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ALARMGUARD HOLDINGS, INC.
PREFERRED STOCK PURCHASE AGREEMENT
Dated as of February 2, 1998
TABLE OF CONTENTS
Page
Article IDEFINITIONS 1
1.1 Definitions; Interpretation 1
Article IIISSUANCE AND SALE OF PREFERRED STOCK 6
2.1 Number of Shares and Price 6
Article IIICLOSING; CLOSING DELIVERIES 6
3.1 Closing 6
3.2 Payment for and Delivery of Preferred Shares 6
Article IVREPRESENTATIONS AND WARRANTIES OF THE COMPANY 7
4.1 Existence; Qualification; Subsidiaries 7
4.2 Authorization and Enforceability; Issuance of Shares 7
4.3 Capitalization 8
4.4 Private Sale; Voting Agreements 8
4.5 Financial Statements; Disclosure 8
4.6 Absence of Certain Changes 9
4.7 Litigation 10
4.8 Licenses, Compliance with Law, Other Agreements, Etc. 11
4.9 Third-Party Approvals 11
4.10 No Undisclosed Liabilities 11
4.11 Tangible Assets 11
4.12 Inventory 11
4.13 Owned Real Property 11
4.14 Real Property Leases 12
4.15 Agreements 12
4.16 Intellectual Property 12
4.17 Employees 12
4.18 ERISA; Employee Benefits 13
4.19 Environment, Health and Safety 13
4.20 Transactions With Affiliates 14
4.21 Taxes 14
4.22 Other Investors 14
4.23 Year 2000 Representations 14
4.24 Seniority 15
4.25 Investment Company 15
4.26 Certain Fees 15
4.27 Solicitation Materials 15
4.28 Form S-3 Eligibility 16
4.29 Listing and Maintenance Requirements Compliance 16
4.30 Registration Rights; Rights of Participation 16
4.31 Recent Results of Operations 16
4.32 Small Business Matters 16
Article VREPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 17
5.1 Authorization and Enforceability 17
5.2 Government Approvals 17
Article VICOMPLIANCE WITH SECURITIES LAWS 17
6.1 Investment Intent of Purchaser 17
6.2 Status of Preferred Shares 17
6.3 Sophistication and Financial Condition of Purchaser 17
6.4 Transfer of Preferred Shares and Conversion Shares 17
6.5 Exculpation Among Purchasers. 19
Article VIICONDITIONS PRECEDENT 19
7.1 Closing Deliveries to the Purchasers 19
7.2 Closing Deliveries to the Company 20
Article VIIICOVENANTS OF THE COMPANY 20
8.1 Restricted Actions 20
8.2 Required Actions 21
8.3 Reservation of Common Stock 23
8.4 Purchasers' Rights if Trading in Common Stock is Suspended
or Delisted. 23
8.5 Use of Proceeds 23
Article IXSURVIVAL 24
9.1 Survival 24
Article XINDEMNIFICATION 24
10.1 Indemnification 24
Article XIGENERAL PROVISIONS 25
11.1 Successors and Assigns 25
11.2 Entire Agreement 25
11.3 Notices 25
11.4 Purchasers Fees and Expenses 26
11.5 Amendment and Waiver 26
11.7 Counterparts 27
11.8 Headings 27
11.9 Specific Performance 27
11.10 Remedies Cumulative 27
11.11 GOVERNING LAW 27
11.12 No Third Party Beneficiaries 27
11.13 Severability 27
Schedule I Purchasers
Exhibit A Amendment to the Certificate of Designations.
Exhibit B Financial Statements
Exhibit C Registration Rights Agreement
Exhibit D Opinion of Counsel
PREFERRED STOCK PURCHASE AGREEMENT
PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") dated
as of February 2, 1998 between Alarmguard Holdings, Inc., a
Delaware corporation (the "Company"), Advance Capital Partners,
L.P., a Delaware limited partnership, Advance Capital Offshore
Partners, L.P., a Cayman Islands limited partnership
(collectively, "Advance"), and each of the other purchasers set
forth on Schedule I hereto (with Advance, each a "Purchaser" and
collectively the "Purchasers").
The Purchasers desire to purchase from the Company, and the
Company desires to issue to the Purchasers, shares of Series A
Convertible Preferred Stock $.0001 par value per share of the
Company (the "Series A Preferred") and Series B Convertible
Preferred Stock $.0001 par value per share of the Company (the
"Series B Preferred").
In consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement,
the parties hereto agree as follows:
Article I
DEFINITIONS
I.1 Definitions; Interpretation.
(a) For purposes of this Agreement, the following
terms have the indicated meanings:
"Advance" has the meaning set forth in the recitals
hereof.
"Advance Closing" has the meaning set forth in Section
3.1.
"Advance Closing Date" has the meaning set forth in
Section 3.1.
"Affiliate" of a person means any other person that
directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with such
person.
"Certificate of Designations" means the Certificate of
Designations designating the rights and preferences of the Series
A Preferred and Series B Preferred adopted by the Board of
Directors of the Company and set forth as Exhibit A hereto.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section
3.1.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Common Stock" means the common stock of the Company,
par value $.0001 per share.
"Company" has the meaning set forth in the recitals
hereof.
"Confidential Information" means any information
concerning the Company's business other than information that (i)
was already known to the Person having a duty to keep
confidential such information on a nonconfidential basis prior to
the time of disclosure, (ii) is or becomes generally available to
the public through no act or omission of such Person or (iii)
becomes available to such Person on a nonconfidential basis from
a source other than any party hereto (or any agent or
representative thereof) if such source was not under a
prohibition against disclosing the information to such Person.
"Conversion Shares" means shares of Common Stock
issued or issuable upon conversion of Preferred Shares.
"Credit Agreement" means that certain Third Amended
and Restated Acquisition Credit and Term Loan Agreement by and
among the Company, certain Subsidiaries of the Company,
BankBoston, N.A. as Administrative Agent, General Electric
Capital Corporation as Documentation Agent and the lenders party
thereto, as the same may be amended, restated, modified or
supplemented from time to time.
"Current Balance Sheet" means the unaudited balance
sheet of the Company dated September 30, 1997.
"Environmental and Safety Requirements" means all
federal, state, local and foreign statutes, regulations,
ordinances and other provisions having the force or effect of
law, all judicial and administrative orders and determinations,
all contractual obligations and all common law concerning public
health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all
those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or by-products, asbestos, polychlorinated biphenyls,
noise or radiation.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Financial Statements" means (i) the unaudited balance
sheets of the Company for the quarterly periods ended June 30,
1997 and September 30, 1997, each as included in a quarterly
report of the Company on Form 10-Q as filed with the SEC pursuant
to the Exchange Act and the audited balance sheet of Triton Group
Ltd. dated March 31, 1997 as included in the annual report of
Triton Group Ltd. (a predecessor to the Company) on Form 10-K as
filed with the SEC pursuant to the Exchange Act and the related
unaudited and audited, as applicable, statements of income and
consolidated cash flow for the quarterly and fiscal year-to-date
periods then ended, each as included in the Company's applicable
quarterly report or annual report on Form 10-Q and Form 10-K, as
applicable, as filed with the SEC pursuant to the Exchange Act,
and (ii) the unaudited balance sheet of Security Systems
Holdings, Inc. for the quarterly period ended March 31, 1997 and
the audited balance sheet of Security Systems Holdings, Inc.
dated December 31, 1996 and the related unaudited and audited, as
applicable, statements of income and consolidated cash flow for
the quarterly and fiscal year-to-date periods then ended, all of
which are attached as Exhibit B hereto.
"Financing" means the purchase of Preferred Shares by
the SBIC Holders hereunder.
"GAAP" means United States generally accepted
accounting principles as in effect from time to time,
consistently applied.
"Governmental Agency" means any federal, state, local,
foreign or other governmental agency, instrumentality,
commission, authority, board or body and the American Stock
Exchange.
"includes" and "including" mean includes and including,
without limitation.
"Intellectual Property" means all patents, patent
applications and inventions; all trademarks, service marks, trade
dress, trade names and corporate names and all goodwill
associated therewith; all copyrights; all registrations,
applications and renewals for any of the foregoing; all trade
secrets, Confidential Information, know-how, technical and
computer data, documentation and software, financial, business
and marketing plans, customer and supplier lists and all other
intellectual property rights; and all copies and tangible
embodiments of the foregoing.
"IRS" means the Internal Revenue Service.
"knowledge" or "know" when used with respect to the
Company means the knowledge of the senior management of the
Company, or any other management personnel that has had
significant involvement in the business and affairs of the
Company.
"Liability" means any liability or obligation (whether
absolute or contingent, liquidated or unliquidated or due or to
become due).
"Lien" means any lien, mortgage, pledge, security
interest, restriction, charge or other encumbrance.
"Material Adverse Change" means any material adverse
change in the business, condition (financial or otherwise),
prospects or results of operations of the Company and its
Subsidiaries taken as a whole.
"Material Adverse Effect" means any material adverse
effect on (i) the business, condition (financial or otherwise),
prospects or results of operations of the Company and its
Subsidiaries taken as a whole, or (ii) the transactions
contemplated hereby or by the Related Documents.
"Ordinary Course of Business" means the ordinary course
of business consistent with past practice (including with respect
to quantity, quality and frequency).
"Permitted Liens" means (i) liens for taxes not yet due
and taxes for which adequate provision is made in the Current
Balance Sheet, (ii) purchase money security interests in supplies
and equipment, (iii) precautionary liens filed by lessors with
respect to leased equipment, (iv) encumbrances which are not
substantial in amount, do not materially detract from the value
of the property subject thereto and do not materially impair the
use of the property subject thereto or the operation of the
Company's business, and (v) liens securing the obligations under
the Credit Agreement and the other documents, agreements and
instruments executed in connection therewith.
"Person" means any individual, partnership, joint
venture, corporation, trust, unincorporated organization or other
entity.
"Plan" means any employee benefit plan (as defined in
Section 3(3) of ERISA), subject to Title IV of ERISA or the
minimum funding requirements of Section 412 of the Code,
maintained or contributed to by the Company, its predecessor or
any Subsidiary at any time during the 5-calendar years
immediately preceding the date of this Agreement.
"Preferred Shares" has the meaning set forth in Section
2.1.
"Registration Rights Agreement" means the Registration
Rights Agreement between the Company and the Purchasers in the
form of Exhibit C hereto.
"Related Documents" means all documents and instruments
to be executed or adopted by the Company in connection herewith,
including the Certificate of Designations, the Preferred Shares
and the Registration Rights Agreement.
"SBA" means the United States Small Business
Administration, and any successor agency performing the functions
thereof.
"SBIC" means a Small Business Investment Company
licensed by the SBA under the SBIC Act.
"SBIC Act" means the Small Business Investment Act of
1958, as amended.
"SBIC Holders" means IBJS Capital Corporation and
Exeter Capital Partners IV, L.P.
"SBIC Regulations" means the SBIC Act and the
regulations issued by the SBA thereunder, codified at Title 13 of
the Code of Federal Regulations ("13 CFR"), Parts 107 and 121.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Series A Preferred" has the meaning set forth in the
recitals hereof.
"Series B Preferred" has the meaning set forth in the
recitals hereof.
"Subsidiary" means 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 the Company 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 the Company. For purposes
hereof, the Company shall be deemed to have a majority ownership
interest in a partnership, association or other business entity
if the Company, directly or indirectly, is allocated a majority
of partnership, association or other business entity gains or
losses, or is or controls the managing director or general
partner of such partnership, association or other business
entity.
"Tax" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code 59A), customs duties,
capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any
kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Tax Returns" means any return, declaration, report,
claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
(b) The words "herein", "hereof" and "hereunder" refer
to this Agreement as a whole and not to any particular
article, section or other subdivision of this Agreement.
Article II
ISSUANCE AND SALE OF PREFERRED STOCK
II.1 Number of Shares and Price. On the terms and
subject to the conditions of this Agreement, at the Closing, the
Company shall issue to the Purchasers, 27,750 shares of Series A
Preferred and 5,000 shares of Series B Preferred (collectively,
with the Shares of Series A Preferred to be issued to Advance at
the Advance Closing, the "Preferred Shares") for a purchase price
of $1,000 per share. On the terms and subject to the conditions
of this Agreement, at the Advance Closing, the Company shall
issue to Advance, 7,250 shares of Series A Preferred for a
purchase price of $1,000 per share. Each Purchaser's obligation
to purchase the number of Preferred Shares opposite such
Purchaser's name on Schedule I hereto shall be subject to the
prior or simultaneous purchase by each other Purchaser (other
than Advance) of the number of Preferred Shares opposite such
Purchaser's name on Schedule I hereto.
Article III
CLOSING; CLOSING DELIVERIES
III.1 Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place at 10:00
a.m. on February 2, 1998, at the offices of Xxxxxxxx & Xxxxx, New
York, New York or at such other time, place and/or date as shall
be agreed upon by the parties hereto except that the closing of
the issuance and sale of Preferred Shares to Advance (the
"Advance Closing") shall take place at 10:00 a.m. on February 13,
1998 or on such other date as shall be agreed upon by the Company
and Advance. The date upon which the Closing occurs is referred
to herein as the "Closing Date" and the date upon which the
Advance Closing occurs is referred to herein as the "Advance
Closing Date".
III.2 Payment for and Delivery of Preferred Shares.
At the Closing, the Company shall issue and deliver to the
Purchasers, stock certificates for the Preferred Shares duly
registered in the name of each Purchaser, against payment by such
Purchaser, by wire transfer of immediately-available funds to the
account designated by the Company, of the purchase price therefor
set forth in Section 2.1. At the Advance Closing, the Company
shall issue and deliver to Advance stock certificates for the
Preferred Shares duly registered in the name of Advance, against
payment by Advance, by wire transfer of immediately-available
funds to the account designated by the Company, of the purchase
price therefor set forth in Section 2.1.
Article IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each
Purchaser as follows:
IV.1 Existence; Qualification; Subsidiaries. The
Company and each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the state
of its incorporation and has full corporate power and authority
to conduct its business and own and operate its properties as now
conducted, owned and operated. The copies of the Restated
Certificate of Incorporation and By-Laws of the Company and all
amendments thereto previously delivered to the Purchasers are
true, correct and complete copies of such documents. The Company
and each Subsidiary is licensed or qualified as a foreign
corporation and is in good standing in all jurisdictions where
such person is required to be so licensed or qualified, except
where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect. Except as set
forth on Schedule 4.1, the Company has no Subsidiaries and owns
no capital stock or other securities of, and has not made any
other investment in, any other entity. All of the issued shares
of capital stock of each Subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable and are
owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or adverse claims other than
liens securing the obligations under the Credit Agreement.
IV.2 Authorization and Enforceability; Issuance of
Shares.
(a) The Company has full power and authority and has
taken all required corporate and other action necessary to permit
it to execute and deliver this Agreement and the Related
Documents and to carry out the terms hereof and thereof and to
issue and deliver the Preferred Shares and the Conversion Shares
(including adoption of the Certificate of Designations), and none
of such actions will violate any provision of the Restated
Certificate of Incorporation of the Company, the By-Laws of the
Company or of any applicable law, regulation, order, judgment or
decree or rule of the stock exchange where the Company's Common
Stock is listed, or result in the breach of or constitute a
default (or an event which, with notice or lapse of time or both
would constitute a default) under any material agreement,
instrument or understanding to which the Company is a party or by
which it is bound or by which it will become bound as a result of
the transaction contemplated by this Agreement. This Agreement
and each of the Related Documents constitutes a legal, valid and
binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent
limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application related to the
enforcement of creditor's rights generally and (ii) general
principles of equity.
(b) The Preferred Shares have been duly authorized
and, when issued and delivered in accordance with this Agreement,
will be validly issued and outstanding. The Preferred Shares
and, when issued, the Conversion Shares, will be fully paid and
nonassessable. The Conversion Shares have been duly reserved for
issuance upon conversion of the Preferred Shares and, when so
issued, will be duly authorized, validly issued and outstanding,
fully paid and nonassessable shares of Series A Preferred, Series
B Preferred or Common Stock, as the case may be. Neither the
issuance and delivery of the Preferred Shares nor the issuance
and delivery of any Conversion Shares upon conversion of any
Preferred Shares is subject to any preemptive right of any
stockholder of the Company or to any right of first refusal or
other similar right in favor of any Person which has not been
waived.
IV.3 Capitalization. As of the Closing, the authorized
capital stock of the Company shall consist of (i) 25,000,000
shares of Common Stock, par value $.0001 per share, of which
5,592,476 shares are outstanding, 4,972,434 shares are reserved
for issuance upon conversion of Preferred Shares and 770,000
shares are reserved for issuance upon the exercise of certain
stock options, and (ii) 5,000,000 shares of Preferred Stock, par
value $.0001 per share, of which 35,700 shares have been
designated Series A Preferred and 5,000 shares have been
designated Series B Preferred, of which 40,000 shares will be
sold to the Purchasers pursuant to this Agreement. At the time
of the Closing, all of the outstanding capital stock will be
validly issued, fully paid and nonassessable and will have been
issued in compliance with all applicable securities laws
(including the provisions of the Securities Act and the rules and
regulations promulgated thereunder). Except as set forth on
Schedule 4.3, as of the Closing, the Company has not granted or
issued any options, convertible securities, warrants, calls,
pledges, transfer restrictions (except restrictions imposed by
federal and state securities laws), liens, rights of first offer,
rights of first refusal, antidilution provisions or commitments
of any character relating to any issued or unissued shares of
capital stock of the Company other than as contemplated in the
Related Documents. Except as contemplated by this Agreement and
the Related Documents or as set forth in Schedule 4.3, there are
no preemptive or other preferential rights applicable to the
issuance and sale of securities of the Company, including the
Preferred Shares.
IV.4 Private Sale; Voting Agreements. Assuming the
accuracy of the representations and warranties made by recipients
of the Company's capital stock made in connection with the
acquisition of such capital stock, the Company has not violated
any applicable federal or state securities laws in connection
with the offer, sale and issuance of any of its capital stock.
Subject to the accuracy of the Purchaser's representations
contained herein, neither the offer, sale and issuance of the
Preferred Shares hereunder nor the issuance and delivery of any
Preferred Shares or Conversion Shares upon conversion of any
Preferred Shares requires registration under the Securities Act
or any state securities laws.
IV.5 Financial Statements; Disclosure.
(a) The Financial Statements (together with the notes
thereto, as applicable), (i) are true, correct and complete
in all material respects, (ii) are in accordance with the
books and records of the Company and (iii) fairly present
the financial condition and results of operations of the
Company as of the dates and for the periods indicated, in
accordance with GAAP except that the unaudited balance
sheets and related financial statements do not contain an
auditors' opinion and do not contain footnotes and are
subject to normal year-end audit adjustments.
(b) This Agreement together with the schedules,
attachments, exhibits, written statements and certificates
supplied to the Purchasers by or on behalf of the Company
with respect to the transactions contemplated hereby does
not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances
in which they were made, not misleading. There is no fact
which has not been disclosed to the Purchasers in writing of
which the Company has knowledge, and which has had or would
reasonably be anticipated to have a Material Adverse Effect.
(c) As of its filing date, each document filed with
the SEC by the Company, as amended or supplemented prior to
the Closing Date, if applicable, pursuant to the Securities
Act and/or the Exchange Act (i) complied in all material
respects with the applicable requirements of the Securities
Act and/or Exchange Act and (ii) did not contain any untrue
statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were
made, not misleading. Each final registration statement
filed with the SEC by the Company pursuant to the Securities
Act, as of the date such statement became effective (i)
complied in all material respects with the applicable
requirements of the Securities Act and (ii) did not contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading (in the case of
any prospectus, in light of the circumstances under which
they were made).
IV.6 Absence of Certain Changes.
(a) Except as set forth on Schedule 4.6 since the date
of the Current Balance Sheet, neither the Company
nor any Subsidiary has:
(i) incurred any Liabilities other than current
Liabilities incurred, or obligations under contracts
entered into, in the Ordinary Course of Business and for
individual amounts not greater than $250,000;
(ii) paid, discharged or satisfied any claim, Lien or
Liability, other than any claim, Lien or Liability (A)
reflected or reserved against on the Current Balance
Sheet and paid, discharged or satisfied in the Ordinary
Course of Business since the date of the Current Balance
Sheet or (B) incurred and paid, discharged or satisfied
since the date of the Current Balance Sheet, in each case
in the Ordinary Course of Business;
(iii) sold, leased, assigned or otherwise transferred
any of its assets, tangible or intangible (other than
sales of inventory in the Ordinary Course of Business and
use of supplies in the Ordinary Course of Business);
(iv) permitted any of its assets, tangible or
intangible, to become subject to any Lien (other than any
Permitted Lien);
(v) written off as uncollectible any accounts
receivable other than (1) in the Ordinary Course of
Business, or (2) for amounts not greater than $100,000;
(vi) terminated or amended or suffered the termination
or amendment of, other than in the Ordinary Course of
Business, failed to perform in all material respects all
of its obligations or suffered or permitted any material
default to exist under, any material agreement, license
or permit;
(vii) suffered any damage, destruction or loss of
tangible property (whether or not covered by insurance)
which in the aggregate exceeds $100,000;
(viii) made any loan (other than intercompany advances)
to any other Person (other than advances to employees in
the Ordinary Course of Business which do not exceed
$5,000 individually or $25,000 in the aggregate);
(ix) canceled, waived or released any debt, claim or
right in an amount or having a value exceeding $100,000;
(x) paid any amount to or entered into any agreement,
arrangement or transaction with any Affiliate (including
its officers, directors and employees) outside the
Ordinary Course of Business and which was not approved by
a majority of the Company's disinterested directors;
(xi) declared, set aside, or paid any dividend or
distribution with respect to its capital stock or
redeemed, purchased or otherwise acquired any of its
capital stock;
(xii) other than in the Ordinary Course of Business,
granted any increase in the compensation of any officer
or employee or made any other change in employment terms
of any officer or employee;
(xiii) made any change in any method of accounting or
accounting practice;
(xiv) suffered or caused any other occurrence, event or
transaction outside the Ordinary Course of Business which
could have a Material Adverse Effect; or
(xv) agreed, in writing or otherwise, to any of the
foregoing.
(b) Since the date of the Current Balance Sheet there has
been no Material Adverse Change.
IV.7 Litigation. As of the date hereof no claim,
suit, proceeding or investigation is pending or, to the knowledge
of the Company, threatened against or affecting the Company or
any Subsidiary or any officer or director thereof or the
Company's and the Subsidiaries' business which if decided
adversely to any such person could have a Material Adverse
Effect.
IV.8 Licenses, Compliance with Law, Other Agreements,
Etc. The Company and each Subsidiary have all material
franchises, permits, licenses and other rights to allow it to
conduct its business and is not in violation, in any material
respects of any order or decree of any court, or of any law,
order or regulation of any Governmental Agency, or of the
provisions of any material contract or agreement to which it is a
party or by which it is bound, and neither this Agreement nor the
Related Documents nor the transactions contemplated hereby or
thereby will result in any such violation except where the
failure to have any such franchise permit or license or any such
violation could not be expected to have a Material Adverse
Effect. The Company's and the Subsidiaries' business has been
conducted in all material respects in compliance with all
federal, state and local laws, ordinances, rules and regulations,
except where such violations, defaults or noncompliance would not
have a Material Adverse Effect.
IV.9 Third-Party Approvals. Assuming the accuracy of
the representations and warranties of the Purchasers contained in
this Agreement, the Company is not required to obtain any order,
consent, approval or authorization of, or to make any declaration
or filing with, any Governmental Agency or other third party
(including under any state securities or "blue sky" laws) in
connection with the execution and delivery of this Agreement or
the Related Documents, or the consummation of the transactions
contemplated hereby or thereby to occur on the Closing Date or
the Advance Closing Date, except for any consents, approvals or
authorizations the failure to obtain which could not have a
Material Adverse Effect.
IV.10 No Undisclosed Liabilities. Neither the Company
nor any of its Subsidiaries has any Liabilities except (i) as and
to the extent of the amounts reflected or reserved against on the
Current Balance Sheet (excluding the footnotes thereto), (ii)
liabilities and obligations incurred in the Ordinary Course of
Business since the date thereof, (iii) such other liabilities
that in the aggregate will not result in a Material Adverse
Effect, and (iv) Liabilities under the Credit Agreement (as
defined therein).
IV.11 Tangible Assets. The Company and its
Subsidiaries own or lease all tangible assets used or reasonably
necessary in connection with the conduct of its business. All
material tangible assets are free from any Liens (other than
Permitted Liens), are free from any material defects, have been
maintained in accordance with normal industry practice and any
regulatory standard or procedure to which such assets are
subject, are in good operating condition and repair (subject to
normal wear and tear) and are suitable for the purposes for which
such assets are used or proposed to be used, other than liens,
defects and wear and tear which in the aggregate could not be
expected to have a Material Adverse Effect.
IV.12 Inventory. All inventory of the Company and its
Subsidiaries, whether reflected on the Current Balance Sheet or
otherwise, consists of a quality and quantity usable or salable
in the Ordinary Course of Business, subject to normal rates of
defect or obsolescence not inconsistent with the Company's
historical experience.
IV.13 Owned Real Property. The Company and its
Subsidiaries own no real property.
IV.14 Real Property Leases. There exists no event of
default (nor any event which with notice or lapse of time would
constitute an event of default) with respect to the Company, any
Subsidiary and, to the Company's knowledge, with respect to any
other party thereto under any agreement pursuant to which the
Company is the lessee or lessor of any real property, except for
such defaults and defects in enforceability as could not in the
aggregate be expected to have a Material Adverse Effect, and all
such agreements are in full force and effect and enforceable
against the lessor or lessee in accordance with their terms
except for such defaults and defects in enforceability as could
not in the aggregate be expected to have a Material Adverse
Effect.
IV.15 Agreements. Neither the Company nor any
Subsidiary is in default, nor to the knowledge of the Company is
there any basis for a valid claim of default, and to the
Company's knowledge no event has occurred which, with notice or
lapse of time, would constitute a default, under any agreement,
arrangement or understanding to which the Company or any
Subsidiary is a party, and to the knowledge of the Company no
other Person is in default under any such agreement, in each case
other than defaults which in the aggregate could not be expected
to have a Material Adverse Effect. Additionally, neither the
Company nor any Subsidiary is party to any agreement the
performance of which in accordance with its terms (including any
termination provision thereof) could be expected to have a
Material Adverse Effect.
IV.16 Intellectual Property. Schedule 4.16 sets forth
a complete list of (i) all patented, registered or applied for
Intellectual Property owned or filed by the Company; and (ii) all
trade names and material unregistered trademarks used by the
Company in connection with its business. The Company owns and
possesses all right, title and interest in and to, or has a valid
and enforceable license to use, the Intellectual Property
necessary for the operation of its business as currently
conducted and as currently proposed to be conducted, and no claim
by any third party contesting the validity, enforceability, use
or ownership of such Intellectual Property has been made or, to
the knowledge of the Company, is threatened. The Company has not
infringed or misappropriated the Intellectual Property of any
third party.
IV.17 Employees. Except as set forth on Schedule 4.17,
since the date of the Current Balance Sheet, no key employees and
no group of employees has terminated, or to the knowledge of the
Company plans to terminate, employment with the Company or any
Subsidiary, as applicable. Except as set forth on Schedule 4.17,
the Company is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strike, material
grievance, material claim of unfair labor practice or other
collective bargaining dispute. Except as set forth on Schedule
4.17, to the knowledge of the Company there is no organizational
effort being made or threatened by or on behalf of any labor
union with respect to its employees. The Company has not
committed any unfair labor practice or materially violated any
federal, state or local law or regulation regulating employers or
the terms and conditions of its employees' employment, including
laws regulating employee wages and hours, employment
discrimination, employee civil rights, equal employment
opportunity and employment of foreign nationals, except for such
violations as could not be expected to have a Material Adverse
Effect.
IV.18 ERISA; Employee Benefits. Each Plan (other than
a Plan which is a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA) that is intended to be qualified
under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service or has
timely filed for a favorable determination letter from the
Internal Revenue Service and no event has occurred since the date
of the last determination letter that could reasonably be
expected to materially adversely affect the qualified status of
such Plan. Each Plan (other than a Plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA) is in full force and effect and has been administered in
all material respects in accordance with its terms and is and has
been, and each plan administrator and fiduciary of a Plan is
acting and has been acting, in compliance in all material
respects with all applicable requirements of the Code and ERISA
(including the funding, reporting and disclosure and prohibited
transaction provisions thereof) and other applicable laws,
regulations and rulings in connection with each such Plan. No
Plan has been terminated or partially terminated. With respect
to each Plan which is a "multiemployer plan" within the meaning
of Section 4001(a)(3) of ERISA, no complete or partial withdrawal
(within the meaning of Sections 4203 and 4205 of ERISA) has
occurred, no such Plan is in reorganization or insolvency
(within the meaning of Title IV of ERISA) and no material
withdrawal liability has been assessed against the Company. The
Company or one of its Subsidiaries has made, accrued or provided
for all contributions required under each Plan. To the knowledge
of the Company, no event has occurred or is reasonably expected
to occur with respect to any employee pension benefit plan of the
Company or any member of the Company's controlled group (within
the meaning of Section 414 of the Code), which could reasonably
be expected to directly or indirectly result in any material
liability (other than liability arising in the ordinary course)
to the Company or any member of its controlled group pursuant to
Title IV of ERISA or Section 412 of the Code. No Plan (other
than a Plan which is a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA) has incurred an "accumulated funding
deficiency" within the meaning of Section 412 of the Code or
Section 302 of ERISA.
IV.19 Environment, Health and Safety.
(a) The Company (as used in this Section 4.19, Company
shall include the Company's Subsidiaries and its predecessor)
has complied and is in compliance in all material respects
with all Environmental and Safety Requirements that are
applicable to the Company's business.
(b) The Company has not received any written notice,
report or other information regarding any liabilities or
potential liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory,
remedial or corrective obligations, relating to the Company
or its facilities and arising under Environmental and Safety
Requirements.
(c) The Company has not, either expressly or by operation
of law, assumed or undertaken any liability, including
without limitation any obligation for corrective or remedial
action, of any other person relating to Environmental and
Safety Requirements.
IV.20 Transactions With Affiliates. Except as
disclosed in filings made by the Company with the SEC pursuant to
the Securities Act and the Exchange Act, neither the Company nor
any Subsidiary is party to any agreement, arrangement or
transaction with any Affiliate which is material to the Company's
and its Subsidiaries business, taken as a whole.
IV.21 Taxes.
(a) Each of the Company, its predecessor and its
Subsidiaries has filed all Tax Returns that it was required
to file, and has paid all Taxes shown thereon as owing,
except where the failure to file Tax Returns or to pay Taxes
would not have a Material Adverse Effect on the financial
condition of the Company and its Subsidiaries taken as a
whole.
(b) None of the Company and its Subsidiaries (A) has been
a member of an affiliated group filing a consolidated federal
Tax Return (other than a group the common parent of which was
the Company) or (B) has any Liability for the Taxes of any
Person (other than any of the Company and its Subsidiaries)
under Treas. Reg. 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(c) Each of the Company, its predecessor and its
Subsidiaries has withheld and paid all taxes required to have
been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(d) There is no dispute or claim concerning any Tax
Liability of any of the Company and its Subsidiaries either
(A) claimed or raised by any authority in writing or (B) as
to which any of the directors and officers (and employees
responsible for Tax matters) of the Company and its
Subsidiaries has knowledge based upon personal contact with
any agent of such authority and which is material to the
Company and its Subsidiaries taken as a whole.
IV.22 Other Investors. Set forth on Schedule 4.22 is a
list of all shareholders of the Company who as of the date
hereof, based upon Schedule I hereto and SEC filings of
shareholders, after giving effect to the terms hereof, own more
than 5% of the fully diluted common equity of the Company and
sets forth such percentage ownership.
IV.23 Year 2000 Representations.
(a) None of the computer software, computer firmware,
computer hardware (whether general or special purpose) or
other similar or related items of automated, computerized or
software systems that are used or relied on by Company or by
any of its Subsidiaries in the conduct of their respective
businesses will malfunction, will cease to function, will
generate incorrect data or will produce incorrect results
when processing, providing or receiving (i) date-related data
from, into and between the twentieth and twenty-first
centuries or (ii) date-related data in connection with any
valid date in the twentieth and twenty-first centuries.
(b) None of the products and services sold, licensed,
rendered, or otherwise provided by the Company or by any of
its Subsidiaries in the conduct of their respective
businesses will malfunction, will cease to function, will
generate incorrect data or will produce incorrect results
when processing, providing or receiving (i) date-related data
from, into and between the twentieth and twenty-first
centuries or (ii) date-related data in connection with any
valid date in the twentieth and twenty-first centuries; and,
accordingly, neither the Company nor any of its Subsidiaries
is or will be subject to any claim, demand, action, suit,
liability, damage, material loss, or material expense arising
from, or related to, circumstances where such products and
services malfunction, cease to function, generate incorrect
data, or produce incorrect results when processing, providing
or receiving (i) date-related data from, into and between the
twentieth and twenty-first centuries or (ii) date-related
data in connection with any valid date in the twentieth and
twenty-first centuries.
(c) Neither the Company nor any of its Subsidiaries has
made any other representations or warranties regarding the
ability of any product or service sold, licensed, rendered,
or otherwise provided by the Company or by any of its
Subsidiaries in the conduct of their respective businesses to
operate without malfunction, to operate without ceasing to
function, to generate correct data or to produce correct
results when processing, providing or receiving (i) date-
related data from, into and between the twentieth and twenty-
first centuries and (ii) date-related data in connection with
any valid date in the twentieth and twenty-first centuries.
IV.24 Seniority. No class of equity securities of the
Company is senior to the Preferred Shares in right of payment,
whether upon liquidation, dissolution or otherwise.
IV.25 Investment Company. The Company is not, and is
not controlled by or under common control with an affiliate of,
an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
IV.26 Certain Fees. Other than fees and expenses due
and payable to Xxxxxx Brothers, no fees or commissions will be
payable by the Company to any broker, financial advisor, finder,
investment banker, or bank with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims
made by or on behalf of Xxxxxx Brothers or other Persons for fees
of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement.
The Company shall indemnify and hold harmless each of the
Purchasers, its employees, officers, directors, agents and
partners, and their respective affiliates (as such term is
defined under Rule 405 promulgated under the Securities Act),
from and against all claims, losses, damages, costs (including
the costs of preparation and attorney's fees) and expenses
suffered in respect to any such claimed or existing fees.
IV.27 Solicitation Materials. The Company has not (i)
distributed any offering materials in connection with the
offering and sale of the Preferred Shares other than the
disclosure materials delivered to Purchasers (the "Disclosure
Materials") or (ii) solicited any offer to buy or sell the
Preferred Shares by means of any form of general solicitation or
advertising. None of the Disclosure Materials or any other
information provided to the Purchasers by or on behalf of the
Company contain any untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
IV.28 Form S-3 Eligibility. No later than May 1, 1998,
the Company will be eligible to register securities for resale
with the SEC under Form S-3 promulgated under the Securities Act.
IV.29 Listing and Maintenance Requirements Compliance.
(i) The Company has not received notice (written or oral) from
the American Stock Exchange that the Company is not in compliance
with the listings or maintenance requirements of such Exchange.
(ii) Upon conversion of the Preferred Shares into shares of
Common Stock and upon the affirmative vote of the Company's
shareholders approving the issuance of the Preferred Shares and
the Conversion Shares, which vote shall occur not later than July
31, 1998, all Conversion Shares shall be listed on the American
Stock Exchange.
IV.30 Registration Rights; Rights of Participation.
Except as described on Schedule 4.30 hereto, (A) the Company has
not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any
securities of the Company registered with the SEC or any other
governmental authority which has not been satisfied and (B) no
Person, including, but not limited to, current or former
shareholders of the Company, underwriters, brokers or agents, has
any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the
transactions contemplated by this Agreement or any other related
document which has not been waived.
IV.31 Recent Results of Operations. Set forth on
Schedule 4.31 is (i) the Company's monthly recurring revenues for
the month of December 1997 and (ii) the Company's number of
subscribers as of December 31, 1997, each as prepared and
calculated in the Ordinary Course of Business.
IV.32 Small Business Matters. The Company acknowledges
that each SBIC Holder is a federally licensed SBIC under the SBIC
Act. The Company, together with its "affiliates" (as that term
is defined in 13 CFR 121.103), is a "small business concern"
within the meaning of the SBIC Regulations, including 13 CFR
121.301. The information regarding the Company and its
affiliates set forth in SBA Form 480, Form 652 and Parts A and B
of Form 1031 delivered at the Closing will be accurate and
complete. Neither the Company nor any of its subsidiaries will
use the proceeds of the Financing directly or indirectly for any
purpose, for which an SBIC is prohibited from providing funds by
SBIC Regulations (including 13 CFR 107.720).
Article V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the
Company as follows:
V.1 Authorization and Enforceability. Such Purchaser has
taken all action necessary to permit it to execute and deliver
this Agreement and the other documents and instruments to be
executed by it pursuant hereto and to carry out the terms hereof
and thereof. This Agreement and each such other document and
instrument, when duly executed and delivered by such Purchaser,
will constitute a valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms.
V.2 Government Approvals. Such Purchaser is not required
to obtain any order, consent, approval or authorization of, or to
make any declaration or filing with, any Governmental Agency in
connection with the execution and delivery of this Agreement and
the other documents and instruments to be executed by it pursuant
hereto or the consummation of the transactions contemplated
hereby and thereby, except for such order, consent, approval,
authorization, declaration or filing as which has been or will be
obtained or made.
Article VI
COMPLIANCE WITH SECURITIES LAWS
VI.1 Investment Intent of Purchasers. Each Purchaser
represents and warrants to the Company that it is acquiring the
Preferred Shares for its own account, with no present intention
of selling or otherwise distributing the same to the public.
VI.2 Status of Preferred Shares. Each Purchaser has
been informed by the Company that the Preferred Shares have not
been and will not be registered under the Securities Act or under
any state securities laws and are being offered and sold in
reliance upon federal and state exemptions for transactions not
involving any public offering.
VI.3 Sophistication and Financial Condition of
Purchaser. Each Purchaser represents and warrants to the Company
that it is an "Accredited Investor" as defined in Regulation D
under the Securities Act and that it considers itself to be an
experienced and sophisticated investor and to have such knowledge
and experience in financial and business matters as are necessary
to evaluate the merits and risks of an investment in the
Preferred Shares.
VI.4 Transfer of Preferred Shares and Conversion
Shares.
(a) Preferred Shares and Conversion Shares may be
transferred pursuant to (i) public offerings registered under
the Securities Act, (ii) Rule 144 of the SEC (or any similar
rule then in force), (iii) to an Affiliate of the
transferor, or (iv) subject to the conditions set forth in
Section 6.4(b), any other legally-available means of
transfer.
(b) In connection with any transfer of any Preferred
Shares or Conversion Shares (other than a transfer described
in Section 6.4(a)(i), (ii) or (iii)), the holder of such
shares shall deliver written notice to the Company describing
in reasonable detail the proposed transfer, together with an
opinion of counsel (Xxxxxxxx & Xxxxx or such other counsel
which, to the Company's reasonable satisfaction, is
knowledgeable in securities law matters) to the effect that
such transfer may be effected without registration of such
shares under the Securities Act. The holder of the shares
being transferred shall not consummate the transfer until (i)
the prospective transferee has confirmed to the Company in
writing its agreement to be bound by the provisions of this
Section 6.4 or (ii) such holder shall have delivered to the
Company an opinion of such counsel that no subsequent
transfer of such Preferred Shares or Conversion Shares shall
require registration under the Securities Act. Promptly upon
receipt of any opinion described in clause (ii) of the
preceding sentence, the Company shall prepare and deliver in
connection with the consummation of the proposed transfer,
new certificates for the Preferred Shares or Conversion
Shares being transferred that do not bear the legend set
forth in Section 6.4(c). Notwithstanding anything to the
contrary contained herein, Preferred Shares may not be
transferred to any of the Company's competitors listed on
Schedule 6.4(b) hereto without the Company's written consent
(other than pursuant to clauses (a)(i) or (a)(ii) above or a
tender offer made to each holder of the Company's Common
Stock).
(c) Except as provided in Section 6.4(b), until
transferred pursuant to clauses (a)(i) or (a)(ii) above, each
certificate for Preferred Shares or Conversion Shares shall
be imprinted with a legend substantially in the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
WERE ORIGINALLY ISSUED ON FEBRUARY 2, 1998 [OR
FEBRUARY 13, 1998 IN THE CASE OF PREFERRED SHARES
ISSUED ON THE ADVANCE CLOSING DATE] AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED OR ANY APPLICABLE STATE SECURITIES
LAW. THE TRANSFER OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS
SET FORTH IN THE PREFERRED STOCK PURCHASE
AGREEMENT DATED AS OF FEBRUARY 2, 1998 BETWEEN
THE ISSUER (THE "COMPANY") AND THE PURCHASERS
LISTED ON SCHEDULE I THERETO. THE COMPANY
RESERVES THE RIGHT TO REFUSE ANY TRANSFER OF SUCH
SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY
OF SUCH CONDITIONS SHALL BE FURNISHED WITHOUT
CHARGE TO THE HOLDER HEREOF UPON WRITTEN REQUEST
TO THE COMPANY.
VI.5 Exculpation Among Purchasers. Each Purchaser
acknowledges that it is not relying upon any person, firm or
corporation (including without limitation any other Purchaser),
other than the Company and its officers and directors, in making
its investment or decision to invest in the Company. Each
Purchaser agrees that no other Purchaser (acting in such
capacity) nor the respective controlling persons, officers,
directors, partners, agents or employees of any such other
Purchaser shall be liable to any other Purchaser in connection
with this investment for any action taken or omitted to be taken
by any of them prior to the date hereof in connection with the
Preferred Shares.
Article VII
CONDITIONS PRECEDENT
VII.1 Closing Deliveries to the Purchasers. The
following documents and items shall be delivered to the
Purchasers at or prior to the Closing:
(a) Evidence acceptable to the Purchasers of adoption by
the Company of the Certificate of Designations;
(b) A fully executed and delivered counterpart of the
Registration Rights Agreement;
(c) The written opinion of Xxxxxxxx & Xxxx LLP, counsel
for the Company, in the form of Exhibit D hereto dated as of
the Closing Date;
(d) certificates of a duly authorized officer of the
Company dated as of the Closing Date:
(A) stating that the following conditions have been
satisfied as of the Closing Date,
(i) the representations and warranties of the Company
contained herein and in any writing delivered pursuant
hereto shall be true and correct when made and at and as
of the time of the Closing;
(ii) No action, suit, investigation or proceeding
shall be pending or threatened before any court or
Governmental Agency to restrain, prohibit, collect
damages as a result of or otherwise challenge this
Agreement or any Related Document or any transaction
contemplated hereby or thereby;
(iii) All acts or covenants required hereunder to
be performed by the Company prior to the Closing shall
have been fully performed by it;
(iv) No Material Adverse Change shall have
occurred between the date of the Current Balance Sheet
and the Closing Date; and
(B) setting forth the resolutions of the board of
directors of the Company authorizing the execution and
delivery of this Agreement and the Related Documents
(including the Certificate of Designations) and the
consummation of the transactions contemplated hereby and
thereby and certifying that such resolutions were duly
adopted and have not been rescinded or amended;
(e) such other documents relating to the transactions
contemplated hereby as Advance or other Purchasers may
reasonably request; and
(f) to each SBIC Holder,
(i) duly completed and executed SBA Forms 480, 652
and Parts A and B of 1031, and
(ii) a written certification from the Company
regarding its intended use of the proceeds of the
Financing.
VII.2 Closing Deliveries to the Company. At Closing,
each Purchaser other than Advance will deliver to the Company the
aggregate purchase price for the Preferred Shares purchased by
it. At the Advance Closing, Advance will deliver to the Company
the aggregate purchase price for the Preferred Shares purchased
by it.
Article VIII
COVENANTS OF THE COMPANY
VIII.1 Restricted Actions. Without the prior written
consent of the holders of two-thirds of the then outstanding
Preferred Shares the Company shall not, and shall not permit any
Subsidiary to:
(a) become subject to any agreement or instrument which
by its terms would (under any circumstances) restrict the
Company's right to comply with the terms of this Agreement or
any of the Related Documents;
(b) use the proceeds from the sale of the Preferred
Shares other than (i) primarily for acquisitions of assets or
businesses reasonably related to the Company's existing
business, and repayment of indebtedness, and (ii) the
remainder for other working capital purposes of the Company;
(c) enter into any transaction or series of transactions
with any stockholder, director, officer, employee or
Affiliate which would require disclosure pursuant to Rule 404
of Regulation S-K under the Securities Act unless such
transaction is approved by the Company's disinterested
directors; or
(e) expand the Company's Board of Directors to
greater than nine members.
VIII.2 Required Actions. For so long as at least 20% of
the Preferred Shares remain outstanding, the Company shall, and
shall cause each Subsidiary to:
(a) cause all properties owned by the Company or any
of its Subsidiaries or used or held for use in the conduct of
its business or the business of any of its Subsidiaries to be
maintained and kept in good condition, repair and working
order (reasonable wear and tear excepted) and supplied with
all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Board of
Directors may be necessary so that the business carried on in
connection therewith may be properly and advantageously
conducted at all times; provided, however, that the foregoing
shall not prevent the Company from discontinuing the
maintenance of any of such properties if such discontinuance
is, in the judgment of the management of the Company,
desirable in the conduct of its business or the business of
any of its Subsidiaries and is not disadvantageous in any
material respect to the holders of Preferred Shares;
(b) preserve and keep in full force and effect the
corporate existence, rights (charter and statutory), licenses
and franchises of the Company and each of its Subsidiaries;
provided, however, that the Company shall not be required to
preserve any such right, license or franchise if the Board of
Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the
Company and its Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the
holders of Preferred Shares;
(c) maintain the books, accounts and records of the
Company and its Subsidiaries in accordance with past custom
and practice as used in the preparation of the Financial
Statements except to the extent permitted or required by
GAAP;
(d) keep all of its and its Subsidiaries' properties
which are of an insurable nature insured with insurers,
believed by the Company in good faith to be financially sound
and responsible, against loss or damage to the extent that
property of similar character is usually so insured by
corporations similarly situated and owning like properties
(which may include self-insurance, if reasonable and in
comparable form to that maintained by companies similarly
situated);
(e) comply with all material legal requirements and
material contractual obligations applicable to the operations
and business of the Company and its Subsidiaries and pay all
applicable Taxes as they become due and payable;
(f) permit representatives of the holders of
Preferred Shares (upon the request of holders of Preferred
Shares aggregating 12.5% or more of the Preferred Shares
originally issued hereunder) and their agents (including
their counsel, accountants and consultants) to have
reasonable access during business hours to the Company's
books, records, facilities, key personnel, officers,
directors, customers, independent accountants and legal
counsel;
(g) at all times file all reports (including annual
reports, quarterly reports and the information, documentation
and other reports) required to be filed by the Company under
the Exchange Act and Sections 13 and 15 of the rules and
regulations adopted by the SEC thereunder, and the Company
shall use its best efforts to file each of such reports on a
timely basis, and take such further action as any holder or
holders of Securities may reasonably request, all to the
extent required to enable such holders to sell Securities
pursuant to Rule 144 adopted by the SEC under the Securities
Act (as such rule may be amended from time to time) or any
similar rule or regulation hereafter adopted by the SEC and
to enable the Company to register securities with the SEC on
Form S-3 or any similar short-form registration statement and
upon the filing of each such report deliver a copy thereof to
each holder of the Preferred Shares (or, if the Company is no
longer subject to the requirements of the Exchange Act,
provide reports in substantially the same form and at the
same times as would be required if it were subject to the
Exchange Act);
(h) maintain at all times a valid listing for the
Common Stock on a national securities exchange or the Nasdaq
National Market System;
(i) maintain all material Intellectual Property
Rights necessary to the conduct of its business and own or
have a valid license to use all right, title and interest in
and to, such material Intellectual Property Rights;
(j) within fifteen (15) days after the Advance
Closing Date (but not before) and at each subsequent election
of directors, (and each Purchaser agrees to use its best
efforts) elect to the Board of Directors of the Company
pursuant to Section 5A of the Certificate of Designations (x)
one individual designated by Advance as long as Advance owns
any Preferred Shares and (y) one individual elected by the
holders of a plurality of the Series A Preferred and Series B
Preferred, voting together as a single class; and
(k) on the Closing Date, have executed and delivered
the Credit Agreement on substantially the same principal
terms and conditions as set forth in the commitment letter
issued by the lenders a party thereto dated January 7, 1998;
and
(l) deliver Conversion Shares in accordance with the
terms and conditions, and time periods, set forth in the
Certificate of Designations.
VIII.3 Reservation of Common Stock. The Company shall
at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purposes of
issuance upon conversion of the Preferred Shares, such number of
shares of Common Stock as are issuable upon the conversion of all
outstanding shares of the Preferred Shares. All shares of Common
Stock which are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable and free from all
Taxes, liens and charges. The Company shall take all such
actions as may be necessary to assure that all such shares of
Common Stock may be so issued without violation of any applicable
law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Common Stock
may be listed (except for official notice of issuance which shall
be immediately transmitted by the Company upon issuance).
VIII.4 Purchasers' Rights if Trading in Common Stock is
Suspended or Delisted. If at any time while any Purchaser (or
any assignee thereof) owns any Preferred Shares or Conversion
Shares, trading in the shares of the Common Stock is suspended on
or delisted from the American Stock Exchange or any other
principal market or exchange for such shares (other than as a
result of the suspension of trading in securities on such market
or exchange generally or temporary suspensions pending the
release of material information) for more than five business days
in the aggregate, at the option of any Purchaser exercisable by
written notice to the Company delivered after such suspension or
delisting, the Company shall redeem, in cash, one-twentieth of
the Preferred Shares and Conversion Shares then held by such
Purchaser, at an aggregate purchase price equal to the sum of (i)
the number of Preferred Shares to be redeemed multiplied by the
product of (1) the average per share market value for the five
(5) business days immediately preceding (a) the day of such
notice or (b) the date of payment in full of the redemption price
calculated under this Section, whichever is greater and (2) a
fraction, the numerator of which is 1,000 and the denominator of
which is the Conversion Price on (a) the date of the repurchase
notice, or (b) the date of payment in full of the redemption
price pursuant to this Section, whichever is lower, (ii) the
aggregate of all accrued but unpaid dividends payable in respect
of all Preferred Shares to be redeemed, (iii) the number of
Conversion Shares then held by such Purchaser multiplied by the
average per share market value for the five (5) business days
immediately preceding (A) the date of the notice or (B) the date
of payment in full by the Company of the redemption price
calculated under this Section, whichever is greater, and (iv)
interest on the amounts set forth in (i) - (iii) above accruing
from the 5th business day after such notice until the repurchase
price under this Section is paid in full at the rate of 14% per
annum. The Company shall provide written notice of any
redemption demand made pursuant to this Section to each other
holder of Preferred Shares or Conversion Shares within 24 hours
of its receipt thereof.
VIII.5 Use of Proceeds. At the same time the Company
files its annual report on Form 10-K and at such other times as
any SBIC Holder reasonably requests, the Company shall deliver to
each SBIC Holder a written statement certified by the Company's
president or chief financial officer describing in reasonable
detail the use of the proceeds of the Financing hereunder by the
Company and its Subsidiaries. In addition to any other rights
granted hereunder, the Company shall grant such SBIC Holder and
the SBA access to the Company's books and records for the purpose
of verifying the use of such proceeds and verifying the
certifications made by the Company in SBA Forms 480 and 652
delivered pursuant to Section 7.1(f) above and for the purpose
of determining whether the principal business activity of the
Company and its Subsidiaries continues to constitute an eligible
business activity (within the meaning of the SBIC Regulations).
Article IX
SURVIVAL
IX.1 Survival. The representations and warranties of
the parties hereto contained herein, or in any writing delivered
pursuant hereto, shall survive the Closing and expire 30 days
following the filing of the Company's annual report on Form 10-K
with the SEC for the Company's fiscal year that ends in 1999,
except that, notwithstanding anything to the contrary contained
herein, the representations of the Company contained in Section
4.23 hereof shall survive the Closing and expire on December 31,
2001.
Article X
INDEMNIFICATION
X.1 Indemnification. In consideration of each
Purchaser's execution and delivery of this Agreement and
acquiring the Preferred Stock hereunder and in addition to all of
the Company's other obligations under this Agreement, the Company
shall defend, protect, indemnify and hold harmless each Purchaser
and each other holder of Preferred Stock and all of their
officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages,
and expenses (including, without limitation, costs of suit and
attorneys' fees and expenses) in connection therewith
(irrespective of whether any such Indemnitee is a party to the
action for which indemnification hereunder is sought) (the
"Indemnified Liabilities"), incurred by the Indemnitees or any of
them as a result of, or arising out of, or relating to (a) the
breach of any representation of warranty contained in any
agreement relating to any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Preferred Stock, (b) the execution, delivery,
performance or enforcement of this Agreement and any other
instrument, document or agreement executed pursuant hereto by any
of the Indemnitees or (c) resulting from any breach of any
representation, warranty, covenant or agreement made by the
Company herein or in any Related Document. The Company shall
reimburse the Indemnitees for the Indemnified Liabilities as such
Indemnified Liabilities are incurred. To the extent that the
foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities
which is permissible under applicable law.
Article XI
GENERAL PROVISIONS
XI.1 Successors and Assigns. This Agreement shall
bind and inure to the benefit of the parties hereto and their
respective successors and assigns, including each subsequent
holder of Preferred Shares or Conversion Shares. Except as
otherwise specifically provided herein, this Agreement shall not
be assignable by any party without the prior written consent of
the other parties hereto.
XI.2 Entire Agreement. This Agreement and the other
writings referred to herein or delivered pursuant hereto
constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior arrangements or
understandings.
XI.3 Notices. All notices, requests, consents and
other communications provided for herein shall be in writing and
shall be (i) delivered in person, (ii) transmitted by telecopy,
(iii) sent by first-class, registered or certified mail, postage
prepaid, or (iv) sent by reputable overnight courier service,
fees prepaid, to the recipient at the address or telecopy number
set forth below, or such other address or telecopy number as may
hereafter be designated in writing by such recipient. Notices
shall be deemed given upon personal delivery, seven days
following deposit in the mail as set forth above, upon
acknowledgment by the receiving telecopier or one day following
deposit with an overnight courier service.
(a) If to the Company:
Alarmguard Holdings, Inc.
000 Xxxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. XxxXxxxxxx
with a copy to:
Xxxxxxxx & Xxxx LLP
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
(b) If to Advance:
Advance Capital Partners, L.P.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
(c) If to any other Purchaser to the address set forth
opposite such Purchaser's name on Schedule I hereto.
XI.4 Purchasers Fees and Expenses. The Company shall
reimburse the Purchasers for the reasonable fees and expenses of
Xxxxxxxx & Xxxxx incurred in connection with the documentation,
negotiation and consummation of the transactions contemplated by
this Agreement and the Related Documents (including any future
amendments or waivers thereto) and for reasonable due diligence
expenses incurred by the Purchasers.
XI.5 Amendment and Waiver. No amendment of any
provision of this Agreement shall be effective, unless the same
shall be in writing and signed by the Company and the holders of
two-thirds of the Preferred Shares and Conversion Shares held by
holders of Series A Preferred and Series B Preferred, taken
together. Any failure of the Company to comply with any
provision hereof may only be waived in writing by the holders of
two-thirds of the Preferred Shares and Conversion Shares held by
holders of Series A Preferred and Series B Preferred, taken
together, and any failure of any holder of Preferred Shares or
Conversion Shares to comply with any provision hereof may only be
waived in writing by the Company. No such waiver shall operate
as a waiver of, or estoppel with respect to, any subsequent or
other failure. No failure by any party to take any action
against any breach of this Agreement or default by any other
party shall constitute a waiver of such party's right to enforce
any provision hereof or to take any such action. Notwithstanding
anything to the contrary contained herein, no amendment to or
waiver of Section 8.2(j) without the prior written consent of
Advance shall be permitted. No amendment of any provision of
this Agreement shall be effective prior to the Advance Closing.
11.6 Like Treatment of Holders. Neither the Company
nor any of its affiliates shall, directly or indirectly, pay or
cause to be paid any consideration, whether by way of interest,
fee, payment for the redemptions or exchange of Preferred Shares,
or otherwise, to any holder of Preferred Shares, for or as an
inducement to, or in connection with the solicitation of, any
consent, waiver or amendment of any terms or provisions of the
Preferred Shares or this Agreement or the Registration Rights
Agreement, unless such consideration is required to be paid to
all holders of Preferred Shares bound by such consent, waiver or
amendment whether or not such holders so consent, waive or agree
to amend and whether or not such holders tender their Preferred
Shares for redemption or exchange. The Company shall not,
directly or indirectly, redeem any Preferred Shares unless such
offer of redemption is made pro rata to all holders of Preferred
Shares on identical terms.
11.7 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be
an original, but all of which together shall constitute one
agreement.
11.8 Headings. The headings of the various sections
of this Agreement have been inserted for reference only and shall
not be deemed to be a part of this Agreement.
11.9 Specific Performance. The Company, on the one
hand, and the Purchasers, on the other hand, acknowledge that
money damages would not be a sufficient remedy for any breach of
this Agreement. It is accordingly agreed that the parties shall
be entitled to specific performance and injunctive relief as
remedies for any such breach, these remedies being in addition to
any of the remedies to which they may be entitled at law or
equity.
11.10 Remedies Cumulative. Except as otherwise
provided herein, the remedies provided herein shall be cumulative
and shall not preclude the assertion by any party hereto of any
other rights or the seeking of any other remedies against any
other party hereto.
11.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE LAWS OF
CONFLICT OR CHOICE OF LAWS OF THE STATE OF NEW YORK OR OF ANY
OTHER JURISDICTION THAT WOULD RESULT IN THE APPLICATION OF ANY
LAWS OTHER THAN THOSE OF THE STATE OF NEW YORK.
11.12 No Third Party Beneficiaries. Except as
specifically set forth or referred to herein, nothing herein is
intended or shall be construed to confer upon any person or
entity other than the parties hereto and their successors or
assigns, any rights or remedies under or by reason of this
Agreement.
11.13 Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent
jurisdiction 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.
* * * * *
IN WITNESS WHEREOF, the parties have caused their duly
authorized officers to execute this Agreement as of the date
first above written.
ALARMGUARD HOLDINGS, INC.
By:
Name:
Title:
ADVANCE CAPITAL PARTNERS, L.P.
By: Advance Capital Associates, L.P.,
its General Partner
By:Advance Capital Management,LLC,
its General Partner
By:
Name: Xxxxxx X. Xxxxxxxxx
Title: Principal
ADVANCE CAPITAL OFFSHORE
PARTNERS, L.P.
By:Advance Capital Offshore
Associates, LDC,
its General Partner
By:Advance Capital Associates,
L.P.,
its Sole Director
By:Advance Capital Management,
LLC,
its General Partner
By:
Name: Xxxxxx X. Xxxxxxxxx
Title: Principal
CANAAN EQUITY, L.P.
By: Canaan Equity Partners, L.L.C.
By:
Name: Xxxxxxx X. Xxxxx
Title: Member/Manager
EXETER CAPITAL PARTNERS IV, L.P.
By: Exeter IV Advisors, L.P.
its General Partner
By: Exeter IV Advisors, Inc.,
its General Partner
By:
Name: Xxxxx X. Xxx
Title: President
LB I GROUP INC.
By:
Name: Xxxx X. Xxxxxxxxxx
Title: Senior Vice President
XXXXXXX ASSOCIATES, L.P.
By:
Name: Xxxx X. Xxxxxx
Title: General Partner
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.
as Attorney-in-Fact
By:
Name: Xxxx X. Xxxxxx
Title: President
ZIFF ASSET MANAGEMENT, L.P.
By:
Name: Xxxxxx X. Xxxxxxx
Title: President
OZ MASTER FUND, LTD.
By:
Name: Xxxxxx X. Och
Title: Managing Member
OZ Management, L.L.C.
IBJS CAPITAL CORPORATION
By:
Name: Xxxxx X. Xxxxxx
Title: Director
CREDIT SUISSE (GUERNSEY) LIMITED
as trustee of the Dynamic
Growth Fund II
By:
Name: M. E. Xxxxxx
Title: Associate
AETNA LIFE INSURANCE COMPANY
By:
Name: Xxxx Xxxxxxxx
Title: Assistant Vice President
GRANITE PROPERTIES MANAGEMENT CORP.
By:
Name: Xxxxx X. Xxxxx
Title: Director, Private Equity
By:
Name: Xxxx Xxxxxxxxxxx
