be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts (without giving effect to the conflict of laws
rules of any jurisdiction) and shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
[INTENTIONALLY LEFT BLANK.]
<PAGE> 183
IN WITNESS WHEREOF, the Assignor and the Successor Lender have
executed this Assignment and Acceptance Agreement as of the date first above
written.
[ASSIGNOR]
By:
--------------------------------
Name:
Title:
[SUCCESSOR LENDER]
By:
--------------------------------
Name:
Title:
[Address for Notices]
Telecopier No.:
Attention:
-------------------------
The foregoing is hereby
acknowledged and approved:
TWEETER HOME ENTERTAINMENT GROUP, INC.*
By:
--------------------------------
Name:
Title:
BANKBOSTON, N.A., as Agent
By:
--------------------------------
Name:
Title:
- ------------
* Include unless Section 12.2 of the Credit Agreement does not require
Tweeter's consent to the assignment.
<PAGE> 184
Schedule 1
Successor Lender's and Assignor's Interest
The Successor Lender's interest under the Credit Agreement on and after the
Assignment Date shall be as follows:
Commitment Percentage _____%
Principal Amount of Revolving Credit Note $________
The Assignor's interest under the Credit Agreement on and after the Assignment
Date shall be as follows:
Commitment Percentage _____%
Principal Amount of Revolving Credit Note $_________
<PAGE> 185
Schedule 2
Lenders' Commitment Percentages
After giving effect to the assignment on the Assignment Date, the
Lenders' respective Commitment Percentages under the Credit Agreement shall be
as follows:
<TABLE>
<CAPTION>
Commitment Maximum Amount
Lender Percentage of Revolving Credit Advances
------ ---------- ----------------------------
<S> <C> <C>
. % $ .
. % $ .
. % $ .
TOTALS 100.00% $ .00
</TABLE>
<PAGE> 186
EXHIBIT J
FORM OF TWEETER TRUST SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT, dated as of July 20, 1998, is entered
into by and among Tweeter Home Entertainment Group Financing Company Trust
("Tweeter Trust" or the "Subordinated Lender"), BANK BOSTON, N.A. ("Bank
Boston"), NEW ENGLAND AUDIO CO., INC. ("New England Audio") and NEA Delaware,
Inc., ("NEA Delaware") (each of New England Audio and NEA Delaware is referred
to herein as individually, as a "Borrower" and collectively as the "Borrowers").
WHEREAS, the Borrowers, have entered into an Amended and Restated
Credit Agreement, dated as of July 20, 1998 (as amended, modified or
supplemented from time to time, the "Credit Agreement") with the Agent and the
other lenders parties thereto (the "Lenders"), and Tweeter Home Entertainment
Group ("Tweeter") and Tweeter Trust as guarantors, and pursuant to which the
Lenders have agreed to make Revolving Credit Advances (as defined in the Credit
Agreement) to the Borrowers, upon the terms and subject to the conditions
contained therein; and
WHEREAS, in connection with the granting of the credits under the
Credit Agreement, the Agent is requiring the Subordinated Lender to execute and
deliver this Subordination Agreement.
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, terms defined in the
Senior Credit Agreement and used herein shall have the meanings given to them in
the Senior Credit Agreement.
(b) The following terms shall have the following meanings:
"Agent": (a) Bank Boston, as agent under the Senior Credit
Agreement and (b) any other Person acting as agent or representative of
the holders of Senior Obligations and so designated by notice to the
holders of Subordinated Obligations from the holders of Senior
Obligations holding not less than 50% of the outstanding amount of the
Senior Obligations.
"Agreement": this Subordination Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
<PAGE> 187
"Blockage Notice": a written notice from the Agent to a
Borrower that an Event of Default has occurred and is continuing.
"Blockage Period": any period commencing on the date a
Blockage Notice is given and ending on the date when the Agent notifies
the Subordinated Lender in writing that the Event of Default that was
the basis for such notice has been cured or waived (which such notice
the Agent shall be obligated to provide promptly upon such cure or
waiver).
"Collateral": the collective reference to any and all property
from time to time subject to security interests to secure payment or
performance of the Senior Obligations.
"Insolvency Event": (a) A Borrower commencing any case,
proceeding or other action (i) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to have
an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (ii)
seeking appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part of its
assets, or a Borrower making a general assignment for the benefit of
its creditors; or (b) there being commenced against a Borrower any
case, proceeding or other action of a nature referred to in clause (a)
above which (i) results in the entry of an order for relief or any such
adjudication or appointment or (ii) remains undismissed, undischarged
or unbonded for a period of 60 days; or (c) there being commenced
against a Borrower any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or substantially all of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (d) a Borrower indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause
(a), (b) or (c) above.
"Senior Credit Agreement:" the Amended and Restated Credit
Agreement dated as of July 20, 1998, among the Borrowers, Tweeter Home
Entertainment Group, Inc., the Agent, the Senior Lenders and the
Subordinated Lender, as such Credit Agreement may be amended, modified
or supplemented from time to time, and any renewals or replacements
thereof in a transaction with an institutional lender on terms
customary for a transaction of the type the Senior Loans comprise.
"Senior Lenders": the Lenders under the Senior Credit
Agreement and any subsequent holders from time to time of the Senior
Notes and the other Senior Obligations.
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"Senior Loan Documents": the collective reference to the
Senior Credit Agreement, the Senior Notes, the Senior Security
Documents and all other documents that from time to time evidence the
Senior Obligations or secure or support payment or
performance thereof, and any renewals or replacements thereof with an
institutional lender on terms customary for a transaction of the type
the Senior Loans comprise.
"Senior Loans": the loans made by the Senior Lenders to the
Borrowers pursuant to the Senior Credit Agreement.
"Senior Notes": the promissory notes of the Borrowers
outstanding from time to time under the Senior Credit Agreement, and
any renewals or replacements thereof evidencing a transaction with an
institutional lender on terms customary for a transaction of the type
the Senior Loans comprise.
"Senior Obligations": the collective reference to the unpaid
principal of and interest on the Senior Notes including, without
limitation, interest accruing at the then applicable rate provided in
the Senior Credit Agreement after the maturity of the Senior Loans and
interest accruing at the then applicable rate provided in the Senior
Credit Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding,
relating to a Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceedings, whether direct
or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in
connection with, the Senior Credit Agreement, the Senior Notes, this
Agreement, the other Senior Loan Documents or any other document made,
delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Agent and any
Senior Lender that are required to be paid by the Borrowers pursuant to
the terms of the Senior Credit Agreement or this Agreement or any other
Senior Loan Document) and any renewals or replacements of part or all
of the foregoing obligations in a transaction with an institutional
lender on terms customary for a transaction of the type the Senior
Loans comprise.
"Senior Security Documents": the collective reference to all
documents and instruments, now existing or hereafter arising, which
create or purport to create a security interest in property to secure
payment or performance of the Senior Obligations, or any renewals or
replacements thereof in a transaction with an institutional lender on
terms customary for a transaction of the type the Senior Loans
comprise.
"Subordinated Loans": all loans made by the Subordinated
Lender to the Borrowers from time to time.
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"Subordinated Notes": any promissory notes of the Borrowers
outstanding from time to time evidencing the Subordinated Loans.
"Subordinated Obligations": the collective reference to the
unpaid principal of and interest on the Subordinated Notes and all
other obligations and liabilities of the Borrowers to the Subordinated
Lender under the Subordinated Loans including, without limitation,
interest accruing at the then applicable rate provided in the
Subordinated Loans whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may
arise under, out of, or in connection with, the Subordinated Loans, the
Subordinated Notes, this Agreement, or any other instrument, in each
case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. Subordination.
(a) The Borrowers and the Subordinated Lender, for itself and
each future holder of the Subordinated Obligations, agree that the Subordinated
Obligations are expressly "subordinate and junior in right of payment" (as that
phrase is defined in paragraph 2(b)) to all Senior Obligations.
(b) "subordinate and junior in right of payments" means that:
(i) no part of the Subordinated Obligations shall
have any claim to the assets of a Borrower on a parity with or prior to
the claim of the Senior Obligations;
(ii) unless and until the Senior Obligations have
been paid in full and the Senior Lenders' commitments to make loans
under the Senior Credit Agreement have been terminated, without the
express prior written consent of the Senior Lenders, the Subordinated
Lender will not take, demand, or receive from a Borrower, and a
Borrower will not make, give or permit, directly or indirectly, by
set-off, redemption, purchase or in any other manner, any payment of or
security for the whole or any part of the Subordinated Obligations,
including, without limitation, any letter of credit or similar credit
support facility to support payment of the Subordinated Obligations;
notwithstanding the foregoing, at any time, except during a Blockage
Period, a
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Borrower may make, and the Subordinated Lender may receive, payments on
account of principal and interest on the Subordinated Loans;
(iii) unless and until the Senior Obligations have
been paid in full and the Senior Lenders' commitments to make loans
under the Senior Credit Agreement have been terminated, the
Subordinated Lender will not commence or participate in any suit or
action to enforce payment of any part or all of the Subordinated
Obligations;
(iv) none of the provisions of subsections 2(b)(iii)
or (iv) above or elsewhere in this Agreement shall in any way derogate
from or diminish the absolute subordination provided under items
2(b)(i) and (ii) above or under Section 3 below.
(c) Upon the termination of any Blockage Period, the
Subordinated Lender's rights to receive principal and interest payments as
provided in subsection 2(b)(ii) above shall be reinstated, and a Borrower may
resume making such payments to the Subordinated Lender to the extent provided in
such subsection 2(b)(ii).
(d) The Agent shall be entitled to deliver a separate Blockage
Notice with respect to any or all Events of Default and each such Blockage
Notice shall be effective as provided in this Agreement.
(e) A Blockage Period shall be effective without the delivery
of a Blockage Notice if (i) the events which would have been set forth in the
Blockage Notice have occurred and (ii) such Blockage Notice may not be given
because of the automatic stay under 11 U.S.C. 362 or any successor statute, or
the Subordinated Lender has actual notice of an Event of Default.
(f) The expressions "prior payment in full," "payment in
full," "paid in full" and any other similar terms or phrases when used herein
with respect to the Senior Obligations shall mean the payment in full, in
immediately available funds, of all of the Senior Obligations.
(g) The Subordinated Lender hereby represents and warrant that
as of the date hereof, the Borrowers have no obligations to the Subordinated
Lender.
3. Additional Provisions Concerning Subordination.
(a) The Subordinated Lender and the Borrowers agree that upon
the occurrence of any Insolvency Event:
(i) all Senior Obligations shall be paid in full
before any payment or distribution (other than a distribution of
securities which are subordinate to the payment of all Senior
Obligations then outstanding) is made with respect to the Subordinated
Obligations; and
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(ii) any payment or distribution of assets of a
Borrower, whether in cash, property or securities (other than a
distribution of securities which are subordinate to the payment of all
Senior Obligations then outstanding), to which the Subordinated Lender
would be entitled except for the provisions hereof, shall be paid or
delivered by such Borrower, or any receiver, trustee in bankruptcy,
liquidating trustee, disbursing agent or other Person making such
payment or distribution, directly to the Agent, to the extent necessary
to pay in full all Senior Obligations, before any payment or
distribution shall be made to the Subordinated Lender.
(b) The Subordinated Lender will not commence or join with any
other creditor or creditors of a Borrower in commencing any bankruptcy,
reorganization or insolvency proceedings against a Borrower. At any meeting of
creditors of a Borrower or in the event of any proceeding, voluntary or
involuntary, for the distribution, division or application of all or part of the
assets of a Borrower or the proceeds thereof, whether such proceeding be for the
liquidation, dissolution or winding up of a Borrower or its business, a
receivership, insolvency or bankruptcy proceeding, an assignment for the benefit
of creditors or a proceeding by or against a Borrower for relief under any
bankruptcy, reorganization or insolvency law or any law relating to the relief
of debtors, readjustment of indebtedness, reorganization, arrangement,
composition or extension or otherwise, if all Senior Obligations have not been
paid in full at the time, the Agent is hereby irrevocably authorized at any such
meeting or in any such proceeding:
(i) To enforce claims comprising Subordinated
Obligations either in its own name or the name or names the
Subordinated Lender, by proof of debt, proof of claim, suit or
otherwise;
(ii) To collect any assets of a Borrower distributed,
divided or applied by way of dividend or payment, or any such
securities issued, on account of Subordinated Obligations and apply the
same, or the proceeds of any realization upon the same that the Agent
in its discretion elects to effect, to Senior Obligations until all
Senior Obligations shall have been paid in full, rendering any surplus
to the Subordinated Lender, pro rata;
(iii) To vote claims comprising Subordinated
Obligations to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition, extension or
otherwise; and
(iv) To take generally any action in connection with
any such meeting or proceeding which the Subordinated Lender might
otherwise take.
(c) If any payment from a Borrower shall be collected or
received by the Subordinated Lender in respect of the Subordinated Obligations,
except payments permitted to be made at the time of payment as provided in this
Agreement, the Subordinated Lender forthwith shall deliver the same to the
Agent, in the form received, duly endorsed to the
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Agent, if required, to be applied to the payment or prepayment of the Senior
Obligations until the Senior Obligations are paid in full. Until so delivered,
such payment or distribution shall be held in trust by the Subordinated Lender
as the property of the Agent, segregated from other funds and property held by
the Subordinated Lender. Until the Senior Obligations are paid in full, the
Subordinated Lender shall not have any right of subrogation, reimbursement,
restitution, contribution or indemnity whatsoever from any assets of a Borrower
or any guarantor or provider of collateral security for the Senior Obligations.
4. Legend. The Subordinated Lender shall cause a conspicuous
legend to be placed on each Subordinated Note to the following effect:
"This Note, and the indebtedness evidenced hereby, is
subordinate and junior in right of payment in the manner and to the
extent set forth in an agreement (the "Subordination Agreement") dated
as of July 20, 1998 originally made by the maker and payee of this Note
in favor of the Senior Lenders to all indebtedness at any time owed by
the maker of this Note to such Bank (or to its successor and assigns or
subsequent holder of "Senior Obligations" as defined in the
Subordination Agreement), and each holder of this Note, by its
acceptance hereof, shall be bound by the Subordination Agreement, and
this Note may be sold or otherwise transferred only in compliance with
the conditions specified in the Subordination Agreement."
5. Liens. The Subordinated Lender shall not have or claim any security
interest, lien, claim, right or other encumbrance in or on any property of a
Borrower on account of the Subordinated Obligations. The Subordinated Lender
hereby agrees, upon request of the Senior Lender at any time and from time to
time, to execute such other documents or instruments as may be requested by the
Agent further to evidence of public record or otherwise the senior priority of
the Senior Obligations as contemplated by this Agreement, and to execute a
subordination agreement on similar terms in favor of any successors or assigns
of the Agent or other lender extending credit to a Borrower in exchange or
replacement of the Senior Obligations.
6. Consent of Subordinated Lender.
(a) The Subordinated Lender consents that, without the
necessity of any reservation of rights and without notice to or further assent:
(i) any demand for payment of any Senior Obligations
made by the Agent or the Senior Lenders may be rescinded in whole or in
part by the Agent or the Senior Lenders, and any Senior Obligation may
be continued, and the Senior Obligations, or the liability of a
Borrower or any guarantor or any other party upon or for any part
thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, or any obligation or liability of a
Borrower or any other party under the Senior Credit Agreement or any
other agreement, may, from time to time, in
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whole or in part, be renewed, extended, modified, accelerated,
compromised, waived, surrendered, or released by the Agent or the
Senior Lenders; and
(ii) the Senior Credit Agreement, the Senior Notes,
any other Senior Loan Document and the Senior Obligations may be
amended, modified, supplemented or terminated, in whole or in part, as
the Agent or the Senior Lenders may deem advisable from time to time,
and any collateral security at any time held by the Agent or the Senior
Lenders for the payment of any of the Senior Obligations may be sold,
exchanged, waived, surrendered or released,
in each case all without notice to or further assent by the Subordinated Lender,
which will remain bound under this Agreement, and all without impairing,
abridging, releasing or affecting the subordination provided for herein.
(b) The Subordinated Lender waives any and all notice of the
creation, renewal, extension or accrual of any of the Senior Obligations and
notice of or proof of reliance by the Agent or the Senior Lenders upon this
Agreement. The Senior Obligations, and any of them, shall be deemed conclusively
to have been created, contracted or incurred in reliance upon this Agreement,
and all dealings between a Borrower and the Agent or the Senior Lenders shall be
deemed to have been consummated in reliance upon this Agreement. The
Subordinated Lender acknowledges and agrees that the Agent and the Senior
Lenders have relied upon the subordination provided for herein in entering into
the Senior Credit Agreement and in making funds available to a Borrower
thereunder. The Subordinated Lender waives notice of or proof of reliance on
this Agreement and protest, demand for payment and notice of default.
7. Senior Obligations Unconditional. All rights and interests of the
Agent and the Senior Lenders hereunder, and all agreements and obligations of
the Subordinated Lender and the Borrowers hereunder, shall remain in full force
and effect irrespective of:
(a) any lack of validity or enforceability of any Senior
Security Documents or any other Senior Loan Documents;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Senior Obligations, or any
amendment or waiver or other modification, whether by course of conduct
or otherwise, of the terms of the Senior Credit Agreement or any other
Senior Security Document;
(c) any exchange, release or nonperfection of any security
interest in any Collateral, or any release, amendment, waiver or other
modification, whether in writing or by course of conduct or otherwise,
of all or any of the Senior Obligations or any guarantee thereof, or
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(d) any other circumstances which otherwise might constitute a
defense available to, or a discharge of, a Borrower in respect of the
Senior Obligations, or of either any Subordinated Lender or a Borrower
in respect of this Agreement.
8. Waiver of Claims. To the maximum extent permitted by law, the
Subordinated Lender waives any claim it might have against the Agent or the
Senior Lenders with respect to, or arising out of, any action or failure to act
or any error of judgment, negligence, or mistake or oversight whatsoever on the
part of the Agent or the Senior Lenders or their respective directors, officers,
employees or agents with respect to any exercise of rights or remedies under the
Senior Loan Documents or any transaction relating to the Collateral. Neither the
Agent or the Senior Lenders nor any of their directors, officers, employees or
agents shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of a Borrower or the
Subordinated Lender or any other Person or to take any other action whatsoever
with regard to the Collateral or any part thereof.
9. Extension of Senior Obligations. Notwithstanding the foregoing
provisions of this Agreement and any extension by the Agent or the Senior
Lenders of the final maturity date of the Senior Obligations, provided that at
the time no Event of Default under the Senior Loan Documents is continuing, the
Subordinated Lender may receive timely payment of all unpaid principal and
accrued interest on the Subordinated Obligations. In the event an Event of
Default does then exist, the subordination of the Subordinated Obligations under
Section 2(b)(i), (ii) and (iii) and Section 3 shall remain in effect and
unimpaired.
10. Provisions Applicable After Bankruptcy. The provisions of this
Agreement shall continue in full force and effect notwithstanding the occurrence
of and from and after any "Insolvency Event."
11. Further Assurances. The Subordinated Lender and the Borrowers, at
their own expense and at any time from time to time, upon the written request of
the Agent or the Senior Lenders will promptly and duly execute and deliver such
further instruments and documents and take such further actions as any Senior
Lender or any successor lender reasonably may request for the purposes of
obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted.
12. Provisions Define Relative Rights. This Agreement is intended
solely for the purpose of defining the relative rights of the Agent or the
Senior Lenders or any successor lenders on the one hand and the Subordinated
Lender and the Borrowers, and no other Person shall have any right, benefit or
other interest under this Agreement.
13. Powers Coupled With An Interest. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until the Senior Obligations are paid in full and the Senior
Lenders' commitments to make loans to the Borrowers are terminated.
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14. Notices. All notices, requests and demands to or upon the Agent or
the Senior Lenders or the Borrowers or the Subordinated Lender to be effective
shall be in writing (or by fax or similar electronic transfer confirmed in
writing) and shall be deemed to have been duly
given or made (i) when delivered by hand or (ii) if given by mail, when
deposited in the mails by certified mail, return receipt requested, or (iii) if
by fax or similar electronic transfer, when sent and receipt has been confirmed,
addressed as follows:
If to the Agent or the
Senior Lenders: Bank Boston, N.A., as Agent
100 Federal Street
Boston, Massachusetts 02110
Attention: Christopher S. Allen, Director
Fax: (617) 434-8102
with a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: Edward Matson Sibble, Jr., P.C.
Fax: (617) 523-1657
If to the Subordinated
Lender or the
Borrowers: New England Audio Co., Inc.
40 Hudson Road
Shawmut Park
Canton, Massachusetts 02021
Attention: Jeffrey Stone, President
Fax: (617) 821-9956
with a copy to: Goulston & Storrs
400 Atlantic Avenue
Boston, MA 02110
Attention: Kitt Sawitsky, Esq. and Daniel Avery, Esq.
Phone: (617) 482-1776
Fax: (617) 574-4112
If to the Subordinated Lender, at its address or transmission number
for notices set forth under its signature below.
The Senior Lenders, the Borrowers and the Subordinated Lender may
change their addresses and transmission numbers for notices by notice in the
manner provided in this Section.
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15. Counterparts. This Agreement may be executed by one or more of the
parties on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
16. 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 provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
17. Integration. This Agreement represents the agreement of the
Borrowers, the Agent, the Senior Lenders and the Subordinated Lender with
respect to the subject matter hereof and there are no promises or
representations by the Borrower, the Agent, the Senior Lenders or the
Subordinated Lender relative to the subject matter hereof not reflected herein.
18. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a written
instrument executed by the Agent, the Borrowers and the Subordinated Lender;
provided that any provision of this Agreement may be waived by the Agent or the
Senior Lenders in a letter or agreement executed by the Agent or the Senior
Lenders or by telex or facsimile transmission from the Agent or the Senior
Lenders.
(b) No failure to exercise, nor any delay in exercising, on
the part of the Agent or the Senior Lenders, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
19. Section Headings. The section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
20. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of the Borrowers and the Subordinated Lender and any
subsequent holders of the Subordinated Obligations and shall inure to the
benefit of the Agent, the Senior Lenders and their successors and assigns and
any future holder of any renewals or replacements of the Senior Obligations.
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21. Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the law of the Commonwealth of Massachusetts
without regard to conflicts of law principles.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
BANKBOSTON, N.A. as Agent
By:
Title:
NEW ENGLAND AUDIO CO., INC.
By:
Title:
NEA DELAWARE, INC.
By:
Title:
TWEETER HOME ENTERTAINMENT
GROUP FINANCING COMPANY
TRUST
Trustee:
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EXHIBIT K
INTERCREDITOR SUBORDINATION AGREEMENT
This Subordination Agreement (the "Agreement") dated _________, ____,
is by and between _____________________________ (the "Vendor") and BankBoston,
N.A., as Agent (the "Senior Agent"), a national banking association whose
address is 100 Federal Street, Boston, MA 02110.
WITNESSETH
WHEREAS, the Senior Agent and the other lenders from time to time for
whom the Senior Agent acts as agent (the "Senior Lenders") has or will extend
credit to New England Audio Co., Inc. and its subsidiaries (the "Borrowers") for
the purpose of financing Borrowers' acquisition of inventory, goods, merchandise
and/or other property and other general corporate purposes upon such terms and
conditions as the Borrowers, the Senior Agent and the Senior Lenders may agree
to; and
WHEREAS, in consideration of all such loans, renewals or extensions of
credit which the Senior Agent and the Senior Lenders may make, the Borrowers
will from time to time enter into various credit agreements, guaranties,
security agreements and related documents (as the same may be from time to time
amended, supplemented or modified the "Senior Loan Agreements"); and
WHEREAS, the Senior Agent and the Vendor, each agree, to the extent of
the security interests each may have in the Borrowers' collateral, that all
rights of the Senior Agent to the security interest and/or liens in and to the
property and/or assets of Borrowers are intended to be senior to all rights of
the Vendor to the security interest and/or liens in and to the property and/or
assets of the Borrowers,
NOW, THEREFORE, in order to induce the Senior Agent and the Senior
Lenders to make and renew loans and extend credit to the Borrowers from time to
time and in consideration thereof, the parties hereto mutually intending to be
bound hereby agree to as follows:
1. All of the understandings, agreements, representations and
warranties contained herein are solely for the benefit of the
Senior Agent and the Senior Lenders and the Vendor and there
are no other parties (including the Borrowers) who are
intended to be benefited in any way by this Agreement.
2. Nothing contained herein is intended to affect or limit, in
any way, the assignments of and the security interests that
each of the parties hereto has in any and all of the assets of
the Borrowers, whether tangible or intangible, insofar as the
rights of the Borrower and third parties are involved. Except
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provided in paragraph 4 below, the parties hereto specifically
reserve all respective rights, security interests and rights
to assert security interests against the Borrowers.
3. The Vendor hereby agrees that all security interest in and
liens on all inventory, accounts receivable, proceeds and any
other property of the Borrowers, which the Vendor now has or
hereafter acquires, including without limitation any purchase
money security interests, shall be and hereby are subordinated
and junior to the security interests and liens in the
Borrowers' assets which the Senior Agent or Senior Lenders now
have or may hereafter acquire at any time.
4. The Vendor hereby agrees that so long as the Borrowers own any
amounts or have any outstanding obligations to the Senior
Agent or the Senior Lenders, the Vender will not assert or
exercise any rights or remedies as a secured party with
respect to the Borrowers' assets.
5. Nothing herein shall impair, as between Borrowers and the
Vendor, the obligation of Borrowers, which is unconditional
and absolute, to pay the Vendor the principal and premium, if
any, and interest on any debts or obligations as and when same
shall become due in accordance with their terms, nor shall
anything herein prevent the Vendor or its assignees from
exercising all remedies otherwise permitted by applicable law,
excluding its rights and remedies as a secured party, upon
default by Borrowers subject to the provisions of this
Agreement and the rights of the Senior Agent and the Senior
Lenders hereunder.
6. This agreement shall be binding upon the Senior Agent and the
Senior Lenders and the Vendor and inure to the benefit of each
and their respective successors and assigns.
7. All notices, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if
delivered in person or sent certified or registered mail,
return receipt requested, postage pre-paid addressed to a
party hereto at its address as set forth below. The date of
the mailing shall be considered the date of the notice for
purposes herein,
If to the Senior Agent and If to the Vendor:
the Senior Lenders:
BankBoston, N.A.
100 Federal Street
Boston, MA 02110
Attn: Mr. Christopher S. Allen
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With copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Edward Mattson Sibble, Jr., P.C.
8. This Agreement shall be construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts.
9. Except as may be expressly otherwise provided for herein, this
Agreement constitutes the entire agreement and understanding
between the parties hereto with respect to the subject matter
hereof and the transactions contemplated hereby, and
supersedes all prior agreements, understandings and
representations, whether written or oral between the parties
thereto.
IN WITNESS WHERE, the parties hereto by their duly authorized
representatives have executed this Agreement as of the date first written above.
BANKBOSTON, N.A.
By:
------------------------------
Print Name:
----------------------
Title:
---------------------------
[Vendor]
By:
------------------------------
Print Name:
----------------------
Title:
---------------------------
3
<PAGE> 202
The Borrowers (as defined in the foregoing Agreement) hereby
acknowledge and accept notice of the foregoing Subordination Agreement and
consents thereto, as of the date first written above.
NEW ENGLAND AUDIO CO., INC.
By:
------------------------------
Print Name:
----------------------
Title:
---------------------------
NEA DELAWARE, INC.
By:
------------------------------
Print Name:
----------------------
Title:
---------------------------
4
<PAGE> 203
SCHEDULE 1
Commitment Percentages
<TABLE>
<CAPTION>
Commitment Maximum Amount
Lender Percentage of Revolving Credit Advances
------ ---------- ----------------------------
<S> <C> <C>
BankBoston, N.A. 100.00% $ 30,000,000.00
</TABLE>
<PAGE> 204
SCHEDULE 2
Pricing Schedule
The Eurodollar Rate Margin, the Base Rate Margin and the Applicable
Commitment Fee on any day are the respective percentages set forth below in the
applicable row under the column corresponding to the Status that exists on such
day:
<TABLE>
<CAPTION>
STATUS LEVEL I LEVEL II LEVEL III LEVEL IV
<S> <C> <C> <C> <C>
Eurodollar Rate Margin 1.00 1.25 1.50 1.75
Commitment Fee 0.25 0.25 0.375 0.375
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"Level I Status" exists at any date if, at such date, the
Applicable Leverage Ratio is less than 1.50-to-1.00 and no Default
exists.
"Level II Status" exists at any date if, at such date, the
Applicable Leverage Ratio is equal to or greater than 1.50-to-1.00 and
less than 2.00-to-1.00 and no Default exists.
"Level III Status" exists at any date if, at such date, the
Applicable Leverage Ratio is equal to or greater than 2.00-to-1.00 and
less than 3.00-to-1.00 and no Default exists.
"Level IV Status" exists at any date if, at such date, no
other Status exists.
"Status" refers to the determination of which of Level I
Status, Level II Status, Level III Status or Level IV Status exists at
any date.
For the period from the Closing Date through the date five Business
Days following the Agent's receipt of the financial statements of Tweeter and
its Subsidiaries for the period ended September 30, 1998, the "Applicable
Leverage Ratio" shall be deemed to be greater than 2.00-to-1.00. Thereafter,
the "Applicable Leverage Ratio" shall be determined on the date five Business
Days following the Agent's receipt of the financial statements of Tweeter and
its Subsidiaries for the previous fiscal quarter certified by the chief
financial officer of Tweeter, commencing with receipt of the financial
statements for the fiscal quarter ending September 30, 1998, and shall be equal
to the Consolidated Leverage Ratio in effect as of the end of such previous
fiscal quarter as reflected on such financial statements.
<PAGE> 205
SCHEDULE 3.1
SUBORDINATED INDEBTEDNESS PAID IN FULL
The "Subordinated Debt" described in the following Subordination Agreements by
and among BankBoston, N.A., the Borrowers and the subordinated lenders described
therein:
1. the Bronfman Subordination Agreement dated as of May 30, 1997 by and among
the Agent, the Company, the Subsidiary and the subordinated lender party
thereto;
2. the HiFi Buys Subordination Agreement dated as of May 30, 1997 by and among
the Agent, the Company, the Subsidiary and HiFi Buys Incorporated;
3. the 1997 Senior Subordinate Note Subordination Agreement dated as of May 30,
1997 by and among the Agent, the Company, the Subsidiary, PNC Capital Corp.,
Seacoast Capital Partners, L.P. and Exeter Venture Lenders, L.P.; and
4. the Preferred Stock Subordination Agreement dated as of May 30, 1997 by and
among the Agent, the Company, the Subsidiary and the holders of the Company's
Series A and Series B Preferred Stock.
See also Schedule 5.20.
-2-
<PAGE> 206
SCHEDULE 5.2
PRINCIPAL PLACES OF BUSINESS
The chief executive office and principal place of business of New England Audio
Co., Inc. is:
40 Hudson Rd
Shawmut Park
Canton Massachusetts 02021
The chief executive office and principal place of business of Tweeter Home
Entertainment Group, Inc. is:
40 Hudson Road
Shawmut Park
Canton Massachusetts 02021
The chief executive office and principal place of business of NEA
Delaware, Inc., is:
301 South Broadway
Salem New Hampshire 03079
The cheif executive office and principal place of business of Tweeter Home
Entertainment Group Financing Company Trust is
40 Hudson Road
Shawmut Park
Canton Massachusetts 02021
Other locations:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
DBA/Store Name Location City State/Zip
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bryn Mawr Stereo & Video 1817 Old York Rd. Abington PA 19001
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 2365 MacArthur Road Whitehall PA 18052
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 1016 Lancaster Avenue Bryn Mawr PA 19010
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 6471 Balt. National Pike Baltimore MD 21228
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 5601 Concord Pike Wilmington DE 19803
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE> 207
<TABLE>
<S> <C> <C> <C>
Bryn Mawr Stereo & Video 585 East Ordnance Road Glen Burnie MD 21060
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 268 W. Dekalb Pike King of Prussia PA 19406
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 3926 Kirkwood Highway Wilmington DE 19808
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 898A Plaza Blvd. Lancaster PA 17601
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video Rt. 38 & Alexander Ave. Maple Shade NJ 08052
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 4850 Carlisle Pike Mechanicsburg PA 17055
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 166 Montgomery Mall North Wales PA 19454
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 320 So. Henderson Rd. King of Prussia PA 19406
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 502 N. Oxford Valley Rd. Langhorn PA 19047
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 3311 Brunswick Pike Lawrenceville NJ 08648
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 1665 State Hill Rd. Wyomissing PA 19610
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 2080 York Road Timonium MD 21093
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 320 So. Henderson Rd. King of Prussia PA 19406
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video 2920 Whiteford Rd. York PA 17402
- ----------------------------------------------------------------------------------------------------------------
Bryn Mawr Stereo & Video Westville-Almonesson Rd. Deptford NJ 08096
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
HiFi Buys 10889 Alpharetta Hwy. Roswell GA 30076
- ----------------------------------------------------------------------------------------------------------------
HiFi Buys 196 Alps Road Athens GA 30608
- ----------------------------------------------------------------------------------------------------------------
HiFi Buys 1155 Ernest Barrett Pkwy Kennesaw GA 30144
- ----------------------------------------------------------------------------------------------------------------
HiFi Buys 3135 Peachtree Rd. Atlanta GA 30305
- ----------------------------------------------------------------------------------------------------------------
HiFi Buys 2021 West Lidell Rd. Duluth GA 30136
- ----------------------------------------------------------------------------------------------------------------
HiFi Buys 2545 H Hargrove Rd. Smyrna GA 30082
</TABLE>
-4-
<PAGE> 208
<TABLE>
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HiFi Buys 5495 Jimmy Carter Blvd. Norcross GA 30093
- ----------------------------------------------------------------------------------------------------------------
HiFi Buys 1062-A Johnson Ferry Rd. Marietta GA 30068
- ----------------------------------------------------------------------------------------------------------------
HiFi Buys 4023 Lavista Road Tucker GA 30084
- ----------------------------------------------------------------------------------------------------------------
HiFi Buys 1311-B Morrow Ind. Blvd. Morrow GA 30260
- ----------------------------------------------------------------------------------------------------------------
HiFi Buys 1200-A Wilson Way Smyrna GA 30082
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. Route 1, Allen Avenue N. Attleboro MA 02760
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 195 West Main Street Avon CT 06001
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 350 Boylston Street Boston MA 02116
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 874 Commonwealth Ave. Boston MA 02215
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. One Wheeler Rd. Burlington MA 01803
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. Crystal Mall Waterford CT 06385
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 109 Federal Road Danbury CT 06810
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. Dedham Plaza Dedham MA 02026
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 40 Hudson Road Canton MA 02021
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 86 Worcester Road Framingham MA 01701
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 1810 Washington Street Hanover MA 02339
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 104 Mount Auburn St. Cambridge MA 02138
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 27 Holyoke Street Holyoke MA 01040
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. Cape Town Plaza Hyannis MA 02601
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 29 Pavilions Way Manchester CT 06040
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 1712 Boston Post Rd. Milford CT 06460
</TABLE>
-5-
<PAGE> 209
<TABLE>
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tweeter, etc. 293 Daniel Webster Hwy. Nashua NH 03060
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 2661 Berlin Turnpike Newington CT 06111
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 14 Needham Street Newton MA 02159
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 242 Andover St., Rte. 114 Peabody MA 01960
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 2001 Woodbury Avenue Newington NH 03801
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 301 South Broadway Salem NH 03079
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. Route 1, Allen Ave N. Attleboro MA 02760
- ----------------------------------------------------------------------------------------------------------------
Tweeter, etc. 21 Universal Boulevard Warwick RI 02886
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE> 210
SCHEDULE 5.9
SCHEDULE OF FINANCIAL STATEMENTS
Consolidated financial statements with respect to the Borrowers and related
entities for the following periods:
Six Month Period Ended March 31, 1998
Fiscal Year Ended September 30, 1997
Fiscal Year Ended September 30, 1996
Fiscal Year Ended September 30, 1995
Fiscal Year Ended September 30, 1994
Fiscal Year Ended September 30, 1993
Fiscal Year Ended September 30, 1992
Fiscal Year Ended September 30, 1991
-7-
<PAGE> 211
SCHEDULE 5.11
SCHEDULE OF ISSUED AND OUTSTANDING STOCK
I. TWEETER HOME ENTERTAINMENT GROUP, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Outstanding Equity Interests Total
- -----------------------------------------------------------------------
<S> <C>
Shares of Common Stock 6,082,690
- -----------------------------------------------------------------------
Common Stock Warrants 511,808
- -----------------------------------------------------------------------
Common Stock Options 438,038
- -----------------------------------------------------------------------
</TABLE>
Effective upon the completion of Tweeter's initial public offering, all
outstanding shares of Tweeter's Series A Preferred Stock and Series B Preferred
Stock converted automatically into shares of Common Stock.
II. NEA DELAWARE, INC.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
NAME Shares of
Common Stock Owned
- ---------------------------------------------------------------------------------------------
<S> <C>
New England Audio Co., Inc. 100
- ---------------------------------------------------------------------------------------------
</TABLE>
III. NEW ENGLAND AUDIO CO., INC.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
NAME SHARES OF
COMMON STOCK OWNED
- ---------------------------------------------------------------------------------------------
<S> <C>
Tweeter Home Entertainment Group, Inc. 100
- ---------------------------------------------------------------------------------------------
</TABLE>
New England Audio has loaned Jeffrey Stone $31,500 in connection with his
purchase of 31,500 shares of New England Audio Common Stock, as evidenced by
that certain Note in the original principal amount of $31,500 and dated July 28,
1992 (and as amended by an Allonge dated November 28, 1995) and certain other
documents ancillary thereto.)
IV. TWEETER HOME ENTERTAINMENT GROUP FINANCING COMPANY TRUST
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Name SHARES OF
COMMON STOCK OWNED
- ---------------------------------------------------------------------------------------------
<S> <C>
Tweeter Home Entertainment Group, Inc. 100
- ---------------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE> 212
SCHEDULE 5.12
CHANGES IN CONDITION
1. On April 24, 1998, in preparation for a future public
offering, Tweeter Home Entertainment Group, Inc. filed a Form
S-1 Registration Statement with the Securities Exchange
Commission (SEC).
2. Any material change in the condition of Tweeter or any
Subsidiary occurring since May 30, 1997 is reflected in the
Consolidated Balance Sheets, which have been audited by
Deloitte & Touche LLP, are current as of March 31, 1998, and
are found in the Form S-1 Registration Statement described in
Paragraph 1 above.
3. In connection with the future public offering described in
Paragraph 1 above, on June 5, 1998, New England Audio
underwent a corporate reorganization, whereby, among other
matters, New England Audio Co., Inc. became a wholly owned
subsidiary of Tweeter Home Entertainment Group, Inc. For
additional information, please see the Reorganization
Agreements and exhibits attached thereto.
4. On June 23, 1998, New England Audio purchased for
approximately $4 Million the property located at 10 Pequot
Way, Canton, Massachusetts for use as a corporate
headquarters.
-9-
<PAGE> 213
SCHEDULE 5.13
SCHEDULE OF LICENSES, PATENTS, COPYRIGHTS AND TRADEMARKS
I. LICENSES - New England Audio has obtained or has had assigned to it
certain Occupation Tax Certificates, Business Tax Certificates,
Business Permits and Business Registration Certificates under which
HiFi Buys, Incorporated conducted its business prior to its acquisition
on May 30, 1997.
II. PATENTS AND PATENT APPLICATIONS - U.S. Patent No. 5,642,279 issued on
June 24, 1997 for Automatic Price Protection, a technique for utilizing
a computer system to provide price protection to retail customers.
III. COPYRIGHTS - None.
IV. SERVICE MARKS - None.
V. TRADEMARKS, TRADEMARK APPLICATIONS AND TRADENAMES
<TABLE>
<CAPTION>
NAME OF MARK: OWNER OF MARK: DATE FILED: REGISTRATION DATE: STATUS OF APPLICATION:
- ------------- -------------- ----------- ------------------ ----------------------
<S> <C> <C> <C> <C>
TWEETER ETC. NEA Delaware, 10/29/96 9/16/97 U.S. Reg. No. 2,097,801
Inc.
THE PLACE FOR New England 3/10/97 6/16/98 U.S. Reg. No. 2,165,512
BASS Audio Co.,
Inc.
AUDIO VIDEO New England Application sent to PTO
AND A BOATLOAD Audio, Co., on 12/2/97. Awaiting
OF KNOW-HOW Inc. confirmation receipt.
SERVICE EXPRESS New England Intent-to-use
Audio Co., application sent to PTO
Inc. on 12/2/97. Awaiting
confirmation receipt.
WISE BUYS New England 5/6/97 6/16/98 U.S. Reg. No. 2,165,708
Audio Co.,
Inc.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
WE SELL NEA Delaware, 3/30/93 U.S. Reg. No. 1,761,825
GOOSEBUMPS Inc.
</TABLE>
-10-
<PAGE> 214
<TABLE>
<S> <C> <C> <C>
STANSBURY NEA Delaware, Inc. 8/25/92 U.S. Reg. No. 1,710,948
BRYN MAWR NEA Delaware, Inc. 9/22/92 U.S. Reg. No. 1,719,134
STEREO
</TABLE>
NOTE: Pursuant to that certain Assignment and Assumption Agreement between
New England Audio and NEA Delaware, New England Audio contributed,
assigned, conveyed, transferred and delivered to NEA Delaware all of
New England Audio's right, title and interest in and to the above "We
Sell Goosebumps", Stansbury" and "Bryn Mawr Stereo" trademarks. Such
assignments have been recorded with the Federal Patent and Trademark
Office. "The Place for Bass" and "Wise Buys" have also been registered,
and will also be assigned to NEA Delaware.
NOTE: HiFi Buys did not own a trademark for the name "HiFi Buys". There is a
corporation located in East Lansing, Michigan that holds a federally
registered patent for the name "HiFi Buys" and which, at the time of
application for such trademark registration, conducted a business
similar in nature to that conducted by HiFi Buys.
-11-
<PAGE> 215
SCHEDULE 5.14
SCHEDULE OF LITIGATION
None.
-12-
<PAGE> 216
SCHEDULE 5.15
SCHEDULE OF PENSION PLANS
New England Audio Company, Inc. 401(k) Retirement Plan, formerly New England
Audio Company Inc. Employee Savings Plan. The New England Audio Company Inc.
401(k) Retirement Plan, as approved by the Internal Revenue Service, has both
discretionary matching employer contributions and discretionary employer profit
sharing contributions, although a representative of the Internal Revenue Service
stated publicly both before and after the favorable determination letter was
issued that plans with such features might not qualify for tax purposes. Should
the Internal Revenue Service issue written guidance specifically stating that
such discretion can no longer appear in existing qualified retirement plans, the
Company will take the action required to keep its 401(k) plan in compliance with
the law.
-13-
<PAGE> 217
SCHEDULE 5.16
SCHEDULE OF INDEBTEDNESS, LIENS, CHARGES AND ENCUMBRANCES
I. CURRENT INDEBTEDNESS FOR BORROWED MONEY
A. The Credit Facility, under the terms of the Amended and
Restated Credit Agreement by and among Tweeter Home
Entertainment Group, Inc. and its subsidiaries and BankBoston
N.A. as Agent, dated as of the date hereof;
B. David Feld, Sixteen thousand two hundred and fifty dollar,
Irrevocable Standby Letter of Credit to New England Audio Co.,
Inc;
C. Guaranties -None.
II. LIENS, CHARGES AND ENCUMBRANCES
NEW ENGLAND AUDIO CO., INC.
UCC SEARCH RESULTS
<TABLE>
<CAPTION>
MASSACHUSETTS SECRETARY OF STATE
CREDITOR/
DEBTOR SECURED PARTY FILE # FILING DATE COLLATERAL & COMMENTS
- ------ ------------- ------ ----------- ---------------------
<S> <C> <C> <C> <C>
New England Audio Co., Yamaha 549859 5/13/98 Amendment to original file #193573,
Inc. Electronics Yamaha electronic equipment
d/b/a Tweeter Etc. Corporation
Bryn Mawr Radio & BankBoston 472547 5/29/97 All asset filing
Television Center, Inc. N.A.
d/b/a New England Audio
Co., Inc.
New England Audio Co., BankBoston 472550 5/29/97 All asset filing
Inc. N.A.
d/b/a HiFi Buys Inc.
HiFi Buys BankBoston 472549 5/29/97 All asset filing
d/b/a New England Audio N.A.
Co. Inc.
New England Audio Co., BankBoston 472548 5/29/97 All asset filing
Inc. N.A.
d/b/a Bryn Mawr Radio &
Television Inc.
</TABLE>
-14-
<PAGE> 218
<TABLE>
<S> <C> <C> <C> <C>
New England Audio Co., BankBoston 472546 5/29/97 All assets filing
Inc. N.A.
d/b/a/ Tweeter Etc.
New England Audio Co., BankBoston 472544 5/29/97 All assets filing
Inc. N.A.
New England Audio Co., BancBoston 467001 5/8/97 Leased computer equipment
Inc. Leasing Inc.
New England Audio Co., Yamaha 193573 10/25/93 Yamaha electronics products
Inc. Electronics
dba/ Tweeter Etc. Corporation,
USA
New England Audio Co. Yamaha 354555 12/1/95 Amendment to 193573; Subordination
dba/ Tweeter, Etc. Electronics of Yamaha's security interest to The
Corporation, First National Bank of Boston
USA
New England Audio, Inc. Yamaha 439344 12/30/96 Amendment to 193573 to add
dba/ Tweeter, Etc. Electronics additional Debtor location: Holyoke
Corporation, Crossing, 27 Holyoke Street,
USA Holyoke, MA 01043
New England Audio Co., Mitsubishi 251388 7/29/94 Mitsubishi electronics products
Inc. Electronics
dba/ Tweeter Etc. America, Inc.
New England Audio Co., Mitsubishi 354557 12/1/95 Amendment to 251388; Subordination
Inc. Electronics of Mitsubishi's security interest to
dba/ Tweeter Etc. America, Inc. The First National Bank of Boston
New England Audio Co., General 308222 4/24/95 Certain General Electric equipment
Inc. Electric
dba/ Tweeter Etc. Capital
Corporation
New England Audio Co., The First 352716 11/21/95 All asset filing
Inc. National Bank
dba/ Tweeter Etc. of Boston
MASSACHUSETTS-BOSTON CITY CLERK
New England Audio Co., Yamaha 370211 10/25/93 Yamaha electronics equipment
Inc. d/b/a Tweeter Electronics (inventory)
Corporation,
USA
New England Audio Co., Yamaha 370211 12/1/95 Amendment-Subordination to First
Inc. d/b/a Tweeter Etc. Electronics National Bank of Boston
Corporation,
USA
New England Audio Co., Yamaha 370211 6/12/95 Amendment adding Boylston Street
Inc. d/b/a Tweeter Etc Electronics store location
Corporation
USA
</TABLE>
-15-
<PAGE> 219
<TABLE>
<S> <C> <C> <C> <C>
New England Audio Co., Sony 391569 6/25/96 Sony electronic equipment (inventory)
Inc. dba Electronics
Inc.
MASSACHUSETTS-DEDHAM
TOWN CLERK
New England Audio Co., Yamaha 244 10/26/93 Yamaha electronics products
Inc. Electronics (inventory)
d/b/a Tweeter Etc. Corporation,
USA
New England Audio Co., Yamaha 243 12/4/95 Subordination to First
Inc. d/b/a Tweeter Etc. Electronics National Bank of Boston
Corporation,
USA
New England Audio Co., Yamaha 9 1/14/97 Amendment to #244 adding collateral
Inc. Electronics statement
d/b/a Tweeter Etc. Corporation,
USA
New England Ausio Co., Sony 122 6/24/96 Sony electronics products (inventory)
Inc. dba Electronics
Inc.
MASSACHUSETTS-CAMBRIDGE
CITY CLERK
New England Audio Co., Sony 60827 7/2/96 Sony electronics products (inventory)
Inc. dba Electronics
Inc.
New England Audio Co., Yamaha 57262 12/4/95 Subordination to interests of First
Inc. d/b/a Tweeter Etc. Electronics National Bank of Boston
Corporation,
USA
New England Audio Co., Yamaha 57262 10/26/93 Yamaha electronic products
Inc. d/b/a Tweeter Etc. Electronics
Corporation,
USA
MASSACHUSETTS - CANTON
TOWN CLERK
New England Audio Co., BancBoston 6428 5/8/97 Leased computer equipment
Inc. Leasing Inc.
New England Audio Co., Yamaha 5091 10/25/93 Yamaha electronics products
Inc. Electronics
dba/ Tweeter Etc. Corporation,
USA
New England Audio Co., Yamaha 5091 Amend. 12/4/95 Subordination to The First National
Inc. Electronics Bank of Boston
dba/ Tweeter Etc. Corporation,
USA
New England Audio Co., General 5676 4/21/95 Equipment
Inc. Electric
dba/ Tweeter Etc. Capital
Corporation
New England Audio Co., The First 6061 5/13/96 All asset filing
Inc. National Bank
dba/ Bryn Mawr Stereo & of Boston
Video
</TABLE>
-16-
<PAGE> 220
<TABLE>
<S> <C> <C> <C> <C>
MASSACHUSETTS-BURLINGTON
TOWN CLERK
New England Audio Co., Yamaha 451 10/25/93 Yamaha products (inventory)
Inc. Electronics
dba Tweeter Etc. Corporation,
USA
New England Audio Co., Yamaha 451 12/4/95 Subordination to First National Bank
Inc. Electronics of Boston
dba Tweeter Etc. Corporation,
USA
New England Audio Co., Yamaha 451 1/14/97 change of debtor's address,
Inc. Electronics subordination to First National Bnk
dba Tweeter Etc. Corporation, of Boston
USA
New England Audio Co., Sony 345 6/25/96 Sony products (inventory)
Inc. Electronics
dba Inc.
MASSACHUSETTS-HANOVER
TOWN CLERK
New England Audio Co., Yamaha 9437 10/25/93 Yamaha products (inventory)
Inc. Electronics
dba Tweeter Etc. Corporation,
USA
MASSACHUSETTS -
BARNSTABLE TOWN CLERK
New England Audio Co., The First 6062 5/13/96 All asset filing
Inc. National Bank
dba Tweeter Etc. of Boston
New England Audio Co., BancBoston 6071 5/20/96 Equipment Lease (Computer Hardware &
Inc. Leasing Inc. Software)
New England Audio Co., Sony 6106 6/24/96 Sony electronic equipment
Inc. Electronics
Inc.
New England Audio Co., BancBoston 6428 5/8/97 Equipment Lease (Computer Hardware &
Inc. Leasing Inc. Software)
Tweeter Etc. Yamaha 13722 10/26/93
Electronics
Corporation,
USA
MASSACHUSETTS-SEEKONK
TOWN CLERK
New England Audio Co., Yamaha Book XV Page 185 10/25/93 Yamaha electronics equipment
Inc. d/b/a Tweeter Etc. Electronics (inventory)
Corporation,
USA
New England Audio Co., Yamaha Book XV Page 687 12/4/95 Amendment: Subordination to First
Inc. d/b/a Tweeter Etc. Electronics National Bank of Boston
Corporation,
USA
</TABLE>
-17-
<PAGE> 221
<TABLE>
<S> <C> <C> <C> <C>
New England Audio Co., Sony Book XV Page 781 6/26/96 Sony Electronic Equipment (inventory)
Inc. dba Electronics
Corporation,
Inc.
MASSACHUSETTS-NORTH
ATTLEBORO TOWN CLERK
New England Audio Co., Yamaha 109 6/12/98 Subordination to First National Bank
Inc. dba Tweeter Etc. Electronics of Boston
Corporation,
USA
MASSACHUSETTS - PEABODY
CITY CLERK
New England Audio Co., Yamaha 33171 10/25/93 Yamaha electronic products;
Inc. dba Tweeter Etc. Electronics Amend: Subordinated to First National Bank
Corporation, 12/4/95 of Boston filed 12/4/95
USA
New England Audio Co., Sony 34679 6/24/96 All inventory with SONY trademark
Inc. Electronics
Inc.
MASSACHUSETTS -
FRAMINGHAM TOWN CLERK
New England Audio Co., Yamaha 11291 10/17/91 Yamaha electronic products.
Inc., dba Tweeter Etc. Electronics *Terminated 3/26/93
Corporation *Continuation 7/9/96
USA
New England Audio Co., Yamaha 13151 10/25/93 Yamaha electronic products;
Inc., dba Tweeter Etc. Electronics Subordinated to First National Bank
Corporation of Boston filed 12/4/95
USA
New England Audio Co., Sony 15316 6/24/96 All inventory with SONY trademark
Inc., dba Tweeter Etc. Electronics
Inc.
MASSACHUSETTS-NEWTON
CITY CLERK
New England Audio Co., Yamaha 617-93 10/25/93 Yamaha electronic equipment
Inc., dba Tweeter Etc. Electronics (inventory)
Corporation
USA
New England Audio Co., Yamaha 617-93 1/13/97 change of debtor's address
Inc., dba Tweeter Etc. Electronics
Corporation
USA
New England Audio Co., Yamaha 542-91 7/9/96 Continuation
Inc., dba Tweeter Etc. Electronics
Corporation
USA
New England Audio Co., Yamaha 542-91 10/21/91 Yamaha electronic products
Inc., dba Tweeter Etc Electronics (inventory) (terminated 3/31/93)
Corporation
USA
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
New England Audio Co., Sony 358-96 358-96 Sony electronic equipment (inventory)
Inc., dba Electronics
Inc.
MASSACHUSETTS -
HOLYOKE CITY CLERK
New England Audio Co., Yamaha 36908 1/2/97 Yamaha electronic products
Inc., dba Tweeter Etc. Electronics
Corporation
NEW HAMPSHIRE SECRETARY
OF STATE
New England Audio Co., BankBoston 436399 6/20/97 Amendment to #31008 to add Nashua
Inc. N.A. Store Location
d/b/a Tweeter
New England Audio Co., BankBoston 488032 5/30/97 All assets filing
Inc. N.A.
d/b/a Tweeter Etc.
New England Audio Co., BankBoston 488030 5/30/97 All assets filing
Inc. N.A.
d/b/a HiFi Buys Inc.
New England Audio Co., Yamaha 436399 1/27/95 Yamaha electronic products;
Inc. Electronics Subordinated to First National Bank
Corporation of Boston filed 1/30/97
New England Audio Co., The First 453839 11/22/95 All assets filing
Inc., dba Tweeter Etc. National Bank
of Boston
New England Audio Co., Sony 466567 6/26/96 All inventory with SONY trademark
Inc. Electronics
Inc.
New England Audio Co., Sony 468643 7/26/96 All inventory with SONY trademark
Inc. Electronics
Inc.
Tweeter Etc. The First 453838 11/22/95 All asset filing
National Bank
of Boston
NEW HAMPSHIRE - SALEM
TOWN CLERK
New England Audio Co., The First 28474 11/27/95 All asset filing
Inc. National Bank
of Boston
Tweeter Etc. The First 28473 11/27/95 All asset filing
National Bank
of Boston
New England Audio Co., Sony 28837 6/26/96 All inventory with SONY trademark
Inc. Electronics
Inc.
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
NEW HAMPSHIRE - NASHUA
CITY CLERK
New England Audio Co., Sony 074630 7/30/96 All inventory with SONY trademark
Inc. Electronics
Inc.
NEW HAMPSHIRE -
NEWINGTON TOWN CLERK
New England Audio Co., Yamaha 2503 12/31/96 Yamaha electronic products
Inc. Electronics
Corporation,
USA.
PENNSYLVANIA SECRETARY
OF STATE
New England Audio Co., The First 25451642 5/13/96 All asset filing
Inc. National Bank
dba/ Tweeter Etc. of Boston
dba/ Bryn Mawr Stereo &
Video
New England Audio Co., Yamaha 26031575 11/5/96 Yamaha electronics products;
Inc. Electronics Subordination to The First National
dba/ Bryn Mawr Stereo & Corporation Bank of Boston
Video
New England Audio Co., BancBoston 25480614 5/21/96 Equipment Lease (Computer related
Inc. Leasing Inc. equipment)
New England Audio Co., BancBoston 26661431 5/12/97 Equipment Lease (computers)
Inc. Leasing Inc.
New England Audio Co., BankBoston 26731311 5/30/97 All assets filing
Inc. N.A.
Tweeter Etc., d/b/a New BankBoston 26731314 5/30/97 All assets filing
England Audio Co. Inc. N.A.
New England Audio Co., BankBoston 26731317 5/30/97 All assets filing
Inc. d/b/a Tweeter Etc. N.A.
Bryn Mawr Radio and BankBoston 26731320 5/30/97 All assets filing
Television Center Inc. N.A.
d/b/a New England Audio
Co., Inc.
New England Audio Co. BankBoston 26731323 5/30/97 All assets filing
Inc., N.A.
d/b/a Bryn Mawr Radio &
Television
HiFi Buys Inc. d/b/a BankBoston 26731326 5/30/97 All assets filing
New England Audio Co., N.A.
Inc.
New England Audio Co., BankBoston 26731329 5/30/97 All assets filing
Inc. d/b/a HiFi Buys N.A.
Inc.
</TABLE>
-20-
<PAGE> 224
<TABLE>
<S> <C> <C> <C> <C>
New England Audio Co., Sony 25581511 7/24/96 Sony electronics products
Inc. Electronics
Inc.
PENNSYLVANIA - BUCKS
COUNTY PROTHONOTARY
New England Audio Co., The First 96-61554 5/13/96 All asset filing
Inc. National Bank
dba/ Tweeter Etc. of Boston
dba/ Bryn Mawr Stereo &
Video
New England Audio Co., Sony 96-62040 6/24/96 Sony electronics products
Inc. Electronics
Inc.
New England Audio Co., Yamaha 96-63872 11/7/96 Yamaha electronics products;
Inc. Electronics Subordination to The First National
dba/ Bryn Mawr Stereo & Corporation Bank of Boston
Video
PENNSYLVANIA-BERKS
COUNTY PROTHONOTARY
New England Audio Co. Yamaha 98-1466ST 6/10/98 Yamaha electronic products
Inc. Electronics (inventory)
d/b/a Bryn Mawr Stereo Corporation
& Video USA
PENNSYLVANIA -
CUMBERLAND COUNTY
PROTHONOTARY
New England Audio The First 96-2624 5/13/96 All asset filing
Co., Inc. National Bank
dba/ Tweeter Etc. of Boston
dba/ Bryn Mawr Stereo
& Video
New England Audio The First 96-2625 5/13/96 All asset filing
Co., Inc. National Bank
dba/ Tweeter Etc. of Boston
dba/ Bryn Mawr Stereo
& Video
New England Audio Sony 96-3503 6/24/96 Sony electronics products
Co., Inc. Electronics Inc.
New England Audio Yamaha 96-6261 11/14/96 Yamaha electronics products;
Co., Inc. Electronics Subordination to The First National
dba/ Bryn Mawr Stereo Corporation Bank of Boston
& Video
PENNSYLVANIA-LANCASTER
COUNTY PROTHONOTARY
New England Audio Co. Yamaha CI-98-06542 6/10/98 Yamaha electronics products
Inc. Electronics (inventory)
d/b/a Bryn Mawr Corporation,
Stereo & Video USA
PENNSYLVANIA - LEHIGH
COUNTY PROTHONOTARY
New England Audio The First 96-UC-719 5/13/96 All asset filing
</TABLE>
-21-
<PAGE> 225
<TABLE>
<S> <C> <C> <C> <C>
Co., Inc. National Bank
dba/ Tweeter Etc. of Boston
dba/ Bryn Mawr Stereo
& Video
New England Audio Sony 96-UC-996 6/27/96 Sony electronics products
Co., Inc. Electronics Inc.
New England Audio Yamaha 96-UC-1771 11/13/96 Yamaha electronics products;
Co., Inc. Electronics Subordination to The First National
dba/ Bryn Mawr Stereo Corporation Bank of Boston
& Video
New England Audio Sony 96-UC-996 6/27/96 Sony electronics products
Co., Inc. Electronics Inc.
Bryn Mawr Radio & Sony 96-UC-849 6/15/93 Sony electronics products
Television Centre, Corporation of
Inc. America
dba/Bryn Mawr Stereo
Bryn Mawr Radio & Sony 96-UC-849 10/7/94 Name change amendment
Television Centre, Electronics Inc.
Inc.
dba/Bryn Mawr Stereo
PENNSYLVANIA-YORK
COUNTY PROTHONOTARY
New England Audio Yamaha 98ST01402 6/10/98 Subordination to First National Bank
Co., Inc. Electronics of Boston
dba/ Bryn Mawr Stereo Corporation, USA
& Video
PENNSYLVANIA -
MONTGOMERY COUNTY
PROTHONOTARY
New England Audio The First 260613 5/13/96 All asset filing
Co., Inc. National Bank
dba/ Tweeter Etc. of Boston
dba/ Bryn Mawr Stereo
& Video
New England Audio The First 260614 5/13/96 All asset filing
Co., Inc. National Bank
dba/ Tweeter Etc. of Boston
dba/ Bryn Mawr Stereo
& Video
New England Audio BancBoston 260754 5/20/96 Equipment Lease
Co., Inc. Leasing Inc.
Bryn Mawr Radio & Sony 261494 6/26/96 Sony electronics products
Television Centre, Electronics Inc.
Inc.
New England Audio Yamaha 264107 11/8/96 Yamaha electronics products;
Co., Inc. Electronics Subordination to The First National
dba/ Bryn Mawr Stereo Corporation Bank of Boston
</TABLE>
-22-
<PAGE> 226
<TABLE>
<S> <C> <C> <C> <C>
Stereo & Video
Bryn Mawr Radio & Makawicha 245751 2/9/94 Makawicha electronics products
Television Centre, America
Inc. Corporation
dba/bryn Mawr Stereo
NEW JERSEY SECRETARY
OF STATE
New England Audio The First 1697975 5/13/96 All asset filing
Co., Inc. National Bank
dba/ Tweeter Etc. of Boston
dba/ Bryn Mawr Stereo
& Video
New England Audio Yamaha 1732197 11/6/96 Yamaha electronics products;
Co., Inc. Electronics Subordination to The First National
dba/ Bryn Mawr Stereo Corporation Bank of Boston
& Video
New England Audio Sony 1706397 6/24/96 Sony electronics products
Co., Inc. Electronics Inc.
NEW JERSEY -
BURLINGTON COUNTY
New England Audio The First 3003018 6/10/96 All asset filing
Co., Inc. National Bank
dba/ Tweeter Etc. of Boston
dba/ Bryn Mawr Stereo
& Video
NEW JERSEY-SECRETARY
OF STATE
Tweeter Etc, d/b/a New BankBoston N.A. 1770595 5/30/97 All asset filing
England Audio Co., Inc.
New England Audio Co., BankBoston N.A. 1770597 5/30/97 All asset filing
Inc. d/b/a Tweeter Etc.
Bryn Mawr Radio & BankBoston N.A. 1770600 5/30/97 All asset filing
Television Center
d/b/a New England
Audio Co., Inc.
New England Audio Co., BankBoston N.A. 1770603 5/30/97 All asset filing
Inc. d/b/a Bryn Mawr
Stereo
HiFi Buys d/b/a New BankBoston N.A. 1770605 5/30/97 All asset filing
England Audio Co., Inc.
New England Audio Co., BankBoston N.A. 1770607 5/30/97 All asset filing
Inc. d/b/a/ HiFi Buys
New England BankBoston N.A. 1770592 5/30/97 All asset filing
</TABLE>
-23-
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<TABLE>
<S> <C> <C> <C> <C>
Audio Co., Inc.
DELAWARE SECRETARY
OF STATE
New England Audio BankBoston N.A. 9717453 5/30/97 All asset filing
Co., Inc.
Tweeter Etc. d/b/a BankBoston N.A. 9717454 5/30/97 All asset filing
New England Audio
Co., Inc.
New England Audio BankBoston N.A. 9717456 5/30/97 All assets filing
Co., Inc. d/b/a
Tweeter Etc.
Bryn Mawr Radio & BankBoston N.A. 9717458 5/30/97 All assets filing
Television Center,
Inc. d/b/a New
England Audio Co.,
Inc.
New England Audio Co. BankBoston N.A. 9717460 5/30/97 All assets filing
Inc. d/b/a Bryn Mawr
Radio & Television
HiFi Buys Inc. d/b/a BankBoston N.A. 9717462 5/30/97 All assets filings
New England Audio
Co., Inc.
New England Audio Co. BankBoston N.A. 9717463 5/30/97 All assets filing
Inc., d/b/a HiFi Buys
Inc.
New England Audio The First 96 12596 5/13/96 All asset filing
Co., Inc. National Bank
dba/Tweeter Etc. of Boston
dba/ Bryn Mawr Stereo
& Video
New England Audio Sony 96 17953 6/26/96 Sony electronics products
Co., Inc. Electronics Inc.
New England Audio Yamaha 96 32240 11/6/96 Yamaha electronics products;
Co., Inc. Electronics Subordination to The First National
dba/ Bryn Mawr Stereo Corporation, USA Bank of Boston
& Video
DELAWARE - NEW CASTLE
COUNTY RECORDER
New England Audio The First 28600 5/13/96 All asset filing
Co., Inc. d/b/a National Bank
Tweeter Etc. of Boston
New England Audio The First 28600 5/13/96 All asset filing
Co., Inc. National Bank
of Boston
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Boston
MARYLAND SECRETARY
OF STATE
New England Audio BankBoston N.A. 71538050 5/30/97 All asset filing
Co., Inc.
New England Audio The First 161518076 5/29/96 All asset filing
Co., Inc. National Bank
dba/Tweeter Etc. of Boston
dba/ Bryn Mawr Stereo
& Video
New England Audio Sony 161768708 6/24/96 Sony electronic products
Co., Inc. Electronics,
Inc.
New England Audio Yamaha 163588499 12/23/96 Yamaha electronics products
Co., Inc. Electronics
dba/ Bryn Mawr Stereo Corporation, USA
& Video
New England Audio Yamaha 163588499 1/27/97 Amendment to 63588499;
Co., Inc. Electronics Subordination to The First National
Corporation, USA Bank of Boston
CONNECTICUT -
SECRETARY OF STATE
New England Audio BankBoston N.A. 1774199 5/30/97 All assets filing
Co., Inc.
New England Audio BankBoston N.A. 1774203 5/30/97 All assets filing
Co., Inc.
d/b/a Tweeter Etc.
New England Audio BankBoston N.A. 1774207 5/30/97 All assets filing
Co., Inc.
d/b/a Bryn Mawr Radio
& Television
New England Audio BankBoston N.A. 1774214 5/30/97 All assets filing
Co., Inc.
d/b/a HiFi Buys Inc.
1858435
New England Audio Yamaha 1032755 10/25/93 Yamaha electronics products
Co., Inc. dba Tweeter Electronics
Etc. Corporation, USA
New England Audio Yamaha 1665677 12/04/95 Amendment to 1032755; Subordination
Co., Inc. dba Tweeter Electronics to The First National Bank of Boston
Etc. Corporation, USA
New England Audio Yamaha 1736853 11/21/96 Amendment to 1032755 to add
Co., Inc. dba Tweeter Electronics Manchester, Avon and Milford
Etc. Corporation, USA locations of Debtor
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
New England Audio Denon America, 959126 3/16/92 All inventory of consumer goods
Co., Inc. dba Tweeter Inc. acquired from Secured Party
Etc.
New England Audio Mitsubishi 1573626 9/2/94 Consumer, office and other
Co., Inc. dba Tweeter Electronics electronic products
Etc. America, Inc.
New England Audio Mitsubishi 1664678 12/04/95 Amendment to 1573626; subordination
Co., Inc. dba Tweeter Electronics to FNBB
Etc. America, Inc.
New England Audio The First 1659333 11/22/95 All assets
Co., Inc. National Bank
of Boston
New England Audio Sony 1703489 6/24/96 All inventory of Debtor bearing
Co., Inc. Electronics Inc. "Sony" tradename
</TABLE>
<TABLE>
<CAPTION>
CLARK COUNTY CLERK
OF THE SUPERIOR COURT,
GEORGIA
CREDITOR/
DEBTOR SECURED PARTY FILE # FILING DATE COLLATERAL & COMMENTS
- ------ ------------- ------ ----------- ---------------------
<S> <C> <C> <C> <C>
New England Audio Yamaha 29-97-1507 7/1/97 Yamaha electronics products
Co., Inc. DBA Hi Fi Electronics
Buys Corporation, USA
GWINNETT COUNTY CLERK
OF THE SUPERIOR COURT,
GEORGIA
New England Audio Yamaha 67-97-7827 6/30/97 Yamaha electronics products
Co., Inc. DBA Hi Fi Electronics
Buys Corporation, USA
DEKALB COUNTY CLERK
OF THE SUPERIOR COURT,
GEORGIA
New England Audio Yamaha 441997006618 7/1/97 Yamaha electronics products
Co., Inc. DBA Hi Fi Electronics
Buys Corporation, USA
CLAYTON COUNTY CLERK
OF THE SUPERIOR COURT;
GEORGIA
New England Audio Co., Yamaha 03197003846 6/30/97
Inc. Electronics
Corporation,
USA
FULTON COUNTY CLERK
OF THE SUPERIOR COURT,
GEORGIA
HiFi Buys BankBoston, 060199710633 6/2/97 All asset filing
Incorporated/ New N.A., as Agent
England Audio Co.,
Inc.
New England Audio BankBoston, 060199710634 6/2/97 All asset filing
Co., Inc./HiFi Buys N.A., as Agent
Incorporated
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
New England Audio BankBoston, 060199710635 6/2/97 All asset filing
Co., Inc./Bryn Mawr N.A., as Agent
Radio & Television
Bryn Mawr Radio & BankBoston, 060199710636 6/2/97 All asset filing
Television Center, N.A., as Agent
Inc./ New England
Audio Co., Inc.
New England Audio BankBoston, 060199710637 6/2/97 All asset filing
Co., Inc./ Tweeter, N.A., as Agent
Etc.
Tweeter, Etc./ New BankBoston, 060199710638 6/2/97 All asset filing
England Audio Co., N.A., as Agent
Inc.
New England Audio BankBoston, 060199710639 6/2/97 All asset filing
Co., Inc. N.A., as Agent
New England Audio Yamaha 060199713361 7/1/97 Yamaha electronics products
Co., Inc. DBA Hi Fi Electronics
Buys Corporation, USA
</TABLE>
<TABLE>
<CAPTION>
NEW HAMPSHIRE SALEM
TOWN CLERK
CREDITOR/
DEBTOR SECURED PARTY FILE # FILING DATE COLLATERAL & COMMENTS
- ------ ------------- ------ ----------- ---------------------
<S> <C> <C> <C> <C>
New England Audio Co., BankBoston, N.A., as 29398 6/2/97 All asset filing
Inc. Agent
New England Audio Co., BankBoston, N.A., as 29399 6/2/97 All asset filing
Inc.d/b/a Tweeter Etc. Agent
New England Audio Co., BankBoston, N.A., as 29400 6/2/97 All asset filing
Inc.d/b/a Bryn Mawr Agent
Radio & Television
New England Audio Co., BankBoston, N.A., as 29401 6/2/97 All asset filing
Inc.d/b/a HiFi Buys Agent
Incorporated
Bryn Mawr Radio & BankBoston, N.A., as 29403 6/2/97 All asset filing
Television Center, Inc. Agent
d/b/a New England Audio
Co., Inc.
Tweeter Etc. d/b/a New BankBoston, N.A., as 29404 6/2/97 All asset filing
England Audio Co., Inc. Agent
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
HiFi Buys Incorporated BankBoston, N.A., as 29405 6/2/97 All asset filing
d/b/a New England Audio Agent
Co., Inc.
NEW HAMPSHIRE - NASHUA
CITY CLERK
New England Audio Co., BankBoston, N.A., as 075721 6/2/97 All asset filing
Inc. Agent
New England Audio Co., BankBoston, N.A., as 075722 6/2/97 All asset filing
Inc.d/b/a Tweeter Etc. Agent
New England Audio Co., BankBoston, N.A., as 075723 6/2/97 All asset filing
Inc.d/b/a Bryn Mawr Agent
Radio & Television
New England Audio Co., BankBoston, N.A., as 075724 6/2/97 All asset filing
Inc.d/b/a HiFi Buys Agent
Incorporated
Tweeter Etc. d/b/a New BankBoston, N.A., as 075725 6/2/97 All asset filing
England Audio Co., Inc. Agent
GEORGIA - COBB COUNTY
CLERK OF SUPERIOR COURT
New England Audio Co., BancBoston Leasing 033199706993 5/12/97 Equipment Lease
Inc. Inc.
New England Audio Co., Yamaha Electronics 033199809248 7/1/97; amended Yamaha Electronics
Inc. Corporation, USA 6/22/98 Products
PENNSYLVANIA -
MONTGOMERY COUNTY
PROTHONOTARY AND
RECORDER OF DEEDS
New England Audio Co., First National Bank 260613 5/13/96
Inc. of Boston
New England Audio Co., First National Bank 260614 5/13/96
Inc. of Boston
New England Audio Co., Sony Electronics Inc. 261494 6/26/96
Inc.
New England Audio Co., Yamaha Electronics 264107 11/8/96
Inc. Corp., USA
New England Audio Co., BancBoston Leasing 267619 5/12/97
Inc. Inc.
RHODE ISLAND SECRETARY
OF STATE AWAITING
COPIES OF THE FOLLOWING
FILE NOS.
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
New England Audio Co., BankBoston, N.A., as 666520 5/30/97 All asset filings
Inc. Agent 666521
666522
666819
666823
666824
666825
</TABLE>
NEW ENGLAND AUDIO, CO. INC.--UCC SEARCHES
RI Warwick City Clerk--clear through 7/3/98
NJ Gloucester County Clerk--clear through 6/30/98
NJ Mercer County Clerk--clear through 7/1/98
MA, Peabody City Clerk--clear through 7/6/98
NH, Rockingham County Registry of Deeds--clear 4/1/98 through 7/1/98
NH, Hillsboro County Registry of Deeds--clear through 6/24/98
NH Newington County Clerk-clear through 7/7/98
NJ, Burlington County Clerk--clear through 6/30/98
MA, Holyoke City Clerk--clear through 7/6/98
MA, Framingham Town Clerk--clear through 7/7/98
MA, Barnstable Town Clerk--clear through 7/6/98
PA, Delaware County Prothonotary & Recorder of Deeds--clear through 6/5/98
PA, Lehigh County Prothonotary & Recorder of Deeds--clear through 6/24/98
PA, Cumberland County Prothonotary & Recorder of Deeds--clear through 7/2/98
PA, Barks County Prothonotary & Recorder of Deeds--clear through 6/5/98
CT, Danbury Town Clerk--clear through 7/6/98
CT, Avon Town Clerk--clear through 7/6/98
CT, Manchester Town Clerk--clear through 7/6/98
CT, Waterford Town Clerk--clear through 7/7/98
CT, Newington Town Clerk--clear through 7/7/98
CT, Milford City Clerk--clear through 7/7/98
MD, Baltimore County Clerk--clear through 6/23/97
MD, Ann Arundel County Clerk--clear through 6/16/98
TWEETER ETC.
UCC SEARCH RESULTS
<TABLE>
<CAPTION>
NEW HAMPSHIRE - NASHUA
CITY CLERK
CREDITOR SECURED
DEBTOR PARTY FILE # FILING DATE COLLATERAL & COMMENTS
- ------ ----- ------ ----------- ---------------------
<S> <C> <C> <C> <C>
Tweeter Etc. d/b/a New BankBoston, N.A., as 075725 6/2/97 All asset filing
England Audio Co., Inc. Agent
</TABLE>
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<PAGE> 233
<TABLE>
<S> <C> <C> <C> <C>
NEW HAMPSHIRE - SALEM
TOWN CLERK
Tweeter Etc. d/b/a New BankBoston, N.A., as 29404 6/2/97 All asset filing
England Audio Co., Ibc. Agent
New England Audio Co., BankBoston, N.A., as 29399 6/2/97 All asset filing
Inc. d/b/a Tweeter Etc. Agent
RHODE ISLAND SECRETARY
OF STATE
Tweeter Etc. Bank Boston, N.A., 666825 5/20/97 All asset filing
as Agent
</TABLE>
<TABLE>
<CAPTION>
CONNECTICUT SECRETARY
OF STATE
CREDITOR/SECURED FILING
DEBTOR PARTY FILE # DATE COLLATERAL & COMMENTS
------ ----- ------ ---- ---------------------
<S> <C> <C> <C> <C>
Tweeter Etc. d/b/a New BankBoston, N.A., as 1774201 5/30/97 All asset filing
England Audio Co., Inc. Agent
MASSACHUSETTS SECRETARY
OF STATE
Tweeter Etc. d/b/a New BankBoston, N.A., as 472545 5/29/97 All asset filing
England Audio Co., Inc. Agent
MASSACHUSETTS -
CAMBRIDGE CITY CLERK
New England Audio Co., Yamaha Electronics 057262 10/26/93 Yamaha electronics products
Inc. d/b/a Tweeter Etc. Corporation, USA,
subordinated to the
First National Bank
of Boston on 12/4/95
</TABLE>
NEW HAMPSHIRE SECRETARY OF STATE
Tweeter Etc. d/b/a New BankBoston, N.A., as 488029 5/30/97 All asset filing
England Audio Co., Inc. Agent
Connecticut-Avon Town Clerk - clear through 7/9/98
Connecticut-Danbury Town Clerk - clear through 7/9/98
Connecticut-Manchester Town Clerk - clear through 7/9/98
Connecticut-Milford City Clerk - clear through 7/9/98
Connecticut-Newington Town Clerk - clear through 7/9/98
Connecticut-Waterford Twon Clerk - clear through 7/9/98
Massachusetts-Barnstable Town Clerk - clear through 7/9/98
Massachusetts-Burlington Town Clerk - clear through 7/8/98
Massachusetts-Canton Town Clerk - clear through 7/8/98
Massachusetts-Framingham Town Clerk - clear through 7/9/98
Massachusetts-Hanover Town Clerk - clear through 7/8/98
-30-
<PAGE> 234
Massachusetts-Holyoke City Clerk - clear through 7/8/98
Massachusetts-Newton City Clerk - clear through 7/8/98
Massachusetts-North Attleboro Town Clerk - clear through 7/9/98
Massachusetts-Peabody City Clerk - clear through 7/7/98
Massachusetts-Seekonk Town Clerk - clear through 7/9/98
New Hampshire-Newington Town Clerk- clear through 7/7/98
New Hampshire-Hillsborough County Registry of Deeds - clear through 7/8/98
New Hampshire-Rockingham County Registry of Deeds - clear through 7/8/98
Rhode Island-Warwick City Clerk - clear through 7/9/98
TWEETER HOME ENTERTAINMENT GROUP, INC.
UCC SEARCH RESULTS
Connecticut Secretary of State - clear through 7/9/98
Delaware Secretary of State - clear through 7/8/98
Maryland State Dept. of Assessments and Taxation - clear through 7/8/98
Massachusetts Secretary of State - clear through 7/6/98
Massachusetts-Canton Town Clerk - clear through 7/8/98
New Hampshire Secretary of State - clear through 7/9/98
Pennsylvania Department of State - clear through 7/8/98
NEA DELAWARE, INC.
UCC SEARCH RESULTS
<TABLE>
<CAPTION>
NEW HAMPSHIRE SECRETARY OF STATE
DEBTOR CREDITOR/SECURED FILE # FILING COLLATERAL & COMMENTS
PARTY DATE
- ------ ---------------- ------ ------ ---------------------
<S> <C> <C> <C> <C>
NEA Delaware, Inc. BankBoston, N.A., as 488034 5/30/97 All asset filing
Agent
</TABLE>
Delaware Secretary of State - clear through 7/8/98
NH Newington Town Clerk - clear through 7/7/98
BRYN MAWR STEREO AND VIDEO
UCC SEARCH RESULTS
PENNSYLVANIA -
MONTGOMERY COUNTY
PROTHONOTARY AND
RECORDER OF DEEDS
<TABLE>
<CAPTION>
DEBTOR CREDITOR/SECURED PARTY FILE # FILING DATE COLLATERAL & COMMENTS
- ------ ---------------------- ------ ----------- ---------------------
<S> <C> <C> <C>
Bryn Mawr Stereo First National Bank of 260613 5/13/96
and Video Boston
</TABLE>
-31-
<PAGE> 235
<TABLE>
<S> <C> <C> <C> <C>
Bryn Mawr Stereo First National Bank of 260614 5/13/96
and Video Boston
Bryn Mawr Stereo Yamaha Electronics 264107 11/8/96 Yamaha Electronics
and Video Products Products
</TABLE>
PENNSYLVANIA-BERKS COUNTY
PROTHONOTARY AND RECORDER
OF DEEDS
<TABLE>
<CAPTION>
DEBTOR CREDITOR/SECURED FILE # FILING COLLATERAL & COMMENTS
PARTY DATE
- ------ ---------------- ------ ------ ---------------------
<S> <C> <C> <C> <C>
Bryn Mawr Stereo and Yamaha Electronics 98-1466ST 6/10/98 Yamaha electronics products
Video Corporation, USA
PENNSYLVANIA-LANCASTER
COUNTY PROTHONOTARY AND
RECORDER OF DEEDS
Bryn Mawr Stereo and Yamaha Electronics CI-98-06542 6/10/98 Yamaha electronics products
Video Corporation, USA
PENNSYLVANIA-LEHIGH
COUNTY PROTHONOTARY AND
RECORDER OF DEEDS
Bryn Mawr Radio & Correstates Bank N.A. 93UC849 3/24/98 Continuation
Television Centre,
Inc./Bryn Mawr Stereo
PENNSYLVANIA-YORK COUNTY
PROTHONOTARY AND RECORDER
OF DEEDS
Bryn Mawr Stereo and Yamaha Electronics 98ST01402-01 6/10/98 Yamaha electonics products
Video Corporation, USA
</TABLE>
New Jersey Secretary of State- clear through 6/24/98
Delaware Secretary of State - clear through 7/8/98
Delaware-New Castle County Recorder of Deeds - clear through 7/8/98
Maryland State Dept. of Assessments and Taxation - clear through 7/8/98
Maryland-Ann Arundel County Clerk of the Circuit Court - clear through 7/7/98
Maryland-Baltimore County Clerk of the Circuit Court - clear through 7/8/98
New Jersey-Burlington County Clerk - clear through 7/8/98
New Jersey-Gloucester County Clerk - clear through 7/8/98
New Jersey-Mercer County Clerk - clear through 7/9/98
Pennsylvania Department of State - clear through 7/8/98
Pennsylvania-Cumberland County Prothonotary and Recorder of Deeds - clear
through 7/9/98
Pennsylvania-Delaware County Prothonotary and Recorder of Deeds - clear through
7/7/98
HIFI BUYS
UCC SEARCH RESULTS
<TABLE>
<CAPTION>
GA - COBB COUNTY CLERK
OF THE SUPERIOR COURT
DEBTOR CREDITOR/ FILE # FILING DATE COLLATERAL & COMMENTS
- ------ --------- ------ ----------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
-32-
<PAGE> 236
<TABLE>
<CAPTION>
SECURED PARTY
<S> <C> <C> <C> <C>
Hi Fi Buys, Inc. Kenwood USA 83-8009 9/9/83; Cont Kenwood Electronics Products
Corporation dba 4/18/88; amended
Kenwood Electronics 3/28/91; Cont. 7/8/93
Hi Fi Buys, Inc. Kenwood USA 83-8009 9/19/88; amended Kenwood Electronics Products
Corporation 3/28/91; cont. 7/8/93
Hi Fi Buys, Inc. Alpine Electronics 89-2646 3/20/89; cont.
of America, Inc. 10/28/93
Hi Fi Buys, Inc. Denon America, Inc. 9102180 3/18/91; cont. Denon Electronics Products
11/20/95
HI-FI Buys, Inc. Dana Commercial 033199513346 9/25/95 Equipment Lease
Credit Corporation
Hi Fi Buys, Inc. Yamaha Electronics 033199709592 7/1/97; amended Yamaha Electronics Products
Corporation, USA 6/22/98
</TABLE>
GEORGIA-DEKALB COUNTY
CLERK OF THE SUPERIOR
COURT
<TABLE>
<CAPTION>
CREDITOR/SECURED
DEBTOR PARTY FILE # FILING DATE COLLATERAL & COMMENTS
- ------ ---------------- ------ ----------- ---------------------
<S> <C> <C> <C> <C>
HiFi Buys, Inc. Yamaha Electronics 87 7911 8/3/87 Yamaha electronics products;
Corporation, USA amended 9/23/91; cont.
6/1/92;amended 5/26/93; cont.
5/20/97
HiFi Buys, Inc. Sony Electronics Inc. 93 07496 9/24/93 Sony electronics products; cont.
6/22/98
HiFi Buys, Inc. Sony Electronics Inc. 93 07497 9/24/93 Sony electronics products; cont.
6/22/98
HiFi Buys, Inc. Sony Electronics Inc. 93 07498 9/24/93 Sony electronics products; cont.
6/22/98
GEORGIA-FULTON COUNTY
CLERK OF THE SUPERIOR
COURT
HiFi Buys, Inc. Sony Electronics Inc. 000799835 9/24/93 Sony electronics products; cont.
6/23/98
HiFi Buys, Inc. Sony Electronics Inc. 000799836 9/24/93 Sony electronics products; cont.
6/23/98
HiFi Buys, Inc. BankBoston N.A. 060199710633 6/2/97
HiFi Buys, Inc. BankBoston N.A. 060199710634 6/2/97
HiFi Buys Inc. Denon America Inc. 060199522196 11/17/95 Denon Inventory. Continuation from
filing 755030 (3/14/91)
HiFi Buys, Incorporated M. Rothman & Co., 060199608653 5/6/96 A T & T electronic consumer goods
Inc. and merchandise
GEORGIA-CLAYTON COUNTY
CLERK OF THE SUPERIOR
COURT
HiFi Buys, Inc. Yamaha Electronics 03197003846 6/30/97 Cont. of prior filing, Yamaha
Corp. USA inventory
</TABLE>
-33-
<PAGE> 237
<TABLE>
GEORGIA-CLARK COUNTY
CLERK OF THE SUPERIOR
COURT
<S> <C> <C> <C> <C>
HiFi Buys, Inc. Yamaha Electronics 029971308 6/9/97 Yamaha Products
Corp. (inventory)
Cont. from:
original filing #
871466 (8/3/97),
amend. # 910738
(3/27/91), continued
# 92110 (6/2/92),
amended #931004
(5/27/93)
HiFi Buys First National Bank 29951650 11/6/90 Continuation of All
of Atlanta assets filing,
original filing
11/6/90 (# 902272),
amended 3/27/91
(#910737)
HiFi Buys Denon America Inc. 029960436 3/8/96 Denon Products
(inventory);
continuation of
original filing
#910661 (3/18/91)
HiFi Buys, Inc. Yamaha Electronics 02997001507 7/1/97 Yamaha Products
Corp, USA (inventory)
GEORGIA-GWINNETT
COUNTY CLERK OF
THE SUPERIOR COURT
HiFi Buys, Inc. Sony Electronics Inc. 93 7101 9/24/93 Sony electronics products; cont.
6/23/98
HiFi Buys, Inc. Sony Electronics Inc. 007668 9/23/93 Sony electronics products; cont.
6/23/98
</TABLE>
TWEETER HOME ENTERTAINMENT GROUP FINANCING COMPANY TRUST
UCC FILINGS
Massachusetts-Canton Town Clerk-clear through 7/10/98
Massachusetts-Secretary of State - clear through 7/10/98
STATE/FEDERAL TAX LIENS SEARCH RESULTS.
DEBTOR: TWEETER HOME ENTERTAINMENT GROUP, INC.
State Tax Lien Search
CT Secretary of State - clear through 7/9/98
-34-
<PAGE> 238
NH Secretary of State - clear through 7/9/98
MA Secretary of State - clear through 7/6/98
MA Canton Town Clerk - clear through 7/8/98
DE New Castle County Superior Court- 7/10/98
Federal Tax Lien Search
CT Secretary of State - clear through 7/9/98
NH Secretary of State - clear through 7/9/98
U.S. District Court, Boston, MA - clear through 7/7/98
DE Secretary of State - clear through 7/8/98
DE New Castle County Recorder of Deeds- clear through 7/10/98
DEBTOR: NEA DELAWARE, INC.
State Tax Lien Search
NH Secretary of State - clear through 7/9/98
NH Nashua City Clerk- clear through 7/9/98
DE New Castle Clerk-clear through 7/10/98
NH Salem Town Clerk-clear through 7/10/98
NH Newington Town Clerk-clear through 7/7/98
Federal Tax Lien
DE Secretary of State - clear through 7/8/98
NH Secretary of State - clear through 7/9/98
NH Nashua City Clerk- clear through 7/9/98
NH Salem Town Clerk- clear through 7/10/98
DE New Castle County Recorder of Deeds- clear through 7/10/98
NH Newington Town Clerk-clear through 7/7/98
DEBTOR: TWEETER ETC.
State Tax Lien Search
CT Secretary of State - clear through 7/9/98
CT-Waterford Town Clerk - clear through 7/9/98
CT-Newington Town Clerk - clear through 7/9/98
CT-Milford City Clerk - clear through 7/9/98
CT-Danbury Town Clerk - clear through 7/9/98
CT-Avon Town Clerk - clear through 7/9/98
CT-Manchester Town Clerk - clear through 7/9/98
MA Secretary of State - clear through 7/6/98
-35-
<PAGE> 239
MA-Barnstable Town Clerk - clear through 7/9/98
MA-Boston City Clerk - clear through 7/9/98
MA-Framingham Town Clerk - clear through 7/9/98
MA-North Attleboro Town Clerk - clear through 7/9/98
MA-Seekonk Town Clerk - clear through 7/9/98
MA-Peabody City Clerk - clear through 7/7/98
MA-Canton Town Clerk - clear through 7/8/98
MA-Holyoke City Clerk - clear through 7/8/98
MA-Hanover Town Clerk - clear through 7/8/98
MA-Burlington Town Clerk - clear through 7/8/98
MA-Newton City Clerk - clear through 7/8/98
MA-Cambridge City Clerk - clear through 7/8/98
MA-Dedham Town Clerk - clear through 7/8/98
NH Secretary of State - clear through 7/9/98
NH, Rockingham Cty. Registry of Deeds - clear through 7/8/98
NH, Hillsborough County Registry of Deeds - clear through 7/8/98
RI-Warwick City Clerk - clear through 7/9/98
NH, Salem Town Clerk- clear through 7/10/98
NH, Newington Town Clerk-clear through 7/7/98
Federal Tax Lien Search
CT Secretary of State - clear through 7/9/98
NH Secretary of State - clear through 7/9/98
CT-Waterford Town Clerk - clear through 7/9/98
CT-Newington Town Clerk - clear through 7/9/98
CT-Milford City Clerk - clear through 7/9/98
CT-Danbury Town Clerk - clear through 7/9/98
CT-Avon Town Clerk - clear through 7/9/98
CT-Manchester Town Clerk - clear through 7/9/98
RI-Warwick City Clerk - clear through 7/9/98
U.S. District Court, Boston, MA - clear through 7/7/98
NH-Rockingham Cty Registry of Deeds - clear through 7/8/98
NH-Hillsborough Cty Registry of Deeds - clear through 7/8/98
NH-Salem Town Clerk- clear through 7/10/98
NH Newington Town Clerk-clear through 7/7/98
DEBTOR: BRYN MAWR STEREO AND VIDEO
State Tax Lien Search
PA-Delaware Cty Prothonotary and Recorder of Deeds - clear through
7/7/98
MD-Ann Arundel County Clerk of the Circuit Court - clear through 7/7/98
DE-New Castle County Recorder of Deeds - clear through 7/8/98
-36-
<PAGE> 240
MD-Baltimore County Clerk of the Circuit Court - clear through 7/8/98
PA-Lehigh County Prothonotary and Recorder of Deeds - clear through
7/9/98
PA-Cumberland County Prothonotary and Recorder of Deeds - clear through
7/9/98
PA-York County Prothonotary and Recorder of Deeds - clear through
7/9/98
PA-Lancaster County Prothonotary and Recorder of Deeds - clear through
7/9/98
PA-Berks County Prothonotary and Recorder of Deeds - clear through
7/9/98
PA-Bucks County Prothonotary and Recorder of Deeds-clear through
7/10/98
PA-Montgomery County Prothonotary and Recorder of Deeds-clear through
7/10/98
Federal Tax Lien Searches
PA-Delaware Cty Prothonotary and Recorder of Deeds - clear through
7/7/98
MD-Ann Arundel County Clerk of the Circuit Court - clear through 7/7/98
DE-New Castle County Recorder of Deeds - clear through 7/8/98
MD-Baltimore County Clerk of the Circuit Court - clear through 7/8/98
DE Secretary of State - clear through 7/8/98
NJ-Gloucester County Clerk - clear through 7/8/98
NJ-Burlington County Clerk - clear through 7/8/98
NJ-Mercer County Clerk - clear through 7/9/98
PA-Lehigh County Prothonotary and Recorder of Deeds - clear through
7/9/98
PA-Cumberland County Prothonotary and Recorder of Deeds - clear through
7/9/98
PA-York County Prothonotary and Recorder of Deeds - clear through
7/9/98
PA-Lancaster County Prothonotary and Recorder of Deeds - clear through
7/9/98
PA-Berks County Prothonotary and Recorder of Deeds - clear through
7/9/98
PA-Bucks County Prothonotary and Recorder of Deeds- clear through
7/10/98
PA-Montgomery County Prothonotary and Recorder of Deeds- clear through
7/10/98
DEBTOR: HIFI BUYS
State Tax Lien Search
-37-
<PAGE> 241
GA-Gwinnett County Clerk of the Superior Court - clear through 7/9/98
GA-Dekalb County Clerk of the Superior Court - clear through 7/9/98
GA-Fulton County Clerk of the Superior Court - clear through 7/9/98
GA-Cobb County Clerk of the Superior Court- clear through 7/10/98
GA-Clayton County Clerk of the Superior Court-clear through 6/9/98
Federal Tax Lien Search
GA-Gwinnett County Clerk of the Superior Court - clear through 7/9/98
GA-Dekalb County Clerk of the Superior Court - clear through 7/9/98
GA-Fulton County Clerk of the Superior Court - clear through 7/9/98
GA-Cobb County Clerk of the Superior Court- clear through 7/10/98
GA-Clayton County Clerk of the Superior Court-clear through 7/9/98
DEBTOR: NEW ENGLAND AUDIO CO., INC.
State Tax Lien Search
RI, Warwick City Clerk- clear through 7/3/98
NJ, Gloucester County Clerk- clear through 6/30/98
NJ, Burlington County Clerk- clear through 6/30/98
MA, Cambridge City Clerk- clear through 6/6/98
MA, Canton Town Clerk- clear through 7/6/98
MA, Dedham Town Clerk- clear through 7/6/98
MA, Hanover Town Clerk- clear through 7/6/98
MA, Holyoke City Clerk-clear through 7/6/98
MA, Framingham Town Clerk-clear through 7/7/98
MA, Barnstable Town Clerk-clear through 7/6/98
MA, Boston City Clerk-clear through 7/7/98
MA, Seekonk Town Clerk-clear through 7/7/98
MA, North Attleboro Town Clerk-clear through 7/7/98
MA, Newton City Clerk-clear through 7/6/98
MA Burlington Town Clerk-clear through 7/6/98
MA, Peabody Clerk- clear through 6/6/98
NH, Rockingham County Registry of Deeds- clear through 7/1/98
NH, Hillsboro County Registry of Deeds- clear through 6/24/98
NH, New Hampshire Secretary of State- clear through 6/22/98
NH, Salem Town Clerk- clear through 7/10/98
NH, Nashua City Clerk- clear through 7/9/98
NH, Newington Town Clerk-clear through 7/7/98
PA, Bucks County Prothonotary and Records of Deeds-clear through
7/10/98
PA, Montgomery County Prothonotary and Recorder of Deeds-clear through
7/10/98
-38-
<PAGE> 242
PA, Delaware County Prothonotary and Recorder of Deeds-clear through
6/5/98
PA, Lehigh County Prothonotary and Recorder of Deeds-clear through
6/24/98
PA, Cumberland County Prothonotary & Recorder of Deeds-clear through
7/2/98
PA, Berks County Prothonotary & Recorder of Deeds-clear through 7/5/98
PA, Lancaster County Prothonotary & Recorder of Deeds-clear through
6/22/98
PA, York County Prothonotary & Recorder of Deeds-clear through 6/19/98
CT, Danbury Town Clerk-clear through 7/6/98
CT Avon Town Clerk-clear through 7/6/98
CT, Manchester Town Clerk-clear through 7/6/98
CT, Waterford Town Clerk-clear through 7/7/98
CT, Newington Town Clerk-clear through 7/7/98
CT, Milford Town Clerk-clear through 7/7/98
CT, Connecticut Secretary of State-clear through 6/30/98
DE, New Castle County Recorder of Deeds-clear through 6/29/98
MD, Baltimore County Clerk-clear through 6/23/98
MD, Ann Arundel County Clerk-clear through 6/16/98
GA, Clark County Clerk- clear through 7/7/98
GA, Gwinnett County Clerk- clear through 6/30/98
GA, DeKalb County Clerk- clear through 6/30/98
GA, Fulton County Clerk- clear through 5/29/98
GA, Cobb County Clerk- clear through 7/10/98
GA, Clayton County Clerk- clear through 6/9/98
Federal Tax Lien Search
RI, Warwick City Clerk-clear through 7/3/98
NJ, Gloucester County Clerk- clear through 6/30/98
GA, Clayton County Clerk- clear through 7/9/97
GA, Cobb County Clerk-clear through 7/10/98
GA, Clark County Clerk-clear through 7/7/98
GA, Gwinnett County Clerk-clear through 6/30/98
GA, DeKalb County Clerk-clear through 6/30/98
GA, Fulton County Clerk-clear through 5/29/98
MA, U.S. District Court, Boston-clear through 6/30/98
NH, Rockingham County Registry of Deeds-clear through 7/1/98
NH, Hillsboro County Registry of Deeds-clear through 6/24/98
NH, New Hampshire Secretary of State- clear through 6/22/98
NH, Salem Town Clerk-clear through 7/10/98
NH, Nashua City Clerk-clear through 7/9/98
NH Newington Town Clerk-clear through 7/7/98
MA, Burlington County Clerk-clear through 6/30/98
-39-
<PAGE> 243
PA, Bucks County Prothonotary and Recorder of Deeds-clear through
7/10/98
PA, Montgomery County Prothonotary & Recorder of Deeds-clear through
7/10/98
PA, Delaware County Prothonotary & Recorder of Deeds-clear through
6/5/98
PA, Lehigh County Prothonotary & Recorder of Deeds-clear through
6/24/98
PA, Cumberland County Prothonotary & Recorder of Deeds-clear through
7/2/98
PA, Berks County Prothonotary & Recorder of Deeds-clear through 6/5/98
PA, Lancaster County Prothonotary & Recorder of Deeds-clear through
6/22/98
PA, York County Prothonotary & Recorder of Deeds-clear through 6/19/98
CT, Danbury Town Clerk-clear through 7/6/98
CT, Avon Town Clerk-clear through 7/6/98
CT, Manchester Town Clerk-clear through 7/6/98
CT, Waterford Town Clerk-clear through 7/7/98
CT, Newington Town Clerk-clear through 7/7/98
CT, Milford City Clerk-clear through 7/7/98
CT, Connecticut Secretary of State-clear through 6/30/98
DE, Secretary of State-clear through 6/25/98
DE, New Castle County Recorder of Deeds-clear through 6/29/98
MD, Baltimore County Clerk-clear through 6/23/97
MD, Ann Arundel County Clerk-clear through 6/16/98
-40-
<PAGE> 244
SCHEDULE 5.17
SCHEDULE OF ENVIRONMENTAL MATTERS
The following environmental assessments of the identified properties have been
conducted:
1. Phase I environmental site assessment report for 320 South
Henderson Road, King of Prussia, PA, prepared by Orbis
Environmental Group, Inc., dated August 29, 1994 updated by RT
Environmental Services, Inc. on May 9, 1996, in a report
entitled Environmental Assessment Update.
2. Level I environmental site assessment and subsurface
investigation reports for 10 Pequot Way, Pequot Industrial
Park, Canton MA, prepared by Rizzo Associates, Inc. on April
22, 1998, May 13, 1998 and a separate letter dated June 2,
1998.
-41-
<PAGE> 245
SCHEDULE 5.20
SCHEDULE OF APPLICATION OF PROCEEDS OF TWEETER IPO
The Company will use all or substantially all of such proceeds to repay existing
indebtedness. Specifically, the Company intends to repay (i) approximately $14.1
million in outstanding indebtedness under its existing Credit Agreement with
BankBoston N.A. (the "Credit Facility"); (ii) approximately $15.0 million in
outstanding indebtedness under the Senior Subordinated Promissory Notes dated
May 30, 1997 issued in connection with the HiFi Buys Acquisition (the "1997
Notes"); (iii) approximately $1.0 million in outstanding indebtedness under the
Senior Subordinated Note dated November 28, 1995 issued in connection with a
recapitalization pursuant to which the Company repurchased Common Stock from
certain of its stockholders (the "Redemption Note") plus a one-time payment of
approximately $814,000 due to these stockholders upon the consummation of the
initial public offering and (iv) approximately $900,000 to repay outstanding
indebtedness under the Subordinated Note dated June 1, 1997 issued in connection
with the HiFi Buys Acquisition (the "HiFi Buys Note"). Any remaining net
proceeds will be used for general working capital purposes.
-42-
<PAGE> 246
SCHEDULE 8.4
SCHEDULE OF INSURANCE
See certificates of insurance delivered in accordance with Section 3.1(l) of the
Amended and Restated Credit Agreement
-43-
<PAGE> 247
SCHEDULE 9.3
SCHEDULE OF INVESTMENTS IN SUBSIDIARIES
1. New England Audio currently own 100 shares of Common Stock, $.01 par
value, of NEA Delaware, which constitutes all of the issued and
outstanding stock of NEA Delaware, which New England Audio purchased
for $.01 per share.
2. Jeffrey Stone is indebted to New England Audio under that certain
Subordinated Promissory Note, dated July 28, 1992, in the original
principal amount of $31,500.00. Pursuant to an Allonge dated the date
hereof, the "Maturity Date" under said Note has been extended to March
31, 2000.
3. Pursuant to the Reorganization Agreement dated June 5, 1998, Tweeter
Home Entertainment Group, Inc. currently owns 100 shares of New Angland
Audio Co., Inc., which constitutes all of the issued and outstanding
stock of New England Audio Co., Inc.
4. Tweeter Home Entertainment Group, Inc. currently owns all of the
beneficial interest of Tweeter Home Entertainment Group Financing
Company Trust, based on an initial capital contribution of $100.
-44-
<PAGE> 1
EXHIBIT 10.2
[COPY -- NOT AN ORIGINAL]
REVOLVING CREDIT NOTE
$30,000,000 July 20, 1998
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned, NEW ENGLAND AUDIO CO., INC., a
Massachusetts corporation, and NEA DELAWARE, INC., a Delaware corporation (the
"Borrowers"), jointly and severally, HEREBY PROMISE TO PAY to the order of
BankBoston, N.A. (the "Lender") the principal sum of THIRTY MILLION DOLLARS
($30,000,000) (or, if less, the aggregate unpaid principal amount of all
Revolving Credit Advances made by the Lender to the Borrower pursuant to the
Credit Agreement as hereinafter defined), together with interest on the unpaid
principal from time to time outstanding at the rate or rates and computed and
payable at the times as described in the Credit Agreement. The entire balance
of outstanding principal and accrued and unpaid interest shall be paid in full
on the Revolving Credit Termination Date (as defined in the Credit Agreement).
This note represents indebtedness for one or more Revolving Credit
Advances made by the Lender to the Borrower under the Amended and Restated
Credit Agreement dated as of July 20, 1998 (as the same may be amended,
modified or supplemented from time to time, the "Credit Agreement") by and
among the Borrowers, the Lenders from time to time parties thereto and
BankBoston, N.A., as Agent for the Lenders (the "Agent"). Capitalized terms
used herein and not otherwise defined shall have the meaning set forth in the
Credit Agreement.
The Borrowers shall have the right, at any time, to voluntarily prepay all
or any part of the outstanding principal amount of this note subject to the
provisions of the Credit Agreement.
In addition to the payment of interest as provided above, the Borrowers
shall, jointly and severally, on demand, pay interest on any overdue
installments of principal and, to the extent permitted by applicable law, on
overdue installments of interest at the rate set forth in the Credit Agreement.
The holder of this note is entitled to all the benefits and rights of a
Lender under the Credit Agreement to which reference is hereby made for a
statement of the terms and conditions under which the entire unpaid balance of
this note, or any portion hereof, shall become immediately due and payable. Any
capitalized term used in this note which is not otherwise expressly defined
herein shall have the meaning ascribed thereto in the Credit Agreement.
The Borrowers hereby waive presentment, demand, notice, protest and other
demands and notices in connection with the delivery, acceptance or enforcement
of this note.
<PAGE> 2
No delay or omission on the part of the holder of this note in exercising
any right hereunder shall operate as a waiver of such right or of any other
right under this note, and a waiver, delay or omission on any one occasion
shall not be construed as a bar to or waiver of any such right on any future
occasion.
The Borrowers, jointly and severally, hereby agree to pay on demand all
reasonable costs and expenses, including, without limitation, reasonable
attorneys' fees and legal expenses, incurred or paid by the holder of this note
in enforcing this note on default.
THE LENDER AND THE BORROWERS AGREE THAT NEITHER OF THEM NOR ANY OF THEIR
ASSIGNEES OR SUCCESSORS SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM OR ANY OTHER ACTION BASED UPON OR ARISING OUT OF, THIS NOTE, THE
CREDIT AGREEMENT, ANY LENDER AGREEMENT, ANY DOCUMENT, INSTRUMENT OR AGREEMENT
EXECUTED IN CONNECTION WITH ANY OF THE FOREGOING, ANY COLLATERAL SECURING ALL
OR ANY PART OF THE LENDER OBLIGATIONS OR THE DEALINGS OR THE RELATIONSHIP
BETWEEN OR AMONG ANY OF THEM OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY EACH OF THE LENDER
AND THE BORROWERS WITH THEIR RESPECTIVE COUNSEL, AND THESE PROVISIONS SHALL BE
SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR ANY BORROWER HAS AGREED WITH
OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE
FULLY ENFORCED IN ALL INSTANCES.
[INTENTIONALLY LEFT BLANK]
<PAGE> 3
This note shall be deemed to be under seal, and all rights and obligations
hereunder shall be governed by the laws of The Commonwealth of Massachusetts
(without giving effect to any conflicts of law provisions contained therein).
NEW ENGLAND AUDIO CO., INC.
By: /s/ Jeffrey S. Stone
-------------------------------
Name: Jeffrey S. Stone
Title: President
NEA DELAWARE, INC.
By: /s/ Jeffrey S. Stone
-------------------------------
Name: Jeffrey S. Stone
Title: President
[COPY -- NOT AN ORIGINAL]
<PAGE> 1
EXHIBIT 10.3
TWEETER TRUST SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT, dated as of July 20, 1998, is entered
into by and among Tweeter Home Entertainment Group Financing Company Trust
("Tweeter Trust" or the "Subordinated Lender"), BANK BOSTON, N.A. ("Bank
Boston"), NEW ENGLAND AUDIO CO., INC. ("New England Audio") and NEA Delaware,
Inc., ("NEA Delaware") (each of New England Audio and NEA Delaware is referred
to herein as individually, as a "Borrower" and collectively as the "Borrowers").
WHEREAS, the Borrowers, have entered into an Amended and Restated
Credit Agreement, dated as of July 20, 1998 (as amended, modified or
supplemented from time to time, the "Credit Agreement") with the Agent and the
other lenders parties thereto (the "Lenders"), and Tweeter Home Entertainment
Group ("Tweeter") and Tweeter Trust as guarantors, and pursuant to which the
Lenders have agreed to make Revolving Credit Advances (as defined in the Credit
Agreement) to the Borrowers, upon the terms and subject to the conditions
contained therein; and
WHEREAS, in connection with the granting of the credits under the
Credit Agreement, the Agent is requiring the Subordinated Lender to execute and
deliver this Subordination Agreement.
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, terms defined in the
Senior Credit Agreement and used herein shall have the meanings given to them in
the Senior Credit Agreement.
(b) The following terms shall have the following meanings:
"Agent": (a) Bank Boston, as agent under the Senior Credit
Agreement and (b) any other Person acting as agent or representative of
the holders of Senior Obligations and so designated by notice to the
holders of Subordinated Obligations from the holders of Senior
Obligations holding not less than 50% of the outstanding amount of the
Senior Obligations.
"Agreement": this Subordination Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"Blockage Notice": a written notice from the Agent to a
Borrower that an Event of Default has occurred and is continuing.
<PAGE> 2
"Blockage Period": any period commencing on the date a
Blockage Notice is given and ending on the date when the Agent notifies
the Subordinated Lender in writing that the Event of Default that was
the basis for such notice has been cured or waived (which such notice
the Agent shall be obligated to provide promptly upon such cure or
waiver).
"Collateral": the collective reference to any and all property
from time to time subject to security interests to secure payment or
performance of the Senior Obligations.
"Insolvency Event": (a) A Borrower commencing any case,
proceeding or other action (i) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to have
an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (ii)
seeking appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part of its
assets, or a Borrower making a general assignment for the benefit of
its creditors; or (b) there being commenced against a Borrower any
case, proceeding or other action of a nature referred to in clause (a)
above which (i) results in the entry of an order for relief or any such
adjudication or appointment or (ii) remains undismissed, undischarged
or unbonded for a period of 60 days; or (c) there being commenced
against a Borrower any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or substantially all of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (d) a Borrower indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause
(a), (b) or (c) above.
"Senior Credit Agreement:" the Amended and Restated Credit
Agreement dated as of July 20, 1998, among the Borrowers, Tweeter Home
Entertainment Group, Inc., the Agent, the Senior Lenders and the
Subordinated Lender, as such Credit Agreement may be amended, modified
or supplemented from time to time, and any renewals or replacements
thereof in a transaction with an institutional lender on terms
customary for a transaction of the type the Senior Loans comprise.
"Senior Lenders": the Lenders under the Senior Credit
Agreement and any subsequent holders from time to time of the Senior
Notes and the other Senior Obligations.
"Senior Loan Documents": the collective reference to the
Senior Credit Agreement, the Senior Notes, the Senior Security
Documents and all other documents that from time to time evidence the
Senior Obligations or secure or support payment or
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<PAGE> 3
performance thereof, and any renewals or replacements thereof with an
institutional lender on terms customary for a transaction of the type
the Senior Loans comprise.
"Senior Loans": the loans made by the Senior Lenders to the
Borrowers pursuant to the Senior Credit Agreement.
"Senior Notes": the promissory notes of the Borrowers
outstanding from time to time under the Senior Credit Agreement, and
any renewals or replacements thereof evidencing a transaction with an
institutional lender on terms customary for a transaction of the type
the Senior Loans comprise.
"Senior Obligations": the collective reference to the unpaid
principal of and interest on the Senior Notes including, without
limitation, interest accruing at the then applicable rate provided in
the Senior Credit Agreement after the maturity of the Senior Loans and
interest accruing at the then applicable rate provided in the Senior
Credit Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding,
relating to a Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceedings, whether direct
or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in
connection with, the Senior Credit Agreement, the Senior Notes, this
Agreement, the other Senior Loan Documents or any other document made,
delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Agent and any
Senior Lender that are required to be paid by the Borrowers pursuant to
the terms of the Senior Credit Agreement or this Agreement or any other
Senior Loan Document) and any renewals or replacements of part or all
of the foregoing obligations in a transaction with an institutional
lender on terms customary for a transaction of the type the Senior
Loans comprise.
"Senior Security Documents": the collective reference to all
documents and instruments, now existing or hereafter arising, which
create or purport to create a security interest in property to secure
payment or performance of the Senior Obligations, or any renewals or
replacements thereof in a transaction with an institutional lender on
terms customary for a transaction of the type the Senior Loans
comprise.
"Subordinated Loans": all loans made by the Subordinated
Lender to the Borrowers from time to time.
"Subordinated Notes": any promissory notes of the Borrowers
outstanding from time to time evidencing the Subordinated Loans.
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<PAGE> 4
"Subordinated Obligations": the collective reference to the
unpaid principal of and interest on the Subordinated Notes and all
other obligations and liabilities of the Borrowers to the Subordinated
Lender under the Subordinated Loans including, without limitation,
interest accruing at the then applicable rate provided in the
Subordinated Loans whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may
arise under, out of, or in connection with, the Subordinated Loans, the
Subordinated Notes, this Agreement, or any other instrument, in each
case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. Subordination.
(a) The Borrowers and the Subordinated Lender, for itself and
each future holder of the Subordinated Obligations, agree that the Subordinated
Obligations are expressly "subordinate and junior in right of payment" (as that
phrase is defined in paragraph 2(b)) to all Senior Obligations.
(b) "subordinate and junior in right of payments" means that:
(i) no part of the Subordinated Obligations shall
have any claim to the assets of a Borrower on a parity with or prior to
the claim of the Senior Obligations;
(ii) unless and until the Senior Obligations have
been paid in full and the Senior Lenders' commitments to make loans
under the Senior Credit Agreement have been terminated, without the
express prior written consent of the Senior Lenders, the Subordinated
Lender will not take, demand, or receive from a Borrower, and a
Borrower will not make, give or permit, directly or indirectly, by
set-off, redemption, purchase or in any other manner, any payment of or
security for the whole or any part of the Subordinated Obligations,
including, without limitation, any letter of credit or similar credit
support facility to support payment of the Subordinated Obligations;
notwithstanding the foregoing, at any time, except during a Blockage
Period, a Borrower may make, and the Subordinated Lender may receive,
payments on account of principal and interest on the Subordinated
Loans;
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<PAGE> 5
(iii) unless and until the Senior Obligations have
been paid in full and the Senior Lenders' commitments to make loans
under the Senior Credit Agreement have been terminated, the
Subordinated Lender will not commence or participate in any suit or
action to enforce payment of any part or all of the Subordinated
Obligations;
(iv) none of the provisions of subsections 2(b)(iii)
or (iv) above or elsewhere in this Agreement shall in any way derogate
from or diminish the absolute subordination provided under items
2(b)(i) and (ii) above or under Section 3 below.
(c) Upon the termination of any Blockage Period, the
Subordinated Lender's rights to receive principal and interest payments as
provided in subsection 2(b)(ii) above shall be reinstated, and a Borrower may
resume making such payments to the Subordinated Lender to the extent provided in
such subsection 2(b)(ii).
(d) The Agent shall be entitled to deliver a separate Blockage
Notice with respect to any or all Events of Default and each such Blockage
Notice shall be effective as provided in this Agreement.
(e) A Blockage Period shall be effective without the delivery
of a Blockage Notice if (i) the events which would have been set forth in the
Blockage Notice have occurred and (ii) such Blockage Notice may not be given
because of the automatic stay under 11 U.S.C. 362 or any successor statute, or
the Subordinated Lender has actual notice of an Event of Default.
(f) The expressions "prior payment in full," "payment in
full," "paid in full" and any other similar terms or phrases when used herein
with respect to the Senior Obligations shall mean the payment in full, in
immediately available funds, of all of the Senior Obligations.
(g) The Subordinated Lender hereby represents and warrant that
as of the date hereof, the Borrowers have no obligations to the Subordinated
Lender.
3. Additional Provisions Concerning Subordination.
(a) The Subordinated Lender and the Borrowers agree that upon
the occurrence of any Insolvency Event:
(i) all Senior Obligations shall be paid in full
before any payment or distribution (other than a distribution of
securities which are subordinate to the payment of all Senior
Obligations then outstanding) is made with respect to the Subordinated
Obligations; and
(ii) any payment or distribution of assets of a
Borrower, whether in cash, property or securities (other than a
distribution of securities which are subordinate
5
<PAGE> 6
to the payment of all Senior Obligations then outstanding), to which
the Subordinated Lender would be entitled except for the provisions
hereof, shall be paid or delivered by such Borrower, or any receiver,
trustee in bankruptcy, liquidating trustee, disbursing agent or other
Person making such payment or distribution, directly to the Agent, to
the extent necessary to pay in full all Senior Obligations, before any
payment or distribution shall be made to the Subordinated Lender.
(b) The Subordinated Lender will not commence or join with any
other creditor or creditors of a Borrower in commencing any bankruptcy,
reorganization or insolvency proceedings against a Borrower. At any meeting of
creditors of a Borrower or in the event of any proceeding, voluntary or
involuntary, for the distribution, division or application of all or part of the
assets of a Borrower or the proceeds thereof, whether such proceeding be for the
liquidation, dissolution or winding up of a Borrower or its business, a
receivership, insolvency or bankruptcy proceeding, an assignment for the benefit
of creditors or a proceeding by or against a Borrower for relief under any
bankruptcy, reorganization or insolvency law or any law relating to the relief
of debtors, readjustment of indebtedness, reorganization, arrangement,
composition or extension or otherwise, if all Senior Obligations have not been
paid in full at the time, the Agent is hereby irrevocably authorized at any such
meeting or in any such proceeding:
(i) To enforce claims comprising Subordinated
Obligations either in its own name or the name or names the
Subordinated Lender, by proof of debt, proof of claim, suit or
otherwise;
(ii) To collect any assets of a Borrower distributed,
divided or applied by way of dividend or payment, or any such
securities issued, on account of Subordinated Obligations and apply the
same, or the proceeds of any realization upon the same that the Agent
in its discretion elects to effect, to Senior Obligations until all
Senior Obligations shall have been paid in full, rendering any surplus
to the Subordinated Lender, pro rata;
(iii) To vote claims comprising Subordinated
Obligations to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition, extension or
otherwise; and
(iv) To take generally any action in connection with
any such meeting or proceeding which the Subordinated Lender might
otherwise take.
(c) If any payment from a Borrower shall be collected or
received by the Subordinated Lender in respect of the Subordinated Obligations,
except payments permitted to be made at the time of payment as provided in this
Agreement, the Subordinated Lender forthwith shall deliver the same to the
Agent, in the form received, duly endorsed to the Agent, if required, to be
applied to the payment or prepayment of the Senior Obligations until the Senior
Obligations are paid in full. Until so delivered, such payment or distribution
shall
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<PAGE> 7
be held in trust by the Subordinated Lender as the property of the Agent,
segregated from other funds and property held by the Subordinated Lender. Until
the Senior Obligations are paid in full, the Subordinated Lender shall not have
any right of subrogation, reimbursement, restitution, contribution or indemnity
whatsoever from any assets of a Borrower or any guarantor or provider of
collateral security for the Senior Obligations.
4. Legend. The Subordinated Lender shall cause a conspicuous
legend to be placed on each Subordinated Note to the following effect:
"This Note, and the indebtedness evidenced hereby, is
subordinate and junior in right of payment in the manner and to the
extent set forth in an agreement (the "Subordination Agreement") dated
as of July 20, 1998 originally made by the maker and payee of this Note
in favor of the Senior Lenders to all indebtedness at any time owed by
the maker of this Note to such Bank (or to its successor and assigns or
subsequent holder of "Senior Obligations" as defined in the
Subordination Agreement), and each holder of this Note, by its
acceptance hereof, shall be bound by the Subordination Agreement, and
this Note may be sold or otherwise transferred only in compliance with
the conditions specified in the Subordination Agreement."
5. Liens. The Subordinated Lender shall not have or claim any
security interest, lien, claim, right or other encumbrance in or on any property
of a Borrower on account of the Subordinated Obligations. The Subordinated
Lender hereby agrees, upon request of the Senior Lender at any time and from
time to time, to execute such other documents or instruments as may be requested
by the Agent further to evidence of public record or otherwise the senior
priority of the Senior Obligations as contemplated by this Agreement, and to
execute a subordination agreement on similar terms in favor of any successors or
assigns of the Agent or other lender extending credit to a Borrower in exchange
or replacement of the Senior Obligations.
6. Consent of Subordinated Lender.
(a) The Subordinated Lender consents that, without the
necessity of any reservation of rights and without notice to or further assent:
(i) any demand for payment of any Senior Obligations
made by the Agent or the Senior Lenders may be rescinded in whole or in
part by the Agent or the Senior Lenders, and any Senior Obligation may
be continued, and the Senior Obligations, or the liability of a
Borrower or any guarantor or any other party upon or for any part
thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, or any obligation or liability of a
Borrower or any other party under the Senior Credit Agreement or any
other agreement, may, from time to time, in whole or in part, be
renewed, extended, modified, accelerated, compromised, waived,
surrendered, or released by the Agent or the Senior Lenders; and
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<PAGE> 8
(ii) the Senior Credit Agreement, the Senior Notes, any
other Senior Loan Document and the Senior Obligations may be amended,
modified, supplemented or terminated, in whole or in part, as the Agent
or the Senior Lenders may deem advisable from time to time, and any
collateral security at any time held by the Agent or the Senior Lenders
for the payment of any of the Senior Obligations may be sold,
exchanged, waived, surrendered or released,
in each case all without notice to or further assent by the Subordinated Lender,
which will remain bound under this Agreement, and all without impairing,
abridging, releasing or affecting the subordination provided for herein.
(b) The Subordinated Lender waives any and all notice of the
creation, renewal, extension or accrual of any of the Senior Obligations and
notice of or proof of reliance by the Agent or the Senior Lenders upon this
Agreement. The Senior Obligations, and any of them, shall be deemed conclusively
to have been created, contracted or incurred in reliance upon this Agreement,
and all dealings between a Borrower and the Agent or the Senior Lenders shall be
deemed to have been consummated in reliance upon this Agreement. The
Subordinated Lender acknowledges and agrees that the Agent and the Senior
Lenders have relied upon the subordination provided for herein in entering into
the Senior Credit Agreement and in making funds available to a Borrower
thereunder. The Subordinated Lender waives notice of or proof of reliance on
this Agreement and protest, demand for payment and notice of default.
7. Senior Obligations Unconditional. All rights and interests of
the Agent and the Senior Lenders hereunder, and all agreements and obligations
of the Subordinated Lender and the Borrowers hereunder, shall remain in full
force and effect irrespective of:
(a) any lack of validity or enforceability of any Senior
Security Documents or any other Senior Loan Documents;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Senior Obligations, or any
amendment or waiver or other modification, whether by course of conduct
or otherwise, of the terms of the Senior Credit Agreement or any other
Senior Security Document;
(c) any exchange, release or nonperfection of any security
interest in any Collateral, or any release, amendment, waiver or other
modification, whether in writing or by course of conduct or otherwise,
of all or any of the Senior Obligations or any guarantee thereof, or
(d) any other circumstances which otherwise might constitute a
defense available to, or a discharge of, a Borrower in respect of the
Senior Obligations, or of either any Subordinated Lender or a Borrower
in respect of this Agreement.
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<PAGE> 9
8. Waiver of Claims. To the maximum extent permitted by law, the
Subordinated Lender waives any claim it might have against the Agent or the
Senior Lenders with respect to, or arising out of, any action or failure to act
or any error of judgment, negligence, or mistake or oversight whatsoever on the
part of the Agent or the Senior Lenders or their respective directors, officers,
employees or agents with respect to any exercise of rights or remedies under the
Senior Loan Documents or any transaction relating to the Collateral. Neither the
Agent or the Senior Lenders nor any of their directors, officers, employees or
agents shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of a Borrower or the
Subordinated Lender or any other Person or to take any other action whatsoever
with regard to the Collateral or any part thereof.
9. Extension of Senior Obligations. Notwithstanding the foregoing
provisions of this Agreement and any extension by the Agent or the Senior
Lenders of the final maturity date of the Senior Obligations, provided that at
the time no Event of Default under the Senior Loan Documents is continuing, the
Subordinated Lender may receive timely payment of all unpaid principal and
accrued interest on the Subordinated Obligations. In the event an Event of
Default does then exist, the subordination of the Subordinated Obligations under
Section 2(b)(i), (ii) and (iii) and Section 3 shall remain in effect and
unimpaired.
10. Provisions Applicable After Bankruptcy. The provisions of this
Agreement shall continue in full force and effect notwithstanding the occurrence
of and from and after any "Insolvency Event."
11. Further Assurances. The Subordinated Lender and the Borrowers,
at their own expense and at any time from time to time, upon the written request
of the Agent or the Senior Lenders will promptly and duly execute and deliver
such further instruments and documents and take such further actions as any
Senior Lender or any successor lender reasonably may request for the purposes of
obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted.
12. Provisions Define Relative Rights. This Agreement is intended
solely for the purpose of defining the relative rights of the Agent or the
Senior Lenders or any successor lenders on the one hand and the Subordinated
Lender and the Borrowers, and no other Person shall have any right, benefit or
other interest under this Agreement.
13. Powers Coupled With An Interest. All powers, authorizations
and agencies contained in this Agreement are coupled with an interest and are
irrevocable until the Senior Obligations are paid in full and the Senior
Lenders' commitments to make loans to the Borrowers are terminated.
14. Notices. All notices, requests and demands to or upon the
Agent or the Senior Lenders or the Borrowers or the Subordinated Lender to be
effective shall be in writing (or by fax or similar electronic transfer
confirmed in writing) and shall be deemed to have been duly
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<PAGE> 10
given or made (i) when delivered by hand or (ii) if given by mail, when
deposited in the mails by certified mail, return receipt requested, or (iii) if
by fax or similar electronic transfer, when sent and receipt has been confirmed,
addressed as follows:
<TABLE>
<S> <C>
If to the Agent or the
Senior Lenders: Bank Boston, N.A., as Agent
100 Federal Street
Boston, Massachusetts 02110
Attention: Christopher S. Allen, Director
Fax: (617) 434-8102
with a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: Edward Matson Sibble, Jr., P.C.
Fax: (617) 523-1657
If to the Subordinated
Lender or the
Borrowers: New England Audio Co., Inc.
40 Hudson Road
Shawmut Park
Canton, Massachusetts 02021
Attention: Jeffrey Stone, President
Fax: (617) 821-9956
with a copy to: Goulston & Storrs
400 Atlantic Avenue
Boston, MA 02110
Attention: Kitt Sawitsky, Esq. and Daniel Avery, Esq.
Phone: (617) 482-1776
Fax: (617) 574-4112
</TABLE>
If to the Subordinated Lender, at its address or transmission number
for notices set forth under its signature below.
The Senior Lenders, the Borrowers and the Subordinated Lender may
change their addresses and transmission numbers for notices by notice in the
manner provided in this Section.
15. Counterparts. This Agreement may be executed by one or more of
the parties on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
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<PAGE> 11
16. 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 provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
17. Integration. This Agreement represents the agreement of the
Borrowers, the Agent, the Senior Lenders and the Subordinated Lender with
respect to the subject matter hereof and there are no promises or
representations by the Borrower, the Agent, the Senior Lenders or the
Subordinated Lender relative to the subject matter hereof not reflected herein.
18. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a written
instrument executed by the Agent, the Borrowers and the Subordinated Lender;
provided that any provision of this Agreement may be waived by the Agent or the
Senior Lenders in a letter or agreement executed by the Agent or the Senior
Lenders or by telex or facsimile transmission from the Agent or the Senior
Lenders.
(b) No failure to exercise, nor any delay in exercising, on
the part of the Agent or the Senior Lenders, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
19. Section Headings. The section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
20. Successors and Assigns. This Agreement shall be binding upon
the successors and assigns of the Borrowers and the Subordinated Lender and any
subsequent holders of the Subordinated Obligations and shall inure to the
benefit of the Agent, the Senior Lenders and their successors and assigns and
any future holder of any renewals or replacements of the Senior Obligations.
21. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the law of the Commonwealth of
Massachusetts without regard to conflicts of law principles.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
BANKBOSTON, N.A. as Agent
By: /s/ Christopher S. Allen
-----------------------------
Title: Director
NEW ENGLAND AUDIO CO., INC.
By:
----------------------------
Title:
NEA DELAWARE, INC.
By:
----------------------------
Title:
TWEETER HOME ENTERTAINMENT
GROUP FINANCING COMPANY
TRUST
---------------------------------
Trustee:
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
BANKBOSTON, N.A. as Agent
By:
-----------------------------
Title:
NEW ENGLAND AUDIO CO., INC.
By: /s/ Jeffrey S. Stone
----------------------------
Title:
NEA DELAWARE, INC.
By: /s/ Jeffrey S. Stone
----------------------------
Title:
TWEETER HOME ENTERTAINMENT
GROUP FINANCING COMPANY
TRUST
/s/ Jeffrey S. Stone
---------------------------------
Trustee:
12
<PAGE> 1
EXHIBIT 10.4
AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT dated as of July 20, 1998
between NEW ENGLAND AUDIO CO., INC., a Massachusetts corporation ("New England
Audio"), NEA DELAWARE, INC., a Delaware corporation ("NEA Delaware") (each of
New England Audio and NEA Delaware is referred to herein individually, as a
"Debtor" and collectively, as the "Debtors") and BANKBOSTON, N.A., a national
banking association, as agent (the "Agent") for itself and the other lenders
which are, or may in the future become, parties to the Credit Agreement (as
hereinafter defined).
Recitals
WHEREAS, the Debtors have entered into an Amended and Restated Credit
Agreement, dated as of July 20, 1998 (as amended, modified or supplemented from
time to time, the "Credit Agreement") with the Agent and the other lenders
parties thereto (the "Lenders"), pursuant to which the Lenders have agreed to
make Revolving Credit Advances (as defined in the Credit Agreement) to the
Debtors, upon the terms and subject to the conditions contained therein; and
WHEREAS, in connection with the granting of the credits under the
Credit Agreement and as security for all of the Obligations, including without
limitation the obligations of the Debtors under the Credit Agreement, the Agent
is requiring the Debtors to execute and deliver this Security Agreement and
grant the security interest contemplated hereby.
WHEREAS, the Debtors and the Agent are parties to a Security Agreement
dated as of May 30, 1997 (the "Security Agreement") and desire to amend and
restate the Security Agreement in connection with the Credit Agreement.
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby amend and restate the
Security Agreement and agree as follows:
ARTICLE 1. GRANT OF SECURITY
Section 1.1 Grant of Security. Each Debtor hereby grants to the Agent a
continuing security interest ("Security Interest") in and to all personal
property and fixtures of each Debtor, whether now or hereafter existing or now
or hereafter acquired and wherever located, including all equipment, accounts,
inventory and general intangibles, all as more fully described as follows (the
"Collateral"):
(a) All money, cash, bank accounts, deposit accounts, goods,
inventory, equipment, computer hardware and software, instruments, securities,
documents, documents of title, chattel paper, accounts, accounts receivable,
lease receivables and leases including but not limited to, rights to rentals
thereunder and each Debtor's reversionary interest in property leased thereunder
and any equity rights in leases sold to third parties, contract rights,
licenses,
<PAGE> 2
general intangibles, copyrights, patents and patents pending, trademarks and
goodwill, Trade Secrets, credits, claims, demands and all other property of the
Debtors (including but not limited to leasehold improvements);
(b) All equipment, including without limitation all fixtures,
machinery, equipment, molds, dies, motor vehicles, and other goods whether now
owned or hereafter acquired by any Debtor, wherever located, all replacements,
substitutions and all parts thereof and all accessions thereto, as well as all
of each Debtor's right, title and interest in and to any such goods now or
hereafter held or used by any Debtor under any lease, lease-purchase,
conditional sales, use or other agreements under which any Debtor is entitled to
the use and possession thereof, with any other rights and benefits flowing from
such agreements, all as may be used or useful in connection with each Debtor's
business as now or hereafter carried on, any operations incidental to or
associated with the same, or for any other purpose (any and all such equipment,
machinery and fixtures, parts and accessions being the "Equipment");
(c) All inventory in all of its forms, wherever located, now
or hereafter existing including, but not limited to (i) raw materials and work
in process therefor, finished goods thereof and (ii) goods which are returned to
or repossessed by any Debtor and all accessions thereto and products thereof
(any and all such inventory, accessions and products being the "Inventory");
(d) All accounts receivable, including without limitation
accounts, contracts (but only to the extent assignable without causing a Default
under the Credit Agreement), contract rights, chattel paper, instruments,
licenses and other obligations of any kind whether now existing or hereafter
arising, including without limitation all rights now or hereafter existing in
and to all security agreements, leases, and other contracts securing or
otherwise relating to any such accounts, contract rights, chattel paper,
instruments, general intangibles or obligations (any and all such accounts,
contract rights, chattel paper, instruments, general intangibles and obligations
being the "Receivables," and any and all such leases, security agreements and
other contracts being the "Contracts");
(e) All general intangibles including without limitation,
tradenames, trademarks, service marks, tax refunds, the corporate name and all
product names; and
(f) All products and proceeds of any and all of the foregoing
Collateral and, to the extent not otherwise included, all payments under
insurance (whether or not the Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.
Section 1.2 Security for Obligations. This Agreement and the Security
Interest shall secure the payment and performance of the Obligations.
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ARTICLE 2
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Debtor represents, warrants and covenants, which representations,
warranties and covenants shall survive execution and delivery of this Agreement,
as follows:
Section 2.1 Necessary Filings. All filings, registrations and
recordings necessary or appropriate to create, preserve and perfect the security
interest granted by each Debtor to the Agent hereby in respect of the Collateral
have been accomplished and the security interest granted to the Agent pursuant
to this Agreement in and to the Collateral constitutes, upon satisfaction of
such filings, registrations and recordings, a perfected security interest
therein (to the extent that the same can be perfected by filing, registration or
recording) prior to the rights of all other Persons therein (other than any such
rights pursuant to Liens permitted by Section 9.2 of the Credit Agreement
("Permitted Liens")) and subject to no other Liens (other than Permitted Liens)
and is entitled to all the rights, priorities and benefits afforded by the
Uniform Commercial Code to perfected security interests.
Section 2.2 No Liens. Each Debtor is, and as to Collateral acquired by
it from time to time after the date hereof each such Debtor will be, the owner
of all Collateral pledged by it hereunder free from any Lien, security interest,
encumbrance or other right, title or interest of any Person (other than
Permitted Liens), and each such Debtor shall defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any interest
therein (other than in connection with Permitted Liens) adverse to the Agent.
Section 2.3 Other Financing Statements. As of the date hereof, there is
no financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral (other than financing statements filed in respect of
Permitted Liens), and so long as any Lender Obligations or commitments with
respect thereto are outstanding, no Debtor will execute or authorize to be filed
in any public office any financing statement (or similar statement or instrument
of registration under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in respect of and
covering the security interests granted hereby by such Debtors or in connection
with Permitted Liens.
Section 2.4 Chief Executive Office; Records. As of the date hereof, the
chief executive office of each such Debtor is located at the address indicated
on Exhibit A hereto. No Debtor will move its chief executive office except to
such new location as any Debtor may establish in accordance with the last
sentence of this Section 2.4. A complete set of books of account and records of
each Debtor relating to the Receivables and the Contract Rights are, and will
continue to be, kept at such chief executive office, at one or more of the other
record locations set forth on Exhibit A hereto for each such Debtor or at such
new locations as each Debtor may establish in accordance with the last sentence
of this Section 2.4. All Receivables and Contract Rights of each Debtor are, and
will continue to be, maintained at, and controlled
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and directed (including, without limitation, for general accounting purposes)
from, the office locations described above or such new location established in
accordance with the last sentence of this Section 2.4. No Debtor shall establish
new locations for such offices until (a) it shall have given to the Agent not
less than ten (10) days' prior written notice of its intention to do so, clearly
describing such new location and providing such other information in connection
therewith as the Agent may reasonably request and (b) with respect to such new
location, it shall have taken all action reasonably satisfactory to the Agent,
to maintain the security interest of the Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect.
Section 2.5 Location of Inventory and Equipment. As of the date hereof,
all Inventory and Equipment held by each Debtor is located at one of the
locations shown on Exhibit B hereto for each Debtor. Each Debtor agrees that all
Inventory and Equipment now held or subsequently acquired by it shall be kept at
(or shall be in transport to) any one of the locations shown on Exhibit B
hereto, or such new location as any Debtor may establish in accordance with the
last sentence of this Section 2.5. A Debtor may establish a new location for
Inventory and Equipment only if (a) it shall have given to the Agent not less
than ten (10) days' prior written notice of its intention so to do, clearly
describing such new location and providing such other information in connection
therewith as the Agent may reasonably request and (b) with respect to such new
location, it shall have taken all action reasonably satisfactory to the Agent to
maintain the security interest of the Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect.
Section 2.6 Recourse. This Agreement is made with full recourse to each
Debtor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of each Debtor contained herein, in the other Lender
Agreements and otherwise in writing in connection herewith or therewith.
Section 2.7 Trade Names; Change of Name. As of the date hereof, no
Debtor operates in any jurisdiction under, or in the preceding 12 months has not
operated in any jurisdiction under, any trade names, fictitious names or other
names except its legal name and except as disclosed on Exhibit F hereto. No
Debtor shall change its legal name or assume or operate in any jurisdiction
under any trade, fictitious or other name except as established in accordance
with the last sentence of this Section 2.7. Each Debtor shall not assume or
operate in any jurisdiction under any new trade, fictitious or other name until
(a) it shall have given to the Agent ten (10) days' prior written notice of its
intention so to do, clearly describing such new name and the jurisdictions in
which such new name shall be used and providing such other information in
connection therewith as the Agent may reasonably request and (b) with respect to
such new name, it shall have taken all action reasonably requested by the Agent,
to maintain the security interest of the Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect.
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Section 2.8 Collateral in Maryland. The value of the Debtors' taxable
Collateral in Maryland shall not at any time exceed $1,000,000 without the
Agent's consent not to be unreasonably withheld.
ARTICLE 3
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
Section 3.1 Additional Representations and Warranties. As of the time
when each of its Receivables arises, each Debtor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto, are what they purport to be in all material
respects, and that such Receivable will, to the best knowledge of each Debtor,
evidence true and valid obligations of the account debtor named therein.
Section 3.2 Maintenance of Records. Each Debtor will keep and maintain
at its own cost and expense, records of its Receivables and Contracts and each
Debtor will make the same available on Debtor's premises to the Agent for
inspection, at the Debtor's own cost and expense, at any and all reasonable
times upon reasonable prior notice to the Debtor. Each Debtor shall affix to
each writing constituting chattel paper, and if the Agent so directs to all
other Receivables and Contracts, as well as books, records and documents of each
Debtor evidencing or pertaining to such Receivables and Contracts, an
appropriate reference, in form and manner satisfactory to the Agent, to the fact
that such chattel paper, Receivables and Contracts have been assigned to the
Agent and that the Agent has a security interest therein. Upon the occurrence
and during the continuance of an Event of Default, and at the reasonable request
of the Agent, each Debtor shall, at its own cost and expense, deliver all
tangible evidence of its Receivables and Contract Rights (including, without
limitation, all documents evidencing the Receivables and all Contracts and each
specific writing constituting chattel paper) and such books and records to the
Agent or to its representatives (copies of which evidence and books and records
may be retained by each Debtor).
Section 3.3 Direction to Account Debtors; Contracting Parties; Etc.
Upon the occurrence and during the continuance of an Event of Default, and if
the Agent so directs, each Debtor agrees (a) to cause all payments on account of
the Receivables and Contracts to be made directly to the Cash Collateral
Account, (b) that the Agent may, at its option, directly notify the obligors
with respect to any Receivables and/or under any Contracts to make payments with
respect thereto as provided in preceding clause (a) and (c) that the Agent may
enforce collection of any such Receivables and Contracts and may adjust, settle
or compromise the amount of payment thereof, in the same manner and to the same
extent as such Debtors. Without notice to or assent by the Debtors, upon the
occurrence and during the continuance of an Event of Default, the Agent may
apply any or all amounts then in, or thereafter deposited in, the Cash
Collateral Account which application shall be effected in the manner provided in
Section 7.4 of this Agreement. The reasonable costs and expenses (including
reasonable
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attorneys' fees) of collection, whether incurred by any Debtor or the Agent,
shall be borne by the Debtors. The Agent shall deliver a copy of each notice
referred to in the preceding clause (b) to the Debtors; provided, that the
failure by the Agent to so notify any Debtor shall not affect the effectiveness
of such notice or the other rights of the Agent created by this Section 3.3.
Section 3.4 Modification of Terms; Etc. No Debtor may rescind or cancel
any indebtedness evidenced by any Receivable or under any Contract, or modify
any term thereof or make any adjustment with respect thereto in a manner adverse
to the Agent, or extend or renew the same, or compromise or settle any material
dispute, claim, suit or legal proceeding relating thereto in a manner adverse to
the Agent, or sell any Receivable or Contract, or interest therein, without the
prior written consent of the Agent, except in accordance with the Debtor's
reasonable business practices.
Section 3.5 Collection. Each Debtor shall endeavor, in accordance with
reasonable business practices, to cause to be collected from the account debtor
named in each of its Receivables or obligor under any Contract, as and when due
(including, without limitation, amounts which are delinquent, such amounts to be
collected in accordance with generally accepted lawful collection procedures)
any and all amounts owing under or on account of such Receivable or Contract,
and apply forthwith upon receipt thereof all such amounts as are so collected to
the outstanding balance of such Receivable or under such Contract. The
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees) of collection, if incurred by any Debtor or the Agent, shall be
borne by the Debtors.
Section 3.6 Instruments. If any Debtor owns or acquires any Instrument
constituting Collateral, the Debtor will within 10 Business Days notify the
Agent thereof, and upon request by the Agent, will promptly deliver such
Instrument to the Agent appropriately endorsed to the order of the Agent as
further security hereunder.
ARTICLE 4
SPECIAL PROVISIONS CONCERNING TRADEMARKS
Section 4.1 Additional Representations and Warranties. Except as set
forth on Schedule 5.16 to the Credit Agreement, each Debtor represents and
warrants that: (i) as of the date hereof, it is the true and lawful owner of all
right, title and interest to, or otherwise has the right to use, the registered
Marks listed on Exhibit C hereto for each Debtor and that, as of the date
hereof, said listed Marks constitute all the marks and applications for marks
registered in the United States Patent and Trademark Office that each Debtor
presently owns or uses in connection with its business; (ii) it owns, is
licensed to use or otherwise has the right to use all Marks that it uses; (iii)
it has no knowledge of any third party claim that any aspect of the Debtor's
present or contemplated business operations infringe or will infringe any
trademark, service mark or trade name in any respect which could reasonably be
expected to have a
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Material Adverse Effect on each Debtor and its Subsidiaries taken as a whole;
and (iv) except as listed on Exhibit C, as of the date hereof, it is the
beneficial and record owner of all trademark registrations and applications
listed on Exhibit C hereto for each Debtor and that said registrations are valid
and subsisting, and that no Debtor is aware of any third-party claim that any of
said registrations in respect of any Mark is invalid or unenforceable. Each
Debtor hereby grants to the Agent an absolute power of attorney to sign, upon
the occurrence and during the continuance of an Event of Default, any document
which may be required by the United States Patent and Trademark Office in order
to effect an absolute assignment of all right, title and interest in each Mark,
and record the same.
Section 4.2 Infringements. Each Debtor agrees, promptly upon learning
thereof, to notify the Agent in writing of the name and address of, and to
furnish such pertinent information that may be available with respect to, any
party who the Debtor believes is infringing or diluting or otherwise violating
in any material respect any of the Debtor's rights in and to any Mark, or with
respect to any party claiming that the Debtor's use of any Mark violates in any
material respect any property right of that party. Each Debtor further agrees to
prosecute any Person infringing any Mark in accordance with reasonable business
practices.
Section 4.3 Preservation of Marks. Each Debtor agrees to use its Marks
as required in each of the applicable jurisdictions during the time in which
this Agreement is in effect, sufficiently to preserve such Marks (and any
registrations thereto) as trademarks or service marks under the laws of the
United States and any other applicable law; provided, that, prior to any
Default, no Debtor shall be obligated to preserve any Mark in the event the
Debtor determines, in its reasonable business judgment, that the preservation of
such Mark is no longer desirable in the conduct of its business.
Section 4.4 Maintenance of Registration. Each Debtor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. Sections 1051 et seq. to maintain trademark registrations, including
but not limited to affidavits of use and applications for renewals of
registration in the United States Patent and Trademark Office for all of its
registered Marks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065, and
shall pay all fees and disbursements in connection therewith and shall not
abandon any such filing of affidavit of use or any such application of renewal
prior to the exhaustion of all administrative and judicial remedies without
prior written consent of the Agent (which consent shall not be unreasonably
withheld); provided, that, prior to any Default, no Debtor shall be obligated to
maintain any Mark in the event that the Debtor determines, in its reasonable
business judgment, that the maintenance of such Mark is no longer necessary or
desirable in the conduct of its business.
Section 4.5 Future Registered Marks. If any Mark registration issues
hereafter to any Debtor as a result of any application now or hereafter pending
before the United States Patent and Trademark Office, within sixty (60) days of
receipt of such certificate, such Debtor shall deliver to the Agent a copy of
such certificate, and an assignment for security in such Mark, to the Agent and
at the expense of such Debtor, confirming the assignment for security
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in such Mark to the Agent hereunder, the form of such security to be
substantially the same as the form hereof or in such other form as may be
reasonably satisfactory to the Agent.
Section 4.6 Remedies. Upon the occurrence and during the continuance of
an Event of Default, the Agent may take any or all of the following actions: (a)
declare the entire right, title and interest of any Debtor in and to each of the
Marks, together with all trademark rights and rights of protection to the same,
vested in the Agent, for the benefit of the Lenders, in which event such rights,
title and interest shall immediately vest in the Agent, for the benefit of the
Lenders, and the Agent shall be entitled to exercise the power of attorney
referred to in Section 4.1 hereof to execute, cause to be acknowledged and
notarized and to record said absolute assignment with the applicable agency; (b)
take and use or sell the Marks and the goodwill of such Debtor's business
symbolized by the Marks or carry on the business and use the assets of such
Debtor which have been used in connection with the Marks; and (c) direct the
Debtor to refrain, in which event the Debtor shall refrain, from using the Marks
in any manner whatsoever, directly or indirectly, and, if requested by the
Agent, change the Debtor's corporate name to eliminate therefrom any use of any
Mark and execute such other and further documents that the Agent may request to
further confirm this and to transfer ownership of the Marks and registrations
and any pending trademark application in the United States Patent and Trademark
Office to the Agent.
Section 4.7 Collateral Assignment. In addition to, and not in
limitation of, the grant of the security interest in Article 1 above, each
Debtor hereby grants, assigns, transfers, conveys and sets over to the Agent,
for the benefit of the Lenders, effective upon the occurrence and during the
continuance of an Event of Default, each Debtor's entire right, title and
interest in and to the Marks, the goodwill of the business symbolized by the
Marks and Proceeds. Each Debtor has delivered to the Agent an Assignment of
Trademarks (the "Assignment") and upon the occurrence and during the continuance
of an Event of Default, the Agent is hereby authorized to file such Assignment
with the United States Patent and Trademark Office. Upon payment in full of all
Obligations, the Agent will assign the Marks to the Debtor.
ARTICLE 5
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
Section 5.1 Additional Representations and Warranties. Except as set
forth on Schedule 5.16 to the Credit Agreement, each Debtor represents and
warrants that, as of the date hereof, it is the true and lawful owner of all
rights in (a) all Trade Secrets and Proprietary Information necessary to operate
its business, (b) the Patents listed on Exhibit D hereto for each Debtor, said
Patents constituting all the patents and applications for patents that each
Debtor owns on the date hereof and (c) the Copyrights listed on Exhibit E hereto
for each Debtor, said Copyrights constituting all registrations of copyrights
and applications for
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copyright registrations that each such Debtor owns on the date hereof. Each
Debtor further warrants that it has no knowledge of any third party claim that
any aspect of its present or contemplated business operations infringe or will
infringe any patent or any copyright or that it has misappropriated any Trade
Secret or Proprietary Information, in each case in any respect which could
reasonably be expected to have a Material Adverse Effect on such Debtor and its
Subsidiaries taken as a whole. Each Debtor hereby grants to the Agent an
absolute power of attorney to sign, upon the occurrence and during the
continuance of an Event of Default, any document which may be required by the
United States Patent and Trademark Office or the United States Copyright Office
in order to effect an absolute assignment of all right, title and interest in
each Patent and Copyright, and to record the same.
Section 5.2 Infringements. Each Debtor agrees, promptly upon learning
thereof, to furnish to the Agent in writing all pertinent information available
to such Debtor with respect to any infringement, contributing infringement or
active inducement to infringe in any material respect any Patent or Copyright or
to any claim that the practice of any Patent or the use of any Copyright
violates in any material respect any property right of a third party, or with
respect to any misappropriation of any Trade Secret right or any claim that
practice of any material Trade Secret right violates in any material respect any
property right of a third party. Each Debtor further agrees, to the extent
consistent with reasonable business practices, to prosecute any Person
infringing any Patent or Copyright or any Person misappropriating any Trade
Secret right.
Section 5.3 Maintenance of Patents. At its own expense, each Debtor
shall make timely payment of all post-issuance fees required pursuant to 35
U.S.C. Section 41 to maintain in force rights under each Patent, absent prior
written consent of the Agent; provided, that no Debtor shall be obligated to
maintain any Patent in the event the Debtor determines, in its reasonable
business judgment, that the maintenance of such Patent is no longer necessary or
desirable in the conduct of its business.
Section 5.4 Prosecution of Patent Application. At its own expense, such
Debtor shall diligently prosecute all applications for Patents for such Debtor
and shall not abandon any such application prior to exhaustion of all
administrative and judicial remedies, absent written consent of the Agent (which
consent shall not be unreasonably withheld); provided, that no Debtor shall be
obligated to prosecute any application in the event the Debtor determines, in
its reasonable business judgment, that the prosecuting of such application is no
longer necessary or desirable in the conduct of its business.
Section 5.5 Other Patents and Copyrights. Within sixty (60) days of the
acquisition or issuance of a Patent, registration of a Copyright, or acquisition
of a registered copyright, the Debtor shall deliver to the Agent a copy of said
Copyright or certificate or registration of said patents, as the case may be,
with an assignment for security as to such Patent or Copyright, as the case may
be, to the Agent and at the expense of the Debtor, confirming the assignment for
security, the form of such assignment for security to be substantially the same
as the form hereof or in such other form as may be reasonably satisfactory to
the Agent.
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Section 5.6 Remedies. Upon the occurrence and during the continuance of
an Event of Default, the Agent may take any or all of the following actions: (a)
declare the entire right, title, and interest of any Debtor in each of the
Patents and Copyrights vested in the Agent, for the benefit of the Lenders, in
which event such right, title, and interest shall immediately vest in the Agent,
for the benefit of the Lenders, and in which case the Agent shall be entitled to
exercise the power of attorney referred to in Section 5.1 hereof to execute,
cause to be acknowledged and notarized and to record said absolute assignment
with the applicable agency; (b) take and practice, use or sell the Patents and
Copyrights; and (c) direct such Debtor to refrain, in which event such Debtor
shall refrain, from practicing the Patents and using the Copyrights, directly or
indirectly, and such Debtor shall execute such other and further documents as
the Agent may request further to confirm this and to transfer ownership of the
Patents and Copyrights to the Agent, for the benefit of the Lenders.
ARTICLE 6
PROVISIONS CONCERNING ALL COLLATERAL
Section 6.1 Protection of Agent's Security. Each Debtor will at all
times keep its Inventory and Equipment insured in favor of the Agent, at each
such Debtor's own expense to the extent and in the manner provided in the Lender
Agreements; all policies or certificates with respect to such insurance (and any
other insurance maintained by the Debtor) (a) shall be endorsed to the Agent's
reasonable satisfaction for the benefit of the Agent (including, without
limitation, by naming the Agent as additional insured and loss payee) and (b)
shall state that such insurance policies shall not be canceled without thirty
(30) days' prior written notice thereof by the insurer to the Agent; and
certified copies of such policies or certificates with respect thereto shall be
deposited with the Agent. If any Debtor shall fail to insure its Inventory and
Equipment in accordance with the preceding sentence, or if any Debtor shall fail
to so endorse and deposit all policies or certificates with respect thereto, the
Agent shall have the right (but shall be under no obligation), upon prior
written notice to any such Debtor, to procure such insurance and such Debtor
agrees to promptly reimburse the Agent for all costs and expenses of procuring
such insurance. The Agent shall, at the time any proceeds of such insurance are
distributed to the Lenders, apply such proceeds in accordance with Section 7.4
hereof except as otherwise provided by the Credit Agreement. Each Debtor assumes
all liability and responsibility in connection with the Collateral acquired by
it and the liability of each Debtor to pay the Obligations shall in no way be
affected or diminished by reason of the fact that such Collateral may be lost,
destroyed, stolen, damaged or for any reason whatsoever unavailable to the
Debtor.
Section 6.2 Further Actions. Each Debtor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Agent from time
to time such lists, descriptions and designations of its Collateral, warehouse
receipts, receipts in the nature of warehouse receipts, bills of lading,
documents of title, vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers
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of attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Agent reasonably
requests in order to perfect, preserve or protect its security interest in the
Collateral.
Section 6.3 Financing Statements. Each Debtor agrees to execute and
deliver to the Agent such financing statements, in form reasonably acceptable to
the Agent, as the Agent may from time to time reasonably request, to establish
and maintain a valid, enforceable, first priority perfected security interest in
the Collateral as provided herein and the other rights and security contemplated
hereby all in accordance with the UCC as enacted in any and all relevant
jurisdictions or any other relevant law. Each Debtor will pay any applicable
filing fees, recordation taxes and related expenses relating to its Collateral.
Each Debtor hereby authorizes the Agent upon the occurrence and during the
continuance of an Event of Default to file any such financing statements without
its signature where permitted by law.
ARTICLE 7
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
Section 7.1 Remedies; Obtaining the Collateral Upon Default. Each
Debtor agrees that upon the occurrence of an Event of Default, the Agent, in
addition to any rights now or hereafter existing under applicable law, shall
have all rights as a secured creditor under the UCC in all relevant
jurisdictions and may:
(a) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Debtor or any other
Person who then has possession of any part thereof, with or without notice or
process of law, and for that purpose may enter upon the Debtor's premises where
any of the Collateral is located and remove the same and use in connection with
such removal any and all services, supplies, aids and other facilities of the
Debtor;
(b) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation, the Receivables
and the Contracts) constituting the Collateral to make any payment required by
the terms of such agreement, instrument or other obligation directly to the
Agent;
(c) withdraw all monies, securities and instruments in the
Cash Collateral Account and/or in any other cash collateral account for
application to the Obligations in accordance with Section 7.4 hereof;
(d) sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof in accordance with Section 7.2 hereof, or direct
the Debtor to sell, assign or otherwise
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liquidate any or all of the Collateral or any part thereof, and, in each case,
take possession of the proceeds of any such sale or liquidation;
(e) take possession of the Collateral or any part thereof, by
directing the relevant Debtor in writing to deliver the same to the Agent at any
place or places reasonably designated by the Agent, in which event such Debtor
shall at its own expense:
(i) forthwith cause the same to be moved to the place
or places so designated by the Agent and there delivered to the Agent;
(ii) store and keep any Collateral so delivered to
the Agent at such place or places pending further action by the Agent
as provided in Section 7.2 hereof; and
(iii) while the Collateral shall be so stored and
kept, provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain them in good
condition; and
(f) license or sublicense, whether on an exclusive or
nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral
for such term and on such conditions and in such manner as the Agent shall in
its reasonable judgment determine;
it being understood that each Debtor's obligation to deliver the Collateral is
of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Agent shall be entitled to a decree
requiring specific performance by any such Debtor of said obligation. The
Lenders agree that this Agreement may be enforced only by the action of the
Agent acting upon the instructions of the Majority Lenders and that no other
Lender shall have any right individually to seek to enforce this Agreement or to
realize upon the security to be granted hereby, it being understood and agreed
that such rights and remedies may be exercised by the Agent for the benefit of
the Lenders upon the terms of this Agreement.
Section 7.2 Remedies: Disposition of the Collateral. Any Collateral
repossessed by the Agent under or pursuant to Section 7.1 hereof and any other
Collateral whether or not so repossessed by the Agent, may be sold, assigned,
leased or otherwise disposed of under one or more contracts or as an entirety,
and without the necessity of gathering at the place of sale the property to be
sold, and in general in such manner, at such time or times, at such place or
places and on such terms as the Agent may, in compliance with any mandatory
requirements of applicable law, determine to be commercially reasonable. Any of
the Collateral may be sold, leased or otherwise disposed of, in the condition in
which the same existed when taken by the Agent or after any overhaul or repair
at the expense of the Debtor which the Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceeding permitted by such requirements shall be made upon not less than ten
(10) days' written notice to the Debtor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for
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the ten (10) days after the giving of such notice, to the right of the Debtor or
any nominee of the Debtor to acquire the Collateral involved at a price or for
such other consideration at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than ten (10) days'
written notice to the Debtor specifying the time and place of such sale and, in
the absence of applicable requirements of law, shall be by public auction (which
may, at the Agent's option, be subject to reserve), after publication of notice
of such auction not less than ten (10) days prior thereto in two newspapers in
general circulation in Boston, Massachusetts. To the extent permitted by any
such requirement of law, the Agent may bid for and become the purchaser of the
Collateral or any item thereof offered for sale in accordance with this Section
without accountability to the Debtor. If, under mandatory requirements of
applicable law, the Agent shall be required to make disposition of the
Collateral within a period of time which does not permit the giving of notice to
the Debtor as hereinabove specified, the Agent need give the Debtor only such
notice of disposition as shall be reasonably practicable in view of such
mandatory requirements of applicable law.
Section 7.3 Waiver of Claims. Except as otherwise provided in this
Agreement, (a) EACH DEBTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE AGENT'S TAKING
POSSESSION OR THE AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH EACH DEBTOR WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and
(b) each Debtor hereby further waives, to the extent permitted by law:
(i) all damages occasioned by such taking of
possession except any damages which are determined by a final,
non-appealable court order to have been caused by the Agent's gross
negligence or willful misconduct; and
(ii) all other requirements as to the time, place and
terms of sale or other requirements with respect to the enforcement of
the Agent's rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law in
order to prevent or delay the enforcement of this Agreement or the absolute sale
of the Collateral or any portion thereof, and each Debtor, for itself and all
who may claim under it, insofar as it or they now or hereafter lawfully may,
hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the Debtor therein and thereto, and shall
be a perpetual bar both at law and in equity against
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the Debtor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under the Debtor.
Section 7.4 Application of Proceeds. All moneys collected by the Agent
upon any sale or other disposition of the Collateral, together with all other
moneys received by the Agent hereunder, shall be applied as provided in Section
10.3 of the Credit Agreement. It is understood and agreed that each Debtor shall
remain liable to the extent of any deficiency between the amount of the proceeds
of the Collateral hereunder and the aggregate amount of the Obligations.
Section 7.5 Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Agent shall be in addition to every other
right, power and remedy specifically given under this Agreement, the other
Lender Agreements or now or hereafter existing at law, in equity or by statute
and each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Agent. All such
rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Agent in the exercise
of any such right, power or remedy and no renewal or extension of any of the
Obligations shall impair any such right, power or remedy or shall be construed
to be a waiver of any Default or Event of Default or an acquiescence therein. No
notice to or demand on any Debtor in any case shall entitle it to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Agent to any other or further action in any
circumstances without notice or demand. In the event that the Agent shall bring
any suit to enforce any of its rights hereunder and shall be entitled to
judgment, then in such suit the Agent may recover reasonable expenses, including
reasonable attorneys' fees, and the amounts thereof shall be included in such
judgment.
Section 7.6 Discontinuance of Proceedings. In case the Agent shall have
instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Agent, then and in every such case each Debtor, the Agent and
each holder of any of the Obligations shall be restored to their former
positions and rights hereunder with respect to the Collateral subject to the
security interest created under this Agreement, and all rights, remedies and
powers of the Agent shall continue as if no such proceeding had been instituted.
ARTICLE 8
MISCELLANEOUS
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Section 8.1 Notices. All notices and other communications made or
required to be given pursuant to this Agreement shall be in writing and shall be
mailed by United States mail, postage prepaid, or sent by hand, by telecopy or
by nationally-recognized overnight carrier service, addressed as follows:
(a) If to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, Telecopier No. (617) 434-8102, Attention: Mr.
Christopher S. Allen, Director, with a copy to: Goodwin, Procter & Hoar
LLP, Exchange Place, Boston, MA 02109, Telecopier No. 617-523-1231,
Attention: Edward Matson Sibble, Jr., P.C., or at such other
address(es) or to the attention of such other Person(s) as the Agent
shall from time to time designate in writing to the Debtors and the
Lenders.
(b) If to the Debtors, c/o New England Audio Co., Inc. at 40
Hudson Road, Shawmut Park, Canton, Massachusetts 02021, Telecopier No.
(617) 821-9956, Attention: Joseph McGuire, Chief Financial Officer,
with a copy to Goulston & Storrs, P.C., 400 Atlantic Avenue, Boston, MA
02110-3333, Telecopier No. (617) 574-4112, Attention: Kitt Sawitsky,
Esq. and Daniel Avery, Esq., or at such other address(es) or to the
attention of such other Person(s) as New England Audio shall from time
to time designate in writing to the Agent and the Lenders.
(c) If to any Lender, at the address(es) and to the attention
of the Person(s) specified below such Lender's name on the execution
page of this Agreement (or in the case of a Successor Lender, at the
address(es) and to the attention of the Person(s) specified in the
Assignment and Acceptance Agreement executed by such Successor Lender),
or at such other address(es) and to the attention of such other
Person(s) as any Lender shall from time to time designate in writing to
the Agent and the Debtors.
Any notice so addressed and mailed by registered or certified mail
shall be deemed to have been given three (3) days after deposit in the mails.
Any notice so addressed and sent by hand, by telecopy or by overnight carrier
service shall be deemed to have been given when received.
A notice from the Agent stating that it has been given on behalf of the
Lenders shall be relied upon by the Debtors as having been given by the Lenders.
Section 8.2 Waiver; Amendment. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Debtor directly affected thereby and the
Agent (with the consent of the Majority Lenders or, to the extent required by
Section 11.1 of the Credit Agreement, all of the Lenders).
Section 8.3 Obligations Absolute. The obligations of each Debtor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation
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or the like of any Debtor; (b) any exercise or non-exercise, or any waiver of,
any right, remedy, power or privilege under or in respect of this Agreement or
any other Lender Agreement; or (c) any amendment to or modification of any other
Lender Agreement or any security for any of the Obligations whether or not the
Debtors shall have notice or knowledge of any of the foregoing.
Section 8.4 Successors and Assigns. This Agreement shall be binding
upon each Debtor and its successors and assigns and shall inure to the benefit
of the Agent and the Lenders and their respective successors and assigns. All
agreements, statements, representations and warranties made by each Debtor
herein or in any certificate or other instrument delivered by any Debtor or on
its behalf under this Agreement shall be considered to have been relied upon by
the Lenders and shall survive the execution and delivery of this Agreement and
the other Lender Agreements regardless of any investigation made by the Agent or
the Lenders or on their behalf.
Section 8.5 Headings Descriptive. The headings of the several sections
of this Agreement are inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this Agreement.
Section 8.6 Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT REGARD TO IT
PRINCIPLES RELATING TO CHOICE OF LAW.
Section 8.7 Debtors' Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Debtor shall remain liable
to perform all of the obligations, if any, assumed by it with respect to the
Collateral and the Agent shall not have any obligations or liabilities with
respect to any Collateral other than an obligation to act in a commercially
reasonable manner, by reason of or arising out of this Agreement, nor shall the
Agent be required or obligated in any manner to perform or fulfill any of the
obligations of any Debtor under or with respect to any Collateral.
Section 8.8 Termination; Release. After the Termination Date, this
Agreement shall terminate (provided that all indemnities set forth in the Credit
Agreement shall survive such termination) and the Agent, at the request and
expense of the Debtors, will promptly execute and deliver to each Debtor a
proper instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to each Debtor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Agent and has not theretofore been sold or
otherwise applied or released pursuant to this Agreement.
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<PAGE> 17
Section 8.9 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with each Debtor
and the Agent.
Section 8.10 The Agent. The Agent will hold in accordance with this
Agreement all items of the Collateral at any time received under this Agreement.
It is expressly understood and agreed that the obligations of the Agent as
holder of the Collateral and interests therein and with respect to the
disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Agent shall act hereunder on the
terms and conditions set forth in this Agreement and in Section 13 of the Credit
Agreement.
ARTICLE 9
DEFINITIONS
Unless otherwise defined herein, terms defined in the Credit Agreement
are used herein as therein defined and the following terms shall have the
following respective meanings (such meanings being equally applicable to the
singular and plural forms of the terms defined):
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Cash Collateral Account" shall mean a non-interest bearing lockbox
account or such other account so designated by the Agent.
"Chattel Paper" and "chattel paper" shall have the meaning provided in
the Uniform Commercial Code as in effect on the date hereof in the Commonwealth
of Massachusetts.
"Contract Rights" shall mean all rights of any Debtor (including,
without limitation, all rights to payment) under each Contract.
"Copyrights" shall mean any United States copyright owned (or subject
to the rights of ownership) by any Debtor, including any registrations of any
copyright in the United States Copyright Office, as well as any application for
a copyright registration now or hereafter made with the United States Copyright
Office by any Debtor.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Documents" and "documents" shall have the meaning provided in the
Uniform Commercial Code as in effect on the date hereof in the Commonwealth of
Massachusetts.
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"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"General Intangibles" and "general intangibles" shall have the meaning
provided in the Uniform Commercial Code as in effect on the date hereof in the
Commonwealth of Massachusetts.
"Goods" and "goods" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the Commonwealth of
Massachusetts.
"Instrument" or "instrument" shall have the meaning provided in the
Uniform Commercial Code as in effect on the date hereof in the Commonwealth of
Massachusetts.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on any Debtor's property.
"Marks" shall mean any United States trademarks, service marks and
trade names now owned, subject to a right of ownership or hereafter acquired by
any Debtor, including any registration of, or application for, any trademarks
and service marks in the United States Patent and Trademark Office, and any
trade dress including logos and/or designs used by any Debtor in the United
States.
"Obligations" shall mean (a) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations and liabilities of each Debtor now existing or hereafter incurred
under, arising out of or in connection with any Lender Agreement to which each
such Debtor is a party and the due performance and compliance by each Debtor
with the terms of each such Lender Agreement; (b) any and all sums advanced by
the Agent in order to preserve the Collateral or preserve its security interest
in the Collateral; (c) in the event of any proceeding for the collection or
enforcement of any obligations or liabilities referred to in clause (a), upon
the occurrence and during the continuance of an Event of Default, the reasonable
expenses of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Collateral, or of any exercise by the
Agent of its rights hereunder, together with reasonable attorneys' fees and
court costs; (d) all amounts paid by any Indemnitee as to which such Indemnitee
has the right to reimbursement under Section 14.5 of the Credit Agreement; and
(e) all other Lender Obligations.
"Patents" shall mean any United States patent owned, subject to a right
of ownership by or hereafter acquired by any Debtor and any divisions,
continuations, reissues, reexaminations, extensions or renewals thereof, as well
as any application for a United States patent now or hereafter made by the
Debtor or subject to a right of ownership in the Debtor.
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"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the Commonwealth of Massachusetts on the date hereof or
under other relevant law and, in any event, shall include, but not be limited
to, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Agent or any Debtor from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due and
payable to any Debtor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any person acting under color of
governmental authority) and (c) any and all other amounts from time to time paid
or payable under or in connection with any of the Collateral.
"Proprietary Information" means all information and know-how worldwide,
including, without limitation, technical data, manufacturing data, research and
development data, data relating to compositions, processes and formulations,
manufacturing and production know-how and experience, management know-how,
training programs, manufacturing, engineering and other drawings,
specifications, performance criteria, operating instructions, maintenance
manuals, technology, technical information, software, engineering and computer
data and databases, design and engineering specifications, catalogs, promotional
literature and financial, business and marketing plans, inventions and invention
disclosures.
"Termination Date" shall mean the date on which all Obligations are
paid in full and the Lenders shall have no further commitments to or for the
account of the Debtors.
"Trade Secrets" means any secretly held existing engineering and other
data, information, production procedures and other know-how relating to the
design, manufacture, assembly, installation, use, operation, marketing, sale and
servicing of any products or business of any Debtor worldwide whether written or
not written.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
DEBTORS:
NEW ENGLAND AUDIO CO., INC.
By: /s/ Jeffrey S. Stone
------------------------------------
Name: Jeffrey S. Stone
Title: President
NEA DELAWARE, INC.
By: /S/ Jeffrey S. Stone
------------------------------------
Name: Jeffrey S. Stone
Title: President
AGENT:
BANKBOSTON, N.A., as Agent
By: /s/ Christopher S. Allen
------------------------------------
Name:
Title: Director
<PAGE> 21
EXHIBIT A
to Security Agreement
See Schedule 5.2 to the Credit Agreement
<PAGE> 22
EXHIBIT B
to Security Agreement
See Schedule 5.2 to the Credit Agreement
<PAGE> 23
EXHIBIT C
to Security Agreement
See Schedule 5.13 to the Credit Agreement
<PAGE> 24
EXHIBIT D
to Security Agreement
See Schedule 5.13 to the Credit Agreement
<PAGE> 25
EXHIBIT E
to Security Agreement
See Schedule 5.13 to the Credit Agreement
<PAGE> 26
EXHIBIT F
to Security Agreement
See Schedule 5.13 to the Credit Agreement
<PAGE> 1
EXHIBIT 10.5
TWEETER SECURITY AGREEMENT
SECURITY AGREEMENT dated as of July 20, 1998 between TWEETER HOME
ENTERTAINMENT GROUP, INC., a Delaware corporation ("Tweeter"), TWEETER HOME
ENTERTAINMENT GROUP FINANCING COMPANY TRUST, a Massachusetts business trust
("Tweeter Trust") (each of Tweeter and Tweeter Trust is referred to herein
individually, as a "Debtor" and collectively, as the "Debtors") and BANKBOSTON,
N.A., a national banking association, as agent (the "Agent") for itself and the
other lenders which are, or may in the future become, parties to the Credit
Agreement (as hereinafter defined).
Recitals
WHEREAS, the Debtors, as guarantors, have entered into an Amended and
Restated Credit Agreement, dated as of July , 1998 (as amended, modified or
supplemented from time to time, the "Credit Agreement") with the Agent and the
other lenders parties thereto (the "Lenders"), pursuant to which the Lenders
have agreed to make Revolving Credit Advances (as defined in the Credit
Agreement) to wholly-owned subsidiaries or affiliates of the Debtors, upon the
terms and subject to the conditions contained therein; and
WHEREAS, in connection with the granting of the credits under the
Credit Agreement and as security for all of the Obligations, including without
limitation the obligations of the Debtors, as guarantors, under the Credit
Agreement, the Agent is requiring the Debtors to execute and deliver this
Security Agreement and grant the security interest contemplated hereby.
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1. GRANT OF SECURITY
Section 1.1 Grant of Security. Each Debtor hereby grants to the Agent a
continuing security interest ("Security Interest") in and to all personal
property and fixtures of each Debtor, whether now or hereafter existing or now
or hereafter acquired and wherever located, including all equipment, accounts,
inventory and general intangibles, all as more fully described as follows (the
"Collateral"):
(a) All money, cash, bank accounts, deposit accounts, goods,
inventory, equipment, computer hardware and software, instruments, securities,
documents, documents of title, chattel paper, accounts, accounts receivable,
lease receivables and leases including but not limited to, rights to rentals
thereunder and each Debtor's reversionary interest in property leased thereunder
and any equity rights in leases sold to third parties, contract rights,
licenses, general intangibles, copyrights, patents and patents pending,
trademarks and goodwill, Trade Secrets, credits, claims, demands and all other
property of the Debtors (including but not limited to leasehold improvements);
<PAGE> 2
(b) All equipment, including without limitation all fixtures,
machinery, equipment, molds, dies, motor vehicles, and other goods whether now
owned or hereafter acquired by any Debtor, wherever located, all replacements,
substitutions and all parts thereof and all accessions thereto, as well as all
of each Debtor's right, title and interest in and to any such goods now or
hereafter held or used by any Debtor under any lease, lease-purchase,
conditional sales, use or other agreements under which any Debtor is entitled to
the use and possession thereof, with any other rights and benefits flowing from
such agreements, all as may be used or useful in connection with each Debtor's
business as now or hereafter carried on, any operations incidental to or
associated with the same, or for any other purpose (any and all such equipment,
machinery and fixtures, parts and accessions being the "Equipment");
(c) All inventory in all of its forms, wherever located, now
or hereafter existing including, but not limited to (i) raw materials and work
in process therefor, finished goods thereof and (ii) goods which are returned to
or repossessed by any Debtor and all accessions thereto and products thereof
(any and all such inventory, accessions and products being the "Inventory");
(d) All accounts receivable, including without limitation
accounts, contracts (but only to the extent assignable without causing a Default
under the Credit Agreement), contract rights, chattel paper, instruments,
licenses and other obligations of any kind whether now existing or hereafter
arising, including without limitation all rights now or hereafter existing in
and to all security agreements, leases, and other contracts securing or
otherwise relating to any such accounts, contract rights, chattel paper,
instruments, general intangibles or obligations (any and all such accounts,
contract rights, chattel paper, instruments, general intangibles and obligations
being the "Receivables," and any and all such leases, security agreements and
other contracts being the "Contracts");
(e) All general intangibles including without limitation,
tradenames, trademarks, service marks, tax refunds, the corporate name and all
product names; and
(f) All products and proceeds of any and all of the foregoing
Collateral and, to the extent not otherwise included, all payments under
insurance (whether or not the Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.
Section 1.2 Security for Obligations. This Agreement and the Security
Interest shall secure the payment and performance of the Obligations.
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<PAGE> 3
ARTICLE 2
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Debtor represents, warrants and covenants, which representations,
warranties and covenants shall survive execution and delivery of this Agreement,
as follows:
Section 2.1 Necessary Filings. All filings, registrations and
recordings necessary or appropriate to create, preserve and perfect the security
interest granted by each Debtor to the Agent hereby in respect of the Collateral
have been accomplished and the security interest granted to the Agent pursuant
to this Agreement in and to the Collateral constitutes, upon satisfaction of
such filings, registrations and recordings, a perfected security interest
therein (to the extent that the same can be perfected by filing, registration or
recording) prior to the rights of all other Persons therein (other than any such
rights pursuant to Liens permitted by Section 9.2 of the Credit Agreement
("Permitted Liens")) and subject to no other Liens (other than Permitted Liens)
and is entitled to all the rights, priorities and benefits afforded by the
Uniform Commercial Code to perfected security interests.
Section 2.2 No Liens. Each Debtor is, and as to Collateral acquired by
it from time to time after the date hereof each such Debtor will be, the owner
of all Collateral pledged by it hereunder free from any Lien, security interest,
encumbrance or other right, title or interest of any Person (other than
Permitted Liens), and each such Debtor shall defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any interest
therein (other than in connection with Permitted Liens) adverse to the Agent.
Section 2.3 Other Financing Statements. As of the date hereof, there is
no financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral (other than financing statements filed in respect of
Permitted Liens), and so long as any Lender Obligations or commitments with
respect thereto are outstanding, no Debtor will execute or authorize to be filed
in any public office any financing statement (or similar statement or instrument
of registration under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in respect of and
covering the security interests granted hereby by such Debtors or in connection
with Permitted Liens.
Section 2.4 Chief Executive Office; Records. As of the date hereof, the
chief executive office of each such Debtor is located at the address indicated
on Exhibit A hereto. No Debtor will move its chief executive office except to
such new location as any Debtor may establish in accordance with the last
sentence of this Section 2.4. A complete set of books of account and records of
each Debtor relating to the Receivables and the Contract Rights are, and will
continue to be, kept at such chief executive office, at one or more of the other
record locations set forth on Exhibit A hereto for each such Debtor or at such
new locations as each Debtor may establish in accordance with the last sentence
of this Section 2.4. All Receivables and Contract Rights of each Debtor are, and
will continue to be, maintained at, and controlled
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<PAGE> 4
and directed (including, without limitation, for general accounting purposes)
from, the office locations described above or such new location established in
accordance with the last sentence of this Section 2.4. No Debtor shall establish
new locations for such offices until (a) it shall have given to the Agent not
less than ten (10) days' prior written notice of its intention to do so, clearly
describing such new location and providing such other information in connection
therewith as the Agent may reasonably request and (b) with respect to such new
location, it shall have taken all action reasonably satisfactory to the Agent,
to maintain the security interest of the Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect.
Section 2.5 Location of Inventory and Equipment. As of the date hereof,
all Inventory and Equipment held by each Debtor is located at one of the
locations shown on Exhibit B hereto for each Debtor. Each Debtor agrees that all
Inventory and Equipment now held or subsequently acquired by it shall be kept at
(or shall be in transport to) any one of the locations shown on Exhibit B
hereto, or such new location as any Debtor may establish in accordance with the
last sentence of this Section 2.5. A Debtor may establish a new location for
Inventory and Equipment only if (a) it shall have given to the Agent not less
than ten (10) days' prior written notice of its intention so to do, clearly
describing such new location and providing such other information in connection
therewith as the Agent may reasonably request and (b) with respect to such new
location, it shall have taken all action reasonably satisfactory to the Agent to
maintain the security interest of the Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect.
Section 2.6 Recourse. This Agreement is made with full recourse to each
Debtor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of each Debtor contained herein, in the other Lender
Agreements and otherwise in writing in connection herewith or therewith.
Section 2.7 Trade Names; Change of Name. As of the date hereof, no
Debtor operates in any jurisdiction under, or in the preceding 12 months has not
operated in any jurisdiction under, any trade names, fictitious names or other
names except its legal name and except as disclosed on Exhibit F hereto. No
Debtor shall change its legal name or assume or operate in any jurisdiction
under any trade, fictitious or other name except as established in accordance
with the last sentence of this Section 2.7. Each Debtor shall not assume or
operate in any jurisdiction under any new trade, fictitious or other name until
(a) it shall have given to the Agent ten (10) days' prior written notice of its
intention so to do, clearly describing such new name and the jurisdictions in
which such new name shall be used and providing such other information in
connection therewith as the Agent may reasonably request and (b) with respect to
such new name, it shall have taken all action reasonably requested by the Agent,
to maintain the security interest of the Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect.
4
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Section 2.8 Collateral in Maryland. The value of the Debtors' taxable
Collateral in Maryland shall not at any time exceed $1,000,000 without the
Agent's consent not to be unreasonably withheld.
ARTICLE 3
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
Section 3.1 Additional Representations and Warranties. As of the time
when each of its Receivables arises, each Debtor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto, are what they purport to be in all material
respects, and that such Receivable will, to the best knowledge of each Debtor,
evidence true and valid obligations of the account debtor named therein.
Section 3.2 Maintenance of Records. Each Debtor will keep and maintain
at its own cost and expense, records of its Receivables and Contracts and each
Debtor will make the same available on Debtor's premises to the Agent for
inspection, at the Debtor's own cost and expense, at any and all reasonable
times upon reasonable prior notice to the Debtor. Each Debtor shall affix to
each writing constituting chattel paper, and if the Agent so directs to all
other Receivables and Contracts, as well as books, records and documents of each
Debtor evidencing or pertaining to such Receivables and Contracts, an
appropriate reference, in form and manner satisfactory to the Agent, to the fact
that such chattel paper, Receivables and Contracts have been assigned to the
Agent and that the Agent has a security interest therein. Upon the occurrence
and during the continuance of an Event of Default, and at the reasonable request
of the Agent, each Debtor shall, at its own cost and expense, deliver all
tangible evidence of its Receivables and Contract Rights (including, without
limitation, all documents evidencing the Receivables and all Contracts and each
specific writing constituting chattel paper) and such books and records to the
Agent or to its representatives (copies of which evidence and books and records
may be retained by each Debtor).
Section 3.3 Direction to Account Debtors; Contracting Parties; Etc.
Upon the occurrence and during the continuance of an Event of Default, and if
the Agent so directs, each Debtor agrees (a) to cause all payments on account of
the Receivables and Contracts to be made directly to the Cash Collateral
Account, (b) that the Agent may, at its option, directly notify the obligors
with respect to any Receivables and/or under any Contracts to make payments with
respect thereto as provided in preceding clause (a) and (c) that the Agent may
enforce collection of any such Receivables and Contracts and may adjust, settle
or compromise the amount of payment thereof, in the same manner and to the same
extent as such Debtors. Without notice to or assent by the Debtors, upon the
occurrence and during the continuance of an Event of Default, the Agent may
apply any or all amounts then in, or thereafter deposited in, the Cash
Collateral Account which application shall be effected in the manner provided in
Section 7.4 of this Agreement. The reasonable costs and expenses (including
reasonable attorneys' fees) of collection, whether incurred by any Debtor or the
Agent, shall be borne by
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the Debtors. The Agent shall deliver a copy of each notice referred to in the
preceding clause (b) to the Debtors; provided, that the failure by the Agent to
so notify any Debtor shall not affect the effectiveness of such notice or the
other rights of the Agent created by this Section 3.3.
Section 3.4 Modification of Terms; Etc. No Debtor may rescind or cancel
any indebtedness evidenced by any Receivable or under any Contract, or modify
any term thereof or make any adjustment with respect thereto in a manner adverse
to the Agent, or extend or renew the same, or compromise or settle any material
dispute, claim, suit or legal proceeding relating thereto in a manner adverse to
the Agent, or sell any Receivable or Contract, or interest therein, without the
prior written consent of the Agent, except in accordance with the Debtor's
reasonable business practices.
Section 3.5 Collection. Each Debtor shall endeavor, in accordance with
reasonable business practices, to cause to be collected from the account debtor
named in each of its Receivables or obligor under any Contract, as and when due
(including, without limitation, amounts which are delinquent, such amounts to be
collected in accordance with generally accepted lawful collection procedures)
any and all amounts owing under or on account of such Receivable or Contract,
and apply forthwith upon receipt thereof all such amounts as are so collected to
the outstanding balance of such Receivable or under such Contract. The
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees) of collection, if incurred by any Debtor or the Agent, shall be
borne by the Debtors.
Section 3.6 Instruments. If any Debtor owns or acquires any Instrument
constituting Collateral, the Debtor will within 10 Business Days notify the
Agent thereof, and upon request by the Agent, will promptly deliver such
Instrument to the Agent appropriately endorsed to the order of the Agent as
further security hereunder.
ARTICLE 4
SPECIAL PROVISIONS CONCERNING TRADEMARKS
Section 4.1 Additional Representations and Warranties. Except as set
forth on Schedule 5.16 to the Credit Agreement, each Debtor represents and
warrants that: (i) as of the date hereof, it is the true and lawful owner of all
right, title and interest to, or otherwise has the right to use, the registered
Marks listed on Exhibit C hereto for each Debtor and that, as of the date
hereof, said listed Marks constitute all the marks and applications for marks
registered in the United States Patent and Trademark Office that each Debtor
presently owns or uses in connection with its business; (ii) it owns, is
licensed to use or otherwise has the right to use all Marks that it uses; (iii)
it has no knowledge of any third party claim that any aspect of the Debtor's
present or contemplated business operations infringe or will infringe any
trademark, service mark or trade name in any respect which could reasonably be
expected to have a Material Adverse Effect on each Debtor and its Subsidiaries
taken as a whole; and (iv) except
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as listed on Exhibit C, as of the date hereof, it is the beneficial and record
owner of all trademark registrations and applications listed on Exhibit C hereto
for each Debtor and that said registrations are valid and subsisting, and that
no Debtor is aware of any third-party claim that any of said registrations in
respect of any Mark is invalid or unenforceable. Each Debtor hereby grants to
the Agent an absolute power of attorney to sign, upon the occurrence and during
the continuance of an Event of Default, any document which may be required by
the United States Patent and Trademark Office in order to effect an absolute
assignment of all right, title and interest in each Mark, and record the same.
Section 4.2 Infringements. Each Debtor agrees, promptly upon learning
thereof, to notify the Agent in writing of the name and address of, and to
furnish such pertinent information that may be available with respect to, any
party who the Debtor believes is infringing or diluting or otherwise violating
in any material respect any of the Debtor's rights in and to any Mark, or with
respect to any party claiming that the Debtor's use of any Mark violates in any
material respect any property right of that party. Each Debtor further agrees to
prosecute any Person infringing any Mark in accordance with reasonable business
practices.
Section 4.3 Preservation of Marks. Each Debtor agrees to use its Marks
as required in each of the applicable jurisdictions during the time in which
this Agreement is in effect, sufficiently to preserve such Marks (and any
registrations thereto) as trademarks or service marks under the laws of the
United States and any other applicable law; provided, that, prior to any
Default, no Debtor shall be obligated to preserve any Mark in the event the
Debtor determines, in its reasonable business judgment, that the preservation of
such Mark is no longer desirable in the conduct of its business.
Section 4.4 Maintenance of Registration. Each Debtor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. Sections 1051 et seq. to maintain trademark registrations, including
but not limited to affidavits of use and applications for renewals of
registration in the United States Patent and Trademark Office for all of its
registered Marks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065, and
shall pay all fees and disbursements in connection therewith and shall not
abandon any such filing of affidavit of use or any such application of renewal
prior to the exhaustion of all administrative and judicial remedies without
prior written consent of the Agent (which consent shall not be unreasonably
withheld); provided, that, prior to any Default, no Debtor shall be obligated to
maintain any Mark in the event that the Debtor determines, in its reasonable
business judgment, that the maintenance of such Mark is no longer necessary or
desirable in the conduct of its business.
Section 4.5 Future Registered Marks. If any Mark registration issues
hereafter to any Debtor as a result of any application now or hereafter pending
before the United States Patent and Trademark Office, within sixty (60) days of
receipt of such certificate, such Debtor shall deliver to the Agent a copy of
such certificate, and an assignment for security in such Mark, to the Agent and
at the expense of such Debtor, confirming the assignment for security
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in such Mark to the Agent hereunder, the form of such security to be
substantially the same as the form hereof or in such other form as may be
reasonably satisfactory to the Agent.
Section 4.6 Remedies. Upon the occurrence and during the continuance of
an Event of Default, the Agent may take any or all of the following actions: (a)
declare the entire right, title and interest of any Debtor in and to each of the
Marks, together with all trademark rights and rights of protection to the same,
vested in the Agent, for the benefit of the Lenders, in which event such rights,
title and interest shall immediately vest in the Agent, for the benefit of the
Lenders, and the Agent shall be entitled to exercise the power of attorney
referred to in Section 4.1 hereof to execute, cause to be acknowledged and
notarized and to record said absolute assignment with the applicable agency; (b)
take and use or sell the Marks and the goodwill of such Debtor's business
symbolized by the Marks or carry on the business and use the assets of such
Debtor which have been used in connection with the Marks; and (c) direct the
Debtor to refrain, in which event the Debtor shall refrain, from using the Marks
in any manner whatsoever, directly or indirectly, and, if requested by the
Agent, change the Debtor's corporate name to eliminate therefrom any use of any
Mark and execute such other and further documents that the Agent may request to
further confirm this and to transfer ownership of the Marks and registrations
and any pending trademark application in the United States Patent and Trademark
Office to the Agent.
Section 4.7 Collateral Assignment. In addition to, and not in
limitation of, the grant of the security interest in Article 1 above, each
Debtor hereby grants, assigns, transfers, conveys and sets over to the Agent,
for the benefit of the Lenders, effective upon the occurrence and during the
continuance of an Event of Default, each Debtor's entire right, title and
interest in and to the Marks, the goodwill of the business symbolized by the
Marks and Proceeds. Each Debtor has delivered to the Agent an Assignment of
Trademarks (the "Assignment") and upon the occurrence and during the continuance
of an Event of Default, the Agent is hereby authorized to file such Assignment
with the United States Patent and Trademark Office. Upon payment in full of all
Obligations, the Agent will assign the Marks to the Debtor.
ARTICLE 5
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
Section 5.1 Additional Representations and Warranties. Except as set
forth on Schedule 5.16 to the Credit Agreement, each Debtor represents and
warrants that, as of the date hereof, it is the true and lawful owner of all
rights in (a) all Trade Secrets and Proprietary Information necessary to operate
its business, (b) the Patents listed on Exhibit D hereto for each Debtor, said
Patents constituting all the patents and applications for patents that each
Debtor owns on the date hereof and (c) the Copyrights listed on Exhibit E hereto
for each Debtor, said Copyrights constituting all registrations of copyrights
and applications for
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copyright registrations that each such Debtor owns on the date hereof. Each
Debtor further warrants that it has no knowledge of any third party claim that
any aspect of its present or contemplated business operations infringe or will
infringe any patent or any copyright or that it has misappropriated any Trade
Secret or Proprietary Information, in each case in any respect which could
reasonably be expected to have a Material Adverse Effect on such Debtor and its
Subsidiaries taken as a whole. Each Debtor hereby grants to the Agent an
absolute power of attorney to sign, upon the occurrence and during the
continuance of an Event of Default, any document which may be required by the
United States Patent and Trademark Office or the United States Copyright Office
in order to effect an absolute assignment of all right, title and interest in
each Patent and Copyright, and to record the same.
Section 5.2 Infringements. Each Debtor agrees, promptly upon learning
thereof, to furnish to the Agent in writing all pertinent information available
to such Debtor with respect to any infringement, contributing infringement or
active inducement to infringe in any material respect any Patent or Copyright or
to any claim that the practice of any Patent or the use of any Copyright
violates in any material respect any property right of a third party, or with
respect to any misappropriation of any Trade Secret right or any claim that
practice of any material Trade Secret right violates in any material respect any
property right of a third party. Each Debtor further agrees, to the extent
consistent with reasonable business practices, to prosecute any Person
infringing any Patent or Copyright or any Person misappropriating any Trade
Secret right.
Section 5.3 Maintenance of Patents. At its own expense, each Debtor
shall make timely payment of all post-issuance fees required pursuant to 35
U.S.C. Section 41 to maintain in force rights under each Patent, absent prior
written consent of the Agent; provided, that no Debtor shall be obligated to
maintain any Patent in the event the Debtor determines, in its reasonable
business judgment, that the maintenance of such Patent is no longer necessary or
desirable in the conduct of its business.
Section 5.4 Prosecution of Patent Application. At its own expense, such
Debtor shall diligently prosecute all applications for Patents for such Debtor
and shall not abandon any such application prior to exhaustion of all
administrative and judicial remedies, absent written consent of the Agent (which
consent shall not be unreasonably withheld); provided, that no Debtor shall be
obligated to prosecute any application in the event the Debtor determines, in
its reasonable business judgment, that the prosecuting of such application is no
longer necessary or desirable in the conduct of its business.
Section 5.5 Other Patents and Copyrights. Within sixty (60) days of the
acquisition or issuance of a Patent, registration of a Copyright, or acquisition
of a registered copyright, the Debtor shall deliver to the Agent a copy of said
Copyright or certificate or registration of said patents, as the case may be,
with an assignment for security as to such Patent or Copyright, as the case may
be, to the Agent and at the expense of the Debtor, confirming the assignment for
security, the form of such assignment for security to be substantially the same
as the form hereof or in such other form as may be reasonably satisfactory to
the Agent.
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Section 5.6 Remedies. Upon the occurrence and during the continuance of
an Event of Default, the Agent may take any or all of the following actions: (a)
declare the entire right, title, and interest of any Debtor in each of the
Patents and Copyrights vested in the Agent, for the benefit of the Lenders, in
which event such right, title, and interest shall immediately vest in the Agent,
for the benefit of the Lenders, and in which case the Agent shall be entitled to
exercise the power of attorney referred to in Section 5.1 hereof to execute,
cause to be acknowledged and notarized and to record said absolute assignment
with the applicable agency; (b) take and practice, use or sell the Patents and
Copyrights; and (c) direct such Debtor to refrain, in which event such Debtor
shall refrain, from practicing the Patents and using the Copyrights, directly or
indirectly, and such Debtor shall execute such other and further documents as
the Agent may request further to confirm this and to transfer ownership of the
Patents and Copyrights to the Agent, for the benefit of the Lenders.
ARTICLE 6
PROVISIONS CONCERNING ALL COLLATERAL
Section 6.1 Protection of Agent's Security. Each Debtor will at all
times keep its Inventory and Equipment insured in favor of the Agent, at each
such Debtor's own expense to the extent and in the manner provided in the Lender
Agreements; all policies or certificates with respect to such insurance (and any
other insurance maintained by the Debtor) (a) shall be endorsed to the Agent's
reasonable satisfaction for the benefit of the Agent (including, without
limitation, by naming the Agent as additional insured and loss payee) and (b)
shall state that such insurance policies shall not be canceled without thirty
(30) days' prior written notice thereof by the insurer to the Agent; and
certified copies of such policies or certificates with respect thereto shall be
deposited with the Agent. If any Debtor shall fail to insure its Inventory and
Equipment in accordance with the preceding sentence, or if any Debtor shall fail
to so endorse and deposit all policies or certificates with respect thereto, the
Agent shall have the right (but shall be under no obligation), upon prior
written notice to any such Debtor, to procure such insurance and such Debtor
agrees to promptly reimburse the Agent for all costs and expenses of procuring
such insurance. The Agent shall, at the time any proceeds of such insurance are
distributed to the Lenders, apply such proceeds in accordance with Section 7.4
hereof except as otherwise provided by the Credit Agreement. Each Debtor assumes
all liability and responsibility in connection with the Collateral acquired by
it and the liability of each Debtor to pay the Obligations shall in no way be
affected or diminished by reason of the fact that such Collateral may be lost,
destroyed, stolen, damaged or for any reason whatsoever unavailable to the
Debtor.
Section 6.2 Further Actions. Each Debtor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Agent from time
to time such lists, descriptions and designations of its Collateral, warehouse
receipts, receipts in the nature of warehouse receipts, bills of lading,
documents of title, vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers
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of attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Agent reasonably
requests in order to perfect, preserve or protect its security interest in the
Collateral.
Section 6.3 Financing Statements. Each Debtor agrees to execute and
deliver to the Agent such financing statements, in form reasonably acceptable to
the Agent, as the Agent may from time to time reasonably request, to establish
and maintain a valid, enforceable, first priority perfected security interest in
the Collateral as provided herein and the other rights and security contemplated
hereby all in accordance with the UCC as enacted in any and all relevant
jurisdictions or any other relevant law. Each Debtor will pay any applicable
filing fees, recordation taxes and related expenses relating to its Collateral.
Each Debtor hereby authorizes the Agent upon the occurrence and during the
continuance of an Event of Default to file any such financing statements without
its signature where permitted by law.
ARTICLE 7
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
Section 7.1 Remedies; Obtaining the Collateral Upon Default. Each
Debtor agrees that upon the occurrence of an Event of Default, the Agent, in
addition to any rights now or hereafter existing under applicable law, shall
have all rights as a secured creditor under the UCC in all relevant
jurisdictions and may:
(a) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Debtor or any other
Person who then has possession of any part thereof, with or without notice or
process of law, and for that purpose may enter upon the Debtor's premises where
any of the Collateral is located and remove the same and use in connection with
such removal any and all services, supplies, aids and other facilities of the
Debtor;
(b) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation, the Receivables
and the Contracts) constituting the Collateral to make any payment required by
the terms of such agreement, instrument or other obligation directly to the
Agent;
(c) withdraw all monies, securities and instruments in the
Cash Collateral Account and/or in any other cash collateral account for
application to the Obligations in accordance with Section 7.4 hereof;
(d) sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof in accordance with Section 7.2 hereof, or direct
the Debtor to sell, assign or otherwise
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liquidate any or all of the Collateral or any part thereof, and, in each case,
take possession of the proceeds of any such sale or liquidation;
(e) take possession of the Collateral or any part thereof, by
directing the relevant Debtor in writing to deliver the same to the Agent at any
place or places reasonably designated by the Agent, in which event such Debtor
shall at its own expense:
(i) forthwith cause the same to be moved to the place
or places so designated by the Agent and there delivered to the Agent;
(ii) store and keep any Collateral so delivered to
the Agent at such place or places pending further action by the Agent
as provided in Section 7.2 hereof; and
(iii) while the Collateral shall be so stored and
kept, provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain them in good
condition; and
(f) license or sublicense, whether on an exclusive or
nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral
for such term and on such conditions and in such manner as the Agent shall in
its reasonable judgment determine;
it being understood that each Debtor's obligation to deliver the Collateral is
of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Agent shall be entitled to a decree
requiring specific performance by any such Debtor of said obligation. The
Lenders agree that this Agreement may be enforced only by the action of the
Agent acting upon the instructions of the Majority Lenders and that no other
Lender shall have any right individually to seek to enforce this Agreement or to
realize upon the security to be granted hereby, it being understood and agreed
that such rights and remedies may be exercised by the Agent for the benefit of
the Lenders upon the terms of this Agreement.
Section 7.2 Remedies: Disposition of the Collateral. Any Collateral
repossessed by the Agent under or pursuant to Section 7.1 hereof and any other
Collateral whether or not so repossessed by the Agent, may be sold, assigned,
leased or otherwise disposed of under one or more contracts or as an entirety,
and without the necessity of gathering at the place of sale the property to be
sold, and in general in such manner, at such time or times, at such place or
places and on such terms as the Agent may, in compliance with any mandatory
requirements of applicable law, determine to be commercially reasonable. Any of
the Collateral may be sold, leased or otherwise disposed of, in the condition in
which the same existed when taken by the Agent or after any overhaul or repair
at the expense of the Debtor which the Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceeding permitted by such requirements shall be made upon not less than ten
(10) days' written notice to the Debtor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for
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the ten (10) days after the giving of such notice, to the right of the Debtor or
any nominee of the Debtor to acquire the Collateral involved at a price or for
such other consideration at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than ten (10) days'
written notice to the Debtor specifying the time and place of such sale and, in
the absence of applicable requirements of law, shall be by public auction (which
may, at the Agent's option, be subject to reserve), after publication of notice
of such auction not less than ten (10) days prior thereto in two newspapers in
general circulation in Boston, Massachusetts. To the extent permitted by any
such requirement of law, the Agent may bid for and become the purchaser of the
Collateral or any item thereof offered for sale in accordance with this Section
without accountability to the Debtor. If, under mandatory requirements of
applicable law, the Agent shall be required to make disposition of the
Collateral within a period of time which does not permit the giving of notice to
the Debtor as hereinabove specified, the Agent need give the Debtor only such
notice of disposition as shall be reasonably practicable in view of such
mandatory requirements of applicable law.
Section 7.3 Waiver of Claims. Except as otherwise provided in this
Agreement, (a) EACH DEBTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE AGENT'S TAKING
POSSESSION OR THE AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH EACH DEBTOR WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and
(b) each Debtor hereby further waives, to the extent permitted by law:
(i) all damages occasioned by such taking of
possession except any damages which are determined by a final,
non-appealable court order to have been caused by the Agent's gross
negligence or willful misconduct; and
(ii) all other requirements as to the time, place and
terms of sale or other requirements with respect to the enforcement of
the Agent's rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law in
order to prevent or delay the enforcement of this Agreement or the absolute sale
of the Collateral or any portion thereof, and each Debtor, for itself and all
who may claim under it, insofar as it or they now or hereafter lawfully may,
hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the Debtor therein and thereto, and shall
be a perpetual bar both at law and in equity against
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the Debtor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under the Debtor.
Section 7.4 Application of Proceeds. All moneys collected by the Agent
upon any sale or other disposition of the Collateral, together with all other
moneys received by the Agent hereunder, shall be applied as provided in Section
10.3 of the Credit Agreement. It is understood and agreed that each Debtor shall
remain liable to the extent of any deficiency between the amount of the proceeds
of the Collateral hereunder and the aggregate amount of the Obligations.
Section 7.5 Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Agent shall be in addition to every other
right, power and remedy specifically given under this Agreement, the other
Lender Agreements or now or hereafter existing at law, in equity or by statute
and each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Agent. All such
rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Agent in the exercise
of any such right, power or remedy and no renewal or extension of any of the
Obligations shall impair any such right, power or remedy or shall be construed
to be a waiver of any Default or Event of Default or an acquiescence therein. No
notice to or demand on any Debtor in any case shall entitle it to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Agent to any other or further action in any
circumstances without notice or demand. In the event that the Agent shall bring
any suit to enforce any of its rights hereunder and shall be entitled to
judgment, then in such suit the Agent may recover reasonable expenses, including
reasonable attorneys' fees, and the amounts thereof shall be included in such
judgment.
Section 7.6 Discontinuance of Proceedings. In case the Agent shall have
instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Agent, then and in every such case each Debtor, the Agent and
each holder of any of the Obligations shall be restored to their former
positions and rights hereunder with respect to the Collateral subject to the
security interest created under this Agreement, and all rights, remedies and
powers of the Agent shall continue as if no such proceeding had been instituted.
ARTICLE 8
MISCELLANEOUS
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Section 8.1 Notices. All notices and other communications made or
required to be given pursuant to this Agreement shall be in writing and shall be
mailed by United States mail, postage prepaid, or sent by hand, by telecopy or
by nationally-recognized overnight carrier service, addressed as follows:
(a) If to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, Telecopier No. (617) 434-8102, Attention: Mr.
Christopher S. Allen, Director, with a copy to: Goodwin, Procter & Hoar
LLP, Exchange Place, Boston, MA 02109, Telecopier No. 617-523-1231,
Attention: Edward Matson Sibble, Jr., P.C., or at such other
address(es) or to the attention of such other Person(s) as the Agent
shall from time to time designate in writing to the Debtors and the
Lenders.
(b) If to the Debtors, c/o Tweeter Home Entertainment Group,
Inc. at 40 Hudson Road, Shawmut Park, Canton, Massachusetts 02021,
Telecopier No. (617) 821-9956, Attention: Joseph McGuire, Chief
Financial Officer, with a copy to Goulston & Storrs, P.C., 400 Atlantic
Avenue, Boston, MA 02110-3333, Telecopier No. (617) 574-4112,
Attention: Kitt Sawitsky, Esq. and Daniel Avery, Esq., or at such other
address(es) or to the attention of such other Person(s) as Tweeter
shall from time to time designate in writing to the Agent and the
Lenders.
(c) If to any Lender, at the address(es) and to the attention
of the Person(s) specified below such Lender's name on the execution
page of this Agreement (or in the case of a Successor Lender, at the
address(es) and to the attention of the Person(s) specified in the
Assignment and Acceptance Agreement executed by such Successor Lender),
or at such other address(es) and to the attention of such other
Person(s) as any Lender shall from time to time designate in writing to
the Agent and the Debtors.
Any notice so addressed and mailed by registered or certified mail
shall be deemed to have been given three (3) days after deposit in the mails.
Any notice so addressed and sent by hand, by telecopy or by overnight carrier
service shall be deemed to have been given when received.
A notice from the Agent stating that it has been given on behalf of the
Lenders shall be relied upon by the Debtors as having been given by the Lenders.
Section 8.2 Waiver; Amendment. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Debtor directly affected thereby and the
Agent (with the consent of the Majority Lenders or, to the extent required by
Section 11.1 of the Credit Agreement, all of the Lenders).
Section 8.3 Obligations Absolute. The obligations of each Debtor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation
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or the like of any Debtor; (b) any exercise or non-exercise, or any waiver of,
any right, remedy, power or privilege under or in respect of this Agreement or
any other Lender Agreement; or (c) any amendment to or modification of any other
Lender Agreement or any security for any of the Obligations whether or not the
Debtors shall have notice or knowledge of any of the foregoing.
Section 8.4 Successors and Assigns. This Agreement shall be binding
upon each Debtor and its successors and assigns and shall inure to the benefit
of the Agent and the Lenders and their respective successors and assigns. All
agreements, statements, representations and warranties made by each Debtor
herein or in any certificate or other instrument delivered by any Debtor or on
its behalf under this Agreement shall be considered to have been relied upon by
the Lenders and shall survive the execution and delivery of this Agreement and
the other Lender Agreements regardless of any investigation made by the Agent or
the Lenders or on their behalf.
Section 8.5 Headings Descriptive. The headings of the several sections
of this Agreement are inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this Agreement.
Section 8.6 Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT REGARD TO IT
PRINCIPLES RELATING TO CHOICE OF LAW.
Section 8.7 Debtors' Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Debtor shall remain liable
to perform all of the obligations, if any, assumed by it with respect to the
Collateral and the Agent shall not have any obligations or liabilities with
respect to any Collateral other than an obligation to act in a commercially
reasonable manner, by reason of or arising out of this Agreement, nor shall the
Agent be required or obligated in any manner to perform or fulfill any of the
obligations of any Debtor under or with respect to any Collateral.
Section 8.8 Termination; Release. After the Termination Date, this
Agreement shall terminate (provided that all indemnities set forth in the Credit
Agreement shall survive such termination) and the Agent, at the request and
expense of the Debtors, will promptly execute and deliver to each Debtor a
proper instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to each Debtor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Agent and has not theretofore been sold or
otherwise applied or released pursuant to this Agreement.
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<PAGE> 17
Section 8.9 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with each Debtor
and the Agent.
Section 8.10 The Agent. The Agent will hold in accordance with this
Agreement all items of the Collateral at any time received under this Agreement.
It is expressly understood and agreed that the obligations of the Agent as
holder of the Collateral and interests therein and with respect to the
disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Agent shall act hereunder on the
terms and conditions set forth in this Agreement and in Section 13 of the Credit
Agreement.
ARTICLE 9
DEFINITIONS
Unless otherwise defined herein, terms defined in the Credit Agreement
are used herein as therein defined and the following terms shall have the
following respective meanings (such meanings being equally applicable to the
singular and plural forms of the terms defined):
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Cash Collateral Account" shall mean a non-interest bearing lockbox
account or such other account so designated by the Agent.
"Chattel Paper" and "chattel paper" shall have the meaning provided in
the Uniform Commercial Code as in effect on the date hereof in the Commonwealth
of Massachusetts.
"Contract Rights" shall mean all rights of any Debtor (including,
without limitation, all rights to payment) under each Contract.
"Copyrights" shall mean any United States copyright owned (or subject
to the rights of ownership) by any Debtor, including any registrations of any
copyright in the United States Copyright Office, as well as any application for
a copyright registration now or hereafter made with the United States Copyright
Office by any Debtor.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Documents" and "documents" shall have the meaning provided in the
Uniform Commercial Code as in effect on the date hereof in the Commonwealth of
Massachusetts.
17
<PAGE> 18
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"General Intangibles" and "general intangibles" shall have the meaning
provided in the Uniform Commercial Code as in effect on the date hereof in the
Commonwealth of Massachusetts.
"Goods" and "goods" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the Commonwealth of
Massachusetts.
"Instrument" or "instrument" shall have the meaning provided in the
Uniform Commercial Code as in effect on the date hereof in the Commonwealth of
Massachusetts.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on any Debtor's property.
"Marks" shall mean any United States trademarks, service marks and
trade names now owned, subject to a right of ownership or hereafter acquired by
any Debtor, including any registration of, or application for, any trademarks
and service marks in the United States Patent and Trademark Office, and any
trade dress including logos and/or designs used by any Debtor in the United
States.
"Obligations" shall mean (a) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations and liabilities of each Debtor now existing or hereafter incurred
under, arising out of or in connection with any Lender Agreement to which each
such Debtor is a party and the due performance and compliance by each Debtor
with the terms of each such Lender Agreement; (b) any and all sums advanced by
the Agent in order to preserve the Collateral or preserve its security interest
in the Collateral; (c) in the event of any proceeding for the collection or
enforcement of any obligations or liabilities referred to in clause (a), upon
the occurrence and during the continuance of an Event of Default, the reasonable
expenses of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Collateral, or of any exercise by the
Agent of its rights hereunder, together with reasonable attorneys' fees and
court costs; (d) all amounts paid by any Indemnitee as to which such Indemnitee
has the right to reimbursement under Section 14.5 of the Credit Agreement; and
(e) all other Lender Obligations.
"Patents" shall mean any United States patent owned, subject to a right
of ownership by or hereafter acquired by any Debtor and any divisions,
continuations, reissues, reexaminations, extensions or renewals thereof, as well
as any application for a United States patent now or hereafter made by the
Debtor or subject to a right of ownership in the Debtor.
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<PAGE> 19
"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the Commonwealth of Massachusetts on the date hereof or
under other relevant law and, in any event, shall include, but not be limited
to, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Agent or any Debtor from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due and
payable to any Debtor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any person acting under color of
governmental authority) and (c) any and all other amounts from time to time paid
or payable under or in connection with any of the Collateral.
"Proprietary Information" means all information and know-how worldwide,
including, without limitation, technical data, manufacturing data, research and
development data, data relating to compositions, processes and formulations,
manufacturing and production know-how and experience, management know-how,
training programs, manufacturing, engineering and other drawings,
specifications, performance criteria, operating instructions, maintenance
manuals, technology, technical information, software, engineering and computer
data and databases, design and engineering specifications, catalogs, promotional
literature and financial, business and marketing plans, inventions and invention
disclosures.
"Termination Date" shall mean the date on which all Obligations are
paid in full and the Lenders shall have no further commitments to or for the
account of the Debtors.
"Trade Secrets" means any secretly held existing engineering and other
data, information, production procedures and other know-how relating to the
design, manufacture, assembly, installation, use, operation, marketing, sale and
servicing of any products or business of any Debtor worldwide whether written or
not written.
[INTENTIONALLY LEFT BLANK]
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
DEBTORS:
TWEETER HOME ENTERTAINMENT GROUP,
INC.
By: /s/ Jeffrey S. Stone
----------------------------------
Name: Jeffrey S. Stone
Title: President
TWEETER HOME ENTERTAINMENT GROUP
FINANCING COMPANY TRUST
By: /s/ Jeffrey S. Stone
----------------------------------
Name: Jeffrey S. Stone
Title: President
AGENT:
BANKBOSTON, N.A., as Agent
By: /s/ Christopher S. Allen
---------------------------------
Name:
Title: Director
<PAGE> 21
EXHIBIT A
to Security Agreement
See Schedule 5.2 to the Credit Agreement
<PAGE> 22
EXHIBIT B
to Security Agreement
See Schedule 5.2 to the Credit Agreement
<PAGE> 23
EXHIBIT C
to Security Agreement
See Schedule 5.13 to the Credit Agreement
<PAGE> 24
EXHIBIT D
to Security Agreement
See Schedule 5.13 to the Credit Agreement
<PAGE> 25
EXHIBIT E
to Security Agreement
See Schedule 5.13 to the Credit Agreement
<PAGE> 26
EXHIBIT F
to Security Agreement
See Schedule 5.13 to the Credit Agreement
<PAGE> 1
EXHIBIT 10.6
AMENDED AND RESTATED STOCK PLEDGE AGREEMENT
AMENDED AND RESTATED STOCK PLEDGE AGREEMENT, dated as of July 20, 1998,
between NEW ENGLAND AUDIO CO., INC., a Massachusetts corporation (the "Pledgor")
and BANKBOSTON, N.A., a national banking association, as Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the Pledgor is the record and beneficial owner of the shares
of Stock described on Schedule I hereto (the "Pledged Shares") issued by the
corporations named therein; and
WHEREAS, the Pledgor has entered into an Amended and Restated Credit
Agreement, dated as of July 20, 1998 (as at any time amended, modified or
supplemented, the "Credit Agreement") with NEA Delaware, Inc., a Delaware
corporation ("NEA Delaware"), Tweeter Home Entertainment Group, Inc. ("Tweeter")
and Tweeter Home Entertainment Group Financing Company Trust ("Tweeter Trust"),
the Agent and the other lenders parties thereto (the "Lenders"), pursuant to
which the Lenders have agreed to make Revolving Credit Advances (as defined in
the Credit Agreement) to the Pledgor and NEA Delaware; and
WHEREAS, in connection with the granting of the credits under the
Credit Agreement and as security for all of the Lender Obligations of the
Pledgor under the Credit Agreement, the Agent is requiring that the Pledgor
execute and deliver this Stock Pledge Agreement and grant the security interest
contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Lenders to grant the credits under the
Credit Agreement, it is agreed as follows:
Section 1. Definitions. Unless otherwise defined herein, terms defined
in the Credit Agreement are used herein as therein defined, and the following
shall have the following respective meanings (such meanings being equally
applicable to both the singular and plural form of the terms defined):
"Act" shall have the meaning assigned to such term in Section 8(d)
hereof.
"Agreement" shall mean this Amended and Restated Stock Pledge
Agreement, including all amendments, modifications and supplements and any
exhibits or schedules to any of the foregoing, and shall refer to the Agreement
as the same may be in effect at the time such reference becomes operative.
<PAGE> 2
"Pledged Collateral" shall have the meaning assigned to such term in
Section 2 hereof.
"Pledged Shares" shall have the meaning assigned to such term in the
first recital hereof.
"Secured Obligations" shall have the meaning assigned to such term in
Section 3 hereof.
"Termination Date" shall mean the date on which all Lender Obligations
have been paid in full and the Lenders shall have no further commitments to or
for the account of the Pledgor or any of its Subsidiaries under any Lender
Agreement.
Section 2. Pledge. The Pledgor hereby pledges and grants to the Agent a
first priority security interest in all of the following (the "Pledged
Collateral"), except as otherwise provided in Section 7(b):
(a) the Pledged Shares and the certificates representing the
Pledged Shares, and all dividends, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares;
(b) all additional shares of Stock of any issuer of the
Pledged Shares from time to time acquired by the Pledgor in any manner (which
shares shall be deemed to be part of the Pledged Shares) and the certificates
representing such shares, and all dividends, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares; and
(c) all shares owned by the Pledgor of any Person other than
the Real Estate Subsidiary, if any, who, after the date of this Agreement,
becomes, as a result of any occurrence, a directly owned Subsidiary of the
Pledgor (which shares shall be deemed to be part of the Pledged Shares) and the
certificates representing such shares, and all dividends, cash, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares.
Section 3. Security for Lender Obligations. This Agreement secures, and
the Pledged Collateral is security for, the prompt payment in full when due,
whether at stated maturity, by acceleration or otherwise, and performance of the
Lender Obligations, whether for principal, premium, interest, fees, costs and
expenses, and all obligations of the Pledgor now or hereafter existing under
this Agreement and under the Credit Agreement, and all other Indebtedness,
liabilities and obligations of the Pledgor to the Agent under any Lender
Agreement, whether now existing or hereafter incurred, whether arising under the
Credit Agreement or otherwise (collectively, the "Secured Obligations").
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<PAGE> 3
Section 4. Delivery of Pledged Collateral. All certificates
representing or evidencing the Pledged Shares shall be delivered to and held by
or on behalf of the Agent pursuant hereto and shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to the Agent. If any Event of Default shall
occur and be continuing, subject to Section 7 hereof, the Agent shall have the
right, at any time in its discretion and without notice to the Pledgor, to
transfer to or to register in the name of the Agent or any of its nominees any
or all of the Pledged Shares. In addition, also subject to Section 7 hereof, the
Agent shall have the right at any time to exchange certificates or instruments
representing or evidencing Pledged Shares for certificates or instruments of
smaller or larger denominations.
Section 5. Representations and Warranties. The Pledgor represents and
warrants to the Agent that:
(a) The Pledgor is, and at the time of delivery of the Pledged
Shares to the Agent pursuant to Section 4 hereof will be, the sole holder of
record and the sole beneficial owner of the Pledged Collateral free and clear of
any Lien thereon or affecting the title thereto except for the Lien created by
this Agreement.
(b) All of the Pledged Shares have been duly authorized and
validly issued and are fully paid and non-assessable.
(c) The Pledgor has the right and requisite corporate
authority to pledge, assign, transfer, deliver, deposit and set over the Pledged
Collateral to the Agent, as provided herein.
(d) None of the Pledged Shares has been issued or transferred
in violation of the securities registration, securities disclosure or similar
laws of any jurisdiction to which such issuance or transfer may be subject.
(e) The authorized Stock of each of the issuers listed on
Schedule I hereto consists of the number of shares of Stock, with the number of
shares issued and outstanding, that are described on Schedule I hereto. As of
the date hereof, there are no existing options, warrants, calls or commitments
of any character whatsoever relating to any Stock of any of such issuers.
(f) No consent, approval, authorization or other order of any
Person and no consent, authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required either (i) for the pledge of the Pledged Collateral pursuant to this
Agreement or for the execution, delivery or performance of this Agreement by the
Pledgor or (ii) for the exercise by the Agent of the voting or other rights
provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement including any disposition thereof, except
as may be required in connection with such disposition by laws affecting the
offering and sale of securities generally.
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<PAGE> 4
(g) The pledge, assignment and delivery of the Pledged
Collateral pursuant to this Agreement will create a valid first priority Lien on
and a first priority perfected security interest in the Pledged Collateral, and
the proceeds thereof, securing the payment of the Secured Obligations.
(h) This Agreement has been duly authorized, executed and
delivered by the Pledgor and constitutes a legal, valid and binding obligation
of the Pledgor enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally, and except as the remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
(i) The Pledged Shares constitute one hundred percent (100%)
of the issued and outstanding shares of Stock of the issuers thereof.
(j) The Subsidiaries listed on Schedule III hereto are the
only Subsidiaries of the Pledgor.
The representations and warranties set forth in this Section 5 shall
survive the execution and delivery of this Agreement.
Section 6. Covenants. The Pledgor covenants and agrees that until the
Termination Date:
(a) Without the prior written consent of the Agent, the
Pledgor will not sell, assign, transfer, pledge, grant a Lien with respect to or
otherwise encumber any of its rights in or to the Pledged Collateral or any
unpaid dividends or other distributions or payments with respect thereto except
as otherwise permitted by the Credit Agreement.
(b) The Pledgor will, at its expense, promptly execute,
acknowledge and deliver all such instruments and take all such action as the
Agent from time to time may reasonably request in order to ensure to the Agent
the benefits of the Liens in and to the Pledged Collateral intended to be
created by this Agreement.
(c) The Pledgor will defend the title to the Pledged
Collateral and the Liens of the Agent thereon against the claim of any other
Person and will maintain and preserve such Liens until the Termination Date.
(d) The Pledgor will, upon obtaining any additional shares of
any Subsidiaries other than the Real Estate Subsidiary, if any, which shares are
not already Pledged Collateral, promptly (and in any event within three (3)
Business Days) deliver to the Agent a Pledge Amendment, duly executed by the
Pledgor, in substantially the form of Schedule II hereto (a "Pledge Amendment"),
in respect of the additional Pledged Shares which are to be pledged pursuant to
this Agreement. The Pledgor hereby authorizes the Agent to attach each such
4
<PAGE> 5
Pledge Amendment to this Agreement and agrees that all Pledged Shares listed on
any Pledge Amendment delivered to the Agent shall for all purposes hereunder be
considered Pledged Collateral.
Section 7. Pledgor's Rights. As long as no Default or Event of Default
shall have occurred and be continuing:
(a) The Pledgor shall have the right, from time to time, to
vote and give consents with respect to the Pledged Collateral or any part
thereof for all purposes not inconsistent with the provisions of this Agreement,
the Credit Agreement and any other Lender Agreement; provided, however, that no
vote shall be cast, and no consent shall be given or action taken, which would
have the effect of impairing the position or interest of the Agent in respect of
the Pledged Collateral or which would authorize or effect (except as and to the
extent expressly permitted by the Credit Agreement) (i) the dissolution or
liquidation, in whole or in part, of any of the Subsidiaries, (ii) the
consolidation or merger of any of the Subsidiaries with any other Person, (iii)
the sale, disposition or encumbrance of all or substantially all of the assets
of any of the Subsidiaries, (iv) any change in the authorized number of shares,
the stated capital or the authorized share capital of any of the Subsidiaries or
the issuance of any additional shares of its Stock, or (v) the alteration of the
voting rights with respect to the Stock of any of the Subsidiaries.
(b) (i) the Pledgor shall be entitled, from time to time, to
collect and receive for its own use all cash dividends paid in respect
of the Pledged Shares to the extent not in violation of the Credit
Agreement other than any and all (A) dividends paid or payable other
than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral, (B) dividends and other
distributions paid or payable in cash in respect of any Pledged
Collateral in connection with a partial or total liquidation or
dissolution and (C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral; provided,
however, that until actually paid all rights to such dividends shall
remain subject to the Lien created by this Agreement; and
(ii) all dividends (other than such cash dividends as
are permitted to be paid to the Pledgor in accordance with clause (i)
above) and all other distributions in respect of any of the Pledged
Shares, whenever paid or made, shall be delivered to the Agent to hold
as Pledged Collateral and shall, if received by the Pledgor, be
received in trust for the benefit of the Agent, be segregated from the
other property or funds of the Pledgor, and be forthwith delivered to
the Agent as Pledged Collateral in the same form as so received (with
any necessary endorsement).
Section 8. Defaults and Remedies.
(a) Upon the occurrence and during the continuance of an Event
of Default (provided that such Event of Default is not waived in accordance with
the terms of the Credit
5
<PAGE> 6
Agreement), the Agent (personally or through an agent) is hereby authorized and
empowered, to transfer and register in its name or in the name of its nominee
the whole or any part of the Pledged Collateral, to exercise the voting rights
with respect thereto, to collect and receive all cash dividends and other
distributions made thereon, to sell in one or more sales after ten (10) days'
notice of the time and place of any public sale or of the time after which a
private sale is to take place (which notice the Pledgor agrees is commercially
reasonable), but without any previous notice or advertisement, the whole or any
part of the Pledged Collateral and to otherwise act and to exercise any and all
rights with respect to the Pledged Collateral as though the Agent was the
outright owner thereof, the Pledgor hereby irrevocably constituting and
appointing the Agent as the proxy and attorney-in-fact of the Pledgor, with full
power of substitution to do so; provided, however, that the Agent shall not have
any duty to exercise any such right or to preserve the same and shall not be
liable for any failure to do so or for any delay in doing so. Any sale shall be
made at a public or private sale at the Agent's place of business, or at any
public building in the City of Boston, Massachusetts or elsewhere to be named in
the notice of sale, either for cash or upon credit or for future delivery at
such price as the Agent may deem fair, and the Agent may be the purchaser of the
whole or any part of the Pledged Collateral so sold and hold the same thereafter
in its own right free from any claim of the Pledgor or any right of redemption.
Each sale shall be made to the highest bidder, but the Agent reserves the right
to reject any and all bids at such sale which, in its discretion, it shall
reasonably deem inadequate. Demands of performance, except as otherwise herein
specifically provided for, notices of sale, advertisements and the presence of
property at sale are hereby waived and any sale hereunder may be conducted by an
auctioneer or any officer or agent of the Agent.
(b) If, at the original time or times appointed for the sale
of the whole or any part of the Pledged Collateral, the highest bid, if there be
but one sale, shall be inadequate to discharge in full all the Secured
Obligations, or if the Pledged Collateral be offered for sale in lots, if at any
of such sales, the highest bid for the lot offered for sale would indicate to
the Agent, in its reasonable discretion, the unlikelihood of the proceeds of the
sales of the whole of the Pledged Collateral being sufficient to discharge all
the Secured Obligations, the Agent may, on one or more occasions and in its
reasonable discretion, postpone any of said sales by public announcement at the
time of sale or the time of previous postponement of sale, and no other notice
of such postponement or postponements of sale need be given, any other notice
being hereby waived; provided, however, that any sale or sales made after such
postponement shall be after ten (10) days' notice to the Pledgor.
(c) In the event of any sales hereunder, the Agent shall,
after deducting all reasonable costs or expenses of every kind (including
reasonable attorneys' fees and disbursements) for care, safekeeping, collection,
sale, delivery or otherwise, apply the residue of the proceeds of the sales to
the payment or reduction, either in whole or in part, of the Secured Obligations
in accordance with the agreements and instruments governing and evidencing the
Secured Obligations, returning the surplus, if any, to the Pledgor.
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<PAGE> 7
(d) If, at any time when the Agent in its reasonable
discretion determines, following the occurrence and during the continuance, of
an Event of Default, that, in connection with any actual or contemplated
exercise of its rights (when permitted under this Section 8) to sell the whole
or any part of the Pledged Collateral hereunder, it is necessary or advisable to
effect a public registration of all or part of the Pledged Collateral pursuant
to the Securities Act of 1933, as amended (or any similar statute then in
effect) (the "Act"), the Pledgor shall, in an expeditious manner, cause each of
its Subsidiaries other than the Real Estate Subsidiary, if any, to:
(i) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to
the Pledged Collateral and use its best efforts to cause such
registration statement to become and remain effective;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the provisions
of the Act with respect to the sale or other disposition of the Pledged
Collateral covered by such registration statement whenever the Agent
shall desire to sell or otherwise dispose of the Pledged Collateral;
(iii) furnish to the Agent such numbers of copies of
a prospectus and a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as the Agent may
reasonably request in order to facilitate the public sale or other
disposition of the Pledged Collateral by the Agent;
(iv) use its best efforts to register or qualify the
Pledged Collateral covered by such registration statement under such
other securities or blue sky laws of such jurisdictions within the
United States as the Agent shall reasonably request, and do such other
reasonable acts and things as may be required of it to enable the Agent
to consummate the public sale or other disposition in such
jurisdictions of the Pledged Collateral by the Agent;
(v) use its best efforts to furnish, at the
reasonable request of the Agent, on the date that shares of the Pledged
Collateral are delivered to the underwriters for sale pursuant to such
registration or, if the security is not being sold through
underwriters, on the date that the registration statement with respect
to such shares of the Pledged Collateral becomes effective, (A) an
opinion, dated such date, of the outside counsel representing such
registrant for the purposes of such registration, addressed to the
underwriters, if any, and in the event the Pledged Collateral is not
being sold through underwriters, then to the Agent, stating that such
registration statement has become effective under the Act and that (1)
to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Act, (2) the registration statement, the related prospectus, and each
amendment or
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<PAGE> 8
supplement thereto, comply as to form in all material respects with the
requirements of the Act and the applicable rules and regulations of the
Commission thereunder (except that such counsel need express no opinion
as to financial statements or other financial or statistical data
contained therein), (3) such counsel has no reason to believe that
either the registration statement or the prospectus, or any amendment
or supplement thereto, contains any untrue statement of a material fact
or omits a material fact required to be stated therein or necessary to
make the statements therein not misleading, (4) the descriptions in the
registration statement or the prospectus, or any amendment or
supplement thereto, of all legal matters and contracts and other legal
documents or instruments are accurate in all material respects and
fairly present the information required to be shown and (5) such
counsel does not know of any legal or governmental proceedings, pending
or threatened, required to be described in the registration statement
or prospectus, or any amendment or supplement thereto, or to be filed
as exhibits to the registration statement which are not described and
filed or incorporated by reference as required; and (B) a letter, dated
such date, from the independent certified public accountants of such
registrant, addressed to the underwriters, if any, and in the event the
Pledged Collateral is not being sold through underwriters, then to the
Agent, stating that they are independent certified public accountants
within the meaning of the Act and that, in the opinion of such
accountants, the financial statements and other financial data of such
registrant included in the registration statement or the prospectus, or
any amendment or supplement thereto, comply as to form in all material
respects with the applicable accounting requirements of the Act. The
opinion of counsel referred to above shall additionally cover such
other legal matters with respect to the registration in respect of
which such opinion is being given as the Agent may reasonably request.
The letter referred to above from the independent certified public
accountants shall additionally cover such other financial matters
(including information as to the period ending not more than five (5)
Business Days prior to the date of such letter) with respect to the
registration in respect of which such letter is being given as the
Agent may reasonably request; and
(vi) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and not later
than 18 months after the effective date of the registration statement,
make available to the Agent an earnings statement (which need not be
audited) covering a period of at least 12 months beginning the first
full month after the effective date of such registration statement
which earnings statement shall satisfy the provisions of Rule 158
promulgated under the Act.
(e) All expenses incurred in complying with Section 8(d)
hereof, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National Association of
Securities Dealers, Inc.), printing expenses, fees and disbursements of counsel
for the registrant, the reasonable fees and expenses of counsel for the Agent,
expenses of the independent certified public accountants (including any special
audits incident to or required by any such registration) and expenses of
complying with the securities or blue sky laws or any jurisdictions, shall be
paid by the Pledgor.
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<PAGE> 9
(f) If, at any time when the Agent shall determine to exercise
its rights to sell the whole or any part of the Pledged Collateral hereunder,
such Pledged Collateral or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Act, the Agent may, in its
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as the Agent may deem necessary or advisable, but subject to the
other requirements of this Section 8, and shall not be required to effect such
registration or to cause the same to be effected. Without limiting the
generality of the foregoing, in any such event the Agent in its discretion (i)
may, in accordance with applicable securities laws, proceed to make such private
sale notwithstanding that a registration statement for the purpose of
registering such Pledged Collateral or part thereof could be or shall have been
filed under the Act (or similar statute), (ii) may approach and negotiate with a
single possible purchaser to effect such sale and (iii) may restrict such sale
to a purchaser who will represent and agree that such purchaser is purchasing
for its own account, for investment and not with a view to the distribution or
sale of such Pledged Collateral or part thereof. In addition to a private sale
as provided above in this Section 8, if any of the Pledged Collateral shall not
be freely distributable to the public without registration under the Act (or
similar statute) at the time of any proposed sale pursuant to this Section 8,
then the Agent shall not be required to effect such registration or cause the
same to be effected but, in its discretion (subject only to applicable
requirements of law), may require that any sale hereunder (including a sale at
auction) be conducted subject to restrictions (A) as to the financial
sophistication and ability of any Person permitted to bid or purchase at any
such sale, (B) as to the content of legends to be placed upon any certificates
representing the Pledged Collateral sold in such sale, including restrictions on
future transfer thereof, (C) as to the representations required to be made by
each Person bidding or purchasing at such sale relating to that Person's access
to financial information about the Pledgor and such Person's intentions as to
the holding of the Pledged Collateral so sold for investment, for its own
account, and not with a view of the distribution thereof and (D) as to such
other matters as the Agent may, in its discretion, deem necessary or appropriate
in order that such sale (notwithstanding any failure so to register) may be
effected in compliance with the Uniform Commercial Code and other laws affecting
the enforcement of creditors' rights and the Act and all applicable state
securities laws.
(g) The Pledgor acknowledges that notwithstanding the legal
availability of a private sale or a sale subject to the restrictions described
above in paragraph (f), the Agent may, in its discretion, elect to register any
or all the Pledged Collateral under the Act (or any applicable state securities
law) in accordance with its rights hereunder. The Pledgor, however, recognizes
that the Agent may be unable to effect a public sale of any or all the Pledged
Collateral and may be compelled to resort to one or more private sales thereof.
The Pledgor also acknowledges any such private sale (conducted in a commercially
reasonable manner for private sales) may result in prices and other terms less
favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Agent shall be
under no obligation to delay a sale of any of the Pledged Collateral for the
period of time necessary to permit the registrant to register such securities
for public sale under the Act, or
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<PAGE> 10
under applicable state securities laws, even if the Pledgor or issuer of the
Pledged Collateral would agree to do so.
(h) The Pledgor agrees that following the occurrence an Event
of Default, it will not at any time plead, claim or take the benefit of any
appraisal, valuation, stay, extension, moratorium or redemption law now or
hereafter in force in order to prevent or delay the enforcement of this
Agreement, or the absolute sale of the whole or any part of the Pledged
Collateral or the possession thereof by any purchaser at any sale hereunder in
accordance with the terms hereof, and the Pledgor waives the benefit of all such
laws to the extent it lawfully may do so. The Pledgor agrees that it will not
interfere with any right, power and remedy of the Agent provided for in this
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise, or the exercise or beginning of the exercise by the Agent of any one
or more of such rights, powers, or remedies. No failure or delay on the part of
the Agent to exercise any such right, power or remedy and no notice or demand
which may be given to or made upon the Pledgor by the Agent with respect to any
such remedies shall operate as a waiver thereof, or limit or impair the Agent's
right to take any action or to exercise any power or remedy hereunder, without
notice or demand, or prejudice its rights as against the Pledgor in any respect.
(i) The Pledgor further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to the
Agent, that the Agent has no adequate remedy at law in respect of such breach
and, as a consequence, agrees that each and every covenant contained in this
Section 8 shall be specifically enforceable against the Pledgor.
(j) Without in any way limiting the provisions of this Section
8, upon the occurrence and during the continuance of an Event of Default, the
Agent may exercise in addition to all other rights and remedies granted to it in
this Agreement and in the Credit Agreement, all rights and remedies of a secured
party under the Uniform Commercial Code.
Section 9. Application of Proceeds. Any cash held by the Agent as
Pledged Collateral and all cash proceeds received by the Agent in respect of any
sale of, liquidation of, or other realization upon all or any part of the
Pledged Collateral shall be applied by the Agent as follows:
(a) First, to the payment of the costs and expenses of such
sale, liquidation or other realization, including reasonable compensation to the
Agent and its agents and counsel, and all expenses, liabilities and advances
made or incurred by the Agent in connection therewith;
(b) Next, to the payment of the Secured Obligations; and
(c) Finally, after payment in full of all Secured Obligations,
to the payment to the Pledgor, or its successors or assigns, or to whomsoever
may be lawfully entitled to receive
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<PAGE> 11
the same or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
Section 10. Waiver. No delay on the Agent's part in exercising any
power of sale, Lien, option or other right hereunder, and no notice or demand
which may be given to or made upon the Pledgor by the Agent with respect to any
power of sale, Lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair the Agent's right to take any action or to exercise
any power of sale, Lien, option, or any other right hereunder, without notice or
demand, or prejudice the Agent's rights as against the Pledgor in any respect.
Section 11. Assignment. The Agent may assign, endorse or transfer any
instrument evidencing all or any part of the Secured Obligations as provided in,
and in accordance with, the Credit Agreement, and the holder of such instrument
shall be entitled to the benefits of this Agreement.
Section 12. Termination. Immediately following the Termination Date,
the Agent shall deliver to the Pledgor the Pledged Collateral subject to this
Agreement and all instruments of assignment executed in connection therewith,
free and clear of the Liens hereof, and any assignment required to be executed
by the Agent to effect such redelivery and, except as otherwise provided herein,
all of the Pledgor's obligations hereunder shall at such time terminate.
Section 13. Lien Absolute. All rights of the Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Credit
Agreement, the Revolving Credit Notes, any other Lender Agreement or any other
agreement or instrument governing or evidencing any Secured Obligations;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any part of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, the Revolving Credit Notes, any other Lender Agreement or any other
agreement or instrument governing or evidencing any Secured Obligations;
(c) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor.
Section 14. Release. The Pledgor consents and agrees that the Agent may
at any time, or from time to time, in its discretion (a) renew, extend or change
the time of payment,
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<PAGE> 12
and/or the manner, place or terms of payment of all or any part of the Secured
Obligations and (b) exchange, release and/or surrender all or any of the Pledged
Collateral, or any part thereof, by whomsoever deposited, which is now or may
hereafter be held by the Agent in connection with all or any of the Secured
Obligations; all in such manner and upon such terms as the Agent may deem
proper, and without notice to or further assent from the Pledgor, it being
hereby agreed that the Pledgor shall be and remain bound upon this Agreement,
irrespective of the existence, value or condition of any of the Pledged
Collateral, and notwithstanding any such change, exchange, settlement,
compromise, surrender, release, renewal or extension, and notwithstanding also
that the Secured Obligations may, at any time exceed the aggregate principal
amount thereof set forth in the Credit Agreement, or any other agreement
governing any Secured Obligations. The Pledgor hereby waives notice of
acceptance of this Agreement, and also presentment, demand, protest and notice
of dishonor of any and all of the Secured Obligations, and promptness in
commencing suit against any party hereto or liable hereon, and in giving any
notice to or of making any claim or demand hereunder upon the Pledgor. No act or
omission of any kind on the Agent's part shall in any event affect or impair
this Agreement.
Section 15. Indemnification. The Pledgor agrees to indemnify the Agent
and its respective directors, officers, employees and agents and hold the Agent
and each such Person harmless from and against any and all losses, taxes,
liabilities, claims and damages, including reasonable attorneys' fees and
disbursements, and other expenses incurred or arising by reason of the taking or
the failure to take action by the Agent, in good faith, in respect of any
transaction effected under this Agreement, or in connection with the Lien
provided for herein, including, without limitation, any taxes payable in
connection with the delivery or registration of any of the Pledged Collateral as
provided herein (collectively "Indemnified Claims") or in connection with any
litigation, investigation or proceedings related to any of the foregoing.
Whether or not the transactions contemplated by this Agreement shall be
consummated, the Pledgor agrees to pay to the Agent all reasonable out-of-pocket
costs and expenses incurred in connection with this Agreement and all reasonable
fees, expenses and disbursements, and the reasonable fees of the Agent's agents
or representatives, incurred in connection with the execution and delivery of
this Agreement and the performance by the Agent of the provisions of this
Agreement and of any transactions effected in connection with this Agreement.
The obligations of the Pledgor under this Section 15 shall survive the
termination of this Agreement. The foregoing notwithstanding, the indemnity
provided for herein shall not apply to any Indemnified Claim of the Agent if a
court of competent jurisdiction determines that such Indemnified Claim is the
result of the gross negligence or willful misconduct of the Agent.
Section 16. Reinstatement. This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against the Pledgor for liquidation or reorganization, should the Pledgor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of the
Pledgor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or
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returned, and in any such case, the Secured Obligations shall be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.
Section 17. Miscellaneous.
(a) The Agent may execute any of its duties hereunder by or
through agents or employees and shall be entitled to advice of counsel
concerning all matters pertaining to its duties hereunder.
(b) The Pledgor agrees to promptly reimburse the Agent for
actual and reasonable out-of-pocket expenses, including, without limitation,
reasonable counsel fees, incurred by the Agent in connection with the
administration and enforcement of this Agreement.
(c) Neither the Agent nor any of its officers, directors,
employees, agents or counsel shall be liable for any action lawfully taken or
omitted to be taken by it or them hereunder or in connection herewith, except
for its or their own gross negligence or willful misconduct.
(d) This Agreement shall be binding upon the Pledgor and its
successors and assigns, and shall inure to the benefit of, and be enforceable
by, the Agent and its respective successors and assigns, and shall be governed
by, and construed and enforced in accordance with, the internal laws in effect
in the Commonwealth of Massachusetts without giving effect to principles of
choice of law, and none of the terms or provisions of this Agreement may be
waived, altered, modified or amended except in writing duly signed for and on
behalf of the Agent and the Pledgor.
(e) At any time and from time to time, upon written request of
the Agent, and at the sole expense of the Pledgor, the Pledgor shall promptly
and duly execute and deliver any and all such further instruments and documents
and take such further action as the Agent may reasonably deem desirable to
obtain the full benefits of this Agreement and of the rights and powers herein
granted.
Section 18. Severability. If for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of or effect those portions of
this Agreement which are valid.
Section 19. Notices. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give or serve upon any other a communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in accordance
with the provisions of Section 14.1 of the Credit Agreement, addressed as
follows:
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(a) If to the Agent, at:
100 Federal Street
Boston, MA 02110
Attention: Christopher S. Allen, Director
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: Edward Matson Sibble, Jr., P.C.
(b) If to the Pledgor, at:
40 Hudson Road
Shawmut Park
Canton, MA 02021
Attention: Chief Financial Officer
with a copy to:
Goulston & Storrs, P.C.
400 Atlantic Avenue
Boston, MA 02110-3333
Attention: Kitt Sawitsky, Esq. or
Daniel Avery, Esq.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, on the date of telecopy transmission or three (3)
Business Days after the same shall have been deposited in the United States
mail, postage prepaid. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to the
persons designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
Section 20. Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
Section 21. Counterparts. This Agreement may be executed in any number
of counterparts, which shall, collectively and separately, constitute one
agreement.
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Section 22. Conflict of Terms. Except as otherwise explicitly provided
in this Agreement, if any provision contained in this Agreement is in conflict
with or inconsistent with any provision in the Credit Agreement, the provision
contained in the Credit Agreement shall govern and control, to the extent of
such conflict or inconsistency.
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IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Stock Pledge Agreement to be duly executed as of the date first written
above.
NEW ENGLAND AUDIO CO., INC.
By: /s/ Jeffrey S. Stone
--------------------------------
Name: Jeffrey S. Stone
Title: President
The undersigned hereby joins in the above Agreement for the sole
purpose of consenting to and being bound by the provisions of Sections 6, 7 and
8 thereof, the undersigned hereby agreeing to cooperate fully and in good faith
with the Agent and the Pledgor in carrying out such provisions.
NEA DELAWARE, INC.
By: /s/ Jeffrey S. Stone
-------------------------------
Name: Jeffrey S. Stone
Title: President
Accepted and Acknowledged by:
BANKBOSTON, N.A., as Agent
By: /s/ Christopher S. Allen
---------------------------
Name:
Title: Director
<PAGE> 17
SCHEDULE I
to the Stock Pledge Agreement
Attached to and forming a part of that certain Stock Pledge Agreement
dated as of July __, 1998 by New England Audio Co., Inc. to BankBoston, N.A.
Class of Certificate Number of
Issuer Stock No(s). Shares
NEA Delaware, Inc. Common 2 100
<PAGE> 18
SCHEDULE II
to the Stock Pledge Agreement
PLEDGE AMENDMENT
This Pledge Amendment, dated _______, is delivered pursuant to Section
6(d) of the Stock Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to that certain Stock Pledge
Agreement, dated as of July __, 1998 by the undersigned, as Pledgor, to
BankBoston, N.A., and that the Pledged Shares listed on this Pledge Amendment
shall be and become a part of the Pledged Collateral referred to in said Stock
Pledge Agreement and shall secure all Secured Obligations referred to in said
Stock Pledge Agreement.
NEW ENGLAND AUDIO CO., INC.
By:
______________________________
Name:
Title:
Class of Certificate Number of
Issuer Stock No(s). Shares
<PAGE> 19
SCHEDULE III
to the Amended and Restated Stock Pledge Agreement
SUBSIDIARIES OF PLEDGOR
NEA Delaware, Inc.
<PAGE> 1
EXHIBIT 10.7
TWEETER STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of July 20, 1998, between TWEETER HOME
ENTERTAINMENT GROUP, INC., a Delaware corporation (the "Pledgor") and
BANKBOSTON, N.A., a national banking association, as Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the Pledgor is the record and beneficial owner of the shares of
stock and other equity and beneficial interests described on Schedule I hereto
(the "Pledged Shares") issued by the corporations and trusts named therein; and
WHEREAS, the Pledgor, as guarantor, has entered into a Amended and
Restated Credit Agreement, dated as of July 20, 1998 (as at any time amended,
modified or supplemented, the "Credit Agreement") with New England Audio, Co.
Inc., a Massachusetts corporation ("New England Audio"), NEA Delaware, Inc., a
Delaware corporation ("NEA Delaware"), Tweeter Home Entertainment Group
Financing Company Trust, a Massachusetts business trust ("Tweeter Trust"), the
Agent and the other lenders parties thereto (the "Lenders"), pursuant to which
the Lenders have agreed to make Revolving Credit Advances (as defined in the
Credit Agreement) to New England Audio and NEA Delaware; and
WHEREAS, in connection with the granting of the credits under the Credit
Agreement and as security for all of the Lender Obligations of the Pledgor under
the Credit Agreement, the Agent is requiring that the Pledgor execute and
deliver this Stock Pledge Agreement and grant the security interest contemplated
hereby.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Lenders to grant the credits under the
Credit Agreement, it is agreed as follows:
Section 1. Definitions. Unless otherwise defined herein, terms defined in
the Credit Agreement are used herein as therein defined, and the following shall
have the following respective meanings (such meanings being equally applicable
to both the singular and plural form of the terms defined):
"Act" shall have the meaning assigned to such term in Section 8(d) hereof.
"Agreement" shall mean this Stock Pledge Agreement, including all
amendments, modifications and supplements and any exhibits or schedules to any
of the foregoing, and shall refer to the Agreement as the same may be in effect
at the time such reference becomes operative.
"Pledged Collateral" shall have the meaning assigned to such term in
Section 2 hereof.
"Pledged Shares" shall have the meaning assigned to such term in the first
recital hereof.
<PAGE> 2
"Secured Obligations" shall have the meaning assigned to such term in
Section 3 hereof.
"Termination Date" shall mean the date on which all Lender Obligations
have been paid in full and the Lenders shall have no further commitments to or
for the account of the Pledgor or any of its Subsidiaries under any Lender
Agreement.
Section 2. Pledge. The Pledgor hereby pledges and grants to the Agent a
first priority security interest in all of the following (the "Pledged
Collateral"), except as otherwise provided in Section 7(b):
(a) the Pledged Shares and the certificates representing the Pledged
Shares, and all dividends, cash, instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares;
(b) all additional shares of stock or other equity and beneficial
interests of any issuer of the Pledged Shares from time to time acquired by the
Pledgor in any manner (which shares shall be deemed to be part of the Pledged
Shares) and the certificates representing such shares, and all dividends, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares; and
(c) all shares of stock or other equity and beneficial interests
owned by the Pledgor of any Person other than the Real Estate Subsidiary, if
any, who, after the date of this Agreement, becomes, as a result of any
occurrence, a directly owned Subsidiary of the Pledgor (which shares shall be
deemed to be part of the Pledged Shares) and the certificates representing such
shares, and all dividends, cash, instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares.
Section 3. Security for Lender Obligations. This Agreement secures, and
the Pledged Collateral is security for, the prompt payment in full when due,
whether at stated maturity, by acceleration or otherwise, and performance of the
Lender Obligations, whether for principal, premium, interest, fees, costs and
expenses, and all obligations of the Pledgor now or hereafter existing under
this Agreement and under the Credit Agreement, and all other Indebtedness,
liabilities and obligations of the Pledgor to the Agent under any Lender
Agreement, whether now existing or hereafter incurred, whether arising under the
Credit Agreement or otherwise (collectively, the "Secured Obligations").
Section 4. Delivery of Pledged Collateral. All certificates representing
or evidencing the Pledged Shares shall be delivered to and held by or on behalf
of the Agent pursuant hereto and shall be accompanied by duly executed
instruments of transfer or
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<PAGE> 3
assignment in blank, all in form and substance reasonably satisfactory to the
Agent. If any Event of Default shall occur and be continuing, subject to Section
7 hereof, the Agent shall have the right, at any time in its discretion and
without notice to the Pledgor, to transfer to or to register in the name of the
Agent or any of its nominees any or all of the Pledged Shares. In addition, also
subject to Section 7 hereof, the Agent shall have the right at any time to
exchange certificates or instruments representing or evidencing Pledged Shares
for certificates or instruments of smaller or larger denominations.
Section 5. Representations and Warranties. The Pledgor represents and
warrants to the Agent that:
(a) The Pledgor is, and at the time of delivery of the Pledged
Shares to the Agent pursuant to Section 4 hereof will be, the sole holder of
record and the sole beneficial owner of the Pledged Collateral free and clear of
any Lien thereon or affecting the title thereto except for the Lien created by
this Agreement.
(b) All of the Pledged Shares have been duly authorized and validly
issued and all of the Pledged Shares representing shares of stock of
corporations are fully paid and non-assessable.
(c) The Pledgor has the right and requisite corporate authority to
pledge, assign, transfer, deliver, deposit and set over the Pledged Collateral
to the Agent, as provided herein.
(d) None of the Pledged Shares has been issued or transferred in
violation of the securities registration, securities disclosure or similar laws
of any jurisdiction to which such issuance or transfer may be subject.
(e) The authorized stock and other equity and beneficial interests
of each of the issuers listed on Schedule I hereto consists of the number of
shares of stock, with the number of shares issued and outstanding, that are
described on Schedule I hereto. As of the date hereof, there are no existing
options, warrants, calls or commitments of any character whatsoever relating to
any stock or other equity and beneficial interests of any of such issuers.
(f) No consent, approval, authorization or other order of any Person
and no consent, authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required either
(i) for the pledge of the Pledged Collateral pursuant to this Agreement or for
the execution, delivery or performance of this Agreement by the Pledgor or (ii)
for the exercise by the Agent of the voting or other rights provided for in this
Agreement or the remedies in respect of the Pledged Collateral pursuant to this
Agreement including any disposition thereof, except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally.
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(g) The pledge, assignment and delivery of the Pledged Collateral
pursuant to this Agreement will create a valid first priority Lien on and a
first priority perfected security interest in the Pledged Collateral, and the
proceeds thereof, securing the payment of the Secured Obligations.
(h) This Agreement has been duly authorized, executed and delivered
by the Pledgor and constitutes a legal, valid and binding obligation of the
Pledgor enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally, and except as the remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
(i) The Pledged Shares constitute one hundred percent (100%) of the
issued and outstanding shares of stock or other equity and beneficial interests
of the issuers thereof.
(j) The Subsidiaries listed on Schedule III hereto are the only
Subsidiaries of the Pledgor.
The representations and warranties set forth in this Section 5 shall
survive the execution and delivery of this Agreement.
Section 6. Covenants. The Pledgor covenants and agrees that until the
Termination Date:
(a) Without the prior written consent of the Agent, the Pledgor will
not sell, assign, transfer, pledge, grant a Lien with respect to or otherwise
encumber any of its rights in or to the Pledged Collateral or any unpaid
dividends or other distributions or payments with respect thereto except as
otherwise permitted by the Credit Agreement.
(b) The Pledgor will, at its expense, promptly execute, acknowledge
and deliver all such instruments and take all such action as the Agent from time
to time may reasonably request in order to ensure to the Agent the benefits of
the Liens in and to the Pledged Collateral intended to be created by this
Agreement.
(c) The Pledgor will defend the title to the Pledged Collateral and
the Liens of the Agent thereon against the claim of any other Person and will
maintain and preserve such Liens until the Termination Date.
(d) The Pledgor will, upon obtaining any additional shares of any
Subsidiaries other than the Real Estate Subsidiary, if any, which shares are not
already Pledged Collateral, promptly (and in any event within three (3) Business
Days) deliver to the Agent a Pledge Amendment, duly executed by the Pledgor, in
substantially the form of Schedule II hereto (a "Pledge Amendment"), in respect
of the additional Pledged Shares which are to be pledged pursuant to this
Agreement. The Pledgor hereby authorizes the Agent to attach each such
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<PAGE> 5
Pledge Amendment to this Agreement and agrees that all Pledged Shares listed on
any Pledge Amendment delivered to the Agent shall for all purposes hereunder be
considered Pledged Collateral.
Section 7. Pledgor's Rights. As long as no Default or Event of Default
shall have occurred and be continuing:
(a) The Pledgor shall have the right, from time to time, to vote and
give consents with respect to the Pledged Collateral or any part thereof for all
purposes not inconsistent with the provisions of this Agreement, the Credit
Agreement and any other Lender Agreement; provided, however, that no vote shall
be cast, and no consent shall be given or action taken, which would have the
effect of impairing the position or interest of the Agent in respect of the
Pledged Collateral or which would authorize or effect (except as and to the
extent expressly permitted by the Credit Agreement) (i) the dissolution or
liquidation, in whole or in part, of any of the Subsidiaries, (ii) the
consolidation or merger of any of the Subsidiaries with any other Person, (iii)
the sale, disposition or encumbrance of all or substantially all of the assets
of any of the Subsidiaries, (iv) any change in the authorized number of shares,
the stated capital or the authorized share capital of any of the Subsidiaries or
the issuance of any additional shares of its stock, or (v) the alteration of the
voting rights with respect to the stock of any of the Subsidiaries.
(b) (i) the Pledgor shall be entitled, from time to time, to collect
and receive for its own use all cash dividends paid in respect of the
Pledged Shares to the extent not in violation of the Credit Agreement
other than any and all (A) dividends paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral, (B) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or total
liquidation or dissolution and (C) cash paid, payable or otherwise
distributed in redemption of, or in exchange for, any Pledged Collateral;
provided, however, that until actually paid all rights to such dividends
shall remain subject to the Lien created by this Agreement; and
(ii) all dividends (other than such cash dividends as are
permitted to be paid to the Pledgor in accordance with clause (i) above)
and all other distributions in respect of any of the Pledged Shares,
whenever paid or made, shall be delivered to the Agent to hold as Pledged
Collateral and shall, if received by the Pledgor, be received in trust for
the benefit of the Agent, be segregated from the other property or funds
of the Pledgor, and be forthwith delivered to the Agent as Pledged
Collateral in the same form as so received (with any necessary
endorsement).
Section 8. Defaults and Remedies.
(a) Upon the occurrence and during the continuance of an Event of
Default (provided that such Event of Default is not waived in accordance with
the terms of the Credit
5
<PAGE> 6
Agreement), the Agent (personally or through an agent) is hereby authorized and
empowered, to transfer and register in its name or in the name of its nominee
the whole or any part of the Pledged Collateral, to exercise the voting rights
with respect thereto, to collect and receive all cash dividends and other
distributions made thereon, to sell in one or more sales after ten (10) days'
notice of the time and place of any public sale or of the time after which a
private sale is to take place (which notice the Pledgor agrees is commercially
reasonable), but without any previous notice or advertisement, the whole or any
part of the Pledged Collateral and to otherwise act and to exercise any and all
rights with respect to the Pledged Collateral as though the Agent was the
outright owner thereof, the Pledgor hereby irrevocably constituting and
appointing the Agent as the proxy and attorney-in-fact of the Pledgor, with full
power of substitution to do so; provided, however, that the Agent shall not have
any duty to exercise any such right or to preserve the same and shall not be
liable for any failure to do so or for any delay in doing so. Any sale shall be
made at a public or private sale at the Agent's place of business, or at any
public building in the City of Boston, Massachusetts or elsewhere to be named in
the notice of sale, either for cash or upon credit or for future delivery at
such price as the Agent may deem fair, and the Agent may be the purchaser of the
whole or any part of the Pledged Collateral so sold and hold the same thereafter
in its own right free from any claim of the Pledgor or any right of redemption.
Each sale shall be made to the highest bidder, but the Agent reserves the right
to reject any and all bids at such sale which, in its discretion, it shall
reasonably deem inadequate. Demands of performance, except as otherwise herein
specifically provided for, notices of sale, advertisements and the presence of
property at sale are hereby waived and any sale hereunder may be conducted by an
auctioneer or any officer or agent of the Agent.
(b) If, at the original time or times appointed for the sale of the
whole or any part of the Pledged Collateral, the highest bid, if there be but
one sale, shall be inadequate to discharge in full all the Secured Obligations,
or if the Pledged Collateral be offered for sale in lots, if at any of such
sales, the highest bid for the lot offered for sale would indicate to the Agent,
in its reasonable discretion, the unlikelihood of the proceeds of the sales of
the whole of the Pledged Collateral being sufficient to discharge all the
Secured Obligations, the Agent may, on one or more occasions and in its
reasonable discretion, postpone any of said sales by public announcement at the
time of sale or the time of previous postponement of sale, and no other notice
of such postponement or postponements of sale need be given, any other notice
being hereby waived; provided, however, that any sale or sales made after such
postponement shall be after ten (10) days' notice to the Pledgor.
(c) In the event of any sales hereunder, the Agent shall, after
deducting all reasonable costs or expenses of every kind (including reasonable
attorneys' fees and disbursements) for care, safekeeping, collection, sale,
delivery or otherwise, apply the residue of the proceeds of the sales to the
payment or reduction, either in whole or in part, of the Secured Obligations in
accordance with the agreements and instruments governing and evidencing the
Secured Obligations, returning the surplus, if any, to the Pledgor.
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<PAGE> 7
(d) If, at any time when the Agent in its reasonable discretion
determines, following the occurrence and during the continuance, of an Event of
Default, that, in connection with any actual or contemplated exercise of its
rights (when permitted under this Section 8) to sell the whole or any part of
the Pledged Collateral hereunder, it is necessary or advisable to effect a
public registration of all or part of the Pledged Collateral pursuant to the
Securities Act of 1933, as amended (or any similar statute then in effect) (the
"Act"), the Pledgor shall, in an expeditious manner, cause each of its
Subsidiaries other than the Real Estate Subsidiary, if any, to:
(i) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to the
Pledged Collateral and use its best efforts to cause such registration
statement to become and remain effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Act with
respect to the sale or other disposition of the Pledged Collateral covered
by such registration statement whenever the Agent shall desire to sell or
otherwise dispose of the Pledged Collateral;
(iii) furnish to the Agent such numbers of copies of a
prospectus and a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as the Agent may
reasonably request in order to facilitate the public sale or other
disposition of the Pledged Collateral by the Agent;
(iv) use its best efforts to register or qualify the Pledged
Collateral covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States
as the Agent shall reasonably request, and do such other reasonable acts
and things as may be required of it to enable the Agent to consummate the
public sale or other disposition in such jurisdictions of the Pledged
Collateral by the Agent;
(v) use its best efforts to furnish, at the reasonable request
of the Agent, on the date that shares of the Pledged Collateral are
delivered to the underwriters for sale pursuant to such registration or,
if the security is not being sold through underwriters, on the date that
the registration statement with respect to such shares of the Pledged
Collateral becomes effective, (A) an opinion, dated such date, of the
outside counsel representing such registrant for the purposes of such
registration, addressed to the underwriters, if any, and in the event the
Pledged Collateral is not being sold through underwriters, then to the
Agent, stating that such registration statement has become effective under
the Act and that (1) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no proceedings
for that purpose have been instituted or are pending or threatened under
the Act, (2) the registration statement, the related prospectus, and each
amendment or
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<PAGE> 8
supplement thereto, comply as to form in all material respects with the
requirements of the Act and the applicable rules and regulations of the
Commission thereunder (except that such counsel need express no opinion as
to financial statements or other financial or statistical data contained
therein), (3) such counsel has no reason to believe that either the
registration statement or the prospectus, or any amendment or supplement
thereto, contains any untrue statement of a material fact or omits a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (4) the descriptions in the
registration statement or the prospectus, or any amendment or supplement
thereto, of all legal matters and contracts and other legal documents or
instruments are accurate in all material respects and fairly present the
information required to be shown and (5) such counsel does not know of any
legal or governmental proceedings, pending or threatened, required to be
described in the registration statement or prospectus, or any amendment or
supplement thereto, or to be filed as exhibits to the registration
statement which are not described and filed or incorporated by reference
as required; and (B) a letter, dated such date, from the independent
certified public accountants of such registrant, addressed to the
underwriters, if any, and in the event the Pledged Collateral is not being
sold through underwriters, then to the Agent, stating that they are
independent certified public accountants within the meaning of the Act and
that, in the opinion of such accountants, the financial statements and
other financial data of such registrant included in the registration
statement or the prospectus, or any amendment or supplement thereto,
comply as to form in all material respects with the applicable accounting
requirements of the Act. The opinion of counsel referred to above shall
additionally cover such other legal matters with respect to the
registration in respect of which such opinion is being given as the Agent
may reasonably request. The letter referred to above from the independent
certified public accountants shall additionally cover such other financial
matters (including information as to the period ending not more than five
(5) Business Days prior to the date of such letter) with respect to the
registration in respect of which such letter is being given as the Agent
may reasonably request; and
(vi) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and not later than 18
months after the effective date of the registration statement, make
available to the Agent an earnings statement (which need not be audited)
covering a period of at least 12 months beginning the first full month
after the effective date of such registration statement which earnings
statement shall satisfy the provisions of Rule 158 promulgated under the
Act.
(e) All expenses incurred in complying with Section 8(d) hereof,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities Dealers,
Inc.), printing expenses, fees and disbursements of counsel for the registrant,
the reasonable fees and expenses of counsel for the Agent, expenses of the
independent certified public accountants (including any special audits incident
to or required by any such registration) and expenses of complying with the
securities or blue sky laws or any jurisdictions, shall be paid by the Pledgor.
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<PAGE> 9
(f) If, at any time when the Agent shall determine to exercise its
rights to sell the whole or any part of the Pledged Collateral hereunder, such
Pledged Collateral or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Act, the Agent may, in its
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as the Agent may deem necessary or advisable, but subject to the
other requirements of this Section 8, and shall not be required to effect such
registration or to cause the same to be effected. Without limiting the
generality of the foregoing, in any such event the Agent in its discretion (i)
may, in accordance with applicable securities laws, proceed to make such private
sale notwithstanding that a registration statement for the purpose of
registering such Pledged Collateral or part thereof could be or shall have been
filed under the Act (or similar statute), (ii) may approach and negotiate with a
single possible purchaser to effect such sale and (iii) may restrict such sale
to a purchaser who will represent and agree that such purchaser is purchasing
for its own account, for investment and not with a view to the distribution or
sale of such Pledged Collateral or part thereof. In addition to a private sale
as provided above in this Section 8, if any of the Pledged Collateral shall not
be freely distributable to the public without registration under the Act (or
similar statute) at the time of any proposed sale pursuant to this Section 8,
then the Agent shall not be required to effect such registration or cause the
same to be effected but, in its discretion (subject only to applicable
requirements of law), may require that any sale hereunder (including a sale at
auction) be conducted subject to restrictions (A) as to the financial
sophistication and ability of any Person permitted to bid or purchase at any
such sale, (B) as to the content of legends to be placed upon any certificates
representing the Pledged Collateral sold in such sale, including restrictions on
future transfer thereof, (C) as to the representations required to be made by
each Person bidding or purchasing at such sale relating to that Person's access
to financial information about the Pledgor and such Person's intentions as to
the holding of the Pledged Collateral so sold for investment, for its own
account, and not with a view of the distribution thereof and (D) as to such
other matters as the Agent may, in its discretion, deem necessary or appropriate
in order that such sale (notwithstanding any failure so to register) may be
effected in compliance with the Uniform Commercial Code and other laws affecting
the enforcement of creditors' rights and the Act and all applicable state
securities laws.
(g) The Pledgor acknowledges that notwithstanding the legal
availability of a private sale or a sale subject to the restrictions described
above in paragraph (f), the Agent may, in its discretion, elect to register any
or all the Pledged Collateral under the Act (or any applicable state securities
law) in accordance with its rights hereunder. The Pledgor, however, recognizes
that the Agent may be unable to effect a public sale of any or all the Pledged
Collateral and may be compelled to resort to one or more private sales thereof.
The Pledgor also acknowledges any such private sale (conducted in a commercially
reasonable manner for private sales) may result in prices and other terms less
favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Agent shall be
under no obligation to delay a sale of any of the Pledged Collateral for the
period of time necessary to permit the registrant to register such securities
for public sale under the Act, or
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<PAGE> 10
under applicable state securities laws, even if the Pledgor or issuer of the
Pledged Collateral would agree to do so.
(h) The Pledgor agrees that following the occurrence an Event of
Default, it will not at any time plead, claim or take the benefit of any
appraisal, valuation, stay, extension, moratorium or redemption law now or
hereafter in force in order to prevent or delay the enforcement of this
Agreement, or the absolute sale of the whole or any part of the Pledged
Collateral or the possession thereof by any purchaser at any sale hereunder in
accordance with the terms hereof, and the Pledgor waives the benefit of all such
laws to the extent it lawfully may do so. The Pledgor agrees that it will not
interfere with any right, power and remedy of the Agent provided for in this
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise, or the exercise or beginning of the exercise by the Agent of any one
or more of such rights, powers, or remedies. No failure or delay on the part of
the Agent to exercise any such right, power or remedy and no notice or demand
which may be given to or made upon the Pledgor by the Agent with respect to any
such remedies shall operate as a waiver thereof, or limit or impair the Agent's
right to take any action or to exercise any power or remedy hereunder, without
notice or demand, or prejudice its rights as against the Pledgor in any respect.
(i) The Pledgor further agrees that a breach of any of the covenants
contained in this Section 8 will cause irreparable injury to the Agent, that the
Agent has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this Section 8
shall be specifically enforceable against the Pledgor.
(j) Without in any way limiting the provisions of this Section 8,
upon the occurrence and during the continuance of an Event of Default, the Agent
may exercise in addition to all other rights and remedies granted to it in this
Agreement and in the Credit Agreement, all rights and remedies of a secured
party under the Uniform Commercial Code.
Section 9. Application of Proceeds. Any cash held by the Agent as Pledged
Collateral and all cash proceeds received by the Agent in respect of any sale
of, liquidation of, or other realization upon all or any part of the Pledged
Collateral shall be applied by the Agent as follows:
(a) First, to the payment of the costs and expenses of such sale,
liquidation or other realization, including reasonable compensation to the Agent
and its agents and counsel, and all expenses, liabilities and advances made or
incurred by the Agent in connection therewith;
(b) Next, to the payment of the Secured Obligations; and
(c) Finally, after payment in full of all Secured Obligations, to
the payment to the Pledgor, or its successors or assigns, or to whomsoever may
be lawfully entitled to receive
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<PAGE> 11
the same or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
Section 10. Waiver. No delay on the Agent's part in exercising any power
of sale, Lien, option or other right hereunder, and no notice or demand which
may be given to or made upon the Pledgor by the Agent with respect to any power
of sale, Lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair the Agent's right to take any action or to exercise
any power of sale, Lien, option, or any other right hereunder, without notice or
demand, or prejudice the Agent's rights as against the Pledgor in any respect.
Section 11. Assignment. The Agent may assign, endorse or transfer any
instrument evidencing all or any part of the Secured Obligations as provided in,
and in accordance with, the Credit Agreement, and the holder of such instrument
shall be entitled to the benefits of this Agreement.
Section 12. Termination. Immediately following the Termination Date, the
Agent shall deliver to the Pledgor the Pledged Collateral subject to this
Agreement and all instruments of assignment executed in connection therewith,
free and clear of the Liens hereof, and any assignment required to be executed
by the Agent to effect such redelivery and, except as otherwise provided herein,
all of the Pledgor's obligations hereunder shall at such time terminate.
Section 13. Lien Absolute. All rights of the Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Credit Agreement,
the Revolving Credit Notes, any other Lender Agreement or any other agreement or
instrument governing or evidencing any Secured Obligations;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any part of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, the Revolving Credit Notes, any other Lender Agreement or any other
agreement or instrument governing or evidencing any Secured Obligations;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor.
Section 14. Release. The Pledgor consents and agrees that the Agent may at
any time, or from time to time, in its discretion (a) renew, extend or change
the time of payment,
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<PAGE> 12
and/or the manner, place or terms of payment of all or any part of the Secured
Obligations and (b) exchange, release and/or surrender all or any of the Pledged
Collateral, or any part thereof, by whomsoever deposited, which is now or may
hereafter be held by the Agent in connection with all or any of the Secured
Obligations; all in such manner and upon such terms as the Agent may deem
proper, and without notice to or further assent from the Pledgor, it being
hereby agreed that the Pledgor shall be and remain bound upon this Agreement,
irrespective of the existence, value or condition of any of the Pledged
Collateral, and notwithstanding any such change, exchange, settlement,
compromise, surrender, release, renewal or extension, and notwithstanding also
that the Secured Obligations may, at any time exceed the aggregate principal
amount thereof set forth in the Credit Agreement, or any other agreement
governing any Secured Obligations. The Pledgor hereby waives notice of
acceptance of this Agreement, and also presentment, demand, protest and notice
of dishonor of any and all of the Secured Obligations, and promptness in
commencing suit against any party hereto or liable hereon, and in giving any
notice to or of making any claim or demand hereunder upon the Pledgor. No act or
omission of any kind on the Agent's part shall in any event affect or impair
this Agreement.
Section 15. Indemnification. The Pledgor agrees to indemnify the Agent and
its respective directors, officers, employees and agents and hold the Agent and
each such Person harmless from and against any and all losses, taxes,
liabilities, claims and damages, including reasonable attorneys' fees and
disbursements, and other expenses incurred or arising by reason of the taking or
the failure to take action by the Agent, in good faith, in respect of any
transaction effected under this Agreement, or in connection with the Lien
provided for herein, including, without limitation, any taxes payable in
connection with the delivery or registration of any of the Pledged Collateral as
provided herein (collectively "Indemnified Claims") or in connection with any
litigation, investigation or proceedings related to any of the foregoing.
Whether or not the transactions contemplated by this Agreement shall be
consummated, the Pledgor agrees to pay to the Agent all reasonable out-of-pocket
costs and expenses incurred in connection with this Agreement and all reasonable
fees, expenses and disbursements, and the reasonable fees of the Agent's agents
or representatives, incurred in connection with the execution and delivery of
this Agreement and the performance by the Agent of the provisions of this
Agreement and of any transactions effected in connection with this Agreement.
The obligations of the Pledgor under this Section 15 shall survive the
termination of this Agreement. The foregoing notwithstanding, the indemnity
provided for herein shall not apply to any Indemnified Claim of the Agent if a
court of competent jurisdiction determines that such Indemnified Claim is the
result of the gross negligence or willful misconduct of the Agent.
Section 16. Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
the Pledgor for liquidation or reorganization, should the Pledgor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of the
Pledgor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or
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<PAGE> 13
returned, and in any such case, the Secured Obligations shall be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.
Section 17. Miscellaneous.
(a) The Agent may execute any of its duties hereunder by or through
agents or employees and shall be entitled to advice of counsel concerning all
matters pertaining to its duties hereunder.
(b) The Pledgor agrees to promptly reimburse the Agent for actual
and reasonable out-of-pocket expenses, including, without limitation, reasonable
counsel fees, incurred by the Agent in connection with the administration and
enforcement of this Agreement.
(c) Neither the Agent nor any of its officers, directors, employees,
agents or counsel shall be liable for any action lawfully taken or omitted to be
taken by it or them hereunder or in connection herewith, except for its or their
own gross negligence or willful misconduct.
(d) This Agreement shall be binding upon the Pledgor and its
successors and assigns, and shall inure to the benefit of, and be enforceable
by, the Agent and its respective successors and assigns, and shall be governed
by, and construed and enforced in accordance with, the internal laws in effect
in the Commonwealth of Massachusetts without giving effect to principles of
choice of law, and none of the terms or provisions of this Agreement may be
waived, altered, modified or amended except in writing duly signed for and on
behalf of the Agent and the Pledgor.
(e) At any time and from time to time, upon written request of the
Agent, and at the sole expense of the Pledgor, the Pledgor shall promptly and
duly execute and deliver any and all such further instruments and documents and
take such further action as the Agent may reasonably deem desirable to obtain
the full benefits of this Agreement and of the rights and powers herein granted.
Section 18. Severability. If for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of or effect those portions of
this Agreement which are valid.
Section 19. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other a communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and either shall be delivered in accordance with the
provisions of Section 14.1 of the Credit Agreement, addressed as follows:
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<PAGE> 14
(a) If to the Agent, at:
100 Federal Street
Boston, MA 02110
Attention: Christopher S. Allen, Director
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: Edward Matson Sibble, Jr., P.C.
(b) If to the Pledgor, at:
40 Hudson Road
Shawmut Park
Canton, MA 02021
Attention: Chief Financial Officer
with a copy to:
Goulston & Storrs, P.C.
400 Atlantic Avenue
Boston, MA 02110-3333
Attention: Kitt Sawitsky, Esq. or
Daniel Avery, Esq.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, on the date of telecopy transmission or three (3)
Business Days after the same shall have been deposited in the United States
mail, postage prepaid. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to the
persons designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
Section 20. Section Titles. The Section titles contained in this Agreement
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
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<PAGE> 15
Section 21. Counterparts. This Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one
agreement.
Section 22. Conflict of Terms. Except as otherwise explicitly provided in
this Agreement, if any provision contained in this Agreement is in conflict with
or inconsistent with any provision in the Credit Agreement, the provision
contained in the Credit Agreement shall govern and control, to the extent of
such conflict or inconsistency.
[INTENTIONALLY LEFT BLANK]
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Stock Pledge
Agreement to be duly executed as of the date first written above.
TWEETER HOME ENTERTAINMENT
GROUP, INC.
By: /s/ JEFFREY S. STONE
----------------------------
Name:
Title:
The undersigned hereby join in the above Agreement for the sole purpose of
consenting to and being bound by the provisions of Sections 6, 7 and 8 thereof,
the undersigned hereby agreeing to cooperate fully and in good faith with the
Agent and the Pledgor in carrying out such provisions.
NEW ENGLAND AUDIO CO., INC. TWEETER HOME ENTERTAINMENT
GROUP FINANCING COMPANY
TRUST
By: /s/ JEFFREY S. STONE By: /s/ JEFFREY S. STONE
---------------------------- ----------------------------
Name: Trustee:
Title:
Accepted and Acknowledged by:
BANKBOSTON, N.A.
By: /s/ CHRISTOPHER S. ALLEN
----------------------------
Name:
Title: Director
16
<PAGE> 17
SCHEDULE I
to the Guarantor's Stock Pledge Agreement
Attached to and forming a part of that certain Guarantor's Stock Pledge
Agreement dated as of July 20, 1998 by Tweeter Home Entertainment Group, Inc. to
BankBoston, N.A.
<TABLE>
<CAPTION>
Class of Certificate Number of
Issuer Stock No(s) Shares
- ------ ----- ----- ------
<S> <C> <C> <C>
New England Audio Co.,
Inc. Common 35 100
Tweeter Home
Entertainment Group
Financing Company Beneficial
Trust Interests 1 100
</TABLE>
<PAGE> 18
SCHEDULE II
to the Stock Pledge Agreement
PLEDGE AMENDMENT
This Pledge Amendment, dated _______, is delivered pursuant to Section
6(d) of the Stock Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to that certain Stock Pledge
Agreement, dated as of July __, 1998 by the undersigned, as Pledgor, to
BankBoston, N.A., and that the Pledged Shares listed on this Pledge Amendment
shall be and become a part of the Pledged Collateral referred to in said Stock
Pledge Agreement and shall secure all Secured Obligations referred to in said
Stock Pledge Agreement.
TWEETER HOME ENTERTAINMENT
GROUP, INC.
By: ________________________________
Name:
Title:
Class of Certificate Number of
Issuer Stock No(s). Shares
------ -------- ----------- ---------
<PAGE> 19
SCHEDULE III
to the Stock Pledge Agreement
SUBSIDIARIES OF PLEDGOR
New England Audio Co., Inc.
Tweeter Home Entertainment Group
Financing Company Trust
<TABLE> <S> <C>
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<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,271,528
<SECURITIES> 0
<RECEIVABLES> 6,211,069
<ALLOWANCES> (564,000)
<INVENTORY> 36,391,887
<CURRENT-ASSETS> 45,437,549
<PP&E> 33,321,403
<DEPRECIATION> (10,878,976)
<TOTAL-ASSETS> 89,394,544
<CURRENT-LIABILITIES> 28,050,476
<BONDS> 0
22,966,062
0
<COMMON> 27,552
<OTHER-SE> (3,555,046)
<TOTAL-LIABILITY-AND-EQUITY> 89,394,544
<SALES> 49,675,691
<TOTAL-REVENUES> 49,675,691
<CGS> 32,256,264
<TOTAL-COSTS> 32,256,264
<OTHER-EXPENSES> 16,334,302
<LOSS-PROVISION> 12,587
<INTEREST-EXPENSE> 745,498
<INCOME-PRETAX> 339,627
<INCOME-TAX> 135,850
<INCOME-CONTINUING> 203,777
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 203,777
<EPS-PRIMARY> (0.35)
<EPS-DILUTED> (0.35)
</TABLE>
