Document:

exv10w29

 

Exhibit 10.29

WARRANT NO. PSP 1

To Purchase 400,000 Shares of Common Stock

of

ENTRX CORPORATION

     This Warrant and the Securities issuable upon exercise of this Warrant
have not been registered under the Securities Act of 1933 (the “1933 Act”) or
under any state securities or “Blue Sky” laws (“Blue Sky Laws”). No transfer,
sale, assignment, pledge, hypothecation or other disposition of this Warrant or
the Securities issuable upon exercise of this Warrant or any interest therein
may be made except (a) pursuant to an effective registration statement under
the 1933 Act and any applicable Blue Sky Laws or (b) if the Corporation has
been furnished with an opinion of counsel for the holder, which opinion and
counsel shall be reasonably satisfactory to the Corporation, to the effect that
no registration is required because of the availability of an exemption from
registration under the 1933 Act and applicable Blue Sky laws.

     THIS CERTIFICATE THAT, for good and valuable consideration Pandora Select
Partners L.P., a British Virgin Islands limited partnership (the “Holder”), or
the Holder’s registered assigns, is entitled to subscribe for and purchase from
Entrx Corporation, a Delaware corporation (the “Corporation”), at any time on
or after December 3, 2003, to and including December 2, 2008 (subject to the
limitations provided in Section 10 below), 400,000 (four hundred thousand)
fully paid and nonassessable shares of the Common Stock of the Corporation at
the price of $1.50 per share (the “Warrant Exercise Price”), subject to the
anti-dilution provisions of this Warrant.

     The shares which may be acquired upon exercise of this Warrant are
referred to herein as the “Warrant Shares.” As used herein, the term “Holder”
means the Holder, any party who acquires all or a part of this Warrant as a
registered transferee of the Holder, or any record holder or holders of the
Warrant Shares issued upon exercise, whether in whole or in part, of the
Warrant. The term “Common Stock” means the common stock, $0.10 par value per
share, of the Corporation.

     This Warrant is subject to the following provisions, terms and conditions:

1. Exercise; Transferability.

     (a) The rights represented by this Warrant may be exercised by the Holder
hereof, in whole or in part (but not as to a fractional share of Common Stock),
by written notice of exercise (in the form attached hereto) delivered to the
Corporation at the principal office of the Corporation prior to the expiration
of this Warrant and accompanied or preceded by the surrender of this Warrant
along with a check in payment of the Warrant Exercise Price for such Warrant
Shares.

     (b) Except as provided in Section 7 hereof, this Warrant may not be sold,
transferred, assigned, hypothecated or divided into two or more Warrants of
smaller denominations, nor may any Warrant Shares issued pursuant to exercise
of this Warrant be transferred.

2. Exchange and Replacement. Subject to Sections 1 and 7 hereof, this Warrant
is exchangeable upon the surrender hereof by the Holder to the Corporation at
its office for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Warrant Shares purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of Warrant Shares (not to exceed the aggregate total number purchasable
hereunder) as shall be designated by the Holder at the time of such surrender.
Upon receipt by the Corporation of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and, in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
it, and upon surrender

 

 

and cancellation of this Warrant, if mutilated, the Corporation will make and
deliver a new Warrant of like tenor, in lieu of this Warrant. This Warrant
shall be promptly canceled by the Corporation upon the surrender hereof in
connection with any exchange or replacement. The Corporation shall pay all
expenses, taxes (other than stock transfer taxes), and other charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant
to this Section 2.

3. Issuance of the Warrant Shares.

     (a) The Corporation agrees that the Warrant Shares shall be and are deemed
to be issued to the Holder as of the close of business on the date on which
this Warrant shall have been surrendered and the payment made for such Warrant
Shares as aforesaid. Subject to the provisions of paragraph (b) of this
Section 3, certificates for the Warrant Shares so purchased shall be delivered
to the Holder within a reasonable time after the rights represented by this
Warrant shall have been so exercised, and, unless this Warrant has expired, a
new Warrant representing the right to purchase the number of Warrant Shares, if
any, with respect to which this Warrant shall not then have been exercised
shall also be delivered to the Holder.

     (b) Notwithstanding the foregoing, however, the Corporation shall not be
required to deliver any certificate for Warrant Shares upon exercise of this
Warrant except in accordance with exemptions from the applicable securities
registration requirements or registrations under applicable securities laws.
Except as described in Section 9, nothing herein shall obligate the Corporation
to effect registrations under federal or state securities laws. If
registrations are not in effect and if exemptions are not available when the
Holder seeks to exercise the Warrant, the Warrant exercise period will be
extended, if need be, to prevent the Warrant from expiring, until such time as
either registrations become effective or exemptions are available, and the
Warrant shall then remain exercisable for a period of at least 30 calendar days
from the date the Corporation delivers to the Holder written notice of the
availability of such registrations or exemptions. The Holder agrees to execute
such documents and make such representations, warranties and agreements as may
be required solely to comply with the exemptions relied upon by the
Corporation, or the registrations made, for the issuance of the Warrant Shares.

4. Covenants of the Corporation. The Corporation covenants and agrees that all
Warrant Shares will, upon issuance, be duly authorized and issued, fully paid,
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof. The Corporation further covenants and agrees that during the
period within which the rights represented by this Warrant may be exercised,
the Corporation will at all times have authorized and reserved for the purpose
of issue or transfer upon exercise of the subscription rights evidenced by this
Warrant a sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Warrant.

5. Anti-dilution Adjustments. The provisions of this Warrant are subject to
adjustment as provided in this Section 5.

     (a) Stock Splits, Dividends and Combinations. The Warrant Exercise Price
shall be adjusted from time to time such that in case the Corporation shall
hereafter:

          (i) pay any dividends on any class of stock of the Corporation payable in
Common Stock or securities convertible into Common Stock;

          (ii) subdivide its then outstanding shares of Common Stock into a greater
number of shares; or

          (iii) combine outstanding shares of Common Stock, by reclassification or
otherwise;

then, in any such event, the Warrant Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (A) the number of shares of Common Stock outstanding
immediately prior to such event,

 

 

multiplied by the then existing Warrant Exercise Price, by (B) the total number
of shares of Common Stock outstanding immediately after such event (including
in each case the maximum number of shares of Common Stock issuable in respect
of any securities convertible into Common Stock), and the resulting quotient
shall be the adjusted Warrant Exercise Price per share. An adjustment made
pursuant to this Subsection shall become effective immediately after the record
date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification. If, as a result of an adjustment made pursuant to this
Subsection, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Corporation, the Board of
Directors (whose determination shall be conclusive) shall determine the
allocation of the adjusted Warrant Exercise Price between or among shares of
such classes of capital stock or shares of Common Stock and other capital
stock. All calculations under this Subsection shall be made to the nearest
cent or to the nearest 1/100 of a share, as the case may be. In the event that
at any time as a result of an adjustment made pursuant to this Subsection, the
holder of any Warrant thereafter surrendered for exercise shall become entitled
to receive any shares of the Corporation other than shares of Common Stock,
thereafter the Warrant Exercise Price of such other shares so receivable upon
exercise of any Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Section.

     (b) Mechanics of Adjustment for Stock Splits, Dividends and Combinations.
Upon each adjustment of the Warrant Exercise Price pursuant to Section 5(a)
above, the Holder of each Warrant shall thereafter (until another such
adjustment) be entitled to purchase at the adjusted Warrant Exercise Price the
number of shares, calculated to the nearest full share, obtained by multiplying
the number of shares specified in such Warrant (as adjusted as a result of all
adjustments in the Warrant Exercise Price in effect prior to such adjustment)
by the Warrant Exercise Price in effect prior to such adjustment and dividing
the product so obtained by the adjusted Warrant Exercise Price.

     (c) Consolidations, Mergers and Reorganization Events. In case of any
consolidation or merger to which the Corporation is a party other than a merger
or consolidation in which the Corporation is the continuing corporation, or in
case of any sale or conveyance to another corporation of the property of the
Corporation as an entirety or substantially as an entirety, or in the case of
any statutory exchange of securities with another corporation (including any
exchange effected in connection with a merger of a third corporation into the
Corporation), there shall be no adjustment under Subsection (a) of this Section
5; but the Holder of each Warrant then outstanding shall have the right
thereafter to convert such Warrant into the kind and amount of shares of stock
and other securities and property which he would have owned or have been
entitled to receive immediately after such consolidation, merger, statutory
exchange, sale or conveyance had such Warrant been converted immediately prior
to the effective date of such consolidation, merger, statutory exchange, sale
or conveyance and, in any such case, if necessary, appropriate adjustment shall
be made in the application of the provisions set forth in this Section with
respect to the rights and interests thereafter of any Holders of the Warrant,
to the end that the provisions set forth in this Section shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in relation
to any shares of stock and other securities and property thereafter deliverable
on the exercise of the Warrant. The provisions of this Subsection shall
similarly apply to successive consolidations, mergers, statutory exchanges,
sales or conveyances.

     (d) Adjustments for Diluting Issues. In addition to the adjustments of
the Warrant Exercise Price provided above, the Warrant Exercise Price shall be
subjected to further adjustment from time to time as follows (the main
operative provision hereof is in Section 5(d)(iii) below):

          (i) Special Definitions:

               (A) “Options” shall mean rights, options or warrants (other than as
excluded by Section 5(d)(i)(D) below) to subscribe for, purchase or otherwise
acquire either Common Stock or Convertible Securities (as defined herein).

 

 

               (B) “Original Issue Date” shall mean the date hereof.

               (C) “Convertible Securities” shall mean securities (other than as excluded
by (4) below) convertible, either directly or indirectly, into or exchangeable
for Common Stock.

               (D) “Additional Shares of Common Stock” shall mean all shares of Common
Stock issued (or, deemed to be issued) by the Corporation after the Original
Issue Date other than shares of Common Stock issued (or deemed to be issued):

                    1. to employees, consultants or directors pursuant to stock option, stock
grant, stock purchase or similar plans or arrangements approved by the
Corporation’s Board of Directors;

                    2. as a dividend or other distribution in connection with which an
adjustment to the Warrant Exercise Price is made;

                    3. in a merger, consolidation, acquisition or similar business combination
that is approved by the Corporation’s Board of Directors;

                    4. pursuant to credit, lease or other commercial financing arrangements
with parties not affiliated with the Corporation that are approved by the
Corporation’s Board of Directors;

                    5. in exchange for technology or other non-cash assets as approved by the
Corporation’s Board of Directors;

                    6. pursuant to any rights or agreements outstanding on the Original Issue
Date; or

                    7. if the Holder agrees in writing that such shares shall not constitute
Additional Shares of Common Stock.

          (ii) Deemed Issue of Additional Shares of Common Stock. Except as
otherwise provided in Section 5(d), in the event the Corporation at any time or
from time to time after the Original Issue Date shall issue any Options or
Convertible Securities or shall fix a record date for the determination of any
holders of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions contained therein
for a subsequent adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such record date shall have been fixed, as of the close of
business on such record date, provided that in any such case in which
Additional Shares of Common Stock are deemed to be issued:

               (A) no further adjustment in the Warrant Exercise Price shall be made upon
the subsequent issue of such Convertible Securities or shares of Common Stock
upon the exercise of such Options or conversion or exchange of such Convertible
Securities;

               (B) if such Options or Convertible Securities by their terms provide, with
the passage of time or otherwise, for any increase or decrease in the
consideration payable to the Company, or increase or decrease in the number of
shares of Common Stock issuable upon the exercise, conversion or exchange
thereof, the Warrant Exercise Price computed upon the original issue thereof or
upon the occurrence of a record date with

 

 

respect thereto, and any subsequent adjustments based thereon, shall, upon any
such increase or decrease becoming effective, be recomputed to reflect such
increase or decrease;

               (C) upon the expiration of any such Option or any rights of conversion or
exchange under such Convertible Securities which shall not have been exercised,
the Warrant Exercise Price computed upon the original issue thereof or upon
occurrence of a record date with respect thereto, and any subsequent
adjustments based thereon, shall, upon such expiration:

                    1. in the case of Convertible Securities or Options for Common Stock, be
recomputed as though the only Additional Shares of Common Stock issued were
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, and the
consideration received therefor was the consideration actually received by the
Company for the issue of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, or for the
issue of all such Convertible Securities, whether or not converted or
exchanged, plus the additional consideration, if any, actually received by the
Company upon such conversion or exchange; and

                    2. in the case of Options for Convertible Securities, be recomputed as
though only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options and the
consideration received by the Company for the Additional Shares of Common Stock
deemed to have been then issued was the consideration actually received by the
Company for the issue of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Company upon the issue of the
Convertible Securities with respect to which such Options were actually
exercised.

               (D) no readjustment pursuant to Section 5(d) shall have the effect of
increasing the Warrant Exercise Price to an amount which exceeds the Warrant
Exercise Price existing immediately prior to the original adjustment with
respect to the issuance of such Options or Convertible Securities, as adjusted
for any Additional Shares of Common Stock issued (or deemed to be issued)
between such original adjustment date and such readjustment date; and

               (E) in the case of any Option or Convertible Security with respect to
which the maximum number of shares of Common Stock issuable upon exercise or
conversion or exchange thereof is not determinable, no adjustment to the
Warrant Exercise Price shall be made until such number becomes determinable.

          (iii) Adjustments for Issuance of Additional Shares of Common Stock. If
the Company, at any time after the issuance of this Warrant, shall issue any
Additional Shares of Common Stock (otherwise than as provided in the Sections
5(a) and 5(c) above) at a price per share less than the applicable Warrant
Exercise Price then in effect or without consideration, then the applicable
Warrant Exercise Price upon each such issuance shall be adjusted to that price
(rounded to the nearest cent) determined by multiplying the applicable Warrant
Exercise Price then in effect by a fraction, (i) the numerator of which shall
be equal to the sum of (A) the number of shares of Common Stock outstanding
immediately prior to the issuance of such Additional Shares of Common Stock
plus (B) the number of shares of Common Stock (rounded to the nearest whole
share) which the aggregate consideration for the total number of such
Additional Shares of Common Stock so issued would purchase at a price per share
equal to the applicable Warrant Exercise Price then in effect, and (ii) the
denominator of which shall be equal to the number of shares of Common Stock
outstanding immediately after the issuance of such Additional Shares of Common
Stock.

                  The provisions of this Section 5(d)(iii) shall not apply under any of the
circumstances for which an adjustment is provided in Sections 5(a), 5(b) or
5(c) above. No adjustment of the applicable Warrant Exercise Price shall be
made under this Section 5(d) upon the issuance of any Additional Shares of
Common Stock which are issued pursuant to any Options or Convertible Securities
if upon the issuance of such Options or Convertible Securities (x) any
adjustment shall have been made pursuant to Section 5(d)(ii) above or (y) no

 

 

adjustment was required pursuant to this Section 5(d)(iii). No adjustment of
the applicable Warrant Exercise Price shall be made under this Section
5(d)(iii) in an amount less than $.01 per share, but any such lesser adjustment
shall be carried forward and shall be made at the time and together with the
next subsequent adjustment, if any, which together with any adjustments so
carried forward shall amount to $.01 per share or more; provided, however,
that upon any adjustment of the applicable Warrant Exercise Price as a result
of any dividend or distribution payable in Common Stock or Convertible
Securities or the reclassification, subdivision or combination of Common Stock
into a greater or smaller number of shares, the foregoing figure of $.01 per
share (or such figure as last adjusted) shall be adjusted (to the nearest
one-half cent) in proportion to the adjustment in the applicable Warrant
Exercise Price.

          (iv) Determination of Consideration. For purposes of this Section 5(d),
the consideration received by the Corporation for any Additional Shares of
Common Stock issued (or deemed to be issued) shall be computed as follows:

               (A) Cash and Property. Such consideration shall:

                    (i) insofar as it consists of cash, be computed at the aggregate amount of
cash received by the Company;

                    (ii) insofar as it consists of securities and the value of such securities
is not determinable by reference to a separate agreement, (A) if the securities
are then traded on a national securities exchange or the Nasdaq Stock Market
(or a similar national quotation system), then the value shall be computed
based on the average of the closing prices of the securities on such exchange
or system over the thirty (30)-day period ending on the date of receipt by the
Corporation, (B) if the securities are actively traded over-the-counter, then
the value shall be computed based on the average of the closing bid prices over
the thirty (30) day ending on the date of receipt by the Corporation, and (C)
if there is no active public market, then the value shall be computed based on
the fair market value thereof on the date of receipt by the Corporation, as
determined in good faith by the Board of Directors;

                    (iii) insofar as it consists of property other than cash and securities,
be computed at the fair market value thereof at the time of such issuance, as
determined in good faith by the Board of Directors; and

                    (iv) if Additional Shares of Common Stock are issued (or deemed to be
issued) together with other shares or securities or other assets of the
Corporation for consideration which cover both, by the proportion of such
consideration so received, computed as provided in the immediately preceding
Sections 5(d)(iv)(A)(i), 5(d)(iv)(A)(ii) and 5(d)(iv)(A)(iii), as determined in
good faith by the Board of Directors.

               (B) Options and Convertible Securities. The consideration received by the
Corporation for Additional Shares of Common Stock deemed to have been issued
pursuant to Section 5(d) relating to Option and Convertible Securities, shall
be the sum of (x) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
Securities, plus (y) the minimum aggregate amount of additional consideration
(as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such consideration)
payable to the Corporation upon the exercise of such Options or the conversion
or exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities.

     (e) Additional Warrants Upon Registration Rights Failure. In the event
that the Corporation fails by June 1, 2004 (the “Registration Deadline”) to
obtain effectiveness under the 1933 Act and applicable state securities laws of
a registration statement for the benefit of the Holder under the terms of a
Registration Rights Agreement of this date covering all of the Warrant Shares
hereunder and all of the securities issuable as payment under a

 

 

convertible promissory note of this date issued by the Corporation to the
original Holder hereof (the “Note”) or into which such Note may be converted
(such failure being considered a default under this Warrant), then for each
full month thereafter (prorated for partial months) that this failure continues
(the “Failure Term”), the Holder shall be entitled to subscribe for and
purchase an additional 6,500 fully paid and nonassessable shares of the
Corporation’s Common Stock at the Warrant Exercise Price, subject to the other
anti-dilution provisions of this Warrant (the “Monthly Additional Warrants”).
If the Failure Term continues for more than 120 days, the Monthly Additional
Warrants shall increase to 13,000 shares during the continuation of the Failure
Term, subject to the other anti-dilution provisions of this Warrant. The
Holder may exercise its rights to acquire these shares at any time through the
later of December 2, 2008 or one year after the Corporation obtains
effectiveness of the registration statement. Despite the foregoing, if the
Holder consents (as provided under the Registration Rights Agreement) to an
extension of the effective date of the registration statement beyond June 1,
2004, then the Registration Deadline hereunder shall be extended by a like
period.

     (f) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Warrant Exercise Price or the number of Warrants covered
hereby pursuant to this Section 5, the Corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to the Holder a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of the Holder, furnish or cause to be furnished to the Holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Warrant Exercise Price at the time in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the exercise of this Warrant.

6. No Voting Rights. This Warrant shall not entitle the Holder to any voting
rights or other rights as a shareholder of the Corporation.

7. Notice of Transfer of Warrant or Resale of the Warrant Shares.

     (a) Subject to the sale, assignment, hypothecation or other transfer
restrictions set forth in Section 1 hereof, the Holder, by acceptance hereof,
agrees to give written notice to the Corporation before transferring this
Warrant or transferring any Warrant Shares of such Holder’s intention to do so,
describing briefly the manner of any proposed transfer. Promptly upon
receiving such written notice, the Corporation shall present copies thereof to
the Corporation’s counsel. If in the opinion of such counsel the proposed
transfer may be effected without registration or qualification (under any
federal or state securities laws), the Corporation, as promptly as practicable,
shall notify the Holder of such opinion, whereupon the Holder shall be entitled
to transfer this Warrant or to dispose of Warrant Shares received upon the
previous exercise of this Warrant, all in accordance with the terms of the
notice delivered by the Holder to the Corporation; provided that an appropriate
legend may be endorsed on this Warrant or the certificates for such Warrant
Shares respecting restrictions upon transfer thereof necessary or advisable in
the opinion of counsel and satisfactory to the Corporation to prevent further
transfers which would be in violation of Section 5 of the 1933 Act and
applicable state securities laws; and provided further that the prospective
transferee or purchaser shall execute such documents and make such
representations, warranties and agreements as may be required solely to comply
with the exemptions relied upon by the Corporation for the transfer or
disposition of the Warrant or Warrant Shares.

     (b) If, in the opinion of the Corporation’s counsel, the proposed transfer
or disposition of this Warrant or such Warrant Shares described in the written
notice given pursuant to this Section 7 may not be effected without
registration or qualification of this Warrant or such Warrant Shares, the
Corporation shall promptly give written notice thereof to the Holder, and the
Holder will limit its activities in respect to such transfer or disposition as,
in the opinion of such counsel, are permitted by law.

8. Fractional Shares. Fractional shares shall not be issued upon the exercise
of this Warrant, but in any case where the holder would, except for the
provisions of this Section, be entitled under the terms hereof to receive a

 

 

fractional share, the Corporation shall, upon the exercise of this Warrant for
the largest number of whole shares then called for, pay a sum in cash equal to
the sum of (a) the excess, if any, of the Market Price of such fractional share
over the proportional part of the Warrant Exercise Price represented by such
fractional share, plus (b) the proportional part of the Warrant Exercise Price
represented by such fractional share. For purposes of this Section, the term
“Market Price” with respect to shares of Common Stock of any class or series
means the last reported sale price or, if none, the average of the last
reported closing bid and asked prices on any national or regional securities
exchange or quoted in the National Association of Securities Dealers, Inc.’s
Automated Quotations System (“Nasdaq”), or if not listed on a national or
regional securities exchange or quoted in Nasdaq, the average of the last
reported closing bid and asked prices as reported by Metro Data Corporation,
Inc. or the OTC Bulletin Board from quotations by market makers in such Common
Stock on the Minneapolis-St. Paul local over-the-counter market, or if no
quotations in such Common Stock are available, the fair market value of the
shares as determined in good faith by the Board of Directors of the
Corporation.

9. Registration Rights. Holder shall have registration rights for the shares
underlying its Warrants as described in the Registration Rights Agreement of
this same date.

10. Limitation of Exercise of this Warrant. Despite anything to the contrary
in this Warrant, the Holder may not exercise this Warrant during the time
period and to the extent that the shares of Common Stock that the Holder could
acquire upon the exercise hereof would cause Holder’s Beneficial Ownership (as
defined below) of the Corporation’s Common Stock to exceed 4.99%. These
limitations on the right to exercise this Warrant shall first reduce the
Holder’s Beneficial Ownership of the Corporation’s Common Stock before
limitation of the Holder’s conversion rights, or the Corporation’s right to
make payments in Common Stock, under the Note. The parties shall compute the
Holder’s “Beneficial Ownership” of Common Stock in accordance with U.S.
Securities and Exchange Commission Rule 13d-3. The Holder will, at the request
of the Corporation, from time to time, notify the Corporation of the Holder’s
computation of Holder’s Beneficial Ownership.

     IN WITNESS WHEREOF, Entrx Corporation has caused this Warrant to be signed
by its duly authorized officer and this Warrant to be dated December 3, 2003.

	 	 	 	 	 
	 	ENTRX CORPORATION

By 

       Wayne W. Mills, Chief Executive Officer

 	 
	 	 	 
	 	 	 
	 	 	 

 

 

EXERCISE FORM

(To Be Executed by the Registered Holder in Order to Exercise the Warrant)

To: Entrx Corporation

The undersigned hereby irrevocably elects to exercise
the attached Warrant to purchase for cash,
          of the shares issuable upon the exercise of
such Warrant, and requests that certificates for such shares (together with a
new Warrant to purchase the number of shares, if any, with respect to which
this Warrant is not exercised) shall be issued in the name of:

	 	 	 
	NAME:

	 	

	 
	 	 
	SOC. SEC. or

TAX I.D. NO.

	 	

	 
	 	 
	ADDRESS:

	 	

	 
	 	 
	 

	 	

	 
	 	 
	Date:
______, 20 ______.

	 	

Signature *

	*	 	The signature on the Notice of Exercise of Warrant must correspond to
the name as written upon the face of the Warrant in every particular
without alteration or enlargement or any change whatsoever. When signing
on behalf of a corporation, partnership, trust or other entity, please
indicate your position(s) and title(s) with such entity.

 

 

ASSIGNMENT FORM

(To be Executed by the Registered Holder in Order to Transfer the Warrant)

To: Entrx Corporation

     FOR VALUE RECEIVED, the undersigned
hereby sells, assigns, and transfers unto
          the right to purchase the
securities of Entrx Corporation to which the within Warrant relates and appoints
          , attorney, to transfer said
right on the books of Entrx Corporation with full power of substitution in the premises.

	 	 	 
	

	 	

	Dated:
______ 20 ______

	 	(Signature)
	 
	 	 
	

	 	Address:<PAGE>

                                                                    EXHIBIT 10.5

                                                                  Execution Copy

         SUBSCRIPTION AND OPTION AGREEMENT dated as of January 14, 2004 (this
"Agreement") between (i) TELEX COMMUNICATIONS HOLDINGS, INC., a Delaware
corporation (the "Company"), and (ii) RAYMOND V. MALPOCHER ("Executive").

         Capitalized terms used but not otherwise defined herein shall have the
meanings set forth in Section 1 hereof.

                                   Witnesseth:

         Whereas, the Company and Executive have entered into an Employment
Agreement dated as of April 14, 2003 (the "Original Employment Agreement")
pursuant to which Executive would serve as the President and Chief Executive
Officer of the Company; and

         Whereas, pursuant to the Employment Agreement, the Company agreed to
issue to Executive shares of Common Stock and an option to purchase additional
shares of Common Stock; and

         Whereas, the Original Employment Agreement was assigned by the Company
to Telex Communications, Inc., a Delaware corporation ("Telex"), an indirect,
wholly-owned subsidiary of the Company on November 19, 2003; and

         Whereas, the Original Employment Agreement is being amended as of the
date hereof, to provide for the purchase of additional stock and options of the
Company by Executive (as so amended, the (the "Employment Agreement"); and

         Whereas, the Company is willing to sell such shares of stock and issue
such options to Executive.

         Now, therefore, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:

         1. Definitions. As used herein, the following terms shall have the
following meanings:

                  "Affiliate" shall mean, as to any Person, any other Person
which, directly or indirectly, controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any member of
the family (including parents, spouse, children and grandchildren) of such
individual and any trust whose principal beneficiary is such individual or one
or more members of such family and any Person who is controlled by any such
member or trust. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies of a Person (whether through ownership of
securities

<PAGE>

or partnership or other ownership interests, by contract or otherwise); and any
Person which owns directly or indirectly 10% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 10% or more of a partnership or other ownership interest of any
other Person will be deemed to control such corporation or other Person. Without
limiting the generality of the foregoing, "Affiliate" shall also include the
following: (i) any direct or indirect Subsidiary of such Person or of any other
Affiliate of such Person; and (ii) any partnership of which such Person or any
of the foregoing or any other Affiliate is a general partner, or is the holder
of any interest in such partnership entitling the holder thereof to 10% or more
of the profits and losses of the partnership or which represents 10% or more of
the contributed capital or the capital contribution requirements of the
partnership. The Company and its Subsidiaries shall not be deemed to be
"Affiliates" of Executive for purposes of this Agreement.

                  "Change of Control" shall have the meaning given such term, or
any similar term, under the Credit Documents.

                  "Common Stock" shall mean the Common Stock, par value $0.01
per share, of the Company.

                  "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock determined on a fully diluted basis giving effect to all
outstanding Common Stock Equivalents.

                  "Common Stock Equivalents" shall mean the Common Stock and all
securities convertible into or exchangeable for Common Stock or any options,
warrants, convertible securities or other rights to acquire Common Stock or such
convertible or exchangeable securities.

                  "Company" shall have the meaning given such term at the
beginning of this Agreement.

                  "Credit Documents" shall mean and include: (i) the Credit
Agreement dated as of November 19, 2003, by and among Telex, the other persons
designated as "Credit Parties" on the signature pages thereof, the Lenders who
become party to such agreement, and General Electric Capital Corporation, as the
initial L/C Issuer and as Agent; (ii) the Indenture dated as of November 19,
2003 among Telex, the Guarantors named therein, and BNY Midwest Trust Company,
as Trustee and Collateral Agent, governing Telex's 11 1/2% Senior Secured Notes
due 2008, (iii) the Indenture dated as of November 19, 2003 by and between
Intermediate Holdings, as Issuer, and BNY Midwest Trust Company, as Trustee and
Collateral Agent governing Intermediate Holdings' 13% Senior Subordinated
Discount Notes due 2009; and (iv) any refunding, restructuring, replacement,
substitution, renewal, modification, increase or extension of any of the
foregoing.

                  "Employment Agreement" shall have the meaning given such term
in the recitals to this Agreement.

                                       2
<PAGE>

                  "Executive" shall have the meaning given such term at the
beginning of this Agreement.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor statute or statutes thereto.

                  "Government" shall mean (or in the case of "Governmental"
shall refer to): (i) the governments of the United States and any country
wherein the Company engages in business; (ii) the government of any state,
province, county, municipality, city, town or district of any such country; and
(iii) any ministry, agency, department, authority, commission, administration,
corporation, bank, court, magistrate, tribunal, arbitrator, instrumentality or
political subdivision of, or within the geographical jurisdiction of, any
government described in the foregoing clauses (i) and (ii).

                  "Initial Shares" shall have the meaning given such term in
Section 2 hereof.

                  "Initial Share Purchase Price" shall have the meaning given
such term in Section 2 hereof.

                  "Insolvency Event", when used with respect to any Person,
shall mean and include any of the following affecting such Person or the assets
of such Person or his estate: bankruptcy; reorganization; insolvency proceeding;
receivership; appointment of a trust or conservatorship; foreclosure on or
seizure of a material portion of the assets of such Person or his estate;
enforcement of any lien, mortgage, collateral assignment or similar agreement or
security interest on a material portion of the assets of such Person or his
estate; or any similar proceeding or action affecting such Person or his estate
or a material portion of the assets of such Person or his estate.

                  "Intermediate Holdings" shall mean Telex Communications
Intermediate Holdings, LLC, a Delaware limited liability company.

                  "Interested Party" when used with respect to any Sale of the
Company shall mean and include: (i) any Person or "group" (as such term is used
in Rule 13d-5(b) under the Exchange Act), which is the "beneficial owner" (as
such term is used in Rule 13d-3 under the Exchange Act) of more than 10% of the
shares of the Common Stock Deemed Outstanding as of immediately prior to any
Sale of the Company Effective Date; (ii) any Affiliate, director, officer or
equity security holder of any Person or group described in the preceding clause
(i); and (iii) any director or officer the Company or any Subsidiary of the
Company, and any Affiliate of any such director or officer of the Company or any
Subsidiary of the Company.

                  "Law" shall mean any of the following of, or issued by, any
Government, including without limitation any amendment, modification or
supplementation of any of the following from time to time subsequent to the
original enactment, adoption, issuance, announcement, promulgation or granting
thereof and prior to the date hereof: any statute, law, act, ordinance, code,
rule or regulation or any writ, injunction, award, decree, judgment or order of
any Government.

                                       3
<PAGE>

                  "Liens" shall mean liens, attachments, encumbrances,
restrictions, licenses, claims, security interests, mortgages, pledges, charges,
usufruct, easement, note of litis, lis pendens, escrows, precautionary measures
(whether taken prior to or after the initiation of the lawsuit), privilege,
right of option or preference, options, rights of first refusal or offer, or
other right of a real or personal kind having similar effect or other limitation
to full ownership, transfer and/or availability of the assets subject to the
Lien in question.

                  "Liquidation Effective Date" shall have the meaning given such
term in Section 3(b)(ii) hereof.

                  "Majority Holders" shall mean the holders of record of more
than 50% of the Common Stock outstanding.

                  "Mandatory Sale Triggering Event" shall have the meaning given
such term in Section 8(a) hereof.

                  "Mandatory Sale Election" and "Mandatory Sale Election Period"
shall have the meaning given such term in Section 8(b) hereof.

                  "Mandatory Sale of Shares" shall have the meaning given such
term in Section 8(c) hereof.

                  "Mandatory Sale Option" shall have the meaning given such term
in Section 8(a) hereof.

                  "Mandatory Sale Purchase Price" shall have the meaning given
such term in Section 8(a) hereof.

                  "Mandatory Sale Shares" shall have the meaning given such term
in Section 8(a) hereof.

                  "Option" shall have the meaning given such term in Section
3(a)(i) hereof.

                  "Option Exercise Notice" shall have the meaning given such
term in Section 3(b)(i) hereof.

                  "Option Exercise Price" shall have the meaning given such term
in Section 3(b)(ii) hereof.

                  "Option Expiration Date" shall have the meaning given such
term in Section 3(b)(ii) hereof.

                  "Option Shares" shall have the meaning given such term in
Sections 3(a)(i) and 3(a)(ii) hereof.

                                       4
<PAGE>

                  "Permitted Transfers" shall have the meaning given such term
in Section 6(b) hereof.

                  "Person" shall mean an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization or a Government.

                  "Public Offering" shall mean the closing of a sale by the
Company to the public of Common Stock for the account of the Company pursuant to
an effective registration statement under the Securities Act.

                  "Qualified Public Offering" shall mean the closing of an
underwritten Public Offering having an aggregate value (based upon the offering
price of such Public Offering) of at least $40 million.

                  "Related Persons" when used with respect to any other Person
shall mean and include: members of the family of such Person (including without
limitation natural and adopted children, parents, grand-parents, siblings and
children of siblings); the estate of such Person upon such Person's death;
descendents of such Person; and trusts or similar entities created for the
benefit of such Person or any Related Person.

                  "Restricted Securities" shall mean and include the Initial
Shares, the Option and the Option Shares.

                  "Sale of the Company" shall have the meaning given such term
in Section 7(a) hereof.

                  "Sale of the Company Effective Date" shall have the meaning
given such term in Section 3(b)(ii) hereof.

                  "Securities Act" shall mean the Securities Act of 1933, as
amended and in effect from time to time, together with the rules and regulations
promulgated thereunder from time to time by the United States Securities and
Exchange Commission.

                  "Subsidiary" shall mean, with respect to any Person, any
corporation, partnership, association or other business entity of which: (i) if
a corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof; or (ii) if a partnership, association
or other business entity, a majority of the partnership or other similar
ownership interest thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be deemed to
have a majority ownership interest in a partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
partnership, association or other business entity gains or losses or shall be or
control

                                       5
<PAGE>

the managing director, managing member or a general partner or other managing
person of such partnership, association or other business entity.

                  "Transfer" or "Transferred" in connection with any Restricted
Securities shall mean a sale, assignment, gift, pledge, mortgage, hypothecation
or other transfer of, the imposition of any Lien on or the grant of any interest
therein, whether occurring voluntarily or involuntarily, directly or indirectly,
or by operation of law or otherwise.

                  "Transferee" shall mean Persons to whom Restricted Securities
are Transferred.

         2. Issuance of Initial Shares. Simultaneously with the execution and
delivery of this Agreement, the Company shall issue to Executive, and Executive
shall purchase, 300,000 shares of the Common Stock (the "Initial Shares") at a
price of $0.30 per Initial Share (the "Initial Shares Purchase Price"), or
$90,000.00 in the aggregate, in cash. The Company shall cause certificates
evidencing the Initial Shares to be issued to Executive as soon as practicable
following payment in full of the Initial Shares Purchase Price.

         3. Option.

                  (a)      (i) Effective as of the date hereof, the Company
hereby grants to Executive the personal and non-transferable right to purchase
(the "Option") from time to time, in whole or in part, up to 100,000 shares (the
"Option Shares") of the Common Stock.

                           (ii) The number of Option Shares which may be
purchased pursuant to the Option to the extent not yet exercised and/or, at the
election of the Company, the Option Exercise Price under the Option to the
extent not yet exercised shall be proportionately adjusted from time to time in
the case of any stock dividend (including without limitation any dividend or
distribution to holders of the Common Stock of any Common Stock Equivalents),
stock split, stock combination, reclassification or recapitalization affecting
as a class the Common Stock outstanding occurring subsequent to the date hereof.
All adjustments and other determinations made by the Board of Directors of the
Company with respect to the Option shall be made in good faith and shall be
final and binding on the Company and Executive. Any other shares of the capital
stock or securities of the Company which shall be issued pursuant to the Option
shall be deemed to be "Option Shares" for all purposes of this Agreement unless
the context otherwise requires.

                  (b)      (i) The Option shall be exercisable from time to
time, in whole or in part, on or before the Option Expiration Date upon written
notice given by Executive to the Company prior to the Option Expiration Date (an
"Option Exercise Notice") accompanied by the payment by Executive to the Company
of the amount of $15.00 per Option Share (the "Option Exercise Price") to be
purchased pursuant to the Option Exercise Notice.

                           (ii) For purposes hereof, the "Option Expiration
Date" shall be the earlier of: (A) April 30, 2008; (B) the date on which any
Sale of the Company shall have been effected (a "Sale of the Company Effective
Date"), unless the Company and Executive shall have agreed to a different
treatment of the Option in connection with any such Sale of the Company;

                                       6
<PAGE>

(C) the date on which any liquidation, dissolution or winding-up of the Company
shall have been effected (a "Liquidation Effective Date"); (D) the death of
Executive; or (E) the effective date of any termination of the employment of the
Executive under the Employment Agreement.

                           (iii) The Company shall give Executive at least 15
days prior written notice of any Sale of the Company Effective Date or any
voluntary Liquidation Effective Date.

                           (iv) The Option to the extent not duly and timely
exercised on or before the Option Expiration Date shall terminate and expire
automatically without the necessity of any notice or action by the Company.

                  (c)      (i) Upon payment in full of the Option Exercise
Price, Executive shall be deemed the holder of record of the Option Shares which
are the subject of the Option Exercise Notice, and the Company shall cause
certificates evidencing such Option Shares to be issued to Executive as soon as
practicable. However, Executive shall not have solely on account of the Option
any rights of a stockholder of the Company, either at law or in equity, or to
any notice of meetings of stockholders or of any other proceedings of the
Company, except as expressly provided herein.

                           (ii) The Company shall at all times reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of providing for the exercise of the Option, such number of shares of
Common Stock as shall, from time to time, be sufficient therefor.

                           (iii) The issuance of any Option Shares and the
delivery of certificates representing Option Shares shall be made without charge
to Executive for any tax or other charge in respect of such issuance. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of any certificate in
a name other than that of Executive, and the Company shall not be required to
issue or deliver any such certificate unless and until the Person requesting the
issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.

         4. Restricted Securities; Legend.

                  (a) Executive acknowledges and confirms as follows: The
Restricted Securities are or will be issued in reliance upon and in accordance
with the exemption from registration afforded by Section 4(2) the Securities Act
and Regulation D thereunder. Executive is acquiring the Restricted Securities
for investment for Executive's own account and not with a view to any public
sale or other distribution thereof. Executive has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company and is a sophisticated purchaser and capable of
evaluating the merits and risks of acquiring the Restricted Securities.
Executive, by reason of Executive's management, business or financial
experience, has the capacity to protect Executive's own interests in connection
with the purchase of the Restricted Securities. Executive acknowledges and
agrees as follows: (i) the Restricted Securities are "restricted securities" (as
defined under the rules and regulations promulgated under the Securities Act)
and as such may not be sold or transferred unless registered under the
Securities

                                       7
<PAGE>

Act, unless an exemption from registration thereunder is available in connection
with any such sale or transfer or unless such registration requirements are not
otherwise applicable to any such sale or transfer; (ii) the Restricted
Securities have not been issued pursuant to any registration or similar filing,
listing or prospectus or document delivery requirements under the laws, rules or
regulations of any Government or the rules, regulations or guidelines of any
stock exchange or quotation system, and the Company has no obligation to effect
any of the foregoing with respect to the Restricted Securities; and (iii)
Executive has received, or has had access to, all information which Executive
considers necessary or advisable to enable Executive to make a decision
concerning the purchase of the Restricted Securities and has been given the
opportunity to ask questions of, and receive answers from, the Company and the
management of the Company regarding the business and prospects of the Company
and the terms and conditions of the issuance of the Restricted Securities.
Executive acknowledges that an investment in the Company involves a high degree
of risk and is subject to a substantial risk of loss.

                  (b) All certificates and other instruments evidencing the
Restricted Securities shall bear a restrictive legend in substantially the
following form:

                  "The securities represented hereby are subject to the terms
         and conditions of the Subscription and Option Agreement dated as of
         January 14, 2004 (the "Subscription and Option Agreement") between the
         Company and Raymond V. Malpocher (as such agreement may be amended or
         supplemented subsequent to such date). Pursuant to the Subscription and
         Option Agreement, no "Transfer" (as defined in the Subscription and
         Option Agreement) of the securities represented hereby may be effected
         except as permitted by the Subscription and Option Agreement.

                  The securities represented hereby have not been issued
         pursuant to any registration or similar filing, listing or prospectus
         or document delivery requirements under the laws of any Government or
         the rules, regulations or guidelines of any stock exchange or quotation
         system, and the Company has no obligation to effect any of the
         foregoing with respect to the securities. No Transfer of the securities
         represented hereby may be made without compliance with any of the
         foregoing, unless an exemption thereunder is available in the opinion
         of counsel for the Company."

         5. Representations and Warranties.

                  (a) Each of the parties hereto represents and warrants to each
other party hereto as follows as of the date of this Agreement:

                           (i) Such party may execute, deliver and perform this
Agreement without the necessity of such party obtaining any consent, approval,
authorization, registration, filing or waiver or giving any notice or otherwise,
except for any of the foregoing which have been irrevocably obtained or given
and, in the case of applicable securities laws, subject to the representations
and warranties made by Executive in Section 4(a) hereof.

                           (ii) This Agreement constitutes the legal, valid and
binding obligation of such party, enforceable in accordance with its terms,
except as may be limited by bankruptcy,

                                       8
<PAGE>

reorganization, fraudulent conveyance, insolvency and similar laws of general
application relating to or affecting the enforcement of rights of creditors.

                  (b) The Company represents and warrants to Executive as
follows as of the date of this Agreement:

                           (i) This Agreement and the issuance of the Restricted
Securities have been duly authorized by the Board of Directors of the Company.

                           (ii) The Initial Shares and the Option Shares will
be, when issued and upon the payment in full of the Initial Shares Purchase
Price or the Option Exercise Price (as applicable) with respect thereto, duly
authorized, validly issued, fully paid and non-assessable shares of the Company,
and will be issued free of preemptive rights. When issued and upon the payment
in full of the Initial Shares Purchase Price or the Option Exercise Price (as
applicable) with respect thereto, valid title to the Initial Shares and the
Option Shares (as applicable) will be acquired by Executive, free and clear of
adverse claims created by the Company.

                           (iii) The Company has authority to issue: (i) 10
million shares of Common Stock; (ii) 900 shares of Series A Preferred Stock, par
value $0.01 per share (the "Series A Preferred Stock"); and (iii) five million
shares of Series B Preferred Stock, par value $0.01 per share (the "Series B
Preferred Stock"). The shares of the Company's Series A Preferred Stock and
Series B Preferred Stock which were outstanding prior to April 16, 2002 were
converted into an equal number of shares of Common Stock as of that date. The
Company has outstanding as of the date hereof an aggregate of 6,135,702 shares
of Common Stock and warrants to purchase an additional 25,333.85 shares of the
Common Stock.

         6. Limitation on Transfer of Shares.

                  (a) Executive shall not effect any Transfer of the Restricted
Securities, except for Permitted Transfers (but subject to the provisions of
Section 4(a) hereof). Any Transfer or attempted Transfer of the Restricted
Securities or any interest therein in violation of the terms and conditions of
this Agreement shall be void and invalid; and the Company may refuse to transfer
any Restricted Securities attempted to be Transferred in violation of this
Agreement. Any Person acquiring Restricted Securities or any interest therein in
violation of the terms and conditions of this Agreement, and any such Restricted
Securities, shall be subject to all of obligations imposed upon or with respect
to the Restricted Securities by this Agreement but shall not be entitled to any
of the rights granted with respect to the Restricted Securities or the holder
thereof by this Agreement.

                  (b) For purposes hereof, "Permitted Transfers" shall mean and
include the following:

                           (i) Transfers by Executive of Initial Shares or,
         subsequent to their issuance, Option Shares pursuant to any Sale of the
         Company or Mandatory Sale of Shares.

                           (ii) Transfers by Executive to Executive's Related
         Persons of Initial Shares or, subsequent to their issuance, Option
         Shares, provided that: (A) such Transfers are

                                       9
<PAGE>

         approved by the Company (which approval shall not be unreasonably
         withheld) and will not result in a Change of Control; and (B) the
         Transferee executes an agreement satisfactory to the Company pursuant
         to which such Transferee agrees that the Transferred Initial Shares and
         Option Shares shall continue to be subject to this Agreement (including
         without limitation the provisions of this Section 6 and Section 7 and 8
         hereof), and that the Transferee shall be subject to this Agreement the
         same as Executive (including without limitation with respect to the
         provisions of this Section 6 and Sections 7, 8 and 9 hereof) and as if
         an original party to this Agreement.

                           (iii) Subsequent to a Qualified Public Offering,
         Transfers by Executive of Initial Shares or, subsequent to their
         issuance, Option Shares (A) if such Transfers are then permitted under
         applicable securities Laws, (B) subject to any restrictions imposed by
         any underwriter of the Qualified Public Offering on Transfers of Common
         Stock by directors, officers and principal stockholders of the Company
         (other than shares of Common Stock which are proposed to be sold by
         stockholders in any such Qualified Public Offering), and (C) provided
         that such Transfers will not result in a Change of Control.

                  (c) All Transfers of Initial Shares and Option Shares shall be
subject to the provisions of Section 4(a) hereof and subject to compliance with
applicable securities laws.

         7. Sale of the Company.

                  (a) In the event that the Board of Directors of the Company or
the Majority Holders shall propose to effect a sale or similar transaction
affecting all the outstanding shares of the Company, a merger, consolidation or
reincorporation of the Company or a sale of all or substantially all of the
assets of Company and its Subsidiaries (a "Sale of the Company"), provided that
such Sale of the Company is not with or to any Interested Party, Executive shall
join in, and cooperate in effecting, the Sale of the Company (including without
limitation the Transfer of the Initial Shares and the Options Shares pursuant to
the Sale of the Company), and shall vote the Initial Shares and the Option
Shares in favor of the Sale of the Company if a vote of the holders of the
Common Stock is necessary to effect the Sale of the Company; provided that
Executive receives the same consideration for each Initial Share and Option
Share as every other holder of the Common Stock.

                  (b) Executive shall execute and deliver all such documents,
certificates, agreements, stock powers, indemnifications, guarantees and
instruments which Majority Holders shall be required to execute and deliver in
connection with any Sale of the Company, and Executive shall deliver the Initial
Shares and the Option Shares free and clear of all Liens.

                  (c) In the event of any Sale of the Company resulting in the
conversion or exchange of the Common Stock, any securities issued in respect of
the Initial Shares and the Option Shares shall, if elected by the Board of
Directors of the Company, be deemed to be "Initial Shares" and "Option Shares"
for purposes of this Agreement; and Executive shall execute any amendment to
this Agreement requested by the Board of Directors to continue the application

                                       10
<PAGE>

of the provisions of this Agreement to any securities received by Executive in
any Sale of the Company.

                  (d) The Chairman of the Board of Directors of the Company is
hereby appointed as the attorney-in-fact of Executive (and the estate of
Executive) with full power and authority to execute and deliver in the name of
Executive (and the estate of Executive) all such documents, certificates,
agreements, indemnifications, guarantees, endorsements and instruments, and to
take all other actions which the Chairman of the Board of Directors of the
Company deems necessary or desirable, in connection with and in furtherance of
any Sale of the Company, including without limitation (i) to execute any stock
powers effecting the Transfer of the Initial Shares and the Options Shares
pursuant to the Sale of the Company, and (ii) to execute or approve any
resolutions of the stockholders of the Company in furtherance of, or desirable
to effect, any Sale of the Company. Such power-of-attorney (which appointment is
irrevocable and coupled with an interest) shall survive the death or disability
of Executive and, in the case of any holder of the Restricted Securities which
is not an individual, any liquidation, dissolution or Insolvency Event affecting
any such holder.

         8. Mandatory Sale of Shares.

                  (a) In the event that any of the following shall have occurred
(a "Mandatory Sale Triggering Event"):

                           (i) the employment of Executive under the Employment
         Agreement shall have been terminated prior to any Sale of the Company
         Effective Date (but other than in connection with any Sale of the
         Company);

                           (ii) an Insolvency Event shall have occurred with
         respect to Executive prior to any Sale of the Company Effective Date;
         or

                           (iii) Executive (or the estate of Executive) shall
         have breached in any respect the provisions of this Agreement;

then the Company shall have the right to require Executive (or the estate of
Executive) to sell to the Company or its assigns (the "Mandatory Sale Option")
all or a portion (as the Company shall elect) of the following amount of Initial
Shares and Option Shares (the "Mandatory Sale Shares"):

                                       11
<PAGE>

<TABLE>
<CAPTION>
If the Mandatory Sale Triggering Event shall
have occurred:                                    Initial Shares     Option Shares
--------------------------------------------      --------------     -------------
<S>                                               <C>                <C>
On or before April 30, 2005.....................     300,000            100,000

During the period commencing May 1, 2005 and
ending April 30, 2006...........................     200,000             66,000

During the period commencing May 1, 2006 and
ending April 30, 2007...........................     100,000             33,000

Subsequent to April 30, 2007....................           0                  0
</TABLE>

                  (b) The Mandatory Sale Option may be exercised by the Company
in whole or in part during the 90-day period following the occurrence of a
Mandatory Sale Triggering Event (the "Mandatory Sale Election Period") by notice
in writing given by the Company to Executive (or to the estate of Executive) (a
"Mandatory Sale Election"). However, in the event that, at the time the Company
is entitled to make a Mandatory Sale Election, the Company is prohibited by the
terms of the Credit Documents from consummating a Mandatory Sale of Shares, then
the applicable Mandatory Sale Election Period may be extended by the Company for
a period ending no later than the 30th day following the date on which such
prohibition under the Credit Documents shall have expired or been waived by the
other parties to the Credit Documents, and the number of Initial Shares and
Option Shares that the Company would otherwise be entitled to purchase during
the original Mandatory Sale Election Period shall continue during such extended
Mandatory Sale Election Period; however, the Company shall use its reasonable
commercial efforts during and after the original Mandatory Sale Election Period
to obtain a consent or waiver under the Credit Documents to allow the Company to
consummate (but the Company shall not be obligated to make a Mandatory Sale
Election) the Mandatory Sale of Shares.

                  (c) In the event that the Company shall make a Mandatory Sale
Election, the Company shall purchase, and Executive (or the estate of Executive)
shall sell, the Mandatory Sale Shares within 30 days following the date on which
the Mandatory Sale Election is received by Executive (or the estate of
Executive) (a "Mandatory Sale of Shares"). Executive (or the estate of
Executive) shall, against the payment of the Mandatory Sale Purchase Price,
deliver the Mandatory Sale Shares to the Company or its assigns free and clear
of any Liens accompanied by stock transfer instruments and endorsements
satisfactory to the Company. The Chairman of the Board of Directors of the
Company is hereby appointed as the attorney-in-fact of Executive (and the estate
of Executive) with full power and authority to execute and deliver in the name
of Executive (or the estate of Executive) all such documents, certificates,
agreements, indemnifications, guarantees, endorsements and instruments, and to
take all other actions which the Chairman of the Board of Directors of the
Company deems necessary or desirable, in connection with and in furtherance of
any Mandatory Sale of Shares.

                  (d) In the event that a Mandatory Sale Election shall be made
by the Company, the "Mandatory Sale Purchase Price" shall be: (A) $0.30 per
Initial Share which is the subject of the Mandatory Sale Election; and (B) the
Option Exercise Price paid by Executive per Option Share

                                       12
<PAGE>

which is the subject of the Mandatory Sale Election. The Mandatory Sale Purchase
Price under this Section 8(d)(ii) shall be proportionately adjusted from time to
time in the case of any stock dividend (including without limitation any
dividend or distribution to holders of the Common Stock of any Common Stock
Equivalents), stock split, stock combination, reclassification or
recapitalization affecting as a class the Common Stock outstanding occurring
subsequent to the date hereof and prior to closing of the Mandatory Sale of
Shares; and any such adjustments shall be made by the Board of Directors of the
Company in good faith and shall be final and binding on the Company and
Executive.

         9. Voting.

                  (a) In connection with any matter submitted to the holders of
the Common Stock or other capital stock or securities of the Company, Executive
shall vote all Initial Shares and Option Shares in favor or against such matters
(including without limitation the election of directors of the Company) in the
same proportion as the Majority Holders shall vote their shares of Common Stock
and other capital stock and securities of the Company.

                  (b) Executive hereby grants to the Chairman of the Board of
Directors of the Company a proxy to vote all Initial Shares and Option Shares as
provided in Section 9(a) hereof; and such proxy shall be irrevocable and shall
survive the death or disability of Executive. In the event that, for any reason,
the foregoing proxy shall become unenforceable or shall have expired, then
Executive shall execute and grant a new proxy on the same terms as provided
herein. The proxy granted hereunder, and the obligations of the undersigned
under this Section 9(a), shall be noted in the voting records and registrar of
the Company if required by the Company.

                  (c) The provisions of this Section 9 shall terminate after any
Qualified Public Offering.

         10. Further Actions. From time to time, as and when requested by the
Company, Executive shall execute and deliver, or cause to be executed and
delivered, such documents and instruments and shall take, or cause to be taken,
such further or other actions as may be deemed necessary or desirable to carry
out the intent and purposes of this Agreement and to consummate and give effect
to, or to evidence, the transactions hereunder and the provisions of this
Agreement.

         11. Miscellaneous.

                  (a) This Agreement, together with the Employment Agreement,
contains the entire agreement among the parties to this Agreement with respect
to the transactions hereunder and supersedes all prior arrangements or
understandings with respect thereto. In the event of any conflict between this
Agreement and the Employment Agreement, the terms of this Agreement shall
govern.

                  (b) The descriptive headings of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.

                                       13
<PAGE>

                  (c) All notices or other communications which are required or
permitted under this Agreement shall be in writing and sufficient if delivered
personally or sent by facsimile transmission, internationally recognized
over-night courier or registered or certified mail, postage prepaid, addressed
as follows:

         If to the Company:                   with a copy to:
         -----------------                    --------------

         12000 Portland Avenue                Stroock & Stroock & Lavan LLP
         Burnsville, Minnesota 55337          180 Maiden Lane
         Telephone: 952.887.7489              New York, New York 10038
         Facsimile: 952.886.3754              Telephone: 212.806.5864
         Attention: Kristine L. Bruer         Facsimile: 212.806.6006
                    General Counsel           Attention: Melvin Epstein

         If to Executive:

         441 Silver Leaf Circle
         Trappe, Pennsylvania 19426

Any such notices or communications shall be deemed to have been received: (i) if
delivered personally or sent by facsimile transmission (with transmission
confirmed in a writing) or nationally recognized overnight courier; or (ii) if
sent by registered or certified mail, on the date on which such mailing was
received by the party to whom it was addressed. Any party may by notice as
aforesaid change the address to which notices or other communications to it are
to be delivered or mailed.

                  (d) This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware.

                  (e) Any action, suit or other proceeding initiated by any
party hereto against the others under or in connection with this Agreement may
be brought only in the United States District Court for the District of Delaware
or a Delaware state court located in the City of Wilmington having appropriate
jurisdiction. The parties hereto hereby submit themselves to the jurisdiction of
any such court for the purpose of any such action and agree that service of
process on them in any such action, suit or proceeding may be effected by the
means by which notices are to be given to it under this Agreement.

                  (f) The parties hereto acknowledge that the award of damages
for any breach of the obligations undertaken by the parties hereto may be
insufficient and inadequate and that the parties hereto shall be entitled to
obtain specific performance of the obligations of the other parties under this
Agreement or other injunctive relief, in addition to damages.

                  (g) In the event that it shall be necessary for any party to
this Agreement to commence litigation to enforce its rights under this
Agreement, and in the event that it is finally determined by a court of
competent jurisdiction that the party against whom such enforcement is sought is
in material breach of its obligations under this Agreement, then the prevailing
party

                                       14
<PAGE>

shall be entitled also to its legal costs in connection with the enforcement of
such rights. In the event that it is finally determined by a court of competent
jurisdiction that the party against whom such enforcement is sought is not in
material breach of its obligations under this Agreement, then such party shall
be entitled to its legal costs in connection with the defense of the action
brought against it.

                  (h) Neither this Agreement nor any claims or rights under this
Agreement shall be assignable otherwise than by operation of law by any party
without the prior written consent of the other parties, and any purported
assignment by any party without the prior written consent of the other parties
shall be void. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors (whether by merger or
otherwise) and permitted assigns.

                  (i) Any waiver of any term or condition of this Agreement, or
any amendment or supplementation of this Agreement, shall be effective only if
in writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Agreement shall not in any way affect, limit or waive a
party's rights under this Agreement at any time to enforce strict compliance
thereafter with every term or condition of this Agreement.

                  (j) Notwithstanding any other provision of this Agreement,
this Agreement shall not create benefits on behalf of any third party or any
other Person; and this Agreement shall be effective only as among the parties
hereto, their successors and permitted assigns.

                  (k) In the event that any provision contained in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and the remaining provisions of this Agreement
shall not, at the election of the party for whose benefit the provision exists,
be in any way impaired.

                  (l) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or the terms hereof to produce or
account for more than one of such counterparts.

             [The remainder of this page intentionally left blank.]

                                       15
<PAGE>

         In witness whereof, the undersigned have executed this Agreement as of
the date first above written.

TELEX COMMUNICATIONS, HOLDINGS, INC.         Executive:

By:__________________________________        ___________________________________
   Name: Gregory Richter                           RAYMOND V. MALPOCHER
   Title: Chief Financial Officer

                                 SPOUSAL CONSENT

         The undersigned, being the spouse of Raymond V. Malpocher
("Executive"), hereby: (i) consents to the terms and conditions of the
Subscription and Option Agreement dated as of January 14, 2004 (the "Agreement")
between Telex Communications Holdings, Inc. (the "Company") and Executive; (ii)
agrees that the Restricted Securities (as defined in the Agreement) shall be
subject to the terms and conditions of the Agreement; (iii) agrees that all
actions taken from time to time by Executive under the Agreement shall be
binding upon the undersigned without the necessity of any consent,
acknowledgment or confirmation by the undersigned; and (iv) acknowledges that
the Company is relying upon the execution by the undersigned of this Spousal
Consent in connection with the execution and performance by the Company of the
Agreement.

         In witness whereof, the undersigned has executed this Spousal Consent
as of the ___ day of January, 2004.

                                             Spouse of Executive:

                                             ___________________________________
                                             Suzanne Malpocher

                                       16

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