<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MASADA SECURITY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 7382 63-1082760
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
950 22ND STREET NORTH, SUITE 800
BIRMINGHAM, ALABAMA 35203
(205) 323-7233
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
TERRY W. JOHNSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MASADA SECURITY HOLDINGS, INC.
950 22ND STREET NORTH, SUITE 800
BIRMINGHAM, ALABAMA 35203
(205) 323-7233
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C>
DAVID D. DOWD, III, ESQ. WILLIAM L. HUDSON, ESQ.
BURR & FORMAN BROBECK PHLEGER & HARRISON LLP
420 NORTH 20TH STREET, SUITE 3100 SPEAR STREET TOWER, ONE MARKET
BIRMINGHAM, ALABAMA 35203 SAN FRANCISCO, CA 94105
(205) 251-3000 (415) 442-0900
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: as soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AGGREGATE
TO BE REGISTERED OFFERING PRICE AMOUNT OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value...... $30,000,000 $9,091
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 4, 1996
MASADA SECURITY (LOGO)
SHARES
COMMON STOCK
All of the shares of Common Stock offered hereby are being issued and sold
by Masada Security Holdings, Inc. ("Masada" or the "Company"). Prior to this
offering, there has been no public market for the Common Stock of the Company.
It is currently estimated that the initial public offering price will be between
$ and $ per share. See "Underwriting" for information relating to
the method of determining the initial public offering price.
---------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE .
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
- ----------------------------------------------------------------------------------------------------
Total(2).......................... $ $ $
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses payable by the Company, estimated at $ .
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an additional shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions,
and Proceeds to Company will be $ , $ and $ ,
respectively.
---------------------
The Common Stock is offered by the Underwriters as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of Robertson, Stephens & Company LLC ("Robertson, Stephens &
Company"), San Francisco, California, on or about , 1996.
ROBERTSON, STEPHENS & COMPANY LEHMAN BROTHERS
The date of this Prospectus is , 1996.
<PAGE> 3
[PHOTOGRAPH OF CENTRAL MONITORING STATION]
[PHOTOGRAPH OF INSTALLER PLACING YARD SIGN]
[PHOTOGRAPH OF SALES CONSULTANT AND PROSPECTIVE SUBSCRIBERS]
[PHOTOGRAPH OF SERVICE TRUCK AND RESIDENCE]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 4
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF,
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................................
Risk Factors..........................................................................
The Company...........................................................................
Use of Proceeds.......................................................................
Dividend Policy.......................................................................
Capitalization........................................................................
Dilution..............................................................................
Selected Consolidated Financial and Operating Data....................................
Management's Discussion and Analysis of Financial Condition and Results of
Operations..........................................................................
Business..............................................................................
Management............................................................................
Principal Stockholders................................................................
Certain Transactions..................................................................
Description of Capital Stock..........................................................
Shares Eligible for Future Sale.......................................................
Underwriting..........................................................................
Legal Matters.........................................................................
Experts...............................................................................
Additional Information................................................................
Index to Consolidated Financial Statements............................................ F-1
</TABLE>
---------------------
The Company intends to furnish to its stockholders annual reports
containing audited financial statements examined by its independent auditors and
quarterly reports containing unaudited condensed financial statements for the
first three quarters of each fiscal year.
Masada Security(R) is a registered tradename of the Company. Safe Choice is
a tradename of the Company.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus. Unless otherwise indicated or the context
otherwise requires, references to "Masada" or the "Company" are to Masada
Security Holdings, Inc. and its subsidiaries. This Prospectus contains
forward-looking statements which involve risk and uncertainties. The Company's
actual results may differ materially from the results discussed in
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors" and elsewhere in this
Prospectus.
THE COMPANY
The Company provides security alarm monitoring services and installs and
services security alarm systems for residential and small business subscribers,
principally in the southern United States. At June 30, 1996, the Company had
approximately 78,000 subscriber accounts for its alarm monitoring services, a
majority of which were residential subscribers. As a result of the Company's
internally generated "Safe Choice" subscriber accounts and acquisitions of
subscriber account portfolios, the Company has increased its monthly recurring
revenue ("MRR")(1) from approximately $0.6 million at February 1, 1993 to
approximately $2.0 million at June 30, 1996, which represents an increase in
annualized MRR from $7.6 million to $24.0 million. The Company believes that
based upon MRR, it is one of the largest residential security alarm monitoring
companies in the southern United States. According to a May 1996 survey by SDM
magazine (formerly Security Distributing and Marketing) ("SDM"), the Company is
the second fastest growing security alarm monitoring company in the United
States based upon the Company's historical three year growth rate in revenues.
The Company's objective is to provide residential security alarm services
to a greater number of Americans by making such services affordable and by
focusing on markets with attractive demographics. The Company's growth strategy
is based upon both internal generation of subscriber accounts marketed under the
tradename "Safe Choice" by the Company's sales consultants, and acquisitions of
subscriber accounts from independent alarm monitoring companies. The Company
believes that it can achieve economies of scale and improve results of
operations by increasing the number and density of subscribers for whom it
provides services, thereby increasing utilization of the Company's central
monitoring station and improving efficiency of its service operations.
From February 1, 1993 through June 30, 1996, Masada has generated
approximately 34,500 subscriber accounts internally through the Safe Choice
marketing program, including over 6,000 new Safe Choice subscriber accounts
during the second quarter of 1996. The Company seeks to create additional
subscriber accounts through the Safe Choice marketing program by subsidizing the
initial installation of a residential security alarm monitoring system in order
to capture the MRR generated by the monitoring contract. By offering the Safe
Choice alarm system at a base installation price of $99, the Company believes it
can access a broader demographic market than is presently being accessed by
other existing companies who, according to the January 1996 issue of SDM, sold
and installed alarm systems during 1995 for an average price of $1,200. In
addition, the Safe Choice program allows Masada to create subscriber accounts
for an investment which, expressed as a multiple of MRR generated, is
substantially lower than that for which the Company can acquire subscriber
accounts and, in the Company's belief, is among the lowest in the industry.
- ---------------
(1) MRR is monthly recurring revenue which the Company is entitled to receive
from contracts in effect at the end of the period. MRR is a term commonly
used in the industry as a measure of a the size of a company but not as a
measure of profitability or performance, and does not include any allowance
for future attrition of subscriber accounts or allowance for doubtful
accounts. The Company does not have sufficient information as to the
attrition of acquired subscriber accounts to predict the amount of acquired
MRR that will be realized in future periods or the impact of the attrition
of acquired subscriber accounts on the Company's overall rate of attrition.
See "Risk Factors -- Attrition of Subscriber Accounts."
4
<PAGE> 6
Since September 1994, the Company has acquired approximately 39,000
subscriber accounts in 17 separate transactions. The Company intends to make
acquisitions and open branches in new geographic markets where the Company does
not presently have subscribers, and then to increase the number of subscriber
accounts in such markets through the Safe Choice marketing program and
subsequent acquisitions, both of which have the effect of increasing subscriber
account density in the area, and thereby improving operating efficiency.
Approximately 90% of the Company's subscribers are located in Florida,
Texas and the Richmond/Washington, D.C./Baltimore metropolitan areas. The
Company's remaining subscribers are located in Georgia, Louisiana, Oklahoma and
Tennessee. According to the Bureau of the Census and the Federal Bureau of
Investigation, the states which the Company serves collectively have higher
projected population growth rates from 1990 through 2010 and had higher crime
rates during 1994 than the nation as a whole. The Company monitors digital
signals arising from burglaries, fires and other monitored events which occur at
the subscribers' premises from the Company's state-of-the-art central monitoring
station located in Birmingham, Alabama, which has the capacity to serve
approximately 250,000 subscriber accounts.
The security alarm industry is highly fragmented and growing. According to
research conducted by J.P. Freeman & Co., a security industry consulting firm
(the "Freeman Research"), as of 1996 there are approximately 11,500 security
alarm companies in the United States. A May 1996 survey by SDM reported that in
1995 the largest companies in the industry accounted for only 23% of alarm
industry revenues and the top 10 security alarm monitoring companies served less
than 3% of all United States households. Freeman Research indicates that
residential security alarm monitoring revenues grew in the United States at a
compounded annual rate of 12% between 1988 and 1995. The Company believes that
several factors, including increased concern about crime and favorable
demographic trends, have contributed to the increased demand for residential
security alarm services. Market penetration, however, remains low, with
monitored security alarm systems installed in only 11% of all U.S. households
according to Freeman Research.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered......................... shares
Common Stock Outstanding after the
Offering................................... shares(2)
Use of Proceeds.............................. Redemption of Class A Preferred Stock and
partial repayment of indebtedness outstanding
under the Company's credit facility. The
Company intends to borrow in the future under
the credit facility to fund the Safe Choice
marketing program, to fund acquisitions of
subscriber accounts, and for general
corporate purposes, including capital
expenditures and working capital. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol....... MSDA
</TABLE>
- ---------------
(2) Excludes, as of October 4, 1996, shares reserved for issuance upon exercise
of outstanding options to purchase 391,500 shares of Common Stock and excludes
shares covered by the Underwriters' over-allotment option.
5
<PAGE> 7
SUMMARY FINANCIAL AND OPERATING DATA
(In thousands, except number of subscribers)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
ELEVEN ----------------------------- -----------------------------
MONTHS ENDED HISTORICAL HISTORICAL
DECEMBER 31, ----------------- PRO FORMA ----------------- PRO FORMA
1993(1) 1994 1995 1995(2) 1995 1996 1996(2)
------------ ------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
- --
STATEMENT OF OPERATIONS DATA:
Revenues:
Monitoring.......................... $ 6,958 $ 8,756 $12,472 $ 22,326 $ 5,587 $ 9,367 $11,417
Installation........................ 2,477 3,083 3,429 5,806 1,626 2,493 2,493
Service............................. 520 678 911 1,083 435 677 677
Other............................... -- -- -- 484 -- -- --
------- ------- ------- ------- ------- ------- -------
Total revenues.................. 9,955 12,517 16,812 29,699 7,648 12,537 14,587
Cost of revenues:
Monitoring.......................... 1,137 1,374 1,945 3,544 942 1,421 1,699
Installation........................ 1,220 1,268 1,339 3,210 622 1,151 1,151
Service............................. 1,429 1,734 2,235 2,235 983 1,628 1,628
------- ------- ------- ------- ------- ------- -------
Total cost of revenues.......... 3,786 4,376 5,519 8,989 2,547 4,200 4,478
------- ------- ------- ------- ------- ------- -------
Gross profit.................... 6,169 8,141 11,293 20,710 5,101 8,337 10,109
General and administrative
expenses............................ 3,091 5,071 7,550 14,874 3,246 4,563 5,955
Noncash compensation expense.......... -- 92 56 56 -- 99 99
Selling and marketing costs........... 1,879 2,923 5,411 5,411 2,416 3,780 3,780
Depreciation and amortization......... 2,406 3,451 5,258 8,764 2,630 4,774 5,469
------- ------- ------- ------- ------- ------- -------
Operating loss.................. (1,207) (3,396) (6,982) (8,395 ) (3,191) (4,879) (5,194)
Interest expense, net................. 754 593 844 3,622 562 1,140 1,671
Other nonoperating expense............ -- -- -- (277 ) -- -- (70)
Gain on disposal of assets............ -- -- -- 2 -- 160 160
Extraordinary loss from early
retirement of debt.................. -- -- -- -- -- (567) (567)
Income tax expense.................... -- -- -- (10 ) -- -- --
------- ------- ------- ------- ------- ------- -------
Net loss........................ $ (1,961) $(3,989) $(7,826) $(12,302 ) $(3,753) $(6,426) $(7,342)
======= ======= ======= ======= ======= ======= =======
OTHER OPERATING DATA:
EBITDA(3)............................. $ 1,199 $ 147 $(1,668) $ 425 $ (561) $ (6) 374
Less Safe Choice revenues........... (1,346) (1,937) (2,076) (2,076 ) (958) (1,352) (1,352)
Plus Safe Choice selling and
marketing expenses................ 1,879 2,923 5,411 5,411 2,416 3,780 3,780
------- ------- ------- ------- ------- ------- -------
Adjusted EBITDA(4)................ $ 1,732 $ 1,133 $ 1,667 $ 3,760 $ 897 $ 2,422 $ 2,802
CERTAIN SUBSCRIBER DATA:
MRR at end of period(5)............... $ 660 $ 903 $ 1,298 $ 1,298 $ 1,051 $ 2,045 $ 2,045
Number of subscribers at end of
period.............................. 21,051 30,053 47,060 47,060 36,353 77,927 77,927
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------------------
ACTUAL PRO FORMA(2) AS ADJUSTED(6)
------- ------------ --------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit).................................... $ (596) $ (596) $ (596)
Total assets................................................. 56,667 56,667 56,667
Long-term debt less current portion.......................... 40,106 40,106
Total stockholders' equity................................... 5,573 5,573
</TABLE>
- ---------------
(1) The Company commenced operations on February 1, 1993.
(2) With respect to Statement of Operations Data, Operating Data and Certain
Subscriber Data, gives effect to acquisitions occurring during 1995 and 1996
as if each had occurred on January 1, 1995, and with respect to Consolidated
Balance Sheet Data, reflects the conversion of all outstanding shares of
Class B convertible preferred stock and Class C convertible preferred stock
into shares of Class B common stock and Class C common stock, respectively,
and the exchange of each outstanding share of Class A common stock, Class B
common stock, and Class C common stock into three shares of a new, single
class of Common Stock, as provided for in the Company's Plan of
Recapitalization, concurrently with the consummation of this offering.
6
<PAGE> 8
(3) EBITDA is derived by adding to net loss the sum of (i) interest expense,
(ii) depreciation and amortization expense, and (iii) noncash compensation
expense related to the Company's stock option grants, less (iv) gain on
disposal of assets. EBITDA does not represent cash flow from operations as
defined by generally accepted accounting principles, should not be construed
as an alternative to net income, and is indicative neither of the Company's
operating performance nor of cash flows available to fund the Company's cash
needs. Items excluded from EBITDA are significant components in
understanding and assessing the Company's financial performance.
(4) Adjusted EBITDA ("Adjusted EBITDA") is derived by adding to EBITDA the Safe
Choice selling and marketing expenses, net of Safe Choice installation
revenues, during the period. Adjusted EBITDA does not represent cash flow
from operations as defined by generally accepted accounting principles,
should not be construed as an alternative to net income, and is indicative
neither of the Company's operating performance nor of cash flows available
to fund the Company's cash needs. Management believes presentation of
Adjusted EBITDA enhances an understanding of the value of the Company,
particularly in comparison to other security alarm companies that grow
substantially through acquisitions of subscriber accounts. Tests similar to
Adjusted EBITDA have been used by lenders and the investment community to
estimate the long-term value of companies with recurring cash flows from
operations and with net losses. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- General -- Accounting
Policies for Safe Choice Installations and Subscriber Account Purchases."
(5) MRR is monthly recurring revenue that the Company is entitled to receive
under contracts in effect at the end of the period. MRR is a term commonly
used in the security alarm industry as a measure of the size of a company,
but not as a measure of profitability or performance, and does not include
any allowance for future attrition or allowance for doubtful accounts. The
Company does not have sufficient information as to the attrition of acquired
subscriber accounts to predict the amount of acquired MRR that will be
realized in future periods or the impact of the attrition of acquired
accounts on the Company's overall rate of attrition.
(6) As adjusted to reflect the sale by the Company of shares of Common
Stock offered hereby and the anticipated application of the estimated net
proceeds therefrom at an assumed offering price of $ per share (less
underwriting discounts and commissions and estimated offering expenses). See
"Use of Proceeds."
---------------------
Unless otherwise indicated or the context otherwise requires, all
information contained in this Prospectus assumes (i) the implementation of the
Company's Plan of Recapitalization (the "Recapitalization") concurrently with
the consummation of this offering, which Recapitalization provides for (a) the
automatic redemption of all outstanding shares of Class A preferred stock, (b)
the automatic conversion of all outstanding shares of Class B convertible
preferred stock and Class C convertible preferred stock into shares of Class B
common stock and Class C common stock, respectively, and (c) the automatic
exchange of each outstanding share of Class A common stock, Class B common stock
and Class C common stock into three shares of a new, single class of Common
Stock, and (ii) that the Underwriters' over-allotment option is not exercised.
7
<PAGE> 9
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered hereby. This Prospectus
contains forward-looking statements which involve risk and uncertainties. The
Company's actual results may differ materially from the results discussed in
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed below and elsewhere in this Prospectus.
DEPENDENCE UPON INTERNALLY GENERATED SUBSCRIBER ACCOUNTS FOR GROWTH
A principal element of the Company's business strategy is to grow by
internally generating subscriber accounts through the Safe Choice marketing
program. From February 1, 1993 to June 30, 1996, the Company added approximately
34,500 subscriber accounts through the Safe Choice marketing program, including
over 6,000 new Safe Choice accounts during the second quarter of 1996. The
Company's internally generated Safe Choice accounts comprise approximately 38%
of the Company's subscriber accounts, including 33% of the new accounts gained
by the Company during the first six months of 1996. The Company believes that
continued Safe Choice account generation will be an integral part of the
Company's revenue growth. Masada faces competition for new subscriber accounts
from other alarm monitoring companies, including companies who are better
capitalized than the Company and who offer low price, subsidized installations
of security systems, such as ADT Security Systems, Inc., Westinghouse Security
Systems, and Brink's Home Security, Inc. See -- "Competition." Competitive
pressures may require the Company to reduce its prices to maintain its Safe
Choice growth. Additionally, the Company faces competition in the hiring of
qualified sales consultants from a variety of businesses. The Company's ability
to maintain or increase its Safe Choice growth in the future will depend in part
upon the number and quality of sales consultants that the Company can hire and
retain. There can be no assurance that the Company will be able to retain a
sufficient number of qualified sales consultants or to sustain its Safe Choice
subscriber account growth.
The costs incurred by Masada to generate a new Safe Choice account
typically exceed the initial revenues received from the Safe Choice customer.
The Company subsidizes the customer's purchase of Safe Choice services in order
to secure the MRR generated by the monitoring contract. See "Business -- The
Safe Choice Program." Because the Safe Choice installations involve a subsidy to
the customer, the Company utilizes its credit facility (the "Credit Facility")
to fund the Safe Choice marketing program. If the Company is required to
increase its subsidy due to competitive pressures or higher costs, the Company's
need for additional capital, which will likely be satisfied through borrowed
funds, will increase. If the Company's borrowing capacity under the Credit
Facility is exhausted, the Company's ability to generate Safe Choice accounts
may be impaired. See -- "Need for Additional Capital." Additionally, the ability
of the Company to generate Safe Choice accounts may be limited from time to time
by restrictive covenants in the Credit Facility. See -- "Leverage, Debt Service
and Covenants."
DEPENDENCE UPON ACQUISITIONS FOR GROWTH; ACQUISITION RISKS
Between September 1, 1994 and June 30, 1996, the Company completed 17
acquisitions of subscriber account portfolios of other alarm monitoring
companies. The Company expects that future acquisitions will be an integral part
of the Company's revenue growth. Other alarm service companies have adopted a
strategy similar to the Company's that entails the acquisition of alarm
monitoring accounts. Some of these competitors have greater financial resources
than the Company or may be willing to offer higher prices than the Company is
prepared to offer to acquire subscriber accounts. The effect of such competition
may be to reduce the acquisition opportunities available to the Company, thus
reducing the Company's rate of growth, or to increase the price paid by the
Company for acquired subscriber accounts, which would adversely affect the
Company's return on its investment in such accounts and its results of
operations. There can be no assurance that the Company will be able to find
acceptable acquisition candidates or sustain its recent acquisition rate. See
-- "Competition."
8
<PAGE> 10
Because the Company funds its acquisitions with borrowings under the Credit
Facility, the Company's ability to continue its acquisition program may be
impaired if the Company's borrowing capacity under the Credit Facility is
exhausted. See --"Need for Additional Capital."
Acquisitions involve a number of special risks, including the possibility
of problems not discovered prior to the acquisition, account attrition, and the
diversion of management's attention to the assimilation of accounts. Since a
significant portion of the Company's acquired accounts were purchased since
January 1, 1996, the Company has limited experience with a significant portion
of its acquired accounts, and there can be no assurance that the Company will
not encounter difficulties in connection with these acquisitions, including an
actual attrition rate that is higher than that assumed by the Company. See
- -- "Attrition of Subscriber Accounts." For acquisitions that are structured as
the purchase of the stock rather than the assets of other alarm companies, the
Company may inherit unexpected liabilities and may have to dispose of the
unnecessary assets of the acquired companies, which may adversely affect the
Company's results of operations.
NEED FOR ADDITIONAL CAPITAL
During 1994 and 1995, the Company incurred costs of approximately $4.5
million and $8.2 million, respectively, in generating internal Safe Choice
accounts, and invested approximately $4.0 million and $6.5 million,
respectively, in acquiring subscriber accounts from alarm monitoring companies.
Net cash provided by (used in) operating activities during 1994 and 1995 was $.2
million and $(3.6) million, respectively. The Company used borrowings under a
prior credit facility and proceeds from sales of equity securities to fund the
Company's Safe Choice marketing program, investing activities, and operations
during these years. As the Company continues its strategy to grow through the
Safe Choice marketing program and the acquisition of subscriber accounts, the
Company's current borrowing capacity is likely to be exhausted. Accordingly, the
Company will likely be required to obtain additional debt financing or sell
additional equity securities in the future, which may result in higher leverage
or the dilution of then existing holders' investments in the Common Stock.
See -- "Leverage, Debt Service and Covenants" and -- "Dilution." There can be no
assurance that external funding will be available to the Company on terms
favorable to the Company or at all. Any inability of the Company to obtain
additional capital will likely adversely affect the Company's ability to
continue to generate Safe Choice accounts or to make acquisitions of subscriber
accounts. See -- "Dependence Upon Internally Generated Subscriber Accounts for
Growth" and -- "Dependence Upon Acquisitions for Growth; Acquisition Risks."
QUARTERLY FLUCTUATIONS IN RESULTS OF OPERATIONS
The Company historically has experienced fluctuations in its quarterly
operating results and expects to experience fluctuations of quarterly operating
results in the future. These fluctuations may be caused by many factors,
including, among others, the opening of new branch offices, the volume and
timing of additional internally generated subscriber accounts, the size and
timing of acquisitions of subscriber account portfolios, acquired subscriber
assimilation, attrition experience, competitive pricing pressures, local and
national crime activity, general economic conditions, and seasonality. The Safe
Choice marketing program can be hampered during the winter months as a result of
unfavorable weather conditions, holidays, and reduced hours of daylight. The
Company's expense levels are based, to some extent, on its expectations of
future subscriber and revenue levels, which are dependent on estimates of
internally generated additions of subscriber accounts and of subscriber account
portfolio acquisitions. The Company may be unable, therefore, to adjust spending
in a timely manner to compensate for any unexpected revenue shortfall due to
less than anticipated levels of internally generated accounts or a delay in the
timing of acquisitions. Given the possibility of quarterly fluctuations, the
Company believes that comparisons of the results of its operations for preceding
quarters are not necessarily meaningful and that the results for any one quarter
should not be relied upon as an indication of future performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Selected Quarterly Results of Opera-
9
<PAGE> 11
tions." In the event that the Company's revenues or operating results for any
quarter are less than the level expected by securities analysts or the market in
general, such shortfall could have an immediate and significant adverse impact
on the market price of the Company's common stock.
GEOGRAPHIC CONCENTRATION AND EXPANSION
At June 30, 1996, almost 90% of the Company's existing subscribers were
located in Florida (55%), Texas (24%) and the Richmond/Washington,
D.C./Baltimore metropolitan area (9%). Accordingly, in these areas the
performance of the Company may be adversely affected by regional or local
economic conditions. See "Business -- Overview."
The Company intends to make acquisitions and open new branch offices in
geographic markets where the Company does not presently have subscribers.
Expansion into new markets requires an investment by the Company in local
branches and personnel necessary to service the subscriber accounts. The
expenses associated with the opening of new branch offices are expensed in the
period in which incurred and thus may substantially impact the Company's
operating results during such period. For the Company to expand successfully
into a new market, the Company must obtain a sufficient number and density of
subscriber accounts in such market to support the additional investment. There
can be no assurance that expansion into new markets will not adversely affect
the Company's future business and results of operations.
ATTRITION OF SUBSCRIBER ACCOUNTS
The Company experiences attrition of subscriber accounts as a result of,
among other factors, relocation of subscribers, adverse financial and economic
conditions, and competition from other alarm service companies. In addition, the
Company may lose acquired accounts in the event it is unable to service them
adequately or to assimilate them into its operations. An increase in such
attrition could have a material adverse effect on the Company's revenues and
results of operations.
When acquiring accounts, the Company usually withholds a portion of the
purchase price as a partial guarantee against subscriber attrition. If the
actual attrition rate for the accounts acquired is greater than the rate assumed
by the Company at the time of the acquisition, and the Company is unable to
recoup its damages from the portion of the purchase price held back from the
seller, such attrition could have a material adverse affect on the Company's
financial condition or results of operations. The Company is not aware of any
reliable historical data relating to account attrition rates prepared by
companies from whom the Company has acquired accounts, and the Company has no
assurance that actual account attrition for acquired accounts will not be
greater than the attrition rate assumed or historically incurred by the Company.
In addition, because some acquired accounts are prepaid on an annual,
semi-annual or quarterly basis, attrition may not become evident for some time
after an acquisition is consummated. See "Business -- The Acquisition Program."
At June 30, 1996, the cost of acquired subscriber accounts, net of
accumulated amortization, was $32.7 million, which constituted 57.7% of the book
value of the Company's total assets. The Company's acquired subscriber accounts
are amortized on a straight-line basis over the estimated life of the related
revenues. The Company estimates the lives of acquired accounts to be
approximately eight years. See Note 1 of Notes to Consolidated Financial
Statements. There could be a material adverse effect on the Company's results of
operations and financial condition if actual account attrition significantly
exceeds assumed attrition and the Company has to make adverse adjustments with
respect to the amortization of acquired subscriber accounts. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- General -- Subscriber Attrition."
LIMITED OPERATING HISTORY; HISTORY OF NET LOSSES; ANTICIPATED FUTURE LOSSES
The Company did not commence operations until February 1993 and has grown
from approximately 19,000 subscriber accounts to approximately 78,000 subscriber
accounts through its Safe Choice marketing program and its acquisition program.
See "Business -- The Safe Choice Program" and
10
<PAGE> 12
"Business -- The Acquisition Program." The Company depends on achieving
economies of scale and improving results of operations by increasing the number
and density of subscribers for whom it provides services, thereby increasing
utilization of the Company's central monitoring station and improving efficiency
of its service operations. See "Business -- Business Strategy." Due to the
Company's limited operating history, there can be no assurance that the
Company's business strategy will be successful on a long-term basis.
The Company incurred net losses of $6.4 million for the six months ended
June 30, 1996, $7.8 million for the year ended December 31, 1995, $4.0 million
for the year ended December 31, 1994, and $2.0 million for the eleven months
ended December 31, 1993. These losses reflect, among other factors, the expenses
associated with internally generated subscriber accounts, the charges incurred
by the Company for amortization of purchased subscriber accounts, and the
interest incurred on its indebtedness. Such charges will increase as the Company
continues to generate new subscriber accounts, as the Company continues to
purchase subscriber accounts, if the Company's indebtedness increases, or if
interest rates increase. The Company expects to continue to incur net losses for
the foreseeable future.
"FALSE ALARM" ORDINANCES
According to Freeman Research, approximately 94% of alarm activations that
result in the dispatch of police or fire department personnel are not
emergencies, and thus are "false alarms." Significant concern has arisen in
certain municipalities about this high incidence of false alarms. This concern
could cause a decrease in the likelihood or timeliness of police response to
alarm activations and thereby decrease the propensity of consumers to purchase
or maintain alarm monitoring services.
Recently, a trend has emerged on the part of local governmental authorities
to consider or adopt various measures aimed at reducing the number of false
alarms. Such measures include (i) subjecting alarm monitoring companies to fines
or penalties for transmitting false alarms, (ii) licensing individual alarm
systems and the revocation of such licenses following a specified number of
false alarms, (iii) imposing fines on alarm subscribers for false alarms, (iv)
imposing limitations on the number of times the police will respond to alarms at
a particular location after a specified number of false alarms, and (v)
requiring further verification of an alarm signal before the police will
respond. Enactment of such laws could adversely affect the Company's future
business and results of operations.
LACK OF AUDITED FINANCIAL INFORMATION RELATING TO ACQUISITIONS
Since the Company's primary consideration in making an acquisition is the
amount of MRR associated with the seller's subscriber accounts, the price paid
by the Company is customarily directly tied to such MRR. The price paid varies
based on the number and quality of accounts being purchased from the seller, the
historical activity of such accounts, and other factors. Typically the seller
does not have audited financial statements from which the Company can verify
levels of acquired MRR. Thus, the actual MRR acquired may be less than the
Company anticipated. No audited historical financial information was available
for any of the 17 acquisitions which the Company made between September 1, 1994
and June 30, 1996. See "Business -- The Acquisition Program." Thus, the Company
must rely on management's knowledge of the industry, due diligence procedures,
and representations and warranties of the sellers. The Company expects that
future acquisitions will present the same risks to the Company as its recent
acquisitions.
LEVERAGE, DEBT SERVICE AND COVENANTS
At June 30, 1996, after giving pro forma effect to the application of the
net proceeds from this offering, the Company's pro forma consolidated long-term
indebtedness would have been approximately $ million. See "Pro Forma
Financial Information." As a result of the Company's strategy to increase
subscriber accounts through the Safe Choice marketing program and acquisitions
of subscriber account portfolios, the Company expects its degree of leverage to
increase significantly, at least
11
<PAGE> 13
through 1997. The Company's indebtedness requires that a significant amount of
its cash flow from operations be applied to the payment of interest, and there
can be no assurance that the Company's operations will generate sufficient cash
flow to service this indebtedness. Borrowings under the Credit Facility are at
variable rates of interest, which subjects the Company to fluctuations in
interest rates.
The Credit Facility, which matures on September 30, 1997, includes
covenants that restrict the operational and financial flexibility of the
Company. Failure to comply with certain covenants would, in some instances,
permit the lenders to accelerate the maturity of the obligations thereunder. In
addition, the Company is required to obtain the consent of its lenders under the
Credit Facility and to maintain certain financial ratios in order to undertake
significant acquisitions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and Note
5 of Notes to Consolidated Financial Statements.
Because the Credit Facility was not paid in full by September 30, 1996, the
Company is obligated to pay the lenders under the Credit Facility a financing
fee equal to .0275% multiplied by the average commitment amount under the Credit
Facility multiplied by the number of days between September 25, 1996 and the
date on which the Credit Facility is paid in full (the "Financing Fee").
Accordingly, the Financing Fee began to accrue on September 25, 1996 at a daily
rate of $13,750. The proceeds from this offering will not be sufficient to pay
the entire balance due under the Credit Facility. If the Company does not pay
the Credit Facility in full until the Credit Facility matures on September 30,
1997, the Financing Fee will be approximately $5.0 million. Although the Company
anticipates that the lenders will agree, following consummation of this
offering, to reduce or waive the Financing Fee and/or extend the maturity date
of the Credit Facility, there can be no assurance that the Company will be able
to obtain these concessions.
RISKS OF LIABILITY
The nature of the services provided by the Company potentially exposes it
to greater risks of liability for employee acts or omissions or system failure
than may be inherent in other businesses. Most of the Company's alarm monitoring
agreements and other agreements pursuant to which it sells its products and
services contain provisions limiting liability to subscribers in an attempt to
reduce this risk. However, in the event of litigation with respect to such
matters, there can be no assurance that these limitations will be enforced, and
the costs of such litigation could have a material adverse effect on the
Company.
The Company carries insurance of various types, including general liability
and errors and omissions insurance. The loss experience of the Company and other
security service companies, however, may affect the availability and cost of
such insurance. Certain of the Company's insurance policies and the laws of some
states may limit or prohibit insurance coverage for punitive or certain other
types of damages, or liability of the Company arising from gross negligence or
wanton behavior.
COMPETITION
The security alarm industry is highly competitive and highly fragmented. In
marketing the Safe Choice system, the Company competes with larger national
companies who are better capitalized and who conduct media advertising, which
the Company does not currently utilize. The Company also competes with larger
national companies, as well as smaller regional and local companies, for the
acquisition of subscriber accounts. Furthermore, new competitors are continuing
to enter the industry and the Company may encounter additional competition from
such future industry entrants. Certain of the Company's current competitors
have, and new competitors may have, greater resources than the Company. There
can be no assurance that the Company will be able to compete effectively in the
future. See "Business -- Competition."
In June 1994, the Company entered into a license agreement with Centennial
Security, Inc., an alarm security company based in New Jersey ("Centennial
Security"), pursuant to which the Company granted to Centennial Security an
exclusive, ten year license to use the Masada Security
12
<PAGE> 14
trademark and tradename, the Safe Choice tradename, and certain other
intellectual property in the northern half of the United States (the states of
California (north of Sacramento), Colorado, Connecticut, Delaware, Idaho,
Illinois, Indiana, Iowa, Kansas, Maine, portions of Maryland, Massachusetts,
Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New
Jersey, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South
Dakota, Utah, Vermont, Washington, Wisconsin and Wyoming) and Canada (the
"Centennial Territory"). Although the license agreement specifically provides
that the Company may operate as a security alarm company within the Centennial
Territory, the license agreement prohibits the Company from operating as "Masada
Security" and from using the "Safe Choice" tradename and other intellectual
property within the Centennial Territory without the consent of Centennial
Security until the license agreement terminates, which is not scheduled to occur
until 2004. In the event the Company enters markets located within the
Centennial Territory, the limitations imposed on the Company by the license
agreement with Centennial Security could have a material adverse effect upon the
Company's future business and operating results. See "Certain
Transactions -- Transactions with Centennial Security."
CONTROL BY CERTAIN EXISTING STOCKHOLDERS
Immediately following the sale of the shares of Common Stock offered
hereby, the Company's nine venture capital investors (Centennial Fund III, L.P.,
Centennial Fund IV, L.P., Criterion Venture Partners III, Limited, Norwest
Equity Partners IV, A Minnesota Limited Partnership, Norwest Equity Partners V,
a Minnesota Limited Liability Partnership, South Atlantic Venture Fund II,
Limited Partnership, South Atlantic Venture Fund III, Limited Partnership,
Hancock Venture Partners IV-Direct Fund L.P., and Chase Venture Capital
Associates), will together beneficially own 4,277,709 shares of Common Stock,
which will comprise % of the outstanding shares of the Common Stock ( %
if the Underwriters' over-allotment option is exercised in full). As a result of
their ownership interests, these investors, as a group, may be able to control
the election of all of the Company's directors and to determine all corporate
actions requiring stockholder approval, including significant corporate
transactions. See "Description of Capital Stock" and "Principal Stockholders."
DEPENDENCE UPON SENIOR MANAGEMENT
The success of the Company's business is largely dependent upon the active
participation of its executive officers. The loss of the services for any reason
of one or more of such officers, in particular Terry W. Johnson, the Chairman,
President and Chief Executive Officer of the Company, may have a material
adverse effect on the Company's business. The Company has no employment
agreements with any of its officers. The Company is actively seeking to hire a
chief operating officer who would assume the title of President. There can be no
assurance that the Company will be able to hire a qualified executive for this
position.
MANAGEMENT OF GROWTH
The Company's business strategy is to grow through the addition of
subscriber accounts. This expansion has placed and will continue to place
substantial demands on the Company's management, operational resources and its
system of financial and internal controls. The Company's future operating
results will depend in part on the Company's ability to continue to implement
and improve its operating and financial controls and to expand, train and manage
its employee base. Additionally, management of growth may limit the time
available to the Company's management to attend to other operational, financial
and strategic issues, which may result in unanticipated adverse developments in
the ongoing operations of the Company.
DEPENDENCE ON THE CENTRAL MONITORING STATION
The Company is dependent on a single alarm monitoring station located in
Birmingham, Alabama to monitor substantially all of its subscriber accounts.
Although the central monitoring station is located in a building which meets or
exceeds all applicable building codes, a catastrophic event such as
13
<PAGE> 15
a bombing, tornado, hurricane, earthquake, fire, or other disaster could render
the central monitoring station inoperable, which could adversely affect the
Company's business and results of operations.
REGULATION
The Company's operations are subject to a variety of laws, regulations and
licensing requirements of federal, state and local authorities. In certain
jurisdictions, the Company is required to obtain licenses or permits, comply
with standards governing employee selection and training, and meet certain
standards in the conduct of its business. The loss of such licenses, or the
imposition of conditions to the granting or retention of such licenses, could
have a material adverse effect on the Company.
The Company's advertising and sales practices are regulated by both the
Federal Trade Commission (the "FTC") and state consumer protection laws. Such
regulations include restrictions on the manner in which the Company promotes the
sale of its security alarm systems and the obligation of the Company to provide
new subscribers with certain rescission rights. While the Company believes that
it has complied with these regulations in all material respects, there can be no
assurance that none of these regulations were violated in connection with the
solicitation of the Company's existing subscriber accounts, particularly with
respect to accounts acquired from third parties, or that no such violations will
occur in the future.
DILUTION
The initial public offering price substantially exceeds the net tangible
book value per share of the Common Stock as adjusted for the receipt of the net
proceeds from this offering, resulting in substantial dilution to purchasers of
Common Stock in this offering. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market could
adversely affect the market price of the Common Stock. Upon completion of this
offering, the shares of Common Stock offered hereby ( if the
Underwriters' over-allotment option is exercised in full) will be eligible for
sale on the open market. Upon the expiration of "lock-up" agreements with the
Underwriters 180 days after this offering (or earlier if Robertson, Stephens &
Company agrees to release shares from the lock-up agreements), approximately
704,463 shares will be eligible for sale without restriction and approximately
4,722,363 shares will be eligible for sale subject to Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act").
ABSENCE OF PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained in the Common Stock. The initial public offering price
of the Common Stock has been determined by negotiations among the Company and
the Underwriters and may have no relationship to the price at which the Common
Stock will trade after completion of this offering. See "Underwriting." The
stock market has from time to time experienced extreme price and volume
fluctuations which have been unrelated to the operating performance of
particular companies. The market price for shares of the Common Stock may be
highly volatile depending upon various factors, including, but not limited to,
the state of the national economy, stock market conditions, alarm industry
reports, and actions by governmental agencies, as well as quarterly variations
in the Company's operating results, changes in financial estimates by securities
analysts or failures by the Company to meet such estimates, litigation involving
the Company, announcements by the Company or its competitors, and general
conditions in the alarm industry. There can be no assurance that the market
price of the Common Stock will not experience significant fluctuations or
decline below the initial public offering price.
14
<PAGE> 16
ANTI-TAKEOVER CONSIDERATIONS
Certain provisions of the Company's Charter and Delaware law could
discourage potential acquisition proposals, delay or prevent a change in control
of the Company, and limit the price that certain investors might be willing to
pay in the future for shares of the Company's Common Stock. These provisions
include a classified board of directors and the issuance, without stockholder
approval, of preferred stock with rights and privileges which could be senior to
the Common Stock. The Company also is subject to Section 203 of the Delaware
General Corporation Laws which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any of a broad range of business
combinations with any "interested stockholder" for a period of three years
following the date that such stockholder became an interested stockholder. See
"Description of Capital Stock -- Certain Provisions of the Company's Charter and
Delaware Law."
15
<PAGE> 17
THE COMPANY
The Company was incorporated in January 1993 under the laws of the State of
Delaware under the name "Masada Security, Inc." Terry W. Johnson (currently the
CEO and a director of the Company) and Daryl E. Harms (currently a director of
the Company) jointly owned an existing security alarm company which conducted
business under the name "Masada Security" ("Predecessor Masada"). Messrs.
Johnson and Harms, together with an investor group including Centennial Fund
III, L.P. ("Centennial III"), Criterion Venture Partners III, Limited
("Criterion"), Norwest Equity Partners IV, A Minnesota Limited Partnership
("Norwest IV"), and South Atlantic Venture Fund II Limited Partnership ("South
Atlantic II"), formed the Company to serve as the sole general partner of Masada
Security Limited Partnership, a Delaware limited partnership (the
"Partnership"), which on February 1, 1993 acquired the security alarm business
of Predecessor Masada and the security alarm business of Network Security.
Concurrently with these acquisitions, the Company received approximately $7.6
million from the investor group for shares of the Company's Class A preferred
stock and Class B common stock, and the Partnership received $1.5 million from
Messrs. Johnson and Harms and the investor group for subordinated debentures
issued by the Partnership.
In February 1994, the Company changed its name to "Masada Security
Holdings, Inc." and formed a wholly-owned subsidiary known as "Masada Security,
Inc." ("Security"), and the Partnership was merged into Security.
Contemporaneously with this merger, the Company issued shares of its Class B
convertible preferred stock to an investor group that included Messrs. Johnson
and Harms, Centennial III, Centennial Fund IV, L.P. ("Centennial IV"),
Criterion, Norwest IV, South Atlantic II, and Hancock Venture Partners IV-Direct
Fund, L.P. ("Hancock") in exchange for the February 1993 Partnership
subordinated debentures and cash totaling approximately $7.0 million.
In May 1995, the Company received $17.5 million in gross proceeds from the
issuance of its Class C convertible preferred stock to an investor group that
included Messrs. Johnson and Harms, Centennial IV, Criterion, Norwest Equity
Partners V, A Minnesota Limited Liability Partnership ("Norwest V"), South
Atlantic II, South Atlantic Venture Fund III Limited Partnership ("South
Atlantic III"), Hancock, and Chase Venture Capital Associates ("Chase").
In September 1996, the Company's Board of Directors and stockholders
unanimously approved the Recapitalization, which will be implemented
concurrently with the consummation of this offering. The Recapitalization
provides for the automatic redemption of all outstanding shares of Class A
preferred stock, the automatic conversion of all outstanding shares of Class B
convertible preferred stock and Class C convertible preferred stock into shares
of Class B common stock and Class C common stock, respectively, and the
automatic exchange of each outstanding share of Class A common stock, Class B
common stock and Class C common stock into three shares of a new, single class
of Common Stock. The closing of this offering will not occur without
implementation of the Recapitalization.
The executive office of the Company is located at 950 22nd Street North,
Suite 800, Birmingham, Alabama 35203 and the Company's telephone number is (205)
323-7233.
16
<PAGE> 18
USE OF PROCEEDS
The net proceeds from the sale of the shares of Common Stock offered
by the Company, based on an assumed initial public offering price of $ per
share and after deduction of the underwriting discounts and commissions and
estimated offering expenses payable by the Company, are estimated to be
approximately $ ($ if the Underwriters' over-allotment option is
exercised in full). The Company intends to use net proceeds as follows: (i)
approximately $8.4 million to redeem all outstanding shares of the Series A
Preferred Stock and pay all accrued dividends on such shares; and (ii) the
remaining net proceeds of $ to repay a portion of indebtedness under
the Credit Facility, including approximately $ of the Financing Fee.
The Company intends in the future to borrow under the Credit Facility to fund
the Safe Choice marketing program, to fund subscriber account acquisitions from
alarm monitoring companies, and for general corporate purposes, including
capital expenditures and working capital.
At June 30, 1996, the Company had $40.1 million of borrowings outstanding
under the $50 million Credit Facility, which amount was accruing interest at an
annual rate, including applicable margin, of 8.75%. All borrowings under the
Credit Facility are due in full on September 30, 1997, at which time the Credit
Facility will terminate if not extended. The interest rates on borrowings under
the Credit Facility are, at the option of the Company, either (a) 2.25% plus the
greater of (i) the rate established by Canadian Imperial Bank of Commerce from
time to time at its New York City office as its "Base Rate" for commercial loans
in U.S. dollars or (ii) the Federal Funds Rate plus 1.00%, or (b) LIBOR plus
3.25%. These interest rates are exclusive of the Financing Fee. The Company used
substantially all of the currently outstanding borrowings under the Credit
Facility to acquire subscriber accounts from alarm monitoring companies and
alarm system dealers and to fund the Safe Choice marketing program. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources," "Business -- The Safe Choice
Program," and "Business -- The Acquisition Program."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock and does not intend to pay any cash dividends in the foreseeable future.
The Company intends to retain its earnings, if any, for the future operation and
expansion of its business. Additionally, the Credit Facility restricts the
Company's ability to declare or pay any dividend on, or make any distribution in
respect of, the Company's capital stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
17
<PAGE> 19
CAPITALIZATION
The following table sets forth, as of June 30, 1996, (i) the actual
capitalization of the Company; (ii) pro forma capitalization to reflect (a) the
conversion of all outstanding shares of Class B convertible preferred stock and
Class C convertible preferred stock into shares of Class B common stock and
Class C common stock, respectively, as provided for in the Recapitalization, and
(b) the exchange of each outstanding share of Class A common stock, Class B
common stock and Class C common stock for three shares of a new, single class of
Common Stock, as provided for in the Recapitalization, and (iii) as adjusted to
give effect to the sale of the shares of Common Stock offered by the
Company hereby and the anticipated application of the estimated net proceeds
therefrom at an assumed offering price of $ per share (less underwriting
discounts and commission and estimated offering expenses). See "Use Of
Proceeds." The information in the table below is qualified in its entirety by,
and should be read in conjunction with, the consolidated financial statements
and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt................................... $ 63 $ 63 $ 63
Long-term debt:
Credit Facility................................................... 40,106 40,106
Redeemable preferred stock:
Class A cumulative redeemable preferred stock, $.01 par value,
redemption value of $100 per share, 75,700 shares issued and
outstanding actual and pro forma; none authorized or outstanding
as adjusted..................................................... 7,570 7,570 --
Stockholders' Equity (deficit):
Class B convertible preferred stock, $.01 par value, 358,332
shares authorized and outstanding actual; none authorized or
outstanding pro forma and as adjusted........................... 4 -- --
Class C convertible preferred stock, $.01 par value, 486,111
shares authorized and outstanding actual; none authorized or
outstanding pro forma and as adjusted........................... 5 -- --
Class A common stock, $.01 par value, 333,500 shares authorized
and outstanding actual; none authorized or outstanding pro forma
and as adjusted................................................. 3 -- --
Class B common stock, $.01 par value, 1,078,572 shares authorized
and 570,240 shares outstanding actual; none authorized or
outstanding pro forma and as adjusted........................... 6 -- --
Class C common stock, $.01 par value, 486,111 shares authorized
and none outstanding actual; none authorized or outstanding pro
forma and as adjusted........................................... -- -- --
Common stock, $.01 par value, none authorized or outstanding
actual; 15,000,000 shares authorized and 5,426,826 shares
outstanding pro forma; shares outstanding as
adjusted(1)..................................................... -- 54
Deferred compensation expense..................................... (184) (184) (184)
Paid-in capital................................................... 25,510 25,474
Accumulated deficit............................................... (19,771) (19,771)
-------- ------- -------
Total stockholders' equity.................................... 5,573 5,573
-------- ------- -------
Total capitalization....................................... $ 53,312 $53,312 $
======== ======= =======
</TABLE>
- ---------------
(1) Excludes, as of October 4, 1996, shares reserved for issuance upon exercise
of outstanding options to purchase 391,500 shares of Common Stock and
excludes shares covered by the Underwriters' over-allotment option.
18
<PAGE> 20
DILUTION
The net tangible book value of the Company as of June 30, 1996 was
approximately $( ) million or $( ) per share of Common Stock, after
giving pro forma effect to the Recapitalization upon the consummation of this
offering. "Net tangible book value" represents the amount of total tangible
assets less total liabilities. "Net tangible book value per share" is such
amount divided by the number of shares of Common Stock outstanding. After giving
effect to the sale of the shares of Common Stock offered hereby at an assumed
initial offering price of $ per share (and deducting underwriting discounts
and commissions and estimated offering expenses payable by the Company), the pro
forma net tangible book value of the Common Stock at June 30, 1996 would have
been $
million or $ per share. This represents an immediate increase in net
tangible book value of $
per share to existing stockholders and an immediate dilution of $ to new
investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price.................................. $
Pro forma net tangible book value before this offering..... $( )
Increase in net tangible book value attributable to new investors.. $
Pro forma net tangible book value after this offering.................. $
Net tangible book value dilution to new investors...................... $
=========
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by existing stockholders
and to be paid by purchasers of the shares offered hereby (before deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ -------------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
--------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 5,426,826 % $26,200,472 % $4.83
New investors.............. % $ % $
--------- --- ----------- --- -----
Total............. 100% $ 100%
========= === =========== ===
</TABLE>
The calculations in the tables set forth above assume no exercise of the
Underwriters' over-allotment option or any management stock options.
19
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(In thousands, except number of subscribers)
The following table sets forth certain selected consolidated financial and
other operating data. The selected consolidated financial data in the table are
derived from the consolidated financial statements of the Company and should be
read in conjunction with the Company's consolidated financial statements and
related notes and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus. The
selected consolidated financial data for the eleven months ended December 31,
1993, the years ended December 31, 1994 and December 31, 1995, and the six
months ended June 30, 1996 have been derived from the audited consolidated
financial statements of the Company included elsewhere in this Prospectus. The
selected consolidated financial data presented below for the six months ended
June 30, 1995 has been derived from the unaudited consolidated financial
statements of the Company. Operating results for the six months ended June 30,
1996 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1996. The Company believes that the unaudited
information has been prepared on the same basis as the audited financial
statements and includes all material adjustments necessary for a fair
presentation of the financial position and operating results for such period.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
ELEVEN ----------------------------- -----------------------------
MONTHS ENDED HISTORICAL HISTORICAL
DECEMBER 31, ----------------- PRO FORMA ----------------- PRO FORMA
1993(1) 1994 1995 1995(2) 1995 1996 1996(2)
------------ ------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Monitoring........................ 6,958 8,756 12,472 $ 22,326 5,587 9,367 $11,417
Installation...................... 2,477 3,083 3,429 5,806 1,626 2,493 2,493
Service........................... 520 678 911 1,083 435 677 677
Other............................. -- -- -- 484 -- -- --
------- ------- ------- ------- ------- ------- -------
Total revenues................ 9,955 12,517 16,812 29,699 7,648 12,537 14,587
Cost of revenues:
Monitoring........................ 1,137 1,374 1,945 3,544 942 1,421 1,699
Installation...................... 1,220 1,268 1,339 3,210 622 1,151 1,151
Service........................... 1,429 1,734 2,235 2,235 983 1,628 1,628
------- ------- ------- ------- ------- ------- -------
Total cost of revenues........ 3,786 4,376 5,519 8,989 2,547 4,200 4,478
------- ------- ------- ------- ------- ------- -------
Gross profit.................. 6,169 8,141 11,293 20,710 5,101 8,337 10,109
General and administrative
expenses........................ 3,091 5,071 7,550 14,874 3,246 4,563 5,955
Noncash compensation expense...... -- 92 56 56 -- 99 99
Selling and marketing costs....... 1,879 2,923 5,411 5,411 2,416 3,780 3,780
Depreciation and amortization..... 2,406 3,451 5,258 8,764 2,630 4,774 5,469
------- ------- ------- ------- ------- ------- -------
Operating loss................ (1,207) (3,396) (6,982) (8,395 ) (3,191) (4,879) (5,194)
Interest expense, net............. 754 593 844 3,622 562 1,140 1,671
Other nonoperating expense........ -- -- -- (277 ) -- -- (70)
Gain on disposal of assets........ -- -- -- 2 -- 160 160
Extraordinary loss from early
retirement of debt.............. -- -- -- -- -- (567) (567)
Income Tax Expense................ -- -- -- (10 ) -- -- --
------- ------- ------- ------- ------- ------- -------
Net loss...................... $ (1,961) $(3,989) $(7,826) $(12,302 ) $(3,753) $(6,426) $(7,342)
======= ======= ======= ======= ======= ======= =======
OTHER OPERATING DATA:
EBITDA(3)........................... $ 1,199 $ 147 $(1,668) $ 425 $ (561) $ (6) 374
Less Safe Choice revenues......... (1,346) (1,937) (2,076) (2,076 ) (958) (1,352) (1,352)
Plus Safe Choice selling and
marketing expenses.............. 1,879 2,923 5,411 5,411 2,416 3,780 3,780
------- ------- ------- ------- ------- ------- -------
Adjusted EBITDA(4)............ $ 1,732 $ 1,133 $ 1,667 $ 3,760 $ 897 $ 2,422 $ 2,802
CERTAIN SUBSCRIBER DATA:
MRR at end of period(5)............. $ 660 $ 903 $ 1,298 $ 1,298 $ 1,051 $ 2,054 2,054
Number of subscribers at end of
period............................ 21,051 30,053 47,060 47,060 36,353 77,927 77,927
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------------------- ---------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit).......................... $ 169 $ (1,775) $ (12) $ 1,497 $ (596 )
Intangible assets(6)............................... 11,909 17,581 25,324 20,423 49,852
Total assets....................................... 17,742 23,571 31,562 26,784 56,667
Long-term debt less current portion................ 11,100 10,234 10,183 1,626 40,106
Total stockholders' equity......................... 5,599 2,326 11,900 16,287 5,573
</TABLE>
- ---------------
(1) The Company commenced operations on February 1, 1993.
(2) Gives effect to acquisitions occurring during 1995 and 1996 as if each had
occurred on January 1, 1995.
(3) EBITDA is derived by adding to net loss the sum of (i) interest expense,
(ii) depreciation and amortization expense, and (iii) noncash compensation
expense related to the Company's stock option grants, less (iv) gain on
disposal of assets. EBITDA does not represent cash flow from operations as
defined by generally accepted accounting principles, should not be construed
as an alternative to net income, and is indicative neither of the Company's
operating performance nor of cash flows available to fund the Company's cash
needs. Items excluded from EBITDA are significant components in
understanding and assessing the Company's financial performance.
(4) Adjusted EBITDA ("Adjusted EBITDA") is derived by adding to EBITDA the Safe
Choice selling and marketing expenses, net of Safe Choice installation
revenues, during the period. Adjusted EBITDA does not represent cash flow
from operations as defined by generally accepted accounting principles,
should not be construed as an alternative to net income, and is indicative
neither of the Company's operating performance nor of cash flows available
to fund the Company's cash needs. Management believes presentation of
Adjusted EBITDA enhances an understanding of the value of the Company,
particularly in comparison to other security alarm companies that grow
substantially through acquisitions of subscriber accounts. Tests similar to
Adjusted EBITDA have been used by lenders and the investment community to
estimate the long-term value of companies with recurring cash flows from
operations and with net losses. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- General -- Accounting
Policies for Safe Choice Installations and Subscriber Account Purchases."
(5) MRR is monthly recurring revenue that the Company is entitled to receive
under contracts in effect at the end of the period. MRR is a term commonly
used in the security alarm industry as a measure of the size of a company,
but not as a measure of profitability or performance, and does not include
any allowance for future attrition or allowance for doubtful accounts. The
Company does not have sufficient information as to the attrition of acquired
subscriber accounts to predict the amount of acquired MRR that will be
realized in future periods or the impact of the attrition of acquired
accounts on the Company's overall rate of attrition.
(6) Includes (i) acquired subscriber agreements, net of accumulated
amortization, (ii) deferred installation costs, net of accumulated
amortization and (iii) other deferred charges and intangible assets, net of
accumulated amortization.
21
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the historical financial condition and
results of operations of the Company as of and for the six month periods ended
June 30, 1996 and June 30, 1995, for each of the two fiscal years ended December
31, 1995 and December 31, 1994 and for the eleven months ended December 31,
1993. The financial information, discussion and analysis which follow are based
upon and should be read in conjunction with the consolidated financial
statements and the notes thereto, included elsewhere herein. This Prospectus
contains forward-looking statements which involve risk and uncertainties. The
Company's actual results may differ materially from the results discussed in
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed below, in "Risk Factors" and elsewhere
in this Prospectus.
GENERAL
The Company provides security alarm monitoring services and installs and
services security alarm systems for residential and small business subscribers,
principally in the southern United States. At June 30, 1996, the Company had
approximately 78,000 subscriber accounts for its alarm monitoring services, a
majority of which were residential subscribers. From February 1, 1993 to June
30, 1996, the Company has generated approximately 34,500 subscriber accounts
internally through the Safe Choice marketing program, including over 6,000 new
Safe Choice subscriber accounts during the second quarter of 1996. Since
September 1994, the Company has added approximately 39,000 subscriber accounts
in 17 separate acquisitions of subscriber account portfolios for an aggregate
purchase price of approximately $33.6 million; 21,054 of these accounts were
acquired during the first six months of 1996. As a result of the Company's Safe
Choice marketing program and subscriber account acquisitions, the Company has
increased its MRR from approximately $0.6 million at February 1, 1993 to
approximately $2.0 million at June 30, 1996, which represents an increase in
annualized MRR from $7.6 million to $24.0 million.
The Company internally generates three different types of new subscriber
accounts -- Safe Choice accounts, "traditional" accounts, and
Sonitrol(TM)accounts. The Company offers to install the Safe Choice alarm system
for a base subsidized installation fee of $99 and requires the subscriber to
sign an alarm monitoring contract with an initial term of three to five years.
The Company retains ownership of the alarm system hardware installed for the new
Safe Choice subscriber. The Company's costs associated with generating a new
Safe Choice account substantially exceed the installation fee received from the
Safe Choice subscriber. The Company also markets "traditional" alarm systems,
which are characterized by the sale of the alarm system hardware by the Company
to the subscriber at a non-subsidized price. The average sales price of a
traditional alarm system during the first six months of 1996 was $1,100. The
Company also sells Sonitrol(TM) sound-based security systems in two counties in
southern Florida as a Sonitrol franchisee. Sonitrol represented 3.7% of the
Company's MRR as of June 30, 1996, and the average sales price of a single
Sonitrol alarm system during the first six months of 1996 was $1,560.
A majority of the Company's revenues are derived from recurring payments
for the monitoring of subscribers' security systems. The remainder of the
Company's revenues include revenues for installing Safe Choice alarm systems,
revenues derived from the sale and installation of traditional and Sonitrol
alarm systems, revenues for installing and/or selling add-ons and upgrades to
alarm systems, and revenues derived from payments for service calls performed on
a time and materials basis. Monitoring and service revenues are recognized as
the service is provided. Selling and marketing costs are related exclusively to
the Safe Choice program and are expensed in the period incurred. Direct
installation costs related to Safe Choice security systems, including materials,
labor and installation overhead, are recognized using the straight-line method
over the average term of the contracts. All direct installation costs related to
traditional and Sonitrol alarm system sales, which include materials, labor and
installation overhead, and marketing costs, are expensed in the period incurred
as costs of revenues.
22
<PAGE> 24
Accounting Policies for Safe Choice Installations and Subscriber Account
Purchases. The difference between the accounting policy for the generation of
subscriber accounts through the Company's Safe Choice program and the accounting
policy for the acquisition of subscriber account portfolios has a significant
impact on the Company's results of operations. All of the Company's costs
related to the marketing of the Safe Choice program are expensed in the period
in which such activities occur. During the first six months of 1996, the Safe
Choice marketing expenses exceeded the associated installation revenues by an
average of $232 for each new account. Accordingly, new Safe Choice accounts
adversely affect operating results for the period in which the associated
marketing expenses are incurred. In contrast to the accounting policy for the
Safe Choice marketing expenses, all direct external costs associated with
acquisitions of subscriber accounts are capitalized and amortized over eight
years on a straight-line basis. Company personnel and related support costs
incurred solely in connection with subscriber account acquisitions and
transitions are expensed as incurred. As a result of these accounting policies,
the Company's results of operations may vary in any period depending on the
relative contributions of growth in subscriber accounts by internal generation
of Safe Choice accounts and by acquisitions of subscriber account portfolios.
Branch Offices. The expenses associated with the opening of new branch
offices are expensed in the period in which incurred and thus may substantially
impact the Company's operating results during such period. The operating margins
of the Company's branch offices improve as the number and density of subscribers
increase. Accordingly, the operating margins of the Company's oldest and largest
branches generally are superior to those of the newer branch offices. Following
the acquisition
by the Company in February 1993 of the businesses of Predecessor Masada and
Network Security and through October 1994, the Company did not add to its then
existing six branch offices. During the second half of 1994, the Company began
implementing a plan to increase the number of branch offices. The Company opened
four new branches during the second half of 1994, including three "cold start"
branches, which are new branches opened prior to the acquisition by the Company
of any subscriber accounts in that market. During 1995, the Company opened eight
new branches, including five cold start branches. In June 1996, the Company
closed its San Bernadino, California branch as a result of the sale of the
Company's California subscriber accounts. The Company has not opened any new
branches in 1996 other than a satellite sales office, in part because of a
decision by the Company to limit new branches to those opened in connection with
acquisitions of subscriber account portfolios. Additionally, the Credit Facility
prohibits the Company from opening any new branches without the consent of the
lenders. The Company, however, anticipates opening additional new branch offices
during 1997 in connection with future acquisitions in new markets.
Subscriber Attrition. Subscriber attrition has a direct impact on the
Company's results of operations, since it affects the Company's revenues. See
"Risk Factors -- Attrition of Subscriber Accounts." Attrition can be measured in
terms of canceled subscriber accounts and in terms of decreased MRR resulting
from canceled subscriber accounts. Gross subscriber attrition is defined by the
Company for a particular period as a quotient, the numerator of which is equal
to the number of subscribers who disconnect during such period and the
denominator of which is the average of the number of subscribers at each month
end during such period. Net MRR attrition is defined by the Company for a
particular period as a quotient, the numerator of which is an amount equal to
gross MRR lost as the result of canceled subscriber accounts during such period,
net of MRR during such period (i) generated by increases in rates to existing
subscribers, (ii) resulting from the reconnection of premises previously
occupied by subscribers of the Company, (iii) resulting from the "conversion" of
new accounts previously monitored by other alarm monitoring companies, and (iv)
associated with canceled accounts with respect to which the Company obtained an
account guarantee, and the
23
<PAGE> 25
denominator of which is the average month-end MRR in effect during such period.
The following table sets forth the Company's gross subscriber attrition and net
MRR attrition for the periods indicated:
<TABLE>
<CAPTION>
ELEVEN
MONTHS TWELVE MONTHS ENDED
ENDED --------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1993 1994 1995 1996
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
Gross subscriber attrition......... 17.6% 20.3% 16.1% 17.1%
Net MRR attrition.................. 14.7% 15.4% 10.2% 6.8%
</TABLE>
The decrease in net MRR attrition from 10.2% for the twelve month period ended
December 31, 1995 to 7.3% for the twelve month period ended June 30, 1996
reflects the substantial increase in account conversions during the first six
months of 1996. Account conversions have increased during 1996 as a result of an
increase in the number of the Company's sales consultants and an increased focus
by certain sales consultants on account conversion opportunities. The Company
has had limited experience with respect to subscriber attrition of account
conversions. These accounts frequently have a shorter contractual term than
accounts based on Safe Choice systems installed by the Company. There can be no
assurance that the Company will not experience higher subscriber attrition with
respect to conversion accounts.
The table below sets forth the change in the Company's subscriber base over
periods 1993-1995 and the first six months of 1996:
<TABLE>
<CAPTION>
JUNE 30,
1993 1994 1995 1996
------ ------ ------ --------
<S> <C> <C> <C> <C>
Number of Subscribers:
Beginning of period......................................... 18,906 21,051 30,053 47,060
Additions through Safe Choice:
New installations......................................... 4,413 7,922 11,072 8,271
Conversions............................................... 27 71 471 2,204
Additions through traditional sales......................... 1,117 1,037 502 374
Reconnections............................................... 140 545 1,126 839
Additions through portfolio acquisitions.................... -- 4,453 9,904 24,720
Reductions through portfolio dispositions................... -- -- -- (511)
Gross subscriber attrition.................................. (3,552) (5,026) (6,068) (5,030)
------ ------ ------ --------
End of Period........................................ 21,051 30,053 47,060 77,927
====== ====== ====== ========
</TABLE>
Average MRR per Subscriber. The average MRR per subscriber has decreased
from approximately $31.35 at December 31, 1993 to approximately $26.24 at June
30, 1996 or 16.3%. This decrease is the result of several factors. First, MRR
generated from the monitoring of Sonitrol(TM) security systems, which generates
substantially higher MRR per subscriber, has decreased as a percentage of the
Company's gross MRR. Second, the Company has recently acquired several security
alarm account portfolios with lower MRR per subscriber than that of the
Company's Safe Choice accounts. Third, as part of its strategy to increase
market penetration, the Company has lowered basic monthly monitoring rates in
certain instances, particularly in connection with conversion accounts. There
can be no assurance that the average MRR per subscriber will not decrease in the
future.
Future Net Losses. The Company expects to incur net losses for the
foreseeable future. See "Risk Factors -- Limited Operating History; History of
Net Losses; Anticipated Future Losses." The negative gross margins generated by
the Safe Choice marketing program comprised approximately 62%, 62%, 41% and 35%
of the Company's net losses during the first six months of 1996, the years ended
December 31, 1995 and 1994, and the eleven months ended December 31, 1993,
respectively. Other factors contributing to the Company's net losses include the
charges incurred by the Company for amortization of purchased subscriber
accounts and interest incurred on its indebtedness. Although the
24
<PAGE> 26
Safe Choice marketing program adversely impacts current period results, the
Company believes the Safe Choice marketing program will benefit operating
results in future years because of the ongoing monitoring revenues associated
with the Safe Choice accounts.
RESULTS OF OPERATIONS
The following table sets forth certain operating data as a percentage of
total revenues for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED ENDED JUNE 30,
----------------------- ----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Monitoring................................................... 69.9% 70.0% 74.2% 73.0% 74.7%
Installation................................................. 24.9 24.6 20.4 21.3 19.9
Service...................................................... 5.2 5.4 5.4 5.7 5.4
----- ----- ----- ----- -----
Total revenues:....................................... 100.0 100.0 100.0 100.0 100.0
Costs of revenues:
Monitoring................................................... 11.4 11.0 11.6 12.3 11.3
Installation................................................. 12.2 10.1 7.9 8.1 9.2
Service...................................................... 14.4 13.9 13.3 12.9 13.0
----- ----- ----- ----- -----
Total costs of revenues............................... 38.0 35.0 32.8 33.3 33.5
Gross profit.......................................... 62.0 65.0 67.2 66.7 66.5
----- ----- ----- ----- -----
General and administrative expenses.......................... 31.0 40.5 44.9 42.4 36.4
Noncash compensation expense................................. .7 .3 .8
Selling and marketing costs.................................. 18.9 23.3 32.2 31.6 30.2
Depreciation and amortization................................ 24.2 27.6 31.3 34.4 38.1
----- ----- ----- ----- -----
Operating (loss)...................................... (12.1)% (27.1)% (41.5)% (41.7)% (39.0)%
===== ===== ===== ===== =====
Other Operating Data:
EBITDA....................................................... 12.0% 1.2% (9.9)% (7.3)% (0.1)%
Less Safe Choice revenues.................................. (13.5) (15.5) (12.3) (12.5) (10.8)
Plus Safe Choice selling and marketing expenses............ 18.9 23.4 32.2 31.6 30.2
----- ----- ----- ----- -----
Adjusted EBITDA....................................... 17.4% 9.1% 10.0% 11.8% 19.3%
===== ===== ===== ===== =====
</TABLE>
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Revenues. Revenues for the first six months of 1996 increased by $4.9
million, or 63.9% to $12.5 million from $7.6 million for the comparable 1995
period. Monitoring revenue increased by $3.8 million or 67.7%, which was caused
by the addition of approximately 41,900 subscribers during the twelve months
ended June 30, 1996. The increase in subscribers was a result of new Safe Choice
subscribers and the acquisition of portfolios of subscriber accounts. MRR
increased to $2.0 million at June 30, 1996 from $1.0 million at June 30, 1995.
Installation revenues, which includes revenues from installations of Safe Choice
systems and from sales of traditional and Sonitrol alarm systems, increased by
53.3% to $2.5 million during 1996 from $1.6 million during 1995. Safe Choice
installations and conversions increased by 114.6% during the six months ended
June 30, 1996 when compared to the six months ended June 30, 1995. This increase
was caused by the Company operating 18 branch offices during the entire six
month period ended June 30, 1996 in contrast to the Company operating 15 branch
offices during the first six months of 1995, five of which opened during such
six month period.
Cost of Revenues. Cost of revenues for the first six months of 1996
increased by $1.6 million, or 64.9% to $4.2 million from $2.6 million for the
comparable period in 1995. Cost of revenues as a percentage of total revenues
increased to 33.5% from 33.3% during the same periods. Monitoring expenses
increased by $.5 million or 50.8%. Monitoring expenses declined as a percentage
of total revenues to 11.3% during the six months ended June 30, 1996 as compared
to 12.3% for the comparable period in 1995. The decline as a percentage of total
revenues was the result of improved economies of
25
<PAGE> 27
scale at the central monitoring station generated by the increase in
subscribers. Installation expenses, which include only expenses related to the
installation of traditional and Sonitrol alarm systems, increased $.5 million or
85.0% to $1.1 million for the six months ended June 30, 1996 from $.6 million
for the six months ended June 30, 1995. As a percent of revenues, installation
expenses increased to 9.2% for the period ended June 30, 1996 as compared to
8.1% for the comparable period in 1995. A substantial increase in the sale of
traditional alarm systems in one of the Company's markets was the principal
cause of this increase.
Gross Profit. Gross profit for the six months ended June 30, 1996 was $8.3
million, which represents an increase of $3.2 million, or 63.4%, over the $5.1
million of gross profit recognized during the comparable 1995 period. Such
increase was primarily caused by an 92.6% increase in the average number of
subscribers for the six months ended June 30, 1996 as compared to the first six
months of 1995. This increase was partially offset by a decrease in the average
MRR per subscriber during the first half of 1996, which was a result of the
acquisition of portfolios of subscriber accounts that had a lower MRR per
subscriber than the Company's historical average and a decrease in MRR per
subscriber from new subscribers generated by the Company's sales and marketing
efforts.
General and Administrative Expenses. General and administrative expenses
rose to $4.7 million for the six months ended June 30, 1996, which represents an
increase of $1.4 million, or 43.6%, over general and administrative expenses for
the comparable period in 1995. Such figures as a percentage of total revenues
decreased to 37.1% for the six months ended June 30, 1996, from 42.4% for the
six months ended June 30, 1995. The reduction in general and administrative
expenses as a percentage of total revenues is primarily the result of
improvement in operating efficiencies of branch offices opened during late 1994
and 1995, the growth in subscriber accounts from portfolio acquisitions serviced
by existing branch offices, and the fact that the Company did not open any new
branch offices during the first six months of 1996.
Selling and Marketing Costs. Selling and marketing costs related to the
Company's Safe Choice program were $3.8 million for the six months ended June
30, 1996, reflecting an increase of $1.4 million or 56.5% over selling and
marketing costs for the comparable 1995 period. The increase was a result of a
114.6% increase in the number of subscribers generated by the Safe Choice
program, including account conversions. Selling and marketing costs grew at a
slower rate than the growth in revenues because of the operating efficiencies
created by the Company's increasing volume of Safe Choice installations in
existing markets.
Depreciation and Amortization Expense. Depreciation and amortization
expense for the six months ended June 30, 1996 increased by $2.1 million, or
81.5%, to $4.8 million from $2.7 million for the six months ended June 30, 1995.
This increase was the result of the addition of approximately 17,000 Safe Choice
subscriber accounts during the twelve months from July 1, 1995 to June 30, 1996
and the Company's acquisition of approximately 36,000 subscriber accounts during
the same twelve month period.
Interest Expense. Interest expense increased by $.6 million to $1.1
million during the six months ended June 30, 1996. This increase was caused by
an increase in the weighted average debt outstanding under the Company's credit
facility to $25.2 million during the first six months of 1996 from $11.4 million
for the comparable 1995 period. The Company increased its borrowings during the
first half of 1996 to fund Safe Choice account growth and the acquisition of
subscriber account portfolios. The Company used borrowings totaling $23.4
million during the first six months of 1996 to consummate subscriber account
acquisitions. The Company anticipates that its interest expense will increase by
more than $400,000 per month beginning in the fourth quarter of 1996 as long as
the Financing Fee continues to accrue.
1995 COMPARED TO 1994
Revenues. Revenues for 1995 increased by $4.3 million, or 34.3% to $16.8
million from $12.5 million for 1994. Monitoring revenue increased by $3.7
million or 42.4%, which was the result of the
26
<PAGE> 28
addition of approximately 17,000 subscribers during 1995. The increase in
subscribers was primarily the result of new Safe Choice subscribers and
acquisitions of subscriber account portfolios. MRR increased to $1.3 million at
December 31, 1995 from $.9 million at December 31, 1994. Installation revenues
increased by 11.2% from $3.1 million during 1994 to $3.4 million during 1995.
Installation revenue grew at a slower rate than monitoring revenue primarily as
a result of the Company's increased focus on the acquisition of portfolios of
subscriber accounts during 1995. Safe Choice installations and conversions
increased by 44.4% from 1994 to 1995 and additions from portfolio acquisitions
increased by 122.4% from 1994 to 1995.
Cost of revenues. Cost of revenues for 1995 increased by $1.1 million, or
26.1% to $5.5 million from $4.4 million in 1994. Cost of revenues as a
percentage of total revenues declined to 32.8% during 1995 from 35.0% during
1994. Monitoring expenses increased by $.6 million, or 41.6% primarily due to
the increased activity at the Company's central monitoring station as a result
of a larger subscriber base. Monitoring expenses as a percentage of monitoring
revenue decreased to 15.6% during 1995 from 15.7% during 1994. Such decrease
reflected improved efficiencies as a result of the relocation of the Company's
central monitoring station in 1995 to Birmingham, Alabama from Ft. Lauderdale,
Florida. These improved efficiencies were offset by a lower MRR per subscriber
in 1995 due primarily to the acquisition of portfolios of subscriber accounts
that had a lower average MRR per subscriber than the Company's average and a
decrease in the MRR per subscriber from new internally generated subscribers.
Service expenses increased by $.5 million or 28.9%, primarily due to a larger
subscriber base. Service expense as a percentage of total revenue decreased from
1994 to 1995 as a result of economies of scale and improved efficiencies due to
a larger subscriber base.
Gross profit. Gross profit for 1995 was $11.3 million, which represents an
increase of $3.2 million, or 38.7%, over the $8.1 million of gross profit
recognized in 1994. Such increase was caused primarily by an increase in
monitoring activity, which paralleled the increase in the Company's subscriber
base from 30,053 at December 31, 1994 to 47,060 at December 31, 1995. Gross
profit as a percentage of total revenues was 67.2% for 1995 as compared to 65.0%
for 1994. This increase was caused primarily by an increase in monitoring
revenues as a percentage of total revenues.
General and administrative expenses. General and administrative expenses
rose to $7.6 million in 1995, which represents an increase of $2.4 million, or
47.3%, over general and administrative expenses in 1994. Such figure as a
percentage of total revenues increased to 45.2% in 1995 from 41.2% in 1994, due
primarily to the opening of eight branch offices during 1995 and four branch
offices during 1994. The increase in expenses was caused by an increase in
corporate and branch overhead expenses incurred to support the additional
offices and a larger subscriber base. The provision for doubtful accounts
increased to $250,000 in 1995 from $85,000 in 1994, reflecting an increase in
the Company's subscriber base.
Selling and marketing costs. Selling and marketing costs related to the
Company's Safe Choice program for 1995 totaled $5.4 million, reflecting an
increase of $2.5 million, or 85.1%, over selling and marketing costs in 1994.
The increase was caused by a 39.8% increase in the number of subscribers
generated by the Safe Choice program, an increase in the number of supervisory
personnel required to manage the additional offices added by the Company during
1995, an increase in training costs to support an increase in the number of
sales consultants, and a modification to the Company's commission rate schedule
for Safe Choice sales consultants in order to attract and retain the Company's
sales force.
Depreciation and amortization expense. Depreciation and amortization
increased by $1.8 million, or 52.4%, to $5.3 million during 1995. The increase
was the result of the addition of approximately 11,500 Safe Choice subscriber
accounts and the Company's purchase of approximately 9,900 subscriber accounts
through portfolio acquisitions during 1995.
Interest expense. Interest expense increased by 42.3% to $.8 million in
1995 from $.6 million in 1994, reflecting the Company's use of debt to finance a
substantial portion of its subscriber account growth.
27
<PAGE> 29
1994 COMPARED TO THE ELEVEN MONTHS ENDED DECEMBER 31, 1993
Revenues. Revenues for 1994 increased by $2.6 million, or 25.7%, to $12.5
million from $10.0 million for 1993. Monitoring revenue increased by $1.8
million or 25.8%, due to the addition of approximately 9,000 subscribers during
1994. The increase in subscribers was primarily a result of new subscribers
generated by the Company's sales and marketing efforts. MRR increased to $.9
million at December 31, 1994 from $.7 million at December 31, 1993. Installation
revenues increased by approximately 24.5% to $3.1 million during 1994 from $2.5
million during 1993.
Cost of revenues. Cost of revenues for fiscal 1994 increased by $.6
million, or 15.6% to $4.4 million. Cost of revenues as a percentage of total
revenues declined to 35.0% during 1994 from 38.0% during 1993. Monitoring
expenses increased by $.2 million, or 20.8%. Monitoring expenses as a percentage
of monitoring revenue decreased to 15.7% during 1994 from 16.3% during 1993.
Such decrease reflects improved economies of scale at the central monitoring
station as a result of the increase in subscriber accounts. Service expenses
increased by $.3 million or 21.3%, primarily due to a larger subscriber base.
Service expense as a percentage of total revenue decreased from 1993 to 1994 as
a result of a decrease in the average cost of service per account.
Gross profit. Gross profit for 1994 was $8.1 million, which represents an
increase of $2.0 million, or 32.0%, over the $6.2 million of gross profit
recognized in 1993. Such increase was caused primarily by an increase in
monitoring activity, which paralleled the increase in the Company's subscriber
base from 21,051 at December 31, 1993 to 30,053 at December 31, 1994. Gross
profit as a percentage of total revenues was 65.0% for 1994 as compared to 62.0%
for 1993. This increase was caused primarily by an increase in monitoring
revenues as a percentage of total revenues.
General and administrative expenses. General and administrative expenses
rose to $5.2 million in 1994, which represents an increase of $2.1 million, or
67.0%, over general and administrative expenses in 1993. Such figure as a
percentage of total revenues increased to 41.2% in 1994 from 31.0% in 1993, due
primarily to the opening of four branch offices during 1994. The increase in
expenses was caused by an increase in corporate and branch overhead expenses
incurred to support the additional offices and a larger subscriber base. During
1994 the Company established a provision for doubtful accounts of $85,000 as a
result of an increase in the Company's subscriber base of 42.8%.
Selling and marketing costs. Selling and marketing costs related to the
Safe Choice program for 1994 totaled $2.9 million, reflecting an increase of
$1.0 million, or 55.6%, over selling and marketing costs in 1993. The increase
was a result of a 79.5% increase in the number of subscribers generated by the
Safe Choice program and an increase in the number of supervisory personnel
required to manage the additional offices added by the Company during 1994.
Depreciation and amortization expense. Depreciation and amortization
increased by $1.0 million, or 43.4%, to $3.5 million for 1994. The increase was
the result of the addition of approximately 8,000 Safe Choice subscriber
accounts during 1994.
Interest expense. Interest expense decreased to $.6 million for 1994 from
$.8 million for 1993 as a result of the Company's use of proceeds from the
issuance of preferred stock to reduce the Company's indebtedness.
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following tables present certain unaudited statement of operations and
other data for each quarter of 1995 and the first two quarters of 1996, as well
as such data expressed as a percentage of the Company's total revenues for the
periods provided. The consolidated statement of operations has been derived from
unaudited financial statements and has been prepared on the same basis as the
Company's audited financial statements which appear elsewhere in this
Prospectus. In the opinion of the Company's management, this data includes all
material adjustments necessary for a fair presentation of such data. Results set
forth below are not necessarily comparable to, or indicative of, results of
future periods.
28
<PAGE> 30
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- ------------- ------------ --------- --------
(IN THOUSANDS, EXCEPT NUMBER OF SUBSCRIBERS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues:
Monitoring...................... $ 2,720 $ 2,867 $ 3,161 $ 3,724 $ 4,092 $ 5,276
Installation.................... 780 846 948 855 1,186 1,307
Service......................... 202 233 259 217 293 383
------- ------- ------- ------- ------- -------
Total revenues............. 3,702 3,946 4,368 4,796 5,571 6,966
------- ------- ------- ------- ------- -------
Cost of revenues:
Monitoring...................... 507 435 474 529 651 770
Installation.................... 269 353 358 359 523 628
Service......................... 479 504 591 661 741 887
------- ------- ------- ------- ------- -------
Total cost of revenues..... 1,255 1,292 1,423 1,549 1,915 2,285
------- ------- ------- ------- ------- -------
Gross profit............... 2,447 2,654 2,945 3,247 3,656 4,681
General and administrative........ 1,484 1,762 2,091 2,213 2,024 2,539
Noncash compensation expense...... -- -- -- 56 30 69
Selling and marketing costs....... 1,082 1,334 1,539 1,456 1,672 2,108
Depreciation and amortization..... 1,315 1,315 1,315 1,313 1,559 3,215
------- ------- ------- ------- ------- -------
Operating Loss............. $(1,434) $(1,757 ) $(2,000) $ (1,791) $(1,629) $(3,250 )
======= ======= ======= ======= ======= =======
OTHER OPERATING DATA:
EBITDA(1)......................... $ (119) $ (442 ) $ (685) $ (422) $ (40) $ (34 )
Less Safe Choice revenues....... (474) (484 ) (583) (535) (622) (730 )
Plus Safe Choice selling and
marketing expenses............ 1,082 1,334 1,539 1,456 1,672 2,108
------- ------- ------- ------- ------- -------
Adjusted EBITDA(2)............ $ 489 $ 408 $ 271 $ 499 $ 1,010 $ 1,412
======= ======= ======= ======= ======= =======
CERTAIN SUBSCRIBER DATA:
MRR at end of period(3)........... $ 948 $ 1,051 $ 1,108 $ 1,298 $ 1,751 $ 2,045
Number of subscribers at end of
period.......................... 31,886 36,353 38,969 47,060 70,049 77,927
AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
Monitoring...................... 73.5% 72.7 % 72.4% 77.7% 73.4% 75.7 %
Installation.................... 21.1 21.4 21.7 17.8 21.3 18.8
Service......................... 5.4 5.9 5.9 4.5 5.3 5.5
------- ------- ------- ------- ------- -------
Total revenues............. 100.0 100.0 100.0 100.0 100.0 100.0
------- ------- ------- ------- ------- -------
Cost of revenues:
Monitoring...................... 13.7 11.0 10.9 11.0 11.7 11.1
Installation.................... 7.3 8.9 8.2 7.5 9.4 9.0
Service......................... 12.9 12.8 13.5 13.8 13.3 12.7
------- ------- ------- ------- ------- -------
Total cost of revenues..... 33.9 32.7 32.6 32.3 34.4 32.8
------- ------- ------- ------- ------- -------
Gross profit............... 66.1 67.3 67.4 67.7 65.6 67.2
General and administrative.......... 40.1 44.7 47.9 45.4 36.3 36.4
Noncash compensation expense........ -- -- -- 1.9 .5 1.0
Selling and marketing............... 29.2 33.8 35.2 30.4 30.0 30.3
Depreciation and amortization....... 35.5 33.3 30.1 27.4 28.0 46.2
------- ------- ------- ------- ------- -------
Operating Loss............. (38.7)% (44.5 )% (45.8)% (37.4)% (29.2)% (46.7 )%
======= ======= ======= ======= ======= =======
EBITDA.............................. (3.2)% (11.2 )% (15.7)% (8.8)% (.7)% .5%
Less Safe Choice revenues......... (12.8) (12.3 ) (13.3) (11.2) (11.2) (10.5 )
Plus Safe Choice selling and
marketing expenses.............. 29.2 33.8 35.2 30.4 30.0 30.3
Adjusted EBITDA............ 13.2% 10.3 % 6.2% 10.4% 18.1% 20.3 %
</TABLE>
- ---------------
(1) EBITDA is derived by adding to net loss the sum of (i) interest expense,
(ii) depreciation and amortization expense, and (iii) noncash compensation
expense related to the Company's stock option grants, less (iv) gain on
disposal of assets. EBITDA does not represent cash flow from operations as
defined by generally accepted
29
<PAGE> 31
accounting principles, should not be construed as an alternative to net
income, and is indicative neither of the Company's operating performance nor
of cash flows available to fund the Company's cash needs. Items excluded from
EBITDA are significant components in understanding and assessing the Company's
financial performance.
(2) Adjusted EBITDA ("Adjusted EBITDA") is derived by adding to EBITDA the Safe
Choice selling and marketing expenses, net of Safe Choice installation
revenues, during the period. Adjusted EBITDA does not represent cash flow from
operations as defined by generally accepted accounting principles, should not
be construed as an alternative to net income, and is indicative neither of the
Company's operating performance nor of cash flows available to fund the
Company's cash needs. Management believes presentation of Adjusted EBITDA
enhances an understanding of the value of the Company, particularly in
comparison to other security alarm companies that grow substantially through
acquisitions of subscriber accounts. Tests similar to Adjusted EBITDA have
been used by lenders and the investment community to estimate the long-term
value of companies with recurring cash flows from operations and with net
losses. See "-- Accounting Policies for Safe Choice Installations and
Subscriber Account Purchases."
(3) MRR is monthly recurring revenue that the Company is entitled to receive
under contracts in effect at the end of the period. MRR is a term commonly
used in the security alarm industry as a measure of the size of a company, but
not as measure of profitability or performance, and does not include any
allowance for future attrition or allowance for doubtful accounts. The Company
does not have sufficient information as to the attrition of acquired
subscriber accounts to predict the amount of acquired MRR that will be
realized in future periods or the impact of the attrition of acquired accounts
on the Company's overall rate of attrition.
The Company's revenues increased in each quarter in 1995 and the first two
quarters of 1996, primarily as a result of increases in the number of
subscribers to the Company's monitoring services. Such subscriber increases have
resulted from the addition of subscribers through sales and marketing efforts of
the Company's personnel and the acquisition of subscriber account portfolios.
Gross profit as a percentage of sales increased each quarter through 1995 but
decreased slightly in the first quarter of 1996 due to the expenses incurred to
increase monitoring personnel in preparation for the consummation of the March
1996 acquisition of the Intercap subscriber account portfolio and due to an
increase in the sale of traditional alarm systems in one of the Company's
markets. Depreciation and amortization increased in the second quarter of 1996
as a result of the March 1996 Intercap acquisition. See "Business -- The
Acquisition Program."
The Company historically has experienced fluctuations in its quarterly
operating results and expects to experience fluctuations of quarterly operating
results in the future. These fluctuations may be caused by many factors,
including, among others, the opening of new branch offices, the volume and
timing of additional internally generated subscriber accounts, the size and
timing of acquisitions of subscriber account portfolios, new subscriber
assimilation, attrition experience, competitive pricing pressures, local and
national crime activity, general economic conditions, and seasonality. The Safe
Choice marketing program can be hampered during the winter months as a result of
unfavorable weather conditions, holidays, and reduced hours of daylight. The
Company's expense levels are based, to some extent, on its expectations of
future subscriber and revenue levels, which are dependent on estimates of
internally generated additions of subscriber accounts and of subscriber account
portfolio acquisitions. The Company may be unable, therefore, to adjust spending
in a timely manner to compensate for any unexpected revenue shortfall due to
less than anticipated levels of internally generated accounts or a delay in the
timing of acquisitions. Given the possibility of quarterly fluctuations, the
Company believes that comparisons of the results of its operations for preceding
quarters are not necessarily meaningful and that the results for any one quarter
should not be relied upon as an indication of future performance. In the event
that the Company's revenues or operating results for any quarter are less than
the level expected by securities analysts or the market in general, such
shortfall could have an immediate and significant adverse impact on the market
price of the Company's common stock.
30
<PAGE> 32
LIQUIDITY AND CAPITAL RESOURCES
General. Since February 1993, the Company has financed its operations and
growth from a combination of borrowings under the Company's revolving credit
facilities and sales of stock. The Company's principal uses of cash are the
costs associated with marketing and installing Safe Choice systems, acquisitions
of subscriber account portfolios, and interest payments on borrowings under the
Credit Facility described below. A substantial portion of the Company's future
operating cash flow will be used to fund the Safe Choice marketing and
installation costs and to service the Company's debt.
Approximately $ million of the proceeds of this offering will be
used to reduce the amount outstanding under the Credit Facility to approximately
$ million. See "Use of Proceeds." The Company believes that after
application of the proceeds of this offering, the funds available under the
Credit Facility would be adequate to meet the Company's anticipated requirements
for operating expenses (including Safe Choice marketing and installation costs),
interest payments required by the Credit Facility, and capital expenditures
through December 1997. The substantial costs associated with the Safe Choice
marketing program, however, could exhaust the Company's current borrowing
capacity prior to that date, particularly if the Company's growth in Safe Choice
installations continues. The Company will need additional capital to pay the
principal indebtedness of the Credit Facility and certain fees required by the
Credit Facility, all of which is due on September 30, 1997, unless the maturity
of the Credit Facility is extended. Future acquisitions of subscriber account
portfolios will likely require additional financing. Although the Company
believes that it can obtain additional debt financing and/or an extension of the
Credit Facility maturity date beyond September 30, 1997, there can be no
assurance that additional capital or an extension of the Credit Facility
maturity date will be available to the Company on terms favorable to the Company
or at all. See "Risk Factors -- Need for Additional Capital" and " -- Leverage,
Debt Service and Covenants."
For the six months ended June 30, 1996, the Company's net cash provided by
(used in) operating activities was $.02 million, compared to ($2.6) million for
the comparable period in 1995. During 1995, 1994 and the eleven months ended
December 31, 1993, the Company's net cash provided by (used in) operating
activities was ($3.6) million, $.2 million and ($.3) million, respectively.
For the six months ended June 30, 1996, the Company's net cash (used in)
investing activities was ($29.3) million, compared to ($4.3) million for the
comparable period in 1995, primarily as a result of the acquisition of
subscriber account portfolios. During 1995, 1994, and the eleven months ended
December 31, 1993, the Company's net cash (used in) investing activities was
($12.7) million, ($8.7) million, and ($1.8) million, respectively, primarily as
a result of the acquisition of subscriber account portfolios and capitalized
Safe Choice installation costs during 1995 and 1994, and primarily as a result
of capitalized Safe Choice installation costs during 1993.
During the six months ended June 30, 1996, the Company's net cash provided
by financing activities was $29.6 million, compared to $7.5 million for the
comparable period in 1995. During 1995, 1994, and the eleven months ended
December 31, 1993, the Company's net cash provided by financing activities was
$16.2 million, $8.6 million, and $1.2 million respectively. Financing activities
were principally the result of the issuance and retirement of term debt during
the first six months of 1996, and the issuance of preferred stock and the
issuance and retirement of long-term debt during 1995 and 1994.
Credit Facility. On March 28, 1996, the Company entered into an agreement
with affiliates of Canadian Imperial Bank of Commerce (collectively, "CIBC") and
SunTrust Bank, Central Florida, N.A. (collectively, the "Lenders") that
established the Credit Facility. The maximum amount available under the Credit
Facility is $50.0 million. The Company had $40.1 million outstanding under the
Credit Facility at June 30, 1996, and $44.3 million outstanding at October 1,
1996. On June 4, 1996 and on August 9, 1996, the Company and the Lenders amended
the Credit Facility to relax certain financial covenants and other provisions.
The Credit Facility matures on September 30, 1997, subject to earlier
termination.
31
<PAGE> 33
Availability under the Credit Facility is restricted in two ways: (i) the
ratio of principal indebtedness under the Credit Facility plus the face amount
of all outstanding letters of credit issued under the Credit Facility to MRR;
and (ii) aggregate advances for acquisitions of subscriber account portfolios
cannot exceed a specified amount. The more restrictive of these availability
tests resulted in total remaining availability of approximately $1.0 million and
$1.8 million at June 30, 1996 and October 1, 1996, respectively.
The interest rates on borrowings under the Credit Facility are, at the
option of the Company, either (a) 2.25% plus the greater of (i) the rate
established by CIBC from time to time at its New York City office as its "Base
Rate" for commercial loans in U.S. dollars or (ii) the Federal Funds Rate plus
1.00% or (b) LIBOR plus 3.25%. The Company has paid to the Lenders facility fees
totaling $1.6 million and is obligated to pay the Lenders a quarterly fee of .5%
per annum on the aggregate daily unused portion of the Credit Facility. Because
the Credit Facility was not paid in full by September 30, 1996, the Company is
obligated to pay the Lenders a financing fee equal to .0275% multiplied by the
average commitment amount under the Credit Facility multiplied by the number of
days between September 25, 1996 and the date on which the Credit Facility is
paid in full (the "Financing Fee"). Accordingly, the Financing Fee began to
accrue on September 25, 1996 at a daily rate of $13,750. The proceeds from this
offering will not be sufficient to pay the entire balance due under the Credit
Facility. If the Company does not pay the Credit Facility in full until the
Credit Facility matures on September 30, 1997, the Financing Fee will be
approximately $5.0 million. Although the Company anticipates that the Lenders
will agree, following consummation of this offering, to reduce or waive the
Financing Fee and/or extend the maturity date of the Credit Facility, there can
be no assurance that the Company will be able to obtain these concessions.
The Credit Facility contains customary covenants including, among others,
restrictions on the incurrence of debt, encumbrances on or sale of assets,
mergers and acquisitions, investments, dividends, and transactions with
affiliates. Financial covenants include the maintenance of (i) a minimum ratio
of adjusted net operating income to total debt service, (ii) a maximum ratio of
total debt to annualized adjusted net operating income, (iii) maximum capital
expenditures during the term of the Credit Facility, (iv) maximum Safe Choice
capital expenditures and purchases of subscriber accounts from dealers
determined monthly, and (v) a maximum ratio of Credit Facility indebtedness,
including Credit Facility letters of credit, to MRR.
The Credit Facility prohibits all transfers of funds, such as loans,
advances, and dividends, to the Company from its subsidiaries, except that
Security may pay up to $100,000 annually to the Company for legal and accounting
fees, directors' fees and expenses, and other administrative costs. The Company
believes that such restrictions have not had and will not have a significant
impact on the Company's ability to meet its cash obligations.
Capital Expenditures. The Company anticipates making capital expenditures
during the six month period ended December 31, 1996 of $.2 million for computers
and other capital items. The Company anticipates that capital expenditures for
equipment and installations related to the Safe Choice program will be
approximately $4.4 for the six month period ended December 31, 1996. In
addition, the Company anticipates making capital expenditures of approximately
$1.0 million for the upgrading of its monitoring and administrative software
during 1997. The Company believes that the installation of new software will
improve efficiencies of both branch and administrative offices. The Company
believes cash flows from operations together with borrowings under the Credit
Facility will be sufficient to fund the Company's capital expenditures in 1996
and 1997.
Impact of SFAS 121. In March 1995, the Financial Accounting Standards
Board issued SFAS 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of" effective for financial statements for
fiscal years beginning after December 15, 1995. This statement requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company determines the value of its "Acquired
32
<PAGE> 34
Subscriber Agreements, net" based on the undiscounted cash flows from the MRR
stream using the most recent historical attrition rate and aggregate MRR. At
June 30, 1996, the undiscounted cash flows from the MRR stream were
significantly in excess of the carrying value of "Acquired Subscriber
Agreements, net." The Company does not anticipate a material impact on its
future financial statements resulting from the January 1, 1996 adoption of this
standard.
33
<PAGE> 35
BUSINESS
The discussion in this section of the Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those discussed herein. Factors that would cause or
contribute to such differences include, but are not limited to, those discussed
in "Risk Factors" and "Management's Discussion of Financial Condition and
Results of Operations," as well as those discussed elsewhere in this section and
in this Prospectus.
OVERVIEW
The Company provides security alarm monitoring services and installs and
services security alarm systems for residential and small business subscribers,
principally in the southern United States. At June 30, 1996, the Company had
approximately 78,000 subscriber accounts for its alarm monitoring services, a
majority of which were residential subscribers. As a result of the Company's
internally generated Safe Choice subscriber accounts and acquisitions of
subscriber account portfolios, the Company has increased its MRR from
approximately $.6 million at February 1, 1993 to approximately $2.0 million at
June 30, 1996, which represents an increase in annualized MRR from $7.6 million
to $24.0 million. The Company believes that based upon MRR, it is one of the
largest residential security alarm monitoring companies in the southern United
States. According to a May 1996 survey by SDM, the Company is the second fastest
growing security alarm monitoring company in the United States based upon the
Company's historical three year growth rate in revenues.
The Company's objective is to provide residential security alarm services
to an increasing number of Americans by making such services affordable and by
focusing on markets with attractive demographics. The Company's growth strategy
is based upon both internal generation of subscriber accounts marketed under the
tradename "Safe Choice" by the Company's sales consultants, and acquisitions of
subscriber accounts from independent alarm monitoring companies. The Company
believes that it can achieve economies of scale and improve results of
operations by increasing the number and density of subscribers for whom it
provides services, thereby increasing utilization of the Company's central
monitoring station and improving efficiency of its service operations.
From February 1, 1993 through June 30, 1996, the Company has generated
approximately 34,500 subscriber accounts internally through the Safe Choice
marketing program, including over 6,000 new Safe Choice subscriber accounts
during the second quarter of 1996. The Company seeks to create additional
subscriber accounts through the Safe Choice marketing program by subsidizing the
initial installation of a residential security alarm monitoring system in order
to capture the MRR generated by the monitoring contract. By offering the Safe
Choice alarm system at a base installation price of $99, the Company believes it
can access a broader demographic market than is presently being accessed by most
other existing companies who, according to the January 1996 issue of SDM, sold
and installed alarm systems during 1995 for an average price of $1,200. In
addition, the Safe Choice program allows the Company to create subscriber
accounts for an investment which, expressed as a multiple of MRR generated, is
substantially lower than that for which the Company can acquire subscriber
accounts and, in the Company's belief, is among the lowest in the industry.
Since September 1994, the Company has acquired approximately 39,000
subscriber accounts in 17 separate transactions. The Company intends to make
acquisitions and open branches in new geographic markets where the Company does
not presently have subscribers, and then to increase the number of subscriber
accounts in such markets through the Safe Choice marketing program and
subsequent acquisitions, both of which have the effect of increasing subscriber
account density in the area, and thereby improving operating efficiency.
Approximately 90% of the Company's subscribers are located in Florida,
Texas and the Richmond/Washington, D.C./Baltimore metropolitan areas. The
Company's remaining subscribers are located in Georgia, Louisiana, Oklahoma and
Tennessee. According to the Bureau of the Census and the Federal Bureau of
Investigation, the states which the Company serves collectively have higher
projected population growth rates from 1990 through 2010 and had higher crime
rates during 1994 than
34
<PAGE> 36
the nation as a whole. The Company monitors digital signals arising from
burglaries, fires and other monitored events which occur at the subscribers'
premises from the Company's state-of-the-art central monitoring station located
in Birmingham, Alabama, which has the capacity to serve approximately 250,000
subscriber accounts.
MARKET OVERVIEW AND TRENDS
The Company's market consists of owners of single family residences and
small businesses. In response to studies commissioned by the Company, the
Company targets a demographic group consisting of young, highly mobile families
with above-average incomes. According to 1994 U.S. Census Bureau data, there are
approximately 23.6 million single-family residences and, according to a 1994
Report of the President, there were approximately 1.2 million businesses with
100 or fewer employees in the states which the Company services.
The security alarm industry is characterized by the following attributes:
- LOW PENETRATION AND RAPID GROWTH. The residential security alarm market
is characterized by a low level of market penetration and rapid growth. An
industry trend toward subsidizing installation costs to increase
affordability, combined with other factors such as heightened concern
about crime and favorable demographic trends, have resulted in increased
demand for residential security alarm services. Freeman Research indicates
that while residential security alarm monitoring revenues grew at a
compounded annual rate of 12.0% between 1988 and 1995, monitored security
alarm systems are installed in only 11% of all U.S. households.
- HIGH DEGREE OF FRAGMENTATION. The security alarm industry is primarily
comprised of a large number of small providers of alarm systems and
services. According to Freeman Research, there are approximately 11,500
security alarm companies nationally, and approximately 3,250 operate in
the geographic regions which the Company currently services. A May 1996
survey by SDM reported that in 1995, the 100 largest companies in the
industry accounted for only 23% of alarm industry revenues and the top 10
security alarm monitoring companies served less than 3% of all United
States households. Based on its acquisition experience, the Company
believes that many smaller alarm service companies, because of their size,
have higher overhead expenses as a percentage of revenues than the Company
and lack access to capital on terms as attractive as those available to
the Company.
- ADVANCES IN DIGITAL COMMUNICATIONS TECHNOLOGY. Prior to the development
of digital communications technology, alarm monitoring required a
dedicated telephone line, which rendered long-distance monitoring
uneconomical. Consequently, in order to achieve a national or regional
presence, alarm monitoring companies were required to maintain a large
number of geographically dispersed monitoring stations. The development of
digital communications technology eliminated the need for dedicated
telephone lines, reducing the cost of monitoring services to the
subscriber and permitting the monitoring of subscriber accounts over a
wide geographic area from a central monitoring station. The elimination of
local monitoring stations has decreased the cost of providing alarm
monitoring services and has substantially increased the economies of scale
for larger alarm service companies. In addition, the concurrent
development of microprocessor-based control panels has substantially
reduced the cost of the equipment available to subscribers in the
residential and small business markets.
The Company believes that several factors contribute to a favorable market
for security alarm services both generally in the United States and specifically
in the southern portion of the country:
- CONCERN ABOUT CRIME. According to the 1994 Uniform Crime Report
published by the Federal Bureau of Investigation (the "UCR"), between 1985
and 1994 the number of violent crimes reported in the United States
increased by more than 40.3% and the total number of reported criminal
offenses increased by 12.6%. Although the UCR reported that the number of
property crimes decreased on a nationwide basis from 1993 to 1994 by 1.7%,
a property crime was
35
<PAGE> 37
committed in the United States in 1994 once every three seconds. The
average property crime rate in 1994 for the states in which the Company
operates was approximately 19.0% higher than the nation as a whole,
averaging approximately 5,542 property crimes per 100,000 residents. In
Florida, the Company's largest market, the 1994 property crime and overall
crime rates were approximately 52.5% and 53.5%, respectively, above the
national averages. The southern states (as designated by the UCR)
accounted for both 42% of murders and 38% of crime index offenses, more
than any other region in the nation.
- DEMOGRAPHIC TRENDS. According to the Bureau of the Census, the states
which the Company serves collectively have higher projected population
growth rates from 1990 to 2010 than the national average. According to the
United States Department of Commerce, 47.1% of U.S. households earn the
Company's target income level. Other recent trends that are favorable to
the residential security alarm business include the increase in women in
the workforce resulting in more children being left at home alone, and the
increase in people working at home, which generates greater demand for
security services to protect home office equipment.
- INSURANCE DISCOUNTS. The increase in demand for security systems may
also be attributable in part to the practice of certain insurance
companies to grant discounts to homeowners who install alarm systems, and
such discounts are typically greater when systems are monitored by a
central station. In addition, insurance companies may require that
businesses install an alarm system as a condition of insurance coverage.
- SECURITY ALARM EFFECTIVENESS. A study entitled "Crime Statistics:
Burglaries and Robberies" in the 1996 Fact Book Issue of Security Sales
magazine reported that non-alarmed homes are burglarized 2.2 times more
often than those with alarms. Furthermore, a study conducted by the
Portland, Oregon Police Bureau in 1993 found that total residential losses
in the Portland area from burglaries in alarmed homes were $104,000
compared to losses of $5.9 million for homes without an alarm.
BUSINESS STRATEGY
The Company's objective is to provide residential security alarm services
to a greater number of Americans by making such services affordable and by
focusing on markets with attractive demographic characteristics. The Company
believes that it can achieve economies of scale and improve results of
operations by increasing the number of subscribers for whom it provides
services, which will increase utilization of the Company's central monitoring
station and improve efficiency of its service operations. The Company therefore
seeks to increase the number of subscriber accounts through both internally and
externally generated growth and retain its focus on the residential security
alarm monitoring market. The Company seeks to target those areas with attractive
demographic profiles and with high levels of concern about crime. The Company's
principal focus to date has been on metropolitan areas in the southern United
States.
The Company intends to achieve this objective through the implementation of
the following strategies:
- INCREASING PENETRATION THROUGH LOWER PRICE POINTS. Freeman Research
indicates that the percentage of total households in the United States
which own an electronic security system is only 11%. The Company believes
that, with crime remaining an important concern of Americans, the Company
can increase the number of households which subscribe to a monitored
security alarm system in any given region by offering initial installation
of such a system at an attractive price. The Company believes that by
offering its Safe Choice residential system at a base installation price
of $99, the Company can access a broader demographic market than is
presently being accessed by most other existing companies who, according
to the January 1996 issue of SDM, sold and installed alarm systems during
1995 for an average price of $1,200.
36
<PAGE> 38
- CREATING INTERNAL GROWTH THROUGH THE SAFE CHOICE MARKETING PROGRAM. The
Company believes that its Safe Choice marketing program, through which it
seeks to create additional subscriber accounts by subsidizing the initial
installation of a residential security alarm monitoring system as a means
of capturing subscriber MRR, represents an effective internal growth
strategy. The Safe Choice program allows the Company to create subscriber
accounts for an investment which, expressed as a multiple of the MRR
generated, is substantially lower than that for which the Company can
acquire subscriber accounts and, in the Company's belief, is among the
lowest in the industry. From February 1, 1993 to June 30, 1996, the
Company has generated approximately 34,500 Safe Choice accounts, including
over 6,000 new Safe Choice accounts during the second quarter of 1996.
- ACQUIRING SUBSCRIBER ACCOUNT PORTFOLIOS. The Company intends to increase
the number of subscriber accounts through a program of selective
acquisitions both as a means to open branch offices in new geographic
markets and to increase subscriber account density in existing markets.
The Company seeks to acquire subscriber portfolios comprised primarily of
residential subscribers in geographic areas with attractive demographic
characteristics. Since September 1994, the Company has acquired over
35,000 subscriber accounts, representing $0.9 million in MRR, in 17
separate transactions. The Company believes that the highly fragmented
nature of the security alarm industry and the benefits to be achieved from
economies of scale will continue to provide it with acquisition
opportunities in the future.
- INCREASING ACCOUNT DENSITY IN EXISTING MARKETS. The Company believes
that increasing account density in the regions it currently
serves -- principally Florida, Texas and the Richmond/Washington
D.C./Baltimore metropolitan areas -- will enhance the efficiency of its
service routes and of its branch office marketing organization. The
Company's objective is to increase the number of Safe Choice installations
in each branch once it has established an initial presence in a
metropolitan area. By servicing and marketing to a higher number of
accounts and potential accounts per employee, the Company seeks to improve
the incremental operating margins associated with new subscriber accounts.
In this way, the Company believes that it can reduce general and
administrative expense as a percentage of sales and increase operating
margins at any given branch office.
- OFFERING ENHANCED SERVICES TO SUBSCRIBERS. The Company seeks to increase
sales of enhanced services to new and existing subscribers, which will
have the effect of increasing the Company's average MRR per subscriber.
The Company currently offers supervised monitoring (primarily to small
businesses) and cellular back-up services. During 1997, the Company
intends to offer enhanced services such as extended warranty service on
the equipment installed in a subscriber's home and paging services for
subscribers.
THE SAFE CHOICE PROGRAM
The Company believes that its Safe Choice marketing program represents an
effective internal growth strategy. The Company subsidizes system installations
in order to secure the MRR associated with providing ongoing alarm monitoring
services. The Company believes that by offering its Safe Choice residential
system at a base installation price of $99, the Company can access a broader
demographic market than is presently being accessed by most other existing
companies who, according to the January 1996 issue of SDM, sold and installed
alarm systems during 1995 for an average price of $1,200. The Company has,
through its Safe Choice program, internally created subscriber accounts during
the first six months of 1996 for an investment that represents a multiple of MRR
which is approximately 65% of the average multiple at which the Company acquired
subscriber accounts during the same period. From February 1, 1993 through June
30, 1996, the Company has generated approximately 34,500 subscriber accounts
internally through the Safe Choice program, including over 6,000 new subscriber
accounts during the second quarter of 1996.
37
<PAGE> 39
Safe Choice Product
The Company currently offers its basic Safe Choice alarm system for base
installation fees of $99 (residential) and $250 (small business). Each
residential or small business customer is required to enter into a written
contract for the Company's monitoring services, generally at a subscription
price of $25 per month and for a term of three to five years. When the Company
generates a subscriber account through a conversion, the Company may alter
certain terms of the basic Safe Choice system, including reduced monthly
monitoring charges. The basic Safe Choice alarm system includes protection for
three openings to the premises, if residential, or two openings, if small
business, an interior motion detector, a centralized processing unit ("CPU")
with the ability to communicate signals to the Company's central monitoring
station, a battery back-up, a siren, window decals and a lawn sign. The Company
retains ownership of the installed equipment. As a result, the Company provides
a lifetime limited warranty on system parts and a one year limited warranty on
labor. For additional installation fees, the account subscriber can protect
additional openings, add additional sirens and motion detectors, or elect to add
additional protective features to the system, such as "panic buttons" and fire
protection by means of smoke and heat detectors. As a result of such customer
additions to the Company's basic Safe Choice package, the Company's average fee
to install a Safe Choice system was approximately $164 per account subscriber
during the first half of 1996.
The primary security alarm system installed by the Company is a
custom-configured, hard-wire alarm system manufactured by C & K Systems, Inc., a
leading manufacturer of such systems in the United States. The Company has
purchased alarm systems from other manufacturers in the past and believes that
it could readily do so in the future if necessary. The Company also installs
alarm systems with hybrid CPUs, which allow for both wireless and hard-wired
installation of protective devices. Wireless devices use radio signals from
transmitters incorporated into the protective devices to communicate activation
signals from such devices to the subscriber's CPU. Hard-wire devices, on the
other hand, use actual wires to connect each of the protective devices to the
subscriber's CPU. While wireless devices can generally be installed more quickly
than those that require wires, thus reducing labor costs, the Company's
experience is that hard-wire systems are currently more economical to install
than wireless systems due to the higher equipment costs of wireless systems. The
Company nevertheless retains the flexibility to install wireless devices.
Marketing
In response to studies commissioned by the Company, the Company targets a
demographic group consisting of young families with above-average income. The
Company primarily markets the Safe Choice system through a direct marketing
campaign conducted by approximately 330 sales consultants in the Company's 18
branch offices. The sales consultant typically visits personally with the
subscriber at the subscriber's residence and presents a mounted display of the
hard-wired equipment and a description of its features. Sales consultants are
compensated solely by commissions and other sales-based bonuses.
Although the Company trains each sales consultant, the Company focuses on
hiring individuals with strong entrepreneurial skills who are capable of
developing their own sales techniques. The Company pays higher commissions than
most other alarm companies, periodically recognizes superior performance of
sales consultants, and gives the sales consultant the freedom to conduct his or
her own marketing. Each sales consultant reports to the applicable Sales Leader
and/or Branch Manager of the branch, who monitors and approves the activities of
the sales consultant. Sale consultants are encouraged to ask for customer
referrals as the Company has found that the use of referrals results in a better
success rate than cold calls or other mass marketing techniques. Sales
consultants also generate additional new leads by distributing flyers in target
neighborhoods, making personal cold calls to homes in target neighborhoods, and
attending trade shows. The Company provides the sales consultants with support
services, training and any sales materials which they may need, such as business
cards, demonstration units, brochures, flyers and other selling materials. The
Company's sales force also occasionally generates new Safe Choice accounts
through new home builders.
38
<PAGE> 40
Although the Company does not generally conduct mass marketing through the
media, the Company's branches occasionally do use a combination of targeted
direct mail and outbound telemarketing to generate prospective subscriber leads.
If a sales consultant sells a new account from a Company generated lead, the
sales consultant receives a lower commission than if the lead was self-
generated.
The Company believes that as it increases the density of its subscriber
base in a geographic region, the placement of highly visible yard signs in front
of each subscriber's home or business will enhance awareness of the Company in
such region and thus lead to more "call-in" and referral business.
Enhanced Services
Part of the Company's internal growth strategy is to increase sales of
enhanced services to new and existing subscribers in an effort to raise the
Company's average MRR per subscriber above the basic $25 per month. The Company
currently offers supervised monitoring (primarily to small businesses) and
cellular back-up services. Supervised monitoring allows the alarm system to send
various types of signals to the central monitoring station containing
information on the use of the system, such as what users armed or disarmed the
system and at what time of the day. Cellular back-up services allow the alarm
system to send signals through a cellular telephone system in the event that
regular telephone service is interrupted. Currently, these enhanced services
account for an immaterial amount of the Company's MRR.
During 1997, the Company intends to offer the following additional enhanced
services: (i) extended warranty service to cover the normal cost of repair and
maintenance of the alarm system during normal business hours after the
expiration of the initial warranty; (ii) paging services, in which the Company
would serve as a reseller of paging services in conjunction with offering the
enhanced service of paging a subscriber in the event of an alarm activation; and
(iii) medic alert package, in which a person experiencing medical difficulty
could signal the monitoring station for assistance in contacting an ambulance.
THE ACQUISITION PROGRAM
The Company intends to continue to increase the number of its subscriber
accounts through a program of selective acquisitions of subscriber accounts from
alarm monitoring companies. The Company seeks acquisitions as a means of
entering new markets and of increasing subscriber account density in existing
markets. From September 1994 through June 1996, the Company acquired
approximately 39,000 subscriber accounts representing almost $.9 million in MRR
through 17 separate transactions. The Company believes that it is an effective
competitor in the acquisition market because of the substantial experience of
its management in acquiring MRR companies, as a result of both the acquisitions
made by the Company and acquisitions made by members of the Company's management
in the cable television and cellular telephone businesses. See "Management."
The six largest acquisitions of alarm service companies since September 1,
1994 are summarized in the following table:
<TABLE>
<CAPTION>
KENMAR THE 593 ALARMS BY
ELECTRONICS, CORPORATION INTERCAP HRD, INC.
INC. D/B/A ALARM D/B/A KRISTYNIK FUNDS D/B/A
HOUSTON DATA CLASSIC SECURITY JOINT SECURE
ALARM GROUP, INC. ALARM SYSTEM, INC. VENTURE AMERICA
------------ ----------- ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Date of Acquisition............. 11/94 9/95 11/95 1/96 3/96 6/96
MRR acquired(1)................. $88,930 $65,834 $40,611 $84,986 $390,189 $128,091
Aggregate number of monitoring
contracts acquired............ 2,972 2,889 2,024 3,831 14,965 5,291
MRR per subscriber.............. $29.92 $22.79 $18.43 $22.18 $26.07 $24.21
Approximate percentage(2) of:
Residential accounts.......... 71% 50% 95% 75% 75% 75%
Commercial accounts........... 29% 50% 5% 25% 25% 25%
</TABLE>
39
<PAGE> 41
- ---------------
(1) MRR is a measure of subscriber base size and not a measure of profitability
or performance. The Company does not have sufficient information to predict
the amount of MRR that will be realized in future periods. See "Risk
Factors -- Attrition of Subscriber Accounts."
(2) These percentages were calculated as of the date of acquisition.
Because the Company's primary consideration in making an acquisition is the
amount of MRR that will be derived from new subscribers acquired, the price paid
by the Company is customarily directly tied to such MRR. To protect the Company
against the loss of acquired accounts and to encourage the seller of such
accounts to facilitate the transfer of subscribers, management typically
requires the seller to provide guarantees against account cancellations for up
to 12 months following the acquisition by placing in an escrow account a
negotiated percentage of the purchase price.
No audited historical financial information was provided to the Company
prior to the closing of any acquisitions consummated by the Company to date, and
the Company is not aware of any reliable historical data relating to collections
as a percentage of billings or account attrition rates prepared by the former
management of the sellers. See "Risk Factors -- Lack of Audited Financial
Information Relating to Acquisitions." In evaluating the quality of the accounts
acquired, the Company relied primarily on management's knowledge of the
industry, its due diligence procedures, its experience integrating accounts into
the Company's operations, its assumptions as to attrition rates for the acquired
accounts, and the representations and warranties of the sellers. If the actual
financial condition or operations of a seller were inaccurately represented to
the Company in connection with an acquisition or the actual attrition rate for
the accounts acquired is greater than the rate assumed by the Company at the
time of the acquisition, and the Company is unable to recoup its damages from
the portion of the purchase price held back from the seller, such acquisition
could have a material adverse effect on the Company's financial condition or
results of operations. See "Risk Factors -- Attrition of Subscriber Accounts."
The Company continues on an ongoing basis to evaluate potential
acquisitions of subscriber account portfolios.
The Acquisition Management System
The Company employs a comprehensive acquisition management system to
identify, evaluate, and assimilate acquisitions of new subscriber accounts. Each
facet of the acquisition management system is administered by an acquisition
team which is comprised of Messrs. Johnson, Kark, Tomick and Armstrong, each of
whom has experience in acquiring companies whose value is based upon MRR. The
Company believes that this system helps to ensure the success of its acquisition
program. The acquisition management system includes the following components:
- IDENTIFICATION AND NEGOTIATION. The Company actively seeks to identify
prospective companies and dealers with targeted direct mail, trade
magazine advertising, trade show participation, membership in key alarm
organizations, and contacts through various prominent vendors and other
industry participants. Management's extensive experience in identifying
and negotiating previous acquisitions and the Company's use of standard
form agreements helps to facilitate the successful negotiation and
execution of acquisitions in a timely manner.
- DUE DILIGENCE. The Company conducts an extensive pre-closing review and
analysis of all facets of the seller's business. The process includes, but
is not limited to: (i) review of all subscriber contracts and an analysis
of the rights and obligations under such contracts, (ii) telephone surveys
of a representative sample of subscribers, (iii) review of customer
billing records and accounts receivable aging reports, and (iv) review of
the seller's telephone traffic to determine if it is reasonable for the
number and type of subscribers.
- ASSIMILATION. The Company develops a specific assimilation program, in
conjunction with the seller, for each acquisition. Assimilation efforts
typically include a letter approved by the
40
<PAGE> 42
Company from the seller to its subscribers explaining the sale and
transition, followed by either a personal visit by a Company
representative or one or more mailings from the Company to provide the
Company's subscriber with service brochures, field service and monitoring
phone number stickers, yard signs and window decals. Thereafter, the
Company often conducts a telephone survey of acquired subscribers to
solicit certain information and answer the subscriber's questions or
concerns. As a follow-up to the survey, as necessary, a Company technician
will service subscribers' alarm systems to verify that they are in proper
working condition. As a result of the acquisition of subscriber accounts
from other alarm monitoring companies, a number of the security alarm
systems monitored by the Company were installed by other companies.
TRADITIONAL SALES AND SONITROL
If requested by the subscriber, the Company will sell "traditional" alarm
monitoring services, which are characterized by substantially higher initial
costs to the subscriber. Traditional subscribers purchase the alarm system
hardware from the Company and are not required by the Company to enter into
multi-year monitoring contracts.
The Company also sells, installs and services Sonitrol(TM) sound-based
security systems in Dade County (Miami) and Broward County (Ft. Lauderdale),
Florida as a Sonitrol franchisee. The Sonitrol system is a sound-based
monitoring system designed primarily for commercial customers. As of June 30,
1996, Sonitrol represented 3.7% of the Company's MRR. The Company operates a
separate monitoring station located in Miami, Florida solely for the purpose of
monitoring its Sonitrol accounts.
THE DEALER PROGRAM
Many small alarm system dealers specialize in selling and installing alarm
systems for residential or small business subscribers in a limited geographic
area. Often, such dealers do not find it profitable to provide central
monitoring station or field services to their subscribers because they do not
have sufficient subscribers to support the fixed operating expenses associated
with such services, or access to capital on attractive terms. The Company has
entered into one oral and one written agreement with such dealers that provide
for the purchase by the Company of the dealers' subscriber accounts on an
ongoing basis. The dealers install an alarm system, arrange for subscribers to
enter into alarm monitoring agreements on a form of agreement approved by the
Company, and, if accepted by the Company, install the Company's yard signs and
window decals. The Company will only accept subscriber contracts which contain
limits on the Company's liability and are with subscribers who have a certain
minimum credit. The contracts are submitted to the Company for periodic review.
The Company currently purchases approximately 50 subscriber accounts per month
through its dealer program.
ALARM MONITORING SERVICES
The Company monitors most of its subscriber accounts at its central
monitoring station in Birmingham, Alabama, which incorporates the use of
advanced communications and computer systems that route incoming alarm signals
and telephone calls to operators. Each operator sits before a computer monitor
that provides immediate information concerning the nature of the alarm signal,
the subscriber whose alarm has been activated and the premises on which such
alarm is located. All telephone conversations are automatically recorded.
The Company's central monitoring station currently has the capacity to
monitor up to 250,000 subscribers, with low incremental costs for expansion. The
equipment at the central monitoring station includes sophisticated phone
switching equipment, digital receivers that process the incoming signals, two
file servers with built-in redundancy, four compute servers which share the
workload of the file servers, a network of "smart" computer terminals, a 32
channel voice-activated recording system,
41
<PAGE> 43
uninterruptable power supply generated by two separate AC power feeds from two
separate power grids, and dual backup generators supplied by different fuel
sources.
The Company's central monitoring station is listed by Underwriters
Laboratories Inc. ("UL") as a protective signaling services station. UL
specifications for central monitoring stations include building integrity,
back-up systems, staffing and standard operating procedures. In many
jurisdictions, applicable law requires that security alarms for certain
buildings be monitored by UL-listed facilities. In addition, such listing is
required by certain insurance companies as a condition to insurance coverage.
Depending upon the type of service for which the subscriber has contracted,
central monitoring station personnel respond to alarms by relaying information
to the local fire or police departments, notifying the subscriber, or taking
other appropriate action. Non-emergency administrative signals include power
failures, low battery signals, deactivation and reactivation of the alarm
monitoring system, and test signals, and are processed automatically by central
monitoring station computers. The Company's central monitoring station operates
24 hours per day, seven days a week, including all holidays. The Company's
central monitoring station personnel are trained to tell subscribers how to turn
off their systems in the event of a false alarm, thus reducing the instances in
which field service personnel must be dispatched.
In certain of its acquisitions of subscriber account portfolios, the
Company has not begun monitoring the acquired accounts following consummation of
the acquisition due to the particular circumstances of the seller. Typically the
monitoring company that was monitoring such subscriber accounts prior to the
acquisition continues to monitor such subscriber accounts in accordance with a
pre-existing contractual arrangement. Following the completion of such
arrangements, the Company commences monitoring at the Birmingham central
monitoring station.
INSTALLATION AND FIELD SERVICES
The Company generally maintains installation and field service personnel in
each of its branch offices. Smaller branches subcontract services and
installation to third party entities until it becomes economically viable to
hire an internal staff. These employees are trained by the Company to install
and maintain the various types of subscriber security systems marketed and
serviced by the Company and also those typically marketed by other dealers and
found in the households of acquired subscriber accounts. The primary alarm
system that the Company installs is manufactured by C&K Systems, Inc. The
Company has purchased alarm systems from other manufacturers in the past and
believes that it can readily do so in the future if necessary. The Company
believes that the majority of installed alarm systems monitored in the United
States were manufactured by a limited number of manufacturers. Accordingly, the
Company believes that it can readily train service personnel to service these
systems. The Company warrants labor for one year after installation.
Installations of new alarm systems are performed promptly after the
completion of the sale of the account. After completing an installation, the
technician instructs the subscriber on the use of the system and furnishes a
written manual and, in many instances, an instruction video. Additional follow-
up instruction is provided by sales consultants in the branch offices on an as
needed basis.
The increasing density of the Company's subscriber base as a result of the
Company's continuing strategy to "infill" its existing branch service areas with
new subscribers permits more efficient scheduling and routing of field service
technicians and results in economies of scale at the branch level. The increased
efficiency in scheduling and routing also allows the Company to provide faster
field service response and support, which leads to a higher level of subscriber
satisfaction.
CUSTOMER RETENTION
The Company believes that customer satisfaction is an important factor in
the retention of subscriber accounts. The Company has implemented a number of
measures intended to maximize customer satisfaction, including an annual survey
of all subscribers, and periodic awards to the
42
<PAGE> 44
branches that maintain superior customer satisfaction. During 1995, the Company
implemented a total quality management ("TQM") program to improve customer
satisfaction. Through the TQM program, the Company on an ongoing basis analyzes
and documents all processes critical to customer satisfaction, including sales,
installations, monitoring, billing and customer service. The Company then
implements improvements and repeats the analysis process. To further enhance
customer satisfaction, and therefore customer retention, each branch is on-line
with the Company's central computer in Birmingham so that employees of any
branch can immediately access subscriber account information and respond
promptly to questions or complaints.
In the normal course of its business, the Company experiences customer
cancellations of monitoring and related services as a result of subscriber
relocation, the cancellation of acquired accounts in the process of assimilation
into the Company's operations, unfavorable economic conditions, and other
reasons. This attrition is offset to a certain extent by revenues from the sale
of additional services to existing subscribers, the reconnection of premises
previously occupied by subscribers, the conversion of accounts previously
monitored by other alarm companies, and guarantees provided by the sellers of
such accounts. The Company experienced 10.2% net MRR attrition in the fiscal
year ended December 31, 1995 and 6.8% net MRR attrition for the twelve month
period ended June 30, 1996. See "Risk Factors -- Attrition of Subscriber
Accounts" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- General -- Subscriber Attrition."
RISK MANAGEMENT
The nature of the services provided by the Company potentially exposes it
to greater risks of liability for employee acts or omissions or system failure
than may be inherent in other businesses. Most of the Company's alarm monitoring
agreements and other agreements pursuant to which it sells its products and
services contain provisions limiting the Company's liability to subscribers in
an attempt to reduce this risk.
The Company carries insurance of various types, including general liability
and errors and omissions insurance. The loss experience of the Company and other
security service companies may affect the availability and cost of such
insurance. Certain of the Company's insurance policies and the laws of some
states may limit or prohibit insurance coverage for punitive or certain other
types of damages, or liability of the Company arising from gross negligence or
wanton behavior. See "Risk Factors -- Risks of Liability."
COMPETITION
The security alarm industry is highly competitive and highly fragmented.
The Company competes with numerous other companies for new subscriber accounts
with regard to both the internal generation of new subscriber accounts and the
acquisition of subscriber accounts. The Company's primary competitors for new
Safe Choice subscriber accounts include ADT Security Systems, Inc., Brink's Home
Security, Inc. (a subsidiary of The Pittston Service Group), Westinghouse
Security Systems (a subsidiary of Westinghouse Electric Corporation) and
Multimedia Security Services, Inc. (a subsidiary of Gannett, Inc.), each of whom
offers low price, subsidized installations of alarm systems, is better
capitalized than the Company, and advertises through media, a practice not
currently utilized by the Company. Competition for new accounts is based
primarily on installation price, monthly monitoring fee, services offered, and
reputation for quality of service. The Company's primary competitors for
acquisitions include Republic Industries, Inc., Vector Security, Inc. and
Rollins Protective Services, Inc. Utility companies and cable television
companies also have recently entered the alarm monitoring business and will
likely compete with the Company for new accounts and for acquisitions. See "Risk
Factors -- Competition."
The Telecommunications Act of 1996 prohibits the regional Bell operating
companies from engaging in the providing of alarm monitoring services until
February 2001, except to the extent any
43
<PAGE> 45
Bell operating company was engaged in such business as of November 30, 1995.
Ameritech, one of the Bell operating companies, entered the alarm monitoring
business prior to November 1995 through a series of acquisitions and continues
to seek acquisitions of subscriber account portfolios.
In June 1994, the Company entered into a license agreement with Centennial
Security, pursuant to which the Company granted to Centennial Security an
exclusive, ten year license to use the Masada Security trademark and tradename,
the Safe Choice tradename, and certain other intellectual property in the
northern half of the United States (the states of California (north of
Sacramento), Colorado, Connecticut, Delaware, Idaho, Illinois, Indiana, Iowa,
Kansas, Maine, portions of Maryland, Massachusetts, Michigan, Minnesota,
Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, North
Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont,
Washington, Wisconsin and Wyoming) and Canada (the "Centennial Territory").
Although the license agreement specifically provides that the Company may
operate as a security alarm company within the Centennial Territory, the license
agreement prohibits the Company from operating as "Masada Security" and from
using the "Safe Choice" tradename and other intellectual property within the
Centennial Territory without the consent of Centennial Security until the
license agreement terminates, which is not scheduled to occur until 2004. In the
event the Company enters markets located within the Centennial Territory, the
limitations imposed on the Company by the license agreement with Centennial
Security could have a material adverse effect upon the Company's future business
and operating results. See "Certain Transactions -- Transactions with Centennial
Security."
REGULATORY MATTERS
Recently, a trend has emerged on the part of local governmental authorities
to consider or adopt various measures aimed at reducing the number of false
alarms. Such measures include (i) subjecting alarm monitoring companies to fines
or penalties for transmitting false alarms, (ii) licensing individual alarm
systems and the revocation of such licenses following a specified number of
false alarms, (iii) imposing fines on alarm subscribers for false alarms, (iv)
imposing limitations on the number of times the police will respond to alarms at
a particular location after a specified number of false alarms, and (v)
requiring further verification of an alarm signal before the police will
respond. See "Risk Factors -- 'False Alarm' Ordinances."
The Company's operations are subject to a variety of other laws,
regulations and licensing requirements of federal, state and local authorities.
In certain jurisdictions, the Company is required to obtain licenses or permits,
to comply with standards governing employee selection and training, and to meet
certain standards in the conduct of its business. Many jurisdictions also
require certain of the Company's employees to obtain licenses or permits.
The alarm industry is also subject to requirements imposed by various
insurance, approval, listing and standards organizations. Depending upon the
type of subscriber served, the type of security service provided and the
requirements of the applicable local governmental jurisdiction, adherence to the
requirements and standards of such organizations is mandatory in some instances
and voluntary in others.
The Company's advertising and sales practices are regulated by both the FTC
and state consumer protection laws. Such laws and regulations include
restrictions on the manner in which the Company promotes the sale of its
security alarm systems and the obligation of the Company to provide purchasers
of its alarm systems with certain rescission rights.
The Company's alarm monitoring business utilizes telephone lines and radio
frequencies to transmit alarm signals. The cost of telephone lines and the type
of equipment which may be used in telephone line transmission are currently
regulated by both federal and state governments. The operation and utilization
of radio frequencies are regulated by the Federal Communications Commission and
state public utilities commissions. See "Risk Factors -- Regulations."
44
<PAGE> 46
TRADEMARKS
The Company operates under the federally registered tradename "Masada
Security." The Company has also applied for federal registration of the
tradename "The Safe Choice -- Masada Security" under which it markets the Safe
Choice system.
LEGAL PROCEEDINGS
The Company experiences routine litigation in the normal course of its
business. The Company is not presently aware of any pending or threatened
litigation that will have a material adverse effect on the financial condition
or results of operations of the Company.
EMPLOYEES
At October 1, 1996, the Company employed 873 individuals, including 819 on
a full-time basis and 54 on a part-time basis. Currently, none of the Company's
employees are represented by a labor union or covered by a collective bargaining
agreement. The Company believes its relations with its employees are good.
PROPERTY
The Company's executive office, administrative office and central
monitoring station are located at 950 22nd Street North, Suite 800, Birmingham,
Alabama 35203. The executive offices constitute 14,623 square feet and are
currently subject to a lease which will expire in August of 2004. The Company
also leases office space for sales and service representatives in Tampa,
Deerfield Beach, Miami, Orlando, Homestead, West Palm Beach and Jacksonville,
Florida; Atlanta, Georgia; Beltsville and Randalstown, Maryland; Alexandria and
Richmond, Virginia; Clear Lake City, Addison, Houston, San Antonio and Austin,
Texas; Oklahoma City, Oklahoma; and Harahan, Louisiana. The Company believes
that its existing office space will be adequate to meet its needs of the
immediate future.
45
<PAGE> 47
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The name, age and current position(s) of each director and executive
officer of the Company are as set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- --------------------------------------
<S> <C> <C>
Terry W. Johnson........................ 54 Chairman of the Board, President and
Chief Executive Officer
John M. Kark............................ 43 Vice President -- Operations and
Director
David P. Tomick......................... 44 Vice President, Chief Financial
Officer, Treasurer and Assistant
Secretary
Charles F. Armstrong.................... 35 Vice President -- Acquisitions
(Security)
Cathy M. Antee.......................... 37 Controller (Security) and Secretary
Robert E. Fincher....................... 41 Vice President -- Marketing (Security)
O. Gene Gabbard......................... 56 Director
I. Robert Greene........................ 36 Director
Steven C. Halstedt...................... 50 Director
Daryl E. Harms.......................... 45 Director
William A. Johnston..................... 44 Director
Bertil D. Nordin........................ 62 Director
George J. Still, Jr..................... 38 Director
</TABLE>
Terry W. Johnson has been Chairman of the Board, President and Chief
Executive Officer of the Company since its formation in January 1993. Mr.
Johnson co-founded Predecessor Masada with Daryl E. Harms in 1988 and served as
its principal executive officer until Predecessor Masada sold the Masada
Security business in February 1993.
John M. Kark has been a director of the Company and responsible for the
branch office operations of Security since February 1993. He has served as a
Vice President of the Company and Security since May 1995 and December 1994,
respectively. He has held his present titles of Vice President -- Operations of
the Company and of Security since September 1996. Prior to February 1993, Mr.
Kark served as the President of Network Security City Branches, Inc., an alarm
security company based in Dallas, Texas which was acquired by the Partnership.
David P. Tomick has been Vice President, Chief Financial Officer, Treasurer
and Assistant Secretary of the Company and Security since May 1995 and December
1994, respectively. Mr. Tomick served in other similar capacities with the
Company from April 1994 to May 1995. Prior to April 1994, Mr. Tomick was Vice
President -- Finance of Falcon Cable TV which was engaged in the business of
operating cable television systems.
Charles F. Armstrong has been Vice President -- Acquisitions of Security
since December 1994. Mr. Armstrong served in a similar capacity with the Company
from May 1994 to December 1994. From 1991 until 1994, Mr. Armstrong was the
principal of Armstrong Capital Corporation, which served as a business
development consultant to cable television and telephone companies as well as
raising capital for emerging business ventures. Prior to 1991, Mr. Armstrong
served as Vice President -- Investment Banking/Business Broker for Johnson
Crowley & Associates, Inc., which concentrated on brokering companies in the
cable television industry.
Cathy M. Antee has been Secretary and Controller of Security since January
1995 and Secretary of the Company since May 1995. Ms. Antee was employed by
Parisian, Inc. as Treasury Director and Director of Investor Relations from
April to December 1994 and as a Senior Financial Analyst from March 1990 to
April 1994. She is a certified public accountant.
46
<PAGE> 48
Robert E. Fincher has been Vice President -- Marketing of Security since
December 1994. Mr. Fincher has served in a similar capacity since November 1993.
From early 1992 to November 1993, Mr. Fincher worked as Vice President/Marketing
Director of BioImaging Diagnostic Center, Inc. Prior to 1992, Mr. Fincher worked
for Southern Cellular as a Regional Vice President from 1991 to 1992 and as a
General Manager from 1990 to 1991.
O. Gene Gabbard has been a director of the Company since its formation in
January 1993. Mr. Gabbard has served as an independent consultant and
entrepreneur since January 1993. From August 1990 until January 1993, Mr.
Gabbard served as an Executive Vice President and the Chief Financial Officer of
MCI Telecommunications Corporation. Mr. Gabbard is also a director of Adtran,
Inc., Data Technology Corporation, Intercel, Inc., and MindSpring Enterprises,
Inc.
I. Robert Greene has been a director of the Company since September 1995.
Mr. Greene has been a Principal with Chase Capital Partners since August 1994.
He was employed by Prudential Equity Investors as an Associate from 1988 until
1992 and as a Director from 1992 until 1994.
Daryl E. Harms has been a director of the Company since its formation in
January 1993. Mr. Harms co-founded Predecessor Masada with Mr. Johnson in 1988
and served as the Secretary of the Company from January 1993 until May 1995 and
as the Secretary of Security from February 1994 through December 1994. Mr. Harms
co-founded with Mr. Johnson in 1994 Masada Resource Group, L.L.C., which is
engaged in the business of developing facilities for the conversion of municipal
waste and sewage sludge into ethanol and other by-products. Mr. Harms is the
principal executive of Masada Resource Group, L.L.C. and owns, with Mr. Johnson,
the corporation that serves as the sole manager of Masada Resource Group, L.L.C.
Steven C. Halstedt has been a director of the Company since its formation
in January 1993. Mr. Halstedt co-founded The Centennial Funds beginning in 1981,
a group of four venture capital funds based in Denver, Colorado that specialize
in electronic communications investments. Two of these funds, Centennial Fund
III, L.P. and Centennial Fund IV, L.P., are stockholders of the Company. See
"Principal Stockholders." Mr. Halstedt serves as an individual general partner
of the general partner of each of The Centennial Funds. He has served since 1986
as Chairman of the Board of Centennial Holdings, Inc., the management company
for The Centennial Funds.
William A. Johnston has been a director of the Company since February 1994.
Mr. Johnston has been employed by Hancock Venture Partners, Inc. in various
capacities since 1983 and has served as a Senior Vice President since 1987.
Bertil D. Nordin has been a director of the Company since February 1994.
Mr. Nordin served as Chairman of Digital Communications Associates, Inc. since
prior to 1990 until his retirement in December 1994. Mr. Nordin is a director of
TechForce Corporation.
George J. Still, Jr. has been a director of the Company since its formation
in January 1993. Mr. Still has been a Principal with Norwest Venture Capital
Management since October 1989. He is a director of PeopleSoft, Inc.
Pursuant to the terms of the Certificate of Incorporation, as amended (the
"Charter"), of the Company, the Board of Directors is divided into three
classes. One class will hold office initially for a term expiring at the annual
meeting of stockholders to be held in 1997, a second class will hold office
initially for a term expiring at the annual meeting of stockholders to be held
in 1998, and a third class will hold office initially for a term expiring at the
annual meeting of stockholders to be held in 1999. Each director will hold
office for the term to which he is elected and until his successor is duly
elected and qualified. Messrs. Halstedt, Kark and Johnston will have terms
expiring in 1997, Messrs. Still, Gabbard and Greene will have terms expiring in
1998, and Messrs. Johnson, Harms and Nordin will have terms expiring in 1999. At
each annual meeting of the stockholders of the Company, the successor to the
class of directors whose terms expire at such meeting will be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election. See "Description of Capital
Stock -- Certain Provisions of the Company's Charter and
47
<PAGE> 49
Delaware Law -- Classified Board of Directors." The Board of Directors elects
officers annually and such officers serve at the discretion of the Board of
Directors. The Company is actively seeking to hire a President/chief operating
officer. See "Risk Factors -- Dependence Upon Senior Management."
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee, currently comprised of
Messrs. Johnson, Nordin and Johnston, and an Audit Committee, currently
comprised of Messrs. Nordin & Still. The Compensation Committee makes
recommendations concerning salaries and bonuses for executive officers of the
Company and administers the Company's stock plans. The Audit Committee reviews
the results and scope of the audits and other services provided by the Company's
independent auditors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Johnson, who serves as a member of the Compensation Committee,
currently serves, and during the Company's last fiscal year served, as the
Chairman of the Board, President and Chief Executive Officer of the Company.
DIRECTOR COMPENSATION
Two of the Company's directors, Mr. Gabbard and Mr. Nordin, receive $1,000
for each Board of Directors or committee meeting attended. All directors are
reimbursed for out-of-pocket expenses incurred to attend Board of Directors or
committee meetings.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table summarizes for 1995 the
compensation of the Company's Chief Executive Officer during 1995 and the other
most highly compensated executive officers of the Company (the "Named Executive
Officers") whose total compensation exceeded $100,000 during 1995:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND PRINCIPAL POSITION SALARY
---------------------------------------------------------------- -------------------
<S> <C>
Terry W. Johnson................................................ $ 160,000
Chief Executive Officer
John M. Kark.................................................... $ 139,858
Vice President
David P. Tomick................................................. $ 134,808
Chief Financial Officer
</TABLE>
Year-End Option Values. The following table sets forth information
regarding the number and value of options held at December 31, 1995 by each of
the Named Executive Officers. No options were exercised during 1995 by such
executives.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING DOLLAR VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
--------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
- --------------------------------------------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Terry W. Johnson............................. -- -- -- --
John M. Kark................................. 0 60,000 $ 0 $166,200
David P. Tomick.............................. 0 45,000 0 124,650
</TABLE>
- ---------------
(1) The value of the options is based upon the exercise price and the estimated
fair market value of the underlying shares at December 31, 1995 ($2.77 per
share).
Stock Plans. The Company has adopted three stock award plans. The Board of
Directors of the Company adopted the Stock Option/Purchase Plan of Masada
Security Holdings, Inc. in 1994 ("1994
48
<PAGE> 50
Stock Plan"), the Masada Security Holdings, Inc. 1996 Stock Option Plan in April
1996 ("1996 Stock Plan"), and the Masada Security Holdings, Inc. 1997 Stock
Option Plan in September 1996 (the "1997 Stock Plan"). The purposes of these
plans are to provide long-term incentives and awards to directors, officers and
key employees of the Company, to assist the Company in attracting and retaining
such individuals on a basis competitive with industry practices, to align their
interests with those of the Company's stockholders, and to provide additional
compensation for them.
1994 Stock Plan
Under the 1994 Stock Plan, 300,000 shares of the Company's Common Stock are
available for issuance, subject to such adjustments as may be necessary to
reflect changes in the capitalization of the Company (i.e., a stock split) or
such other significant transactions requiring adjustment of the number of shares
reserved for the 1994 Stock Plan. As of September 30, 1996, awards covering
241,500 of the 300,000 shares of Common Stock available for issuance under the
1994 Stock Plan had been granted.
The 1994 Stock Plan is administered by the Compensation Committee of the
Board of Directors of the Company (the "Compensation Committee"). The
Compensation Committee has full authority, in its discretion, to administer and
interpret the 1994 Stock Plan and to adopt or appeal such rules and regulations
consistent with the terms of the 1994 Stock Plan as the Compensation Committee
deems necessary or advisable in order to carry out the administration of the
1994 Stock Plan. The Compensation Committee shall have the authority to select,
for participation in the 1994 Stock Plan, those officers, directors or other key
employees of the Company whom the Compensation Committee deems to be important
to the long-term growth and success of the Company. The Compensation Committee
shall also have authority to determine the number of shares that will be subject
to a stock award and the conditions subject to which stock awards will become
payable. The participant, however, has the right to elect the form in which he
or she wishes to accept the stock award. The participant may choose to accept a
grant of a stock award as either an incentive stock option ("ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), or a non-qualified stock option ("NQSO"), which is a stock option that
fails to meet one or more of the requirements of an ISO (hereinafter, an ISO and
a NQSO are collectively referred to as "Stock Options"), or a stock purchase
award which shall be deemed a purchase and sale of the Common Stock of the
Company and shall not be a Stock Option ("Stock Purchase") (hereinafter and
heretofore, an ISO, NQSO and a Stock Purchase are collectively referred to as
"Stock Awards"). Only one form of Stock Award may be selected upon any single
grant.
Upon the grant of a Stock Award, the Compensation Committee provides the
participant written notice ("Participation Notice") which sets forth the name of
the participant, the number of shares of Common Stock to be granted to such
participant pursuant to the Stock Award, depending upon the form of Stock Award
selected by the participant, and the price per share of Common Stock to be
granted to such participant, depending upon the form of Stock Award selected by
the participant. Upon receipt of such Participation Notice, the participant has
thirty (30) days to notify the Company ("Participation Acceptance") of the
elected form of the Stock Award. The participant may only select one form of
Stock Award in response to any single Participation Acceptance. If the
participant fails to properly elect a form of Stock Award, the Compensation
Committee may, in its sole discretion, select the form of Stock Award which will
be utilized in the grant of the shares of Common Stock to the participant. In
the event the participant fails to deliver a Participation Acceptance within the
thirty (30) days after delivery of the Participation Notice, the Stock Award
identified in the Participation Notice shall be automatically canceled and
rescinded without any further or additional actions on the part of the
Compensation Committee; provided, however, the Compensation Committee may elect
to allow a participant to receive such Stock Award at any future time during the
term of the 1994 Stock Plan.
The Compensation Committee shall not grant an ISO to any person who, at the
time of granting, is not an employee of the Company or a subsidiary.
Furthermore, the Compensation Committee shall not grant an ISO pursuant to which
the aggregate fair market value ("FMV") of the Company's Common
49
<PAGE> 51
Stock on the date of grant with respect to which such ISO is exercisable for the
first time during any calendar year is in excess of $100,000 or such other
limitations as may be provided by the Code. All Stock Options shall expire ten
(10) years after the effective date of the grant of such Stock Option unless
earlier terminated, canceled or forfeited. A Stock Option is effectively granted
upon the execution of an agreement between the participant and the Company
evidencing the grant of such Stock Option ("Stock Option Agreement"). The
exercise price of an ISO shall not be less than one hundred percent (100%) of
the FMV as of the date of the Participation Notice. The exercise price for a
NQSO shall be such price as determined by the sole discretion of the
Compensation Committee. The exercise price must be paid in cash upon exercise.
Each Stock Option pursuant to the 1994 Stock Plan shall become vested based
upon the participant's years of employment (or service as a director of the
Company) beginning on or after February 1, 1993 with the Company or a subsidiary
("Vesting Period"). Upon two years of employment/director service, each Stock
Option becomes 40% vested. On the anniversary date of each year thereafter, an
additional 20 percent of any Stock Option becomes vested until it is 100 percent
vested upon the completion of the participant's fifth year of
employment/director service.
A participant who is a director of the Company, but not an employee of the
Company or any subsidiary (a "Director Participant") may exercise during the
Vesting Period that portion of his or her Stock Options which are vested. Except
as indicated below, any participant that is not Director Participant (an
"Employee Participant") may not exercise any portion of his or her Stock
Options, whether or not vested, until the conclusion of the Vesting Period. If
an Employee Participant, prior to completion of the Vesting Period, resigns from
his or her employment or is terminated for "cause" (as defined in the 1994 Stock
Plan), then the Employee Participant's Stock Option is automatically canceled
and forfeited in its entirety. If the Employee Participant's employment is
terminated during the Vesting Period for any other reason, including death or
disability, the Employee Participant (or his or her representative) within three
months, may exercise only the vested portion of the Employee Participant's Stock
Options. The non-vested portion is automatically canceled and forfeited.
The effective date of a Stock Purchase shall be the date that the Company
and the participant entered into an agreement evidencing the sale of such shares
of Common Stock identified in the Participation Notice ("Stock Purchase
Agreement"). The price per share of Common Stock purchased pursuant to a Stock
Purchase shall be the price determined by the Compensation Committee in its sole
discretion. The Stock Purchase price shall be paid by the participant to the
Company in a single payment on the fifth anniversary of the date of execution of
the Stock Purchase Agreement. The obligation of payment of the Stock Purchase
shall be evidenced by the execution and delivery by the participant of an 8%
promissory note ("Promissory Note"). Payment of the Promissory Note shall be
secured by a pledge of the Common Stock comprising the Stock Purchase.
The Stock Purchase shall become incrementally non-forfeitable and not
subject to repurchase by the Company over a five year period based upon the
participant's years of employment with the Company or a subsidiary (or service
as a director of the Company) beginning on or after February 1, 1993. Upon
completion of two years of employment (or service as a director of the Company)
the Stock Purchase shall become 40 percent non-forfeitable. On the anniversary
date of each year thereafter, another 20 percent of the Stock Purchase shall
become non-forfeitable until upon completion of the fifth year of
employment/director service, the Stock Purchase becomes 100 percent
non-forfeitable ("Forfeiture Period"). If any Director Participant ceases to
serve as a director of the Company during the Forfeiture Period for any reason
whatsoever, then the percentage of the Stock Purchase which remains forfeitable
may, at the option of the Compensation Committee, be forfeited to and
repurchased by the Company in exchange for the cancellation of the pro rata
obligation under the Promissory Note. As regards the non-forfeitable portion,
the Director Participant must pay the pro rata portion of the Promissory Note,
including interest accrued thereon. The Compensation Committee may in its
discretion, elect not to exercise its right to force the forfeiture and
repurchase of the forfeitable portion of the Stock Purchase.
50
<PAGE> 52
If any Employee Participant, prior to the completion of the Forfeiture
Period, either resigns from his or her employment or is terminated for "cause"
(as defined in the 1994 Stock Plan), then the Stock Purchase shall, at the
option of the Compensation Committee, be forfeited to and be repurchased by the
Company in exchange for the cancellation of the pro rata portion of the
Promissory Note as discussed above. If the Employee Participant's employment is
terminated during the Forfeiture Period for any other reason, including death
and disability, then the Compensation Committee, at its option, may cause the
Stock Purchase to be forfeited and repurchased by the Company in the following
manner. A percentage of the Stock Purchase which remains forfeitable as of such
date shall be forfeited to and repurchased by the Company in exchange for the
cancellation by the Company of the obligation of payment of the pro rata portion
of the Promissory Note associated with such forfeitable amounts. The
non-forfeitable portion of the Stock Purchase shall be forfeited to and
repurchased by the Company in exchange for (i) the cancellation by the Company
of the obligation of payment remaining under the Promissory Note ("Cancellation
Amount") and (ii) payment by the Company to the participant of the difference
between the Cancellation Amount and the fair market value of the percentage of
the Common Stock comprising the Stock Purchase which has become non-forfeitable.
If within one (1) year after such payment, the Company sells securities
comprising at least 20% of the Common Stock (assuming full dilution and complete
conversion of all convertible securities) or participates in certain
reorganization events, and the valuation of the Common Stock in such
transaction(s) is greater than that paid to the participant for his Stock
Purchase, then the Company is obligated to pay to the participant the excess of
the fair market value as determined with reference to such transaction and the
fair market value previously paid to the participant. The Compensation Committee
may, at its discretion, elect not to exercise its right of forfeiture.
Notwithstanding the foregoing, in the event that any participant shall fail
to pay the Promissory Note upon maturity, then the Company may exercise any and
all remedies available in law or equity to obtain full payment in accordance
with the Promissory Note.
In the event that the Company is acquired by a third party ("Acquiror"),
whether by means of a merger or consolidation in which the Company does not
survive, the sale of all or substantially all of the assets of the Company or
Security, or the sale of at least 80% of the shares of capital stock of the
Company ("Reorganization Event"), then the Compensation Committee may, in its
absolute discretion, accelerate the dates upon which the Stock Options are
vested and exercisable and upon which the Stock Purchases become non-forfeitable
to the date immediately preceding the date of the Reorganization Event.
Nonetheless, the Company must (i) in the event that the Acquiror shall assume
the 1994 Stock Plan, accelerate 50% of the non-vested Stock Options and/or
forfeitable Stock Purchases of any Employee Participant who has been offered and
has accepted comparable employment with the Acquiror or an affiliate of the
Acquiror, and (ii) accelerate 100% of the non-vested Stock Options and/or
forfeitable Stock Purchases of any Employee Participant who has not been offered
comparable employment by the Acquiror or any affiliate of the Acquiror.
Upon issuance of Common Stock or upon the exercise of a Stock Option or on
account of a Stock Purchase, the ownership of such Common Stock shall be subject
to the restrictions upon transferability imposed by the federal and state
securities laws and may not be transferred or resold unless the participant
shall furnish to the Company an opinion of counsel acceptable to the Company, at
such participant's expense, that such transfer or sale does not violate any
federal or applicable state securities laws. Furthermore, in the event that the
participant desires to transfer, incumber, pledge, assign, sell or otherwise
dispose of all or any portion of any Common Stock required pursuant to any Stock
Option or Stock Purchase, he or she may transfer such Common Stock only after
first giving the Company an option to purchase all of such shares at the same
price, terms and conditions as offered to the participant.
The Compensation Committee may terminate or amend the 1994 Stock Plan at
any time; provided, however, that the termination or modification of the 1994
Stock Plan does not adversely affect the rights of any participant with regard
to a Stock Award that has previously been granted pursuant to the 1994 Stock
Plan.
51
<PAGE> 53
1996 Stock Plan
Under the 1996 Stock Plan, 150,000 shares of Common Stock are available for
issuance, subject to such adjustments which may be necessary to reflect changes
in the number or kind of shares of Common Stock or other securities of the
Company. The 1996 Stock Plan provides for the granting to directors, officers,
or key employees of the Company an ISO or a NQSO. As of September 30, 1996,
Stock Options covering all 150,000 shares of Common Stock available for issuance
under the 1996 Stock Plan had been granted.
The 1996 Stock Plan is administered by the Compensation Committee, which
has the discretion to, among other matters, determine the persons to whom
options will be granted; the number of shares purchasable upon exercise of each
Stock Option; whether Stock Options will be an ISO or a NQSO; the exercise price
of the shares issuable pursuant to the Stock Options (which price may not be
less than the greater of 100 percent of the fair market value of the Common
Stock or $10.67 per share if an ISO or no less than $10.67 per share if an
NQSO); and the period of time during which each Stock Option may be exercised
(not to exceed 10 years for an ISO). The purchase price of the shares issued
pursuant to each Stock Option must be paid in cash or, if permitted by the
Compensation Committee, by surrender of shares of Common Stock held by the
participant or combination of cash and shares, or by the delivery to the Company
of such other consideration consisting of money or property actually received by
the Company or as may be deemed in the sole opinion of the Compensation
Committee to have a value equal to the aggregate exercise price.
The aggregate fair market value of the shares of Common Stock for which an
ISO may first be exercisable by a participant during any one calendar year may
not exceed $100,000. No ISO may be granted after the tenth anniversary of
adoption of the 1996 Stock Plan, and no ISO may be granted to any employee who
owns stock possessing more than 10 percent of the total combined voting power of
all classes of stock of the Company, unless the exercise price is no less than
the greater of 110 percent of the fair market value of the Common Stock or
$10.67 per share and such ISO, by its terms, would not be exercisable after five
years from the date on which the ISO is granted.
The Compensation Committee has the power to specify, with respect to Stock
Options granted to a particular participant, the effect upon such participant's
right to exercise a Stock Option in the event that the participant shall cease
to be employed by, or otherwise associated or affiliated with the Company,
either directly, as an employee or member of the Board of Directors of the
Company, or indirectly, as an employee of a subsidiary, under various
circumstances. In no event, however, can an ISO be exercised more than three
months after termination of employment for any reason other than disability, or
more than one year after termination by reason of disability.
No ISO or NQSO shall be transferrable by a participant other than by will
or the laws of descent and distribution or pursuant to a Qualified Domestic
Relations Order. In addition, no Common Stock received or purchased pursuant to
the exercise of an ISO cannot be transferred by the participant except pursuant
to the participant's will or the laws of descent and distribution until such
date which is the later of two years after the grant of such ISO or one year
after the issuance to the participant of the shares pursuant to the exercise of
such ISO.
The Board of Directors may terminate or amend the 1996 Stock Plan;
provided, however, that the Board of Directors of the Company may not amend the
1996 Stock Plan without approval of the stockholders of the Company for the
following: (i) to increase the total number of shares of stock issuable pursuant
to an ISO or materially increase the number of shares of Common Stock pursuant
to the 1996 Stock Plan; (ii) to change the class of employees eligible to
receive an ISO or to materially change the class of persons who may participate
in the 1996 Stock Plan; or (iii) otherwise materially increase the benefits
accruing to participants. However, in no event may a termination or amendment of
the 1996 Stock Plan affect the rights of a participant under an existing Stock
Option Agreement without the consent of such a participant or his or her legal
representative.
52
<PAGE> 54
1997 Stock Plan
The 1997 Stock Plan provides for the granting to officers or other key
employees of the Company an ISO or a NQSO (with or without reload rights).
Directors who are not employees of the Company are not eligible to receive
options under the 1997 Stock Plan. Under the 1997 Stock Plan, an aggregate of
500,000 shares of Common Stock ("Maximum Aggregate Shares") become available
over a five year period beginning in 1997, subject to such adjustments which may
be necessary to reflect changes in the number or kind of shares of Common Stock
or other securities of the Company. On January 1, 1997, twenty percent of the
Maximum Aggregate Shares, or 100,000 shares, will become eligible for issuance.
An additional 100,000 shares become eligible for issuance each of the next four
years thereafter, until all of the Maximum Aggregate Shares are available for
Stock Option grants on January 1, 2001.
The 1997 Stock Plan is administered by the Compensation Committee, which
has the discretion to, among other matters, determine the persons to whom Stock
Options will be granted; the number of shares purchasable upon exercise of each
Stock Option; whether the Stock Option will be an ISO or a NQSO; whether the
Stock Option will have related rights; the exercise price of the shares issuable
pursuant to the Stock Option (which price may not be less than 100 percent of
the fair market value of the Common Stock if an ISO or not less than 85 percent
of fair market value if an NQSO); and the period of time during which each Stock
Option may be exercised (not to exceed 10 years for an ISO). The purchase price
of the shares issued pursuant to each Stock Option must be paid in cash or, if
permitted by the Compensation Committee, by surrender of shares of Common Stock
held by the participant or combination of cash and shares, or by the delivery to
the Company of such other consideration consisting of money or property actually
received by the Company or as may be deemed in the sole opinion of the
Compensation Committee to have a value equal to the aggregate exercise price.
The aggregate fair market value of the shares of Common Stock for which an
ISO may first be exercisable by a participant during any one calendar year may
not exceed $100,000. No ISO may be granted after the tenth anniversary of
adoption of the 1997 Stock Plan, and no ISO may be granted to any employee who
owns stock possessing more than 10 percent of the total combined voting power of
all classes of stock of the Company, unless the exercise price is no less than
110 percent of the fair market value of the Common Stock and such ISO, by its
terms, would not be exercisable after five years from the date on which the ISO
is granted.
The Compensation Committee may in its discretion grant reload option rights
in conjunction with any Stock Option. Reload option rights entitle the
participant, upon exercise of any Stock Option through the delivery of
previously owned shares, to be automatically granted, on the date of such
exercise, a new Stock Option (the "Reload Option") (a) for a number of shares of
the Company's Common Stock not exceeding the number of shares of the Company's
Common Stock delivered in payment of the option price of the original Stock
Option; (b) having an option price not less than the fair market value of the
Company's Common Stock on the date of grant of the Reload Option; (c) having an
expiration date not later than the expiration date of the original Stock Option;
and (d) otherwise having the same terms and conditions as the Stock Option whose
exercise has triggered such payment, except that no Reload Option may be
exercised prior to the end of one year from the date of grant of the Reload
Option and unless the participant retains beneficial ownership of the shares of
the Company's Common Stock issued pursuant to the exercise of the original Stock
Option for a period of one year. In granting Reload Option rights, the
Compensation Committee may provide for successive grants of Reload Options upon
the exercise of Reload Options.
Because the number of shares covered by a Reload Option is limited to the
number of previously owned shares delivered in payment of the option price of
the original Stock Option, Reload Option rights will not increase the net number
of shares which may be acquired under a Stock Option. Because the option price
of the Reload Option may not be less than fair market value on the date that the
underlying Stock Option is exercised, Reload Option rights also will not
increase the total net value (excess of fair market value over the option price)
realizable under the original Stock Option.
53
<PAGE> 55
However, since a participant who exercises a Stock Option before the end of its
term will not forfeit the potential for future market price appreciation, Reload
Option rights will encourage earlier stock option exercises, thereby promoting
the identification with stockholder interest resulting from ownership of the
Company's Common Stock by participants.
The Compensation Committee has the power to specify, with respect to Stock
Options granted to a particular participant, the effect upon such participant's
right to exercise a Stock Option in the event that the participant shall cease
to be employed by the Company under various circumstances. In no event, however,
can an ISO be exercised more than three months after termination of employment
for any reason other than disability, or more than one year after termination by
reason of disability.
No ISO or NQSO shall be transferrable by a participant other than by will
or the laws of descent and distribution or pursuant to a Qualified Domestic
Relations Order. In addition, no Common Stock received or purchased pursuant to
the exercise of an ISO cannot be transferred by the participant except pursuant
to the participant's will or the laws of descent and distribution until such
date which is the later of two years after the grant of such ISO or one year
after the issuance to the participant of the shares pursuant to the exercise of
such ISO.
The Board of Directors may terminate or amend the 1997 Stock Plan;
provided, however, that the Board of Directors of the Company may not amend the
1997 Stock Plan without approval of the stockholders of the Company for the
following: (i) to increase the total number of shares of stock issuable pursuant
to an ISO or materially increase the number of shares of Common Stock pursuant
to the 1997 Stock Plan; (ii) to change the class of employees eligible to
receive an ISO or to materially change the class of persons who may participate
in the 1997 Stock Plan; or (iii) otherwise materially increase the benefits
accruing to participants. However, in no event may a termination or amendment of
the 1997 Stock Plan affect the rights of a participant under an existing Stock
Award Agreement without the consent of such a participant or his or her legal
representative.
401(K) PLAN
Effective January 1, 1996, any employee (including the Named Executive
Officers) of Security who has completed 1,000 hours of service at the end of his
or her first twelve months of employment or any calendar year ending thereafter,
may contribute to the Masada Security 401(k) Plan ("401(k) Plan"). Security
contributes to each employee's 401(k) account an amount equal to 50% of the
first 6% of each employee's compensation that is contributed by such employee to
the 401(k) Plan.
54
<PAGE> 56
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of Common Stock (a) immediately prior to this offering and assuming
the exercise of options and warrants exercisable within 60 days of the date
hereof and the conversion of all shares of Class B and Class C Convertible
Preferred Stock into shares of Common Stock, and (b) as adjusted to reflect the
sale of the shares of Common Stock pursuant to this offering by (i) each person
known to the Company to own beneficially more than 5% of the outstanding shares
of Common Stock, (ii) each of the Company's directors, (iii) each of the Named
Executive Officers, and (iv) all directors and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
PERCENT OWNED(1)
--------------------------------
NAME AND ADDRESS NUMBER OF SHARES BEFORE OFFERING AFTER OFFERING
- ---------------------------------------------------- ---------------- --------------- --------------
<S> <C> <C> <C>
Norwest Equity Partners IV, A Minnesota 814,362 15.0% %
Limited Partnership
245 Lytton Avenue, Suite 250
Palo Alto, CA 94301-1426
Norwest Equity Partners V, A Minnesota 282,567 5.2% %
Limited Liability Partnership
245 Lytton Avenue, Suite 250
Palo Alto, CA 94301-1426
Centennial Fund III, L.P. 731,931 13.5% %
1999 Broadway, Suite 2100
Denver, CO 80201-3977
Centennial Fund IV, L.P. 635,205 11.7% %
1999 Broadway, Suite 2100
Denver, CO 80201-3977
South Atlantic Venture Fund II, Limited Partnership 531,426 9.8% %
614 West Bay Street, Suite 200
Tampa, FL 33606-2704
Hancock Venture Partners IV-Direct Fund L.P. 531,246 9.8% %
One Financial Center, 44th Floor
Boston, MA 02111
Chase Venture Capital Associates 468,750 8.6% %
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, NY 10017
Terry W. Johnson(2) 1,054,617 19.4% %
Daryl E. Harms(2) 1,054,617 19.4% %
Steven C. Halstedt(3) 1,570,833 28.9% %
George J. Still, Jr.(4) 1,096,929 20.2% %
William A. Johnston(5) 531,246 9.8% %
I. Robert Greene(6) 468,750 8.6% %
O. Gene Gabbard(7) 26,007 * *
Bertil D. Nordin(8) 23,007 * *
John M. Kark 0 -- --
David P. Tomick 0 -- --
All directors and executive officers as a group
(13 individuals) (2, 3, 4, 5, 6, 7, 8) 4,825,226 88.7% %
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting power and sole investment power with respect to all the
shares beneficially owned, subject to community property laws, where
applicable.
(2) Includes 1,000,380 shares owned by MSAM, Inc., a corporation owned and
controlled by Messrs. Johnson and Harms.
55
<PAGE> 57
(3) Consists of 731,931 shares held of record by Centennial III, 635,205 shares
held of record by Centennial IV, and 203,697 shares held of record by
Criterion. Mr. Halstedt, a director of the Company, is one of three general
partners of Centennial Holdings, III, L.P., the sole general partner of
Centennial III, is one of seven general partners of Centennial Holdings IV,
L.P., the sole general partner of Centennial IV, and is the Chairman of the
Board and owner of 30.5% of the capital stock of Centennial Holdings, Inc.,
the parent company of Criterion Investments, Inc., one of four general
partners of CVP III General Partner, the sole general partner of Criterion.
Mr. Halstedt disclaims beneficial ownership of all shares held of record by
Centennial III, Centennial IV, and Criterion. Each of Centennial III,
Centennial IV, and Criterion disclaims beneficial ownership of the shares held
of record by the others.
(4) Consists of 814,362 shares held of record by Norwest IV, and 282,567 shares
held of record by Norwest V. Mr. Still, a director of the Company, is a
non-managing general partner of Itasca Partners, the general partner of
Norwest IV, and is one of three managing general partners of Itasca Partners
V, LLP, the general partner of Norwest V. Mr. Still disclaims beneficial
ownership of such shares except to the extent of his indirect pecuniary
interest in such shares.
(5) Consists of 531,246 shares held of record by Hancock. Mr. Johnston, a
director of the Company, is a Senior Vice President of the Hancock Venture
Partners, Inc., one of three managing general partners of Back Bay Partners
XII, L.P., the sole general partner of Hancock. Mr. Johnston disclaims
beneficial ownership of such shares.
(6) Consists of 468,750 shares held of record by Chase. Mr. Greene, a director
of the Company, is a Principal of Chase Capital Partners, the sole general
partner of Chase. Mr. Greene disclaims beneficial ownership of such shares
except to the extent of his indirect pecuniary interest in such shares.
(7) Includes 17,007 shares owned by the O. Gene Gabbard Revocable Trust of which
Mr. Gabbard is a trustee, and 9,000 shares issuable pursuant to certain NQSOs
granted pursuant to the 1994 Stock Option Plan and which are currently
exercisable or will be exercisable within 60 days of October 4, 1996.
(8) Includes 6,000 shares issuable pursuant to certain NQSOs granted pursuant to
the 1994 Stock Option Plan and which are currently exercisable or will be
exercisable within 60 days of October 4, 1996.
56
<PAGE> 58
CERTAIN TRANSACTIONS
All information set forth below, other than the information under
"-- Recapitalization," does not assume implementation of the Recapitalization.
FEBRUARY 1993 CAPITALIZATION AND ACQUISITION OF PREDECESSOR MASADA
Prior to January 1993, Predecessor Masada was an operating security alarm
company that did business under the name "Masada Security." The owners of
Predecessor Masada, Mr. Johnson and Mr. Harms, each a director of the Company,
along with an investor group led by Centennial III and Criterion, formed the
Company to serve as the sole general partner of the Partnership and formed the
Partnership to acquire the security alarm business of Predecessor Masada and the
security alarm business of Network Security, Inc., which acquisitions were
consummated on February 1, 1993. Predecessor Masada received $6,950,000 from the
Partnership for the sale of the Predecessor Masada security alarm business, of
which $6,320,000 was applied by Predecessor Masada to satisfy its bank
financing. To obtain a portion of the funds needed for these acquisitions, the
Company and the Partnership engaged in the following securities transactions,
also on February 1, 1993: (i) the Company sold 75,200 shares of Class A
Preferred Stock for $100 cash per share as follows: 500 shares to Mr. Gabbard, a
director of the Company, and 27,800, 25,000, 13,900 and 8,000 shares to
Centennial III, Norwest IV, South Atlantic II, and Criterion, respectively; (ii)
the Company sold 60,000 shares of Class B Common Stock for $1 per share as
follows: 22,182 shares to Centennial III; 19,944 shares to Norwest IV; 11,094
shares to South Atlantic II; 6,384 shares to Criterion; and 396 shares to
Gabbard; (iii) the Company sold 20 shares of Class A Common Stock to each of
Messrs. Johnson and Harms for $1 per share; (iv) the Partnership issued
subordinated debentures in the aggregate principal amount of $1,500,000 (the
"Partnership Debentures") in exchange for cash in like amount as follows:
$350,479 from Centennial III; $315,179 from Norwest IV; $175,240 from South
Atlantic II; $100,857 from Criterion; $279,123 from Mr. Johnson; and $279,122
from Mr. Harms. Additionally, MSAM, Inc., a corporation owned by Messrs. Johnson
and Harms ("MSAM"), made a capital contribution of $40,000 to the Partnership in
February 1993 in exchange for a limited partnership interest in the partnership.
As a result of these transactions, designees of Centennial III (Mr. Halstedt)
and Norwest IV (Mr. Still) became directors of the Company.
FEBRUARY 1994 RECAPITALIZATION AND MERGER
On February 11, 1994, the Partnership was merged into the Company's newly
formed subsidiary, Security. Contemporaneously with this merger (the "Merger"),
the Company issued an additional 506,501 shares of Class B Common Stock to the
five holders thereof (Centennial III, Norwest IV, South Atlantic II, Criterion
and Mr. Gabbard) pursuant to a 9.44167 to 1 stock split of the Class B Common
Stock. As a result of the Merger, the following occurred: (i) the Partnership
ceased to exist; (ii) the Company sold 358,332 shares of Class B Convertible
Preferred Stock for cash and/or the redemption of the Partnership Debentures
equal to $24 per share as follows: 11,630, 11,630, 1,399 and 1,399 shares to Mr.
Johnson, Mr. Harms, Mr. Nordin and an affiliate of Mr. Gabbard, respectively,
each a director of the Company; 25,020, 87,745, 83,149, 46,221, 6,285 and 83,333
shares to Centennial III, Centennial IV, Norwest IV, South Atlantic II,
Criterion, and Hancock, respectively; and 521 shares to Carol deB. Whitaker
("Ms. Whitaker"); and (iii) MSAM received 333,460 shares of the Company's Class
A Common Stock in exchange for MSAM's limited partnership interest in the
Partnership. The Company also sold to Mr. Nordin, contemporaneously with the
Merger, 500 shares of Class A Preferred Stock for $50,000 cash and 3,739 shares
of Class B Common Stock for $396. As a result of these transactions, a designee
of Hancock (Mr. Johnston) became a director of the Company.
MAY 1995 EQUITY FINANCING
In May 1995, the Company sold 486,111 shares of Class C Convertible
Preferred Stock for $36 cash per share as follows: 5,715, 5,715, 472 and 472
shares to Mr. Johnson, Mr. Harms, Mr. Nordin and an affiliate of Mr. Gabbard,
each a director of the Company; 8,464, 110,214, 1,190, 83,724, 23,267, 23,267,
57
<PAGE> 59
83,333 and 138,889 shares to Centennial III, Centennial IV, Criterion, Norwest
V, South Atlantic II, South Atlantic III, Hancock, and Chase, respectively; and
1,389 shares to Ms. Whitaker. As a result of these transactions, a designee of
Chase (Mr. Greene) became a director of the Company.
TRANSACTIONS WITH CENTENNIAL SECURITY
In June 1994, Security entered into three agreements with Centennial
Security, a security alarm company organized in part by one of the Company's
stockholders, Centennial IV: a licensing agreement (the "Licensing Agreement"),
a monitoring agreement (the "Monitoring Agreement") and a purchase agreement
(the "Purchase Agreement"). Security granted to Centennial Security in the
Licensing Agreement an exclusive license to use the Masada Security trademark
and tradename and certain intellectual property in the northern half of the
United States (the states of California (north of Sacramento), Colorado,
Connecticut, Delaware, Idaho, Illinois, Indiana, Iowa, Kansas, Maine, portions
of Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska,
Nevada, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oregon,
Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Washington, Wisconsin
and Wyoming) and Canada. The Licensing Agreement has a ten year initial term.
Unless one party gives notice of termination to the other party, the License
Agreement will automatically be extended for successive three year renewal
terms. In exchange for the grant of this license, Centennial Security issued to
Security 4,750 shares of the class B common stock of Centennial Security
pursuant to the Purchase Agreement.
Pursuant to the Monitoring Agreement, Security agreed to provide monitoring
and certain administrative services to Centennial Security in exchange for fees
for a period of at least 18 months to begin when Centennial Security commenced
operations. In accordance with the Monitoring Agreement, Security monitored
certain security alarm accounts of Centennial Security beginning in August 1995
and provided administrative services to Centennial Security during 1995. In
April 1996, Security and Centennial Security agreed to terminate the Monitoring
Agreement effective upon the assumption of the monitoring function by an
independent monitoring company, which occurred during June 1996. In connection
with such termination, Centennial Security agreed to pay a $112,000 termination
payment to Security in the form of an unsecured promissory note payable in
twelve monthly installments beginning in September 1996. Centennial Security
paid fees of $40,127 and $16,152 to Security pursuant to the Monitoring
Agreement during 1995 and 1996 (through June), respectively.
The Purchase Agreement, as amended in June 1995, provides that if
Centennial Security determines to seek a sale of Centennial Security, it must
give written notice to Security of such determination prior to negotiating with
any other person for a possible sale, and it must negotiate exclusively with
Security thereafter for a stated period that could last up to six months. If
Centennial Security and Security negotiate for a stated period without reaching
an agreement for the acquisition of Centennial Security, Centennial Security can
sell to a third party, but only at a price higher than the average of Security's
last offer to Centennial Security and Centennial Security's last counteroffer to
Security. These restrictions on Centennial Security's ability to sell its
business expire upon the closing of any public offering by Centennial Security
of its capital stock.
During July 1995, Centennial Security sold 438,049 shares of its Series B
Convertible Preferred Stock to Centennial IV, Chase, Hancock, Centennial
Holdings, Inc. ("Centennial Holdings"), and Security in a private offering.
Security purchased 27,867 of these shares, which are convertible into shares of
Centennial Security's common stock, in exchange for a cash payment of $766,343.
In connection with this transaction, Security's 4,750 shares of class B common
stock of Centennial Security were converted into 67,199 shares of Centennial
common stock. Additionally, Security and the other purchasers obtained certain
registration rights with respect to the common stock of Centennial Security.
Masada (through Security) presently owns 12.3% of the capital stock of
Centennial Security. Centennial IV and Centennial Holdings, which provides
administrative services to Centennial III and
58
<PAGE> 60
Centennial IV and is the parent company of one of four general partners of the
general partner of Criterion, presently own 29.7% and 2.3% of the capital stock
of Centennial Security, respectively. Upon completion of this offering,
Centennial IV, Centennial III and Criterion will collectively own approximately
% of the Common Stock of the Company. Hancock and Chase, which own 14.1%
and 21.1%, respectively, of the capital stock of Centennial Security, will own
approximately % and %, respectively, of the Company's Common Stock
upon completion of this offering. Mr. Johnson and Mr. Johnston have served as
directors of Centennial Security since June 1994 and July 1995, respectively. As
compensation for his service as a director, Centennial Security has granted to
Mr. Johnson options to purchase 2,500 shares of Centennial Security common
stock.
TRANSACTIONS WITH MASADA RESOURCE GROUP, L.L.C.
The Company and Masada Resource Group, L.L.C. ("Resource") both lease
office space for their respective principal executive offices on the same floor
of the same building located at 950 22nd Street North, Birmingham, Alabama
35203. See "Business -- Property." Pursuant to an oral agreement reached during
1996 between the Company and Resource, the Company subleases to Resource
approximately 1,700 square feet of improved office space in this building for
annual rent of approximately $25,000, and Resource subleases to the Company
approximately 1,200 square feet of unimproved office space in this building for
annual rent of approximately $12,000. The Company and Resource otherwise operate
independently of each other. Messrs. Johnson and Harms collectively own
approximately 85% of the equity interests of Resource.
RECAPITALIZATION
During September 1996, the Board of Directors and stockholders of the
Company unanimously approved the Recapitalization, which will be implemented
concurrently with the closing of this offering. The Recapitalization provides
for (i) the automatic redemption of all 75,700 outstanding shares of the
Company's Class A preferred stock, (ii) the automatic conversion of all 358,332
outstanding shares of the Company's Class B convertible preferred stock into
358,332 shares of the Company's Class B common stock, (iii) the automatic
conversion of all 486,111 outstanding shares of the Company's Class C
convertible preferred stock into 546,870 shares of the Company's Class C common
stock, (iv) upon the filing of an amendment to the Company's Charter, the
automatic exchange of each share of the Company's Class A common stock, Class B
common stock and Class C common stock outstanding following the conversion of
Class B and C convertible preferred stock (collectively, 1,808,942 shares) for
three shares of a new, single class of Common Stock, and (v) the cancellation of
all shares of Class A, Class B and Class C common stock, Class A preferred
stock, and Class B and C convertible preferred stock. The closing of this
offering will not occur without implementation of the Recapitalization.
Prior to adoption of the Recapitalization, each share of Class C
convertible preferred stock was convertible into one share of Class C common
stock pursuant to the Company's Charter. Several of the Company's venture
capital stockholders would not agree to convert voluntarily their shares of
Class C convertible preferred stock on this basis. Following a series of
negotiations, all stockholders agreed that the Recapitalization should provide
that each share of Class C convertible preferred stock would convert into 1.125
shares of Class C common stock.
59
<PAGE> 61
DESCRIPTION OF CAPITAL STOCK
Upon the consummation of this offering, the authorized capital stock of the
Company will consist of 15,000,000 shares of Common Stock and 5,000,000 shares
of Preferred Stock; and in accordance with the Recapitalization, all outstanding
shares of the Company's Class A preferred stock will have been redeemed and
canceled, and all outstanding shares of the Company's Class B convertible
preferred stock and Class C convertible preferred stock (collectively, the
"Convertible Preferred Stock") will have been converted, indirectly, into Common
Stock and canceled. See "Use of Proceeds" and "Certain
Transactions -- Recapitalization."
COMMON STOCK
Immediately prior to the completion of this offering, there will be
5,426,826 shares of Common Stock outstanding held of record by fifteen
stockholders (assuming implementation of the Recapitalization). Upon
consummation of this offering, shares of Common Stock will be issued
and outstanding (assuming the Underwriter's over-allotment is not exercised).
The holders of Common Stock are entitled to cast one vote for each share
held of record on all matters presented to stockholders. The holders of Common
Stock do not possess cumulative voting rights, and directors are elected by
plurality. The holders of Common Stock are entitled to such dividends as may be
declared by the Board of Directors and funds will be available therefore,
subject to the right of the holders of any preferred stock which may be issued.
Upon liquidation, dissolution or winding up of the Company, the assets legally
available for distribution to stockholders are to be distributed equally among
the holders of Common Stock at that time outstanding, subject to prior
distribution rights for creditors and the preferential rights of any shares of
preferred stock then outstanding. The holders of Common Stock have no preemptive
rights or conversion rights.
PREFERRED STOCK
Following the completion of this offering, no shares of Preferred Stock
will be outstanding. The Company will use approximately $8.4 million of the net
proceeds of this offering to pay all accrued Class A preferred stock dividends
and to redeem and cancel all shares of the Class A preferred stock in accordance
with the Recapitalization. All shares of Convertible Preferred Stock will have
been converted, indirectly, into shares of Common Stock and thereafter canceled,
all in accordance with the Recapitalization. See "Use of Proceeds" and "Certain
Transactions -- Recapitalization."
The Company is authorized to issue Preferred Stock with such designations,
rights and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue Preferred Stock with dividend, liquidation, conversion,
voting or other rights that would adversely affect the voting power or other
rights of the holders of the Common Stock. In the event of such issuance, the
Preferred Stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company. The
Company has no present intention to issue any shares of Preferred Stock.
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND DELAWARE LAW
Classified Board of Directors. The Company's Charter provides for the
Board of Directors to be divided into three classes of directors, as nearly
equal in number as is reasonably possible, serving staggered terms so that
directors' initial terms will expire either at the 1997, 1998 or 1999 annual
meeting of the stockholders. Starting with the 1997 annual meeting of the
stockholders, one class of directors will be elected each year for a three-year
term. See "Management -- Directors and Executive Officers."
The Company believes that a classified Board of Directors will help to
assure the continuity and stability of the Board of Directors and the Company's
business strategies and policies as determined by the Board of Directors, since
a majority of the directors at any given time will have had prior experience as
directors of the Company. The Company believes that this, in turn, will permit
the Board of Directors to more effectively represent the interests of
stockholders.
60
<PAGE> 62
Delaware Anti-Takeover Statute. The Company is subject to Section 203 of
the Delaware General Corporation Laws which, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any of a broad range of
business combinations with any "interested stockholder" for a period of three
years following the date that such stockholder became an interested stockholder,
unless: (i) prior to such date, the Board of Directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder; (ii) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares owned
(a) by persons who are directors and also officers and (b) by employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer; or (iii) on or after such date, the business
combination is approved by the Board of Directors and authorized at an annual or
special meeting of stockholders, and not by written consent, by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder. An "interested stockholder" is defined as any person
that is (a) the owner of 15% or more of the outstanding voting stock of the
corporation or (b) an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation at any
time within the three-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested stockholder.
REGISTRATION RIGHTS
The holders of all shares of capital stock of the Company currently
outstanding (collectively, the "Existing Stockholders") and the Company are
parties to the Third Amended and Restated Securities Purchase Agreement, which
will be in effect following the consummation of this offering (the "Purchase
Agreement"). Pursuant to the Purchase Agreement, subject to the provisions of
the lock-up agreements executed by each of the Existing Stockholders (see
"Underwriting"), the Existing Stockholders have the following rights: (a) those
Existing Stockholders who own at least 50% of the 2,785,716 shares of Common
Stock to be issued pursuant to the Recapitalization in exchange for 928,572
shares of Class B common stock (the "Common B Shares") can request that the
Company effect the registration under the Securities Act on one occasion of
Common B Shares held by them, subject to certain restrictions; (b) in the event
the Company becomes eligible to use a registration statement on Form S-3,
Existing Stockholders can make additional requests that the Company effect the
registration under the Securities Act of Common B Shares held by them, subject
to certain restrictions; (c) those Existing Stockholders who own at least 30% of
the 1,640,610 shares of Common Stock to be issued pursuant to the
Recapitalization in exchange for 546,870 shares of Class C common stock (the
"Common C Shares") can request that the Company effect the registration under
the Securities Act on two occasions of Common C Shares held by them, subject to
certain restrictions; (d) in the event the Company becomes eligible to use a
registration statement on Form S-3, Existing Stockholders can make additional
requests that the Company effect the registration under the Securities Act of
Common C Shares held by them, subject to certain restrictions; and (e) in the
event the Company proposes to register shares of Common Stock under the
Securities Act, other than pursuant to a registration statement on Form S-4 or
Form S-8 or in connection with an exchange offering of securities solely to
existing holders of the Company's securities, the Company is required to notify
all Existing Stockholders and, subject to certain limitations, any Existing
Stockholder may request the registration of any Common B Shares, Common C Shares
or the other 1,000,500 shares of Common Stock issued to them pursuant to the
Recapitalization.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is SunTrust Bank,
Atlanta.
61
<PAGE> 63
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, the Company will have shares
of Common Stock outstanding ( if the Underwriters' over-allotment option
is exercised in full), assuming that no options are exercised. The shares
sold in this offering will be freely tradeable without restrictions or further
registration under the Securities Act, other than shares purchased by affiliates
of the Company, as that term is defined under applicable law ("Affiliates").
All of the persons who were stockholders of the Company prior to this
offering have agreed that they will not, for a period commencing on the date of
the lock-up agreement through a period of 180 days after the effective date of
the registration statement without the prior written consent of Robertson,
Stephens & Company, subject to certain limited exceptions, offer to sell,
contract to sell, or otherwise dispose of, pledge or grant any rights with
respect to any shares of Common Stock, or any securities convertible into or
exchangeable for shares of Common Stock presently owned or thereafter acquired
(the "Lock-up Agreements").
After the expiration of the Lock-up Agreements, 704,463 shares of Common
Stock will be freely tradeable without restriction or registration under the
Securities Act. All of the remaining 4,722,363 shares of Common Stock
outstanding prior to this offering were issued and sold by the Company in
private transactions in reliance upon the exemption set forth in Section 4(2) of
the Securities Act and are restricted securities under Rule 144 under the
Securities Act, or were issued by the Company upon conversion of other shares of
capital stock that were issued and sold in such transactions (the "Restricted
Shares"). Restricted Shares may not be sold unless they are registered under the
Securities Act or are sold pursuant to an applicable exemption from
registration, including pursuant to Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years, including Affiliates, would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the number of shares of Common Stock then outstanding (approximately
immediately after this offering) or the average weekly trading volume of the
Common Stock during the four calendar weeks preceding the making of a filing
with the SEC with respect to such sale. Such sales are also subject to certain
manner of sale and notice requirements and to the availability of current public
information about the Company. A person who is not an Affiliate at any time
during the three months preceding a sale and who has beneficially owned
Restricted Shares for at least three years is entitled to sell such Restricted
Shares under Rule 144 without regard to the availability of public information,
volume limitations, manner of sale provisions or notice requirements (the "Sale
Conditions"). However, after the three-year holding period Restricted Shares
held by Affiliates must continue to be sold in the manner prescribed by Rule 144
and are subject to the Sale Conditions.
As of the date of this Prospectus 450,000 shares of Common Stock were
reserved for issuance pursuant to the 1994 Stock Plan and the 1996 Stock Plan.
Prior to this offering there has been no public market for the Common
Stock. The Company cannot predict the effect, if any, that sales of shares of
Common Stock, or the availability of such shares for sale, will have on the
market price prevailing from time to time. Nevertheless, sales of substantial
amounts of Common Stock in the public market could adversely affect prevailing
market prices.
62
<PAGE> 64
UNDERWRITING
The Underwriters named below, acting through their representatives,
Robertson, Stephens & Company and Lehman Brothers Inc. (the "Representatives"),
have severally agreed with the Company, subject to the terms and conditions of
the Underwriting Agreement, to purchase from the Company the number of shares of
Common Stock set forth opposite their respective names below. The Underwriters
are committed to purchase and pay for all such shares if any are purchased.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------------------------------------------------------------------------------- ----------------
<S> <C>
Robertson, Stephens & Company LLC..................................................
Lehman Brothers Inc................................................................
---------
Total.....................................................................
=========
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession of not more than $ per share, of which
$ may be reallowed to other dealers. After the initial public offering,
the public offering price, concession and reallowance to dealers may be reduced
by the Representatives. No such reduction shall change the amount of proceeds to
be received by the Company as set forth on the cover page of this Prospectus.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to
additional shares of Common Stock at the same price per share as the Company
receives for the shares that the Underwriters have agreed to purchase. To
the extent that the Underwriters exercise such option, each of the Underwriters
will have a firm commitment to purchase approximately the same percentage of
such additional shares as the number of shares of Common Stock to be purchased
by it shown in the above table represents as a percentage of the shares
offered hereby. If purchased, such additional shares will be sold by the
Underwriters on the same terms as those on which the shares are being
sold.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the Underwriting Agreement.
Pursuant to the terms of the Lock-up Agreements, the holders of 5,426,826
shares of the Company's Common Stock will not, from the date of the Lock-up
Agreements through 180 days after the effective date of the registration
statement, subject to certain limited exceptions, offer to sell, contract to
sell or otherwise dispose of, pledge or grant any rights with respect to any
shares of Common Stock, any options or warrants to purchase Common Stock or any
securities convertible into or exchangeable for Common Stock owned directly by
such holders or with respect to which they have the power of disposition without
the prior written consent of Robertson, Stephens & Company. The Company has also
agreed not to offer, sell, contract to sell or otherwise dispose of any shares
of Common Stock, any options or warrants to purchase Common Stock or any
securities convertible into or exchangeable for Common Stock through 180 days
after the effective date of the registration statement without the prior written
consent of Robertson, Stephens & Company. Robertson, Stephens & Company may in
its sole discretion and at any time without notice release all or a portion of
the securities subject to the Lock-up Agreements.
63
<PAGE> 65
The Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock has been determined through negotiations among the Company and the
Representatives. Among the factors to be considered in such negotiations were
prevailing market conditions, certain financial information of the Company,
market valuations of other publicly traded companies which the Company and the
Representatives believe to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development, the current state of the industry and the economy as a whole and
other factors deemed relevant.
LEGAL MATTERS
The validity of the Common Stock will be passed upon for the Company by
Burr & Forman, Birmingham, Alabama, counsel for the Company. Certain legal
matters will be passed upon for the Underwriters by Brobeck, Phleger & Harrison
LLP, San Francisco, California.
EXPERTS
The consolidated financial statements of Masada Security Holdings, Inc. at
December 31, 1993, 1994 and 1995 and June 30, 1996, and for the eleven months
ended December 31, 1993, the years ended December 31, 1994 and 1995, and the six
months ended June 30, 1996, appearing in this Prospectus and the registration
statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
In November 1995, the Company's Board of Directors, upon the recommendation
of its Audit Committee, retained Ernst & Young LLP as its independent public
auditors to audit the Company's financial statements for 1995 in place of the
Company's former auditors, Coopers & Lybrand LLP. Ernst & Young was subsequently
engaged in June 1996 to audit the Company's financial statements for 1994, the
eleven months ended December 31, 1993, and the six months ended June 30, 1996.
The reports of Coopers & Lybrand LLP on the Company's financial statements for
1994 and the eleven months ended December 31, 1993, before restatement, did not
contain any adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope, or accounting principles. During 1994
and the eleven months ended December 31, 1993, there were no disagreements
between the Company and Coopers & Lybrand LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreement, if not resolved to the satisfaction of Coopers &
Lybrand LLP, would have caused it to make reference to the subject matter of the
disagreement in connection with its report.
The Company has filed a registration statement on Form S-1 (together with
any amendments thereto, the "Registration Statement") with the Securities and
Exchange Commission under the Securities Act with respect to the Common Stock.
This Prospectus, which constitutes a part of the Registration Statement, omits
certain information contained in the Registration Statement and reference is
made to the Registration Statement and the exhibits and schedules thereto for
further information with respect to the Company and the Common Stock offered
hereby. This Prospectus contains summaries of the material terms and provisions
of certain documents and in each instance reference is made to the copy of such
document filed as an exhibit to the Registration Statement. Each such summary is
qualified in its entirety by such reference.
64
<PAGE> 66
The Registration Statement (including the exhibits and schedules thereto)
and the periodic reports and other information to be filed by the Company with
the Commission may be inspected, without charge, at public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W. Washington,
D.C., 20549, and at the following regional offices of the Commission: New York
Regional Office, 7 World Trade Center, Suite 1300, New York, NY 10048; Los
Angeles Regional Office, 5670 Wilshire Blvd., 11th Floor, Los Angeles, CA
90036-3648; and Chicago Regional Office, Suite 1400, Citicorp Center, 500 W.
Madison Street, Chicago, IL 60661-2511. Copies of such materials may be obtained
from the Public Reference Section of the Commission at 450 Fifth Street N.W,
Washington, D.C. 20549, and its public reference facilities in New York, New
York; Los Angeles, California; and Chicago, Illinois, at prescribed rates. The
Commission also maintains a Web Site at http://www.sec.gov which contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission.
65
<PAGE> 67
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MASADA SECURITY HOLDINGS, INC. AND SUBSIDIARIES:
Report of Independent Accounts.................................................................. F-2
Consolidated Balance Sheets as of December 31, 1993, 1994 and 1995, and as of June 30, 1996..... F-3
Consolidated Statements of Operations for the eleven months ended December 31, 1993, the years
ended December 31, 1994 and 1995, and for the six months ended June 30, 1996.................. F-4
Consolidated Statements of Charges in Stockholders' Equity for the eleven months ended December
31, 1993, the years ended December 31, 1994 and 1995, and for the six months ended June 30,
1996.......................................................................................... F-5
Consolidated Statements of Cash Flows for the eleven months ended December 31, 1993, the years
ended December 31, 1994 and 1995, and for the six months ended June 30, 1996.................. F-6
Notes to Consolidated Financial Statements...................................................... F-7
PRO FORMA FINANCIAL INFORMATION:
Explanatory Note................................................................................ F-19
Pro Forma Combined Condensed Statements of Operations (unaudited) for the year ended December
31, 1995 and the six months ended June 30, 1996............................................... F-20
Notes to Pro Forma Combined Condensed Statements of Operations (unaudited) for the year ended
December 31, 1995 and the six months ended June 30, 1996...................................... F-22
</TABLE>
F-1
<PAGE> 68
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Masada Security Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Masada
Security Holdings, Inc. as of December 31, 1993, 1994, 1995 and June 30, 1996,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the eleven months ended December 31, 1993, the years
ended December 31, 1994 and 1995, and the six months ended June 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Masada Security
Holdings, Inc. at December 31, 1993, 1994, 1995 and June 30, 1996, and the
consolidated results of operations and cash flows for the eleven months ended
December 31, 1993, the years ended December 31, 1994 and 1995, and the six
months ended June 30, 1996, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
August 2, 1996, except for
Note 15 as to which the
date is September 27, 1996
F-2
<PAGE> 69
MASADA SECURITY HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1993 1994 1995 1996
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 221,501 $ 341,197 $ 205,364 $ 516,479
Accounts receivable, less allowance for doubtful accounts
of $0, $85,000, $250,000 and $398,836.................. 476,148 668,479 773,061 1,362,881
Other receivables........................................ -- 7,765 16,650 90,283
Prepaid expenses......................................... 89,138 137,630 229,054 51,807
Inventory................................................ 425,052 511,971 672,800 799,897
----------- ----------- ----------- -----------
Total current assets............................... 1,211,839 1,667,042 1,896,929 2,821,347
Property and equipment, net................................ 4,484,485 4,283,711 3,535,574 3,187,272
Acquired subscriber agreements, net of accumulated
amortization of $547,479, $1,245,123, $2,477,496 and
$4,164,481............................................... 4,252,521 6,453,492 10,868,286 32,702,110
Other deferred charges and intangible assets, net.......... 6,109,289 6,838,289 6,850,964 7,244,165
Deferred installation costs, net of accumulated
amortization of $153,804, $805,592, $2,310,005 and
$3,486,800............................................... 1,547,636 4,288,783 7,604,256 9,905,408
Other assets............................................... 136,227 40,000 806,373 806,373
----------- ----------- ----------- -----------
Total assets....................................... $17,741,997 $23,571,317 $31,562,382 $56,666,675
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft........................................... $ 130,089 $ 489,914 $ 492,244 $ 240,436
Accounts payable......................................... 33,981 881,300 538,817 583,118
Current portion of notes payable......................... 10,310 1,192,073 84,800 62,668
Accrued liabilities...................................... 729,935 713,002 560,458 1,291,402
Subscriber deposits...................................... 138,589 165,321 232,752 1,240,008
----------- ----------- ----------- -----------
Total current liabilities.......................... 1,042,904 3,441,610 1,909,071 3,417,632
Notes payable, less current portion........................ 11,100,000 10,233,877 10,183,227 40,105,974
----------- ----------- ----------- -----------
Total liabilities.................................. 12,142,904 13,675,487 12,092,298 43,523,606
Redeemable preferred stock:
Class A cumulative redeemable preferred stock, $.01 par
value, redemption value of $100 per share; 75,700
shares authorized, issued and outstanding.............. -- 7,570,000 7,570,000 7,570,000
Stockholders' equity:
Class B convertible preferred stock, $.01 par value
(involuntary liquidation preference of $24 per share,
see Note 8); 358,332 shares authorized, issued and
outstanding............................................ -- 3,583 3,583 3,583
Class C convertible preferred stock, $.01 par value
(involuntary liquidation preference of $36 per share,
see Note 8); 486,111 shares authorized, issued and
outstanding............................................ -- -- 4,861 4,861
Class A common stock, $.01 par value; 333,500 shares
authorized, issued and outstanding..................... -- 3,335 3,335 3,335
Class B common stock, $.01 par value; 1,078,572 shares
authorized, 570,240 shares issued and outstanding...... -- 5,702 5,702 5,702
Class C common stock, $.01 par value; 486,111 shares
authorized, -0- shares issued and outstanding.......... -- -- -- --
Deferred compensation expense............................ -- (189,540 ) (133,170 ) (183,877)
Paid-in capital.......................................... -- 8,170,599 25,510,064 25,510,064
Accumulated deficit...................................... -- (5,667,849 ) (13,494,291 ) (19,770,599)
Partners' capital........................................ 5,599,093 -- -- --
----------- ----------- ----------- -----------
Total stockholders' equity......................... 5,599,093 2,325,830 11,900,084 5,573,069
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity......... $17,741,997 $23,571,317 $31,562,382 $56,666,675
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 70
MASADA SECURITY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1993, THE YEARS ENDED
DECEMBER 31, 1994 AND 1995, AND THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
1993 1994 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Monitoring revenue.......................... $ 6,958,463 $ 8,756,096 $12,472,090 $ 9,367,488
Installation revenue........................ 2,476,716 3,082,844 3,428,873 2,493,036
Service revenue............................. 520,056 678,275 910,841 676,509
----------- ----------- ----------- -----------
Total revenues.................... 9,955,235 12,517,215 16,811,804 12,537,033
Monitoring expense.......................... 1,137,077 1,374,181 1,945,270 1,420,776
Installation costs and expenses............. 1,219,502 1,267,563 1,338,518 1,151,080
Service expenses............................ 1,429,017 1,734,055 2,235,275 1,628,354
----------- ----------- ----------- -----------
Total cost of revenues............ 3,785,596 4,375,799 5,519,063 4,200,210
----------- ----------- ----------- -----------
Gross profit................................ 6,169,639 8,141,416 11,292,741 8,336,823
Operating expenses:
Selling and marketing..................... 1,879,200 2,922,851 5,410,579 3,780,178
General and administrative................ 3,091,056 5,162,930 7,605,510 4,661,956
Depreciation.............................. 895,524 1,069,489 1,196,770 623,535
Amortization.............................. 1,510,605 2,381,168 4,061,993 4,150,569
----------- ----------- ----------- -----------
Total operating expenses.......... 7,376,385 11,536,438 18,274,852 13,216,238
----------- ----------- ----------- -----------
Loss from operations........................ (1,206,746) (3,395,022) (6,982,111) (4,879,415)
Other (expenses) income:
Interest.................................. (754,161) (593,770) (844,331) (1,140,189)
Gain on disposal of subscriber
agreements............................. -- -- -- 160,167
----------- ----------- ----------- -----------
Net loss before income taxes and
extraordinary item........................ (1,960,907) (3,988,792) (7,826,442) (5,859,437)
Income taxes................................ -- -- -- --
----------- ----------- ----------- -----------
Loss before extraordinary item.............. (1,960,907) (3,988,792) (7,826,442) (5,859,437)
Extraordinary loss from early retirement of
debt (net of income taxes of $0).......... -- -- -- (566,911)
----------- ----------- ----------- -----------
Net loss.................................... $(1,960,907) $(3,988,792) $(7,826,442) $(6,426,348)
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED PRO FORMA
INFORMATION -- NOTE 10) (HISTORICAL)
<S> <C> <C> <C> <C>
Loss per share (see Notes 1 and 10):
Net loss.................................... $(1,960,907) $(3,988,792) $(7,826,442) $(6,426,348)
Increase in interest expense (Note 1)..... 116,875 10,625 -- --
Preferred dividends (Note 10)............. -- -- (416,350) (189,250)
----------- ----------- ----------- -----------
Adjusted net loss........................... $(1,844,032) $(3,978,167) $(8,242,792) $(6,615,598)
=========== =========== =========== ===========
Loss per share.............................. $ (1.46) $ (3.14) $ (5.13) $ (3.64)
=========== =========== =========== ===========
Shares used in computing loss per share..... 1,262,072 1,267,741 1,608,000 1,815,042
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 71
MASADA SECURITY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1993, THE YEARS ENDED
DECEMBER 31, 1994 AND 1995, AND THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
CLASS CLASS CLASS DEFERRED
CLASS B CLASS C A B C COMPENSATION PAID-IN ACCUMULATED PARTNERS' STOCKHOLDERS'
PREFERRED PREFERRED COMMON COMMON COMMON EXPENSE CAPITAL DEFICIT CAPITAL EQUITY TOTAL
--------- --------- ------ ------ ------ ------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
February
1,
1993...$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 7,560,000 $ 7,560,000
Net
loss... -- -- -- -- -- -- -- -- (1,960,907) (1,960,907)
------ ------ ------ ------ ------ --------- ----------- ------------ ----------- ------------
Balance
December
31,
1993... -- -- -- -- -- -- -- -- 5,599,093 5,599,093
Recapitalization
upon
merger
into a
corporation,
net of
transaction
costs... -- -- 3,335 5,702 -- -- (19,037) (1,960,907) (5,599,093) (7,570,000)
Conversion
of
subordinated
note
payable
to
62,500
shares
of
Class
B
convertible
preferred
stock... 625 -- -- -- -- -- 1,499,375 -- -- 1,500,000
Issuance
of
295,832
shares
of
Class
B
convertible
preferred
stock,
net of
issuance
costs...2,958 -- -- -- -- -- 6,690,261 -- -- 6,693,219
Issuance
of
compensatory
stock
options... -- -- -- -- -- (281,850) -- 281,850 -- --
Amortization
of
deferred
compensation
expense.. -- -- -- -- -- 92,310 -- -- -- 92,310
Net
loss... -- -- -- -- -- -- (3,988,792) -- (3,988,792)
------ ------ ------ ------ ------ --------- ----------- ------------ ----------- ------------
Balance
December
31,
1994... 3,583 -- 3,335 5,702 -- (189,540) 8,170,599 (5,667,849) -- 2,325,830
Issuance
of
486,111
shares
of
Class
C
convertible
preferred
stock,
net of
issuance
costs... -- 4,861 -- -- -- -- 17,339,465 -- -- 17,344,326
Amortization
of
deferred
compensation
expense.. -- -- -- -- -- 56,370 -- -- -- 56,370
Net
loss... -- -- -- -- -- -- -- (7,826,442) -- (7,826,442)
------ ------ ------ ------ ------ --------- ----------- ------------ ----------- ------------
Balance
December
31,
1995... 3,583 4,861 3,335 5,702 -- (133,170) 25,510,064 (13,494,291) -- 11,900,084
Issuance
of
compensatory
stock
options... -- -- -- -- -- (150,040) -- 150,040 -- --
Amortization
of
deferred
compensation
expense.. -- -- -- -- -- 99,333 -- -- -- 99,333
Net
loss... -- -- -- -- -- -- -- (6,426,348) -- (6,426,348)
------ ------ ------ ------ ------ --------- ----------- ------------ ----------- ------------
Balance
June
30,
1996... $3,583 $4,861 $3,335 $5,702 $ -- $ (183,877) $25,510,064 $(19,770,599) $ -- $ 5,573,069
====== ====== ====== ====== ====== ========= =========== ============ =========== ============
</TABLE>
See accompanying notes.
F-5
<PAGE> 72
MASADA SECURITY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1993, THE YEARS ENDED
DECEMBER 31, 1994 AND 1995, AND THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
1993 1994 1995 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Operating activities:
Net loss............................................ $(1,960,907) $(3,988,792) $ (7,826,442) $ (6,426,348)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization..................... 2,406,129 3,450,657 5,258,763 4,774,104
Amortization of deferred compensation expense..... -- 92,310 56,370 99,333
Losses on accounts receivable..................... 176,025 389,176 774,544 613,193
(Gain) loss on sale of assets..................... -- -- 15,919 (160,167)
Loss from retirement of debt, net of tax.......... 2,540 -- -- 566,911
Changes in operating assets and liabilities:
Accounts and other receivables.................... (227,382) (589,272) (888,011) (1,276,646)
Prepaid expenses.................................. (57,449) (48,492) (91,424) 177,247
Inventory......................................... (138,883) (86,919) (160,829) (127,097)
Other assets...................................... (40,000) 96,227 -- --
Accounts payable.................................. 33,981 847,319 (342,483) 44,301
Accrued liabilities............................... (348,650) (16,933) (246,793) 730,944
Subscriber deposits............................... (174,810) 26,732 (144,813) 1,007,256
----------- ----------- ------------ ------------
Net cash provided by (used in) operating
activities............................... (329,406) 172,013 (3,595,199) 23,031
Investing activities:
Purchase of property and equipment.................. (394,218) (868,715) (433,538) (281,516)
Proceeds from the sale of property and equipment and
acquired subscriber agreements.................... 16,859 -- 6,900 624,607
Purchase of subscriber agreements................... -- (3,951,031) (6,525,535) (23,923,389)
Purchase of other deferred charges and intangible
assets............................................ 184,588 (450,093) (190,926) (2,290,178)
Increase in deferred installation costs............. (1,701,441) (3,392,935) (4,819,885) (3,477,947)
Investment in Centennial Security................... -- -- (766,373) --
Other............................................... 51,930 -- -- --
----------- ----------- ------------ ------------
Net cash used in investing activities...... (1,842,282) (8,662,774) (12,729,357) (29,348,423)
Financing activities:
Bank overdraft...................................... 130,089 359,825 2,330 (251,808)
Additions to long-term debt......................... 1,100,000 11,167,280 13,966,000 45,932,542
Repayment of debt................................... (17,991) (9,609,867) (15,123,933) (16,044,227)
Proceeds from Class C preferred stock, net of
issuance cost..................................... -- -- 17,344,326 --
Proceeds from Class B preferred stock, net of
issuance cost..................................... -- 6,693,219 -- --
----------- ----------- ------------ ------------
Net cash provided by financing
activities............................... 1,212,098 8,610,457 16,188,723 29,636,507
----------- ----------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents.............................. (959,590) 119,696 (135,833) 311,115
Cash and cash equivalents, beginning of period...... 1,181,091 221,501 341,197 205,364
----------- ----------- ------------ ------------
Cash and cash equivalents, end of period............ $ 221,501 $ 341,197 $ 205,364 $ 516,479
=========== =========== ============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest............ $ 754,161 $ 671,491 $ 912,109 $ 847,093
=========== =========== ============ ============
</TABLE>
Supplemental disclosure of noncash investing and financing activities:
On February 11, 1994, the Company converted $1,500,000 of subordinated
notes payable to 62,500 shares of Class B convertible stock in connection
with the Company's reorganization and merger.
On October 17, 1994, the Company entered into a note
payable -- subordinated promissory note in an amount of $258,227 in exchange
for the rights to certain subscriber agreements.
See accompanying notes.
F-6
<PAGE> 73
MASADA SECURITY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Masada Security Limited Partnership was formed on February 1, 1993, through
the purchase of the business and assets of MSAM, L.P., MSAM, Inc. and Network
Security City Branches, Inc. as described in Note 2. Masada Security Holdings,
Inc. was a 1% capital and profits interest general partner and a 61.94% profits
and a 98.48% capital interests in Masada Security Limited Partnership. On
February 11, 1994, in connection with a reorganization and merger transaction,
Masada Security Limited Partnership was merged into a newly formed corporation,
which is a wholly owned subsidiary of Masada Security Holdings, Inc.
The consolidated financial statements present the operations of Masada
Security Limited Partnership through February 11, 1994 and Masada Security
Holdings, Inc. in all subsequent periods (collectively referred to as the
"Company"). The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries.
The Company's business is to acquire, construct, develop, operate and own
residential and commercial security alarm systems. The Company operates security
monitoring service systems in Georgia, Florida, Texas, Virginia, Maryland,
Louisiana, Oklahoma and the District of Columbia. All material intercompany
accounts and transactions have been eliminated.
CASH EQUIVALENTS
The Company considers all highly liquid debt securities with an original
maturity period of three months or less at the time of purchase to be cash
equivalents.
INVENTORY
Inventory consists primarily of parts and supplies and is stated at the
lower of cost or market, with cost determined using the first-in, first-out
method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Costs of maintenance and repairs
are charged to expense when incurred and costs of betterments are capitalized.
Depreciation is provided on a straight-line basis using the following lives:
<TABLE>
<S> <C>
Security monitoring equipment........................................... 5 years
Office equipment........................................................ 7 years
Computer equipment...................................................... 5 years
Leasehold improvements.................................................. lease term
Vehicles................................................................ 5 years
</TABLE>
F-7
<PAGE> 74
MASADA SECURITY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER DEFERRED CHARGES AND INTANGIBLE ASSETS
Other deferred charges and intangible assets are recorded at cost.
Amortization is provided on a straight-line basis, using the following lives:
<TABLE>
<S> <C>
Acquired subscriber agreements........................................ 8 years
Noncompete agreements................................................. 3 to 7 years
Nonsolicitation agreement............................................. 5 years
Franchise agreement................................................... 15 years
Loan acquisition costs................................................ term of loan
Organizational costs.................................................. 5 years
Goodwill.............................................................. 15 years
</TABLE>
DEFERRED INSTALLATION COSTS
Deferred installation costs consist of materials, labor and overhead
associated with the installation of residential security alarm systems (Safe
Choice). Amortization is provided on a straight-line basis over the estimated
average period subscribers are expected to generate monitoring revenues which
approximates five years.
LONG-LIVED ASSETS
Effective January 1, 1996, the Company adopted the provisions of Financial
Accounting Standards Board Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of." This statement
requires impairment losses to be recognized for long-lived assets used in
operations when events and circumstances indicates that the assets might be
impaired and the undiscounted cash flows are not sufficient to recover the
assets' carrying amount. The adoption of this statement did not have a material
impact on the Company's consolidated financial statements.
REVENUES
Monitoring revenues are recognized in the period services are provided.
Amounts paid in advance are deferred and recognized in the period service
occurs.
Installation revenues are recognized in the period of installation of the
alarm system to the extent of direct selling costs. Any excess installation
revenue is deferred and amortized over the life of the monitoring contract.
Service revenue is recognized in the period that the services are provided.
INCOME TAXES
Effective February 11, 1994, concurrent with the Company's merger into a
new corporation, as described above, the Company adopted the provisions of
Financial Accounting Standards Board Statement No. 109 "Accounting for Income
Taxes." This statement requires the establishment of deferred tax liabilities
and assets for all temporary differences caused when the tax bases of assets and
liabilities differ from those reported in the accompanying consolidated
financial statements. The adoption of this statement did not have a material
impact on these consolidated financial statements. Prior to February 11, 1994,
there were no deferred tax liabilities or assets recorded as the net loss of the
Company was reported in the tax returns of the partners of Masada Security
Limited Partnership.
F-8
<PAGE> 75
MASADA SECURITY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK COMPENSATION
The Company accounts for its stock compensation arrangements under the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued To Employees," and intends to continue to do so. The alternative fair
value accounting provided for under Financial Accounting Standards Board
Statement No. 123, "Accounting and Disclosure for Stock-Based Compensation,"
requires the use of option valuation models. The effect of applying Statement
No. 123's fair value method to the Company's stock option awards results in net
loss and loss per share that are not materially different from amounts reported.
LOSS PER SHARE
Loss per share in the statements of operations is computed based on the
weighted average number of common and common equivalent shares outstanding
during the periods after giving effect to the conversion of the preferred stock
(as discussed more fully in Note 8), and upon the exercise of stock options
using the treasury stock method. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin (SAB) No. 55, the number of common equivalent shares
which became issuable during the periods pursuant to the grant of stock options
(using the treasury stock method), have been considered in the calculation of
common and common equivalent shares as if they were outstanding for all periods
presented. The unaudited pro forma loss per share calculation on the statement
of operations reflects the reported net loss, adjusted for interest on
subordinated debt as though it was converted to equity on February 1, 1993, and
an adjustment to net loss for dividends in arrears on the Class A redeemable
preferred stock. The pro forma weighted number of common shares assumes
conversion of all preferred stock retroactive to February 1, 1993.
CONCENTRATION OF CREDIT RISK
The Company is exposed to credit losses in the event of nonperformance by
the counterparties to its interest rate caps and nonderivative financial assets.
The Company grants credit to customers for relatively short periods of time
before disconnecting monitoring service to these customers.
DERIVATIVES
Premiums paid for purchased interest rate cap agreements are amortized to
interest expense over the terms of the cap agreements. Amounts receivable from
cap agreements are accrued as a reduction of interest expense.
USE OF ESTIMATES
The preparation of the accompanying consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.
ADVERTISING COSTS
Advertising costs are expensed as incurred.
2. ACQUISITIONS
In connection with the formation of the Company, on February 1, 1993, the
Company acquired the business and assets of MSAM, L.P. and MSAM, Inc.
(collectively MSAM), and Network Security City Branches, Inc. (Network) for an
aggregate purchase price of approximately $15,900,000. The
F-9
<PAGE> 76
MASADA SECURITY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchase price was allocated primarily to property and equipment, subscriber
agreements, a franchise agreement and a nonsolicitation agreement based on their
fair value at that date. The excess of the purchase price over the fair value of
the assets acquired (goodwill) of approximately $1,900,000 is being amortized on
a straight-line basis over 15 years. MSAM and Network operated security
monitoring systems in Florida and Georgia.
During 1994, the Company acquired certain subscriber agreements and other
assets and certain liabilities from Strategic Security Systems, Inc. on March
15, Williams Security, Inc. on September 22, Electronic Technical Associates,
Inc. on October 14, KenMar Electronics, Inc. on November 1 and Select Security,
Inc. on December 14, for an aggregate purchase price of approximately
$3,900,000. The acquisitions have been accounted for by the purchase method of
accounting and, accordingly, the purchase price has been allocated to the net
assets based on the estimated fair value at the date of acquisition.
During 1995, the Company acquired certain subscriber agreements and other
assets and assumed certain liabilities from Global Security, Inc. on May 5,
Alert Centre Inc. on June 15, GRB Security Systems, Inc. on June 29, Deltron,
Inc. on June 30, Network Multi-Family Security Corporation on July 26, TelStar
Cellular Corporation on September 11, Alarm Data Group, Inc. on September 30,
Lafayette Security and Electronics Systems, Inc. on October 10 and The 593
Corporation (Classic Alarm) on November 2, for an aggregate purchase price of
approximately $6,300,000. The acquisitions have been accounted for by the
purchase method of accounting and, accordingly, the purchase price has been
allocated to the net assets based on the estimated fair value at the date of
acquisition.
During 1996, the Company acquired certain subscriber agreements and other
assets and assumed certain liabilities from Kristynik Security Systems, Inc. on
January 8, InterCap Funds Joint Venture on March 28, Alarms by HRD Inc. on June
4 and Home Protection Services, Inc. on June 14, for an aggregate purchase price
of approximately $23,400,000. The acquisitions have been accounted for by the
purchase method of accounting and, accordingly, the purchase price has been
allocated to the net assets based on the estimated fair value at the date of
acquisition.
The following unaudited pro forma information presents the consolidated
results of operations of the Company as though the aforementioned 1995 and 1996
acquisitions had occurred as of January 1, 1995. This pro forma summary does not
necessarily reflect what the actual results of operation would have been had the
acquisitions occurred at January 1, 1995.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C>
Revenues................................................. $ 29,699 $ 14,587
Net loss................................................. (12,302) (7,342)
Net loss per share....................................... (7.65) (4.05)
</TABLE>
F-10
<PAGE> 77
MASADA SECURITY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment, net consists of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1993 1994 1995 1996
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Security monitoring equipment... $4,302,635 $ 4,708,642 $ 4,807,777 $ 4,884,182
Office equipment................ 197,601 294,069 464,271 541,354
Computer equipment.............. 115,378 194,471 326,663 374,939
Leasehold improvements.......... 433,790 481,372 513,246 544,728
Vehicles........................ 330,605 570,170 585,400 601,670
---------- ----------- ----------- -----------
5,380,009 6,248,724 6,697,357 6,946,873
Less accumulated depreciation... (895,524) (1,965,013 ) (3,161,783 ) (3,759,601)
---------- ----------- ----------- -----------
$4,484,485 $ 4,283,711 $ 3,535,574 $ 3,187,272
========== =========== =========== ===========
</TABLE>
4. OTHER DEFERRED CHARGES AND INTANGIBLE ASSETS
Other deferred charges and intangible assets, net consist of the following
at:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1993 1994 1995 1996
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Noncompete agreements........... $ 308,334 $ 1,625,960 $ 2,778,408 $ 2,752,266
Nonsolicitation agreement....... 1,900,000 1,900,000 1,900,000 1,900,000
Franchise agreement............. 2,100,000 2,100,000 2,100,000 2,100,000
Loan acquisition costs.......... 588,327 983,784 1,169,961 2,485,015
Organization costs.............. 73,643 121,296 121,296 121,296
Goodwill........................ 1,948,306 1,948,306 1,948,306 1,948,306
----------- ----------- ----------- -----------
6,918,610 8,679,346 10,017,971 11,306,883
Less accumulated amortization... (809,321) (1,841,057 ) (3,167,007 ) (4,062,718)
----------- ----------- ----------- -----------
$6,109,289 $ 6,838,289 $ 6,850,964 $ 7,244,165
=========== =========== =========== ===========
</TABLE>
F-11
<PAGE> 78
MASADA SECURITY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. NOTES PAYABLE
Notes payable consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1994 DECEMBER 31, 1995 JUNE 30, 1996
------------------------- ------------------------- ------------------------- -------------------------
YEAR END YEAR END PERIOD END PERIOD END
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
----------- ---------- ----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Credit
agreement -- payable
in full on
September 30,
1997......... $ -- -- $ -- -- $ -- -- $40,096,567 10.5%-8.75%
Revolving
credit and
term loan
agreement -- payable
in quarterly
installments
of various
amounts
beginning
March 31,
1995 and
continuing
through
December 31,
2000......... 9,600,000 10% 11,000,000 10.5% 9,925,000 9.5% -- --
Note
payable -- subordinated
promissory
note with
interest
payments due
monthly and
principle due
on November
1, 1999...... -- -- 258,227 7% 258,227 7% -- --
Note
payable -- subordinated
debt......... 1,500,000 -- -- -- -- -- -- --
Note
payable...... 10,310 Various 167,723 Various 84,800 Various 72,075 Various
----------- ----------- ----------- -----------
$11,110,310 $11,425,950 $10,268,027 $40,168,642
=========== =========== =========== ===========
</TABLE>
On February 11, 1993, the Company entered into a $10,000,000 Revolving
Credit and Term Loan agreement (the Agreement) with State Street Bank and Trust
Company (State Street) and Citizens Savings Bank (Citizens). Borrowings under
the Agreement were permitted on a revolving basis, subject to compliance with
certain restrictive covenants and the lenders' approval, until February 1, 1994,
at which time the then outstanding loan balance was to convert to a term note
payable in 72 monthly installments, at varying amounts, beginning February 28,
1994. Interest was based upon prime (8.0% at December 31, 1993) plus a variable
margin not to exceed 2%. The Company paid, on a monthly basis, an annual
commitment fee of .5% of the unused portion of the commitment. Amounts borrowed
under the Agreement were collateralized by a senior security interest in
substantially all assets of the Company.
On February 11, 1994, the Company entered into an amended revolving credit
and term loan agreement (the Amended Agreement) with State Street and Citizens
in which the Company increased its maximum borrowing capacity to $17,500,000.
Borrowings under the Amended Agreement were permitted on a revolving basis.
Interest was based upon prime rate plus a variable margin not to exceed 2%. The
Company paid, on a monthly basis, an annual commitment fee of .5% of the unused
portion of the commitment. Amounts borrowed under this Amended Agreement were
collateralized by a senior security interest in substantially all assets of the
Company.
On August 9, 1994, the Amended Agreement was revised to give the Company
the option of basing its interest rate on either the London Interbank Offering
Rate (LIBOR) and/or prime rate plus an applicable margin (margin is a function
of the ratio of senior debt to earnings before interest, taxes, depreciation and
amortization) or a fixed rate. The revision to the Amended Agreement also
changed the payment of an annual commitment fee from a monthly to a quarterly
basis and lowered the amount of annualized net operating income (as defined in
the revised Amended Agreement) required to be maintained for each quarterly
period beginning March 31, 1994 and continuing through December 31, 1995.
F-12
<PAGE> 79
MASADA SECURITY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The subordinated debt represented notes payable to certain stockholders. On
February 11, 1994, in conjunction with the reorganization and merger described
in Note 1, the subordinated debt was converted to 62,500 shares of Class B
preferred stock.
On August 24, 1995, the Amended Agreement was revised to give the Company
borrowings on a revolving basis, subject to compliance with certain restrictive
covenants. At December 31, 1995, the total outstanding advances of $9,925,000
carried an effective interest rate of 9.5% based on prime (8.5% at December 31,
1995).
On March 28, 1996, the Company entered into a Credit Agreement (the Credit
Agreement) with Canadian Imperial Bank of Commerce (CIBC) and SunTrust Bank
(SunTrust) in which the Company increased its maximum borrowing capacity to
$50,000,000. Borrowings under the Credit Agreement are permitted on a revolving
basis, subject to restrictive covenants related primarily to specific ratios,
capital expenditures and the continuing operation of the Company. These
covenants remain in effect until September 30, 1997 (the expiration date). The
outstanding balance of the revolving loans shall be due and payable in full on
the expiration date. The Company has the option of basing its interest rate on
either the LIBOR rate plus 3.25%, or the prime rate plus 2.25%. A portion of the
proceeds from the Credit Agreement was used to retire the existing debt under
the Amended Agreement as revised on August 24, 1995. The Company pays, on a
quarterly basis, an annual commitment fee of .5% of the unused portion of the
commitment. In addition to the interest rate and the annual commitment fee, the
Company is required to pay a financing fee equal to .0275% of the commitment
amount under the Credit Agreement from September 25, 1996 through the earlier of
the expiration date or the date at which the Credit Agreement is paid in full.
Amounts borrowed under the Credit Agreement are collateralized by a senior
security interest in substantially all assets of the Company.
The fair value of the Company's notes payable approximates their carrying
values because their rates fluctuate with the prime rate.
6. INCOME TAXES
The deferred tax benefits of approximately $2,000,000, $2,800,000 and
$2,400,000 generated during the 1994, 1995 and 1996 periods, respectively, have
been offset by a valuation allowance.
Differences between the tax bases of assets and liabilities and their
financial reporting amounts that give rise to significant portions of deferred
income tax items are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
------------ ------------ -----------
<S> <C> <C> <C>
Deferred tax assets:
Net operating losses....................... $ 1,497,000 $ 2,970,000 $ 3,566,000
Acquired subscriber agreements............. 329,000 1,410,000 2,624,000
Property and equipment..................... 67,000 203,000 697,000
Accounts receivable........................ 29,000 91,000 147,000
Other...................................... 66,000 98,000 149,000
----------- ----------- -----------
Gross deferred tax assets.................... 1,988,000 4,772,000 7,183,000
Valuation allowance.......................... (1,988,000 ) (4,772,000 ) (7,183,000)
----------- ----------- -----------
Net deferred tax assets...................... $ -- $ -- $ --
=========== =========== ===========
</TABLE>
The Company has net operating loss carry-forwards, subject to certain
limitations, for regular federal income tax purposes of approximately
$3,992,000, $7,900,000 and $9,500,000 at December 31, 1994, December 31, 1995
and June 30, 1996, respectively, which begin expiring in 2009 and continue to
expire through 2011. Utilization of the net operating losses may be subject to a
substantial annual limitation due to the ownership change provisions of Internal
Revenue Code Section 382. The
F-13
<PAGE> 80
MASADA SECURITY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
valuation allowance has been established until it is more likely than not that
the deferred tax assets will be realized.
7. REDEEMABLE PREFERRED STOCK
The Class A redeemable preferred stock of $7,570,000 is reflected in the
accompanying financial statements on February 11, 1994, effective with the
merger of Masada Security Limited Partnership into a corporation as described in
Note 1. The Class A Redeemable Preferred Stock may be redeemed by the Company at
any time based on a redemption price of $100 per share. The Class A redeemable
preferred stock is subject to mandatory redemption on December 31, 1998 and
1999, or upon the occurrence of an event of noncompliance, as defined in the
Company's Certificate of Incorporation, if demand for redemption is made by the
holders of sixty percent of the Class A redeemable preferred stock, and subject
to various bank restrictions.
The holders of the Company's Class A redeemable preferred stock are
entitled to receive cumulative cash dividends out of assets of the Company, that
are available by law for the payment of dividends, when, as and if declared by
the Board of Directors. Dividends accrue at 6% from February 1, 1995 through
February 1, 1998 and at 12% thereafter. No dividends have been approved or
declared as of June 30, 1996.
The holders of 60% of the Class A redeemable preferred stock must approve
the declaration of any dividend to the common stockholders. Any dividends so
approved must be simultaneous and equal to all classes of common stock.
8. STOCKHOLDERS' EQUITY
CLASS B CONVERTIBLE PREFERRED STOCK
Shares of Class B convertible preferred stock are convertible at any time
at the option of the holders into Class B common stock at the rate of one share
of Class B common stock for each share of Class B convertible preferred stock,
subject to adjustments to prevent the holders of Class B convertible preferred
stock from being diluted by any stock dividends, stock splits or sales below $24
per share of Class B common stock or securities convertible into common stock.
The holders of the Class B convertible preferred stock are entitled to
receive dividends declared on Class B common stock as if the Class B convertible
preferred stock had been converted into Class B common stock.
CLASS C CONVERTIBLE PREFERRED STOCK
Shares of Class C convertible preferred stock are convertible at any time
at the option of the holders into shares of Class C common stock at the rate of
one share of Class C common stock for each share of Class C convertible
preferred stock, subject to adjustments to prevent the holders of Class C
convertible preferred stock from being diluted by any stock dividends, stock
splits or sales below $36 per share of Class C common stock.
The holders of the Class C convertible preferred stock are entitled to
receive dividends declared on the Class C common stock as if the Class C
convertible preferred stock had been converted into Class C common stock.
VOTING RIGHTS
Generally, voting rights are vested in the Company's common stock provided
that the holders of the Class B and Class C convertible preferred stock are
deemed to have converted into Class B and
F-14
<PAGE> 81
MASADA SECURITY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Class C common stock at the time of any vote. For the election of directors, the
holders of Class B and Class C convertible preferred stock have voting rights.
The holders of the Class B and Class C convertible preferred stock also have
voting rights related to the authorization, issuance or redemption of the
Company's capital stock and acquisitions or mergers of the Company.
RIGHTS ON LIQUIDATION
In the event of liquidation or dissolution of the Company, the assets
remaining after the payment of all liabilities will be distributed to the
stockholders in the following order of priority:
(a) first, to the holders of the Class C convertible preferred stock,
an amount equal to $36 per share, plus any accrued and unpaid dividends;
(b) second, to the holders of the Class B convertible preferred stock,
an amount equal to $24 per share, plus any accrued and unpaid dividends;
(c) third, to the holders of the Class A redeemable preferred stock,
an amount equal to $100 per share, plus any accumulated and unpaid
dividends;
(d) fourth, to the holders of the Class A and Class B common stock,
the aggregate sum of $16,480,000, to be allocated based on the number of
shares held (the holders of convertible preferred do not participate in
this distribution), and
(e) fifth, the remainder, if any, to the holders of the Class A, Class
B and Class C common stock in proportion to the number of shares held,
provided that the Class B and Class C convertible preferred stock shall be
deemed to have been converted into Class B and Class C common stock for
purposes of this distribution.
9. STOCK OPTION PLAN
Under the 1994 Stock Option/Purchase Plan (94 Plan) the Company has 100,000
shares of Class B common stock reserved for issue to key employees and/or
nonemployee directors through stock options. Options granted under the 94 Plan
become exercisable after five years of continued service from the initial date
of service.
Under the 1996 Stock Option Plan (96 Plan) the Company has 50,000 shares of
Class B common stock reserved for issuance to employees and nonemployee
directors through stock options. The period for exercise of each option under
the 96 Plan is determined by the Compensation Committee of the Board of
Directors and shall not be exercisable after ten years from the date of grant.
During 1994 and 1996, 62,500 and 18,000 options, respectively, were granted
at an exercise price of $.01. Because the exercise price of the options was less
than the fair value of the Company's common stock at the date of grant,
compensation expense of $281,850 and $150,040, respectively, will be recognized
over the vesting period of the options. Compensation expense of $92,310, $56,370
and $99,333 was recognized in 1994, 1995 and 1996, respectively, related to
these options.
At June 30, 1996, 5,000 of the 80,500 outstanding options were exercisable
and 69,500 options remained available for grant.
10. LOSS PER SHARE
Primary loss per share is based on the weighted average number of common
shares and equivalents outstanding during each period and the assumed exercise
of dilutive stock options less the
F-15
<PAGE> 82
MASADA SECURITY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
number of treasury shares assumed to be purchased from the proceeds using the
average market price of the Company's common stock.
The following table presents historical primary loss per share for each
period. The Company did not have any securities which were not considered common
stock equivalents and, therefore, primary loss per share is the same as fully
diluted loss per share.
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net loss, adjusted for preferred dividends................. $3,988,792 $8,242,792 $6,615,598
========== ========== ==========
Loss per common and equivalent share, adjusted for
preferred dividends
Primary:
Loss from continuing operations.......................... $ 2.92 $ 4.60 $ 2.78
Loss before extraordinary item........................... 3.43 5.13 3.32
Extraordinary loss from early retirement of debt......... -- -- .32
---------- ---------- ----------
Loss per share............................................. $ 3.43 $ 5.13 $ 3.64
========== ========== ==========
</TABLE>
11. CENTENNIAL SECURITY, INC.
The Company has a strategic alliance with Centennial Security, Inc.
(Centennial), a business similar to that of the Company with a target market of
the northern United States.
The Company has an investment in the Series B preferred and common stock of
Centennial, which amounted to $766,373 at June 30, 1996 and represented
approximately 12% of Centennial's total equity. This investment, which is
accounted for on the cost method, is included in other assets in the
accompanying consolidated balance sheet. As a part of the arrangement with
Centennial, the Company will be partially shielded from dilution as Centennial's
equity rises to certain benchmarks and will have a right of first refusal for
participation in certain subsequent stock issuances. The fair value of the
Company's investment in Centennial approximates its carrying value.
In consideration for the Company's equity interest in Centennial, in June
1994 the Company and Centennial entered into a trademark and intellectual
property agreement which grants Centennial the right to use the trade name
Masada and certain intellectual property throughout the northern United States
and Canada. This agreement also provides Centennial with a variety of services
and support of the Safe Choice program.
The Company and Centennial also entered into an agreement under which the
Company will provide monitoring and billing and collection services to
Centennial for two years from the commencement of Centennial's operations. The
total services provided to Centennial amounted to $16,152 in 1995 and $40,127
for the six months ended June, 30, 1996. No services had been provided under
this agreement at December 1994.
12. DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to manage
well-defined interest rate risks on specifically identified outstanding debt
obligations.
Interest rate cap agreements are used to reduce the potential impact of
increases in interest rates on floating rate long-term debt. At December 31,
1993, December 31, 1994, December 31, 1995, and June 30, 1996, the Company was a
party to two interest rate cap agreements, each with an original term of four
years. At June 30, 1996, the two interest rate cap agreements had remaining
terms of 8 and
F-16
<PAGE> 83
MASADA SECURITY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
20 months. The agreements entitle the Company to receive from counterparties on
a quarterly basis the amounts, if any, by which the Company's interest payments
on $5,000,000 and $3,750,000 of its floating rate notes payable due on December
31, 2000 exceed 8%.
13. COMMITMENTS AND CONTINGENCIES
The Company leases certain land and buildings under operating leases in the
normal course of business. The total minimum lease commitment at June 30, 1996,
under noncancelable operating leases, is as follows:
<TABLE>
<S> <C>
1996..................................................................... $ 379,905
1997..................................................................... 728,723
1998..................................................................... 547,136
1999..................................................................... 385,805
2000..................................................................... 315,824
Thereafter............................................................... 960,526
----------
$3,317,919
==========
</TABLE>
Total rental expense amounted to approximately $220,000, $389,600, $638,000
and $409,747 in 1993, 1994, 1995 and 1996, respectively.
The Company is party to claims and matters of litigation incidental to the
normal course of its business. The ultimate outcome of these matters cannot
presently be determined; however, in the opinion of management of the Company,
the resolution of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations and cash flows.
14. BENEFIT PLAN
On January 1, 1996 the Company established a 401(k) profit sharing plan and
trust available to all eligible employees who have completed one year of service
and are twenty-one years of age. The 401(k) plan provides for discretionary
contributions by the Company as determined by resolutions of the board of
directors. The Company contribution to the 401(k) plan in 1996 totaled $57,085.
15. SUBSEQUENT EVENTS
On August 14, 1996, the compensation committee of the board of directors
approved the grant of 50,000 options under the 96 Plan at an exercise price of
$32, which exceeded the estimated fair market value of the Company's Class B
common stock on that date. Accordingly, no compensation expense will be
recognized in connection with these options.
On September 27, 1996, the board of directors and stockholders of the
Company approved a plan of recapitalization contingent upon the closing of the
proposed initial public offering. The plan of recapitalization provides for the
automatic redemption of all outstanding shares of Class A preferred stock from
the proceeds of the proposed offering, the automatic conversion of all
outstanding shares of Class B convertible preferred stock and Class C
convertible preferred stock into shares of Class B common stock and Class C
common stock, respectively, and the automatic exchange of each outstanding share
of Class A common stock, Class B common stock and Class C common stock into
three shares of a new, single class of Common Stock.
The number of options included above and elsewhere in these financial
statements and notes do not reflect the three for one share exchange
contemplated in connection with the plan of recapitalization described above.
F-17
<PAGE> 84
MASADA SECURITY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On September 27, 1996, the board of directors and stockholders of the
Company approved the 1997 Stock Option Plan (97 Plan) which allows the Company
to grant to officers and other key employees up to 500,000 shares of the new,
single class of common stock over five years beginning on January 1, 1997. The
adoption of the 97 Plan is contingent upon the completion of the plan of
recapitalization.
F-18
<PAGE> 85
PRO FORMA FINANCIAL INFORMATION
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1995 AND SIX MONTHS ENDED JUNE 30, 1996
The unaudited pro forma statements of operations for the year ended
December 31, 1995 and the six months ended June 30, 1996 reflect the combination
of historical income statements for those acquisitions that occurred between
January 1, 1995 and June 30, 1996, prior to their respective dates of
acquisition as if they had occurred on January 1, 1995 and adjustments as
described below. All combinations are included in the audited June 30, 1996
consolidated financial statements and have been accounted for using the purchase
method of accounting.
In the opinion of the Company's management, all adjustments necessary to
present fairly such pro forma financial statements have been made. These
unaudited pro forma financial statements are not necessarily indicative of the
actual results of operations had all acquisitions occurred as of January 1, 1995
nor do they purport to indicate the results of future operations of the Company.
These unaudited pro forma financial statements should be read in connection with
the accompanying notes and the historical financial statements and notes thereto
of the Company included elsewhere in this Prospectus. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
F-19
<PAGE> 86
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)(A)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------
MASADA COMBINED
SECURITY ACQUIRED PRO FORMA
HOLDINGS, INC. PORTFOLIOS ADJUSTMENTS PRO FORMA
-------------- -------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Monitoring revenue............................ $ 12,472 $ 9,854 $ $ 22,326
Installation revenue.......................... 3,429 2,377 5,806
Service revenue............................... 911 172 1,083
Other......................................... 484 484
--------- ------ ------ ------
Total revenue....................... 16,812 12,887 29,699
Monitoring expenses........................... 1,945 1,599 3,544
Installation costs and expenses............... 1,339 1,871 3,210
Service expenses.............................. 2,235 2,235
--------- ------ ------ ------
Total cost of revenues.............. 5,519 3,470 8,989
--------- ------ ------ ------
Gross profit........................ 11,293 9,417 20,710
Operating expenses:
Selling and marketing costs................. 5,410 5,410
General and administrative.................. 7,606 7,325 14,931
Depreciation................................ 1,197 101 1,298
Amortization................................ 4,062 1,967 1,437(b) 7,466
--------- ------ ------ ------
Total operating expenses............ 18,275 9,393 1,437 29,105
--------- ------ ------ ------
Loss from operations................ (6,982) 24 (1,437) (8,395)
Other (expenses) income:
Interest.................................... (844) (916 ) (1,862)(c) (3,622)
Other....................................... (277 ) (277)
Gain on disposal............................ 2 2
--------- ------ ------ ------
Net loss before benefit for income taxes...... (7,826) (1,167 ) (3,299) (12,292)
Income tax expense............................ (10 ) (10)
--------- ------ ------ ------
Net loss...................................... $ (7,826) $(1,177 ) $(3,299) $ (12,302)
========= ====== ====== ======
Net loss per share(d)......................... $ (4.87) $ (7.65)
========= ======
Shares used in computing net loss per
share(d).................................... 1,608,000 1,608,000
========= ======
</TABLE>
See accompanying notes to pro forma combined condensed statements of operations
(unaudited).
F-20
<PAGE> 87
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
------------------------------------------------------
MASADA COMBINED
SECURITY ACQUIRED PRO FORMA
HOLDINGS, INC. PORTFOLIOS ADJUSTMENTS PRO FORMA
-------------- -------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Monitoring revenue............................ $ 9,367 $2,050 $ $ 11,417
Installation revenue.......................... 2,493 2,493
Service revenue............................... 677 677
Other.........................................
--------- ------ ------ ------
Total revenue....................... 12,537 2,050 14,587
Monitoring expenses........................... 1,421 278 1,699
Installation costs and expenses............... 1,151 1,151
Service expenses.............................. 1,628 1,628
--------- ------ ------ ------
Total cost of revenue............... 4,200 293 4,478
--------- ------ ------ ------
Gross profit........................ 8,337 1,810 10,109
Operating expenses:
Selling and marketing costs................. 3,780 3,780
General and administrative.................. 4,662 1,392 6,054
Depreciation................................ 623 2 625
Amortization................................ 4,151 427 266(b) 4,844
--------- ------ ------ ------
Total operating expenses...................... 13,216 1,798 266 15,303
--------- ------ ------ ------
Loss from operations................ (4,879) 12 (266) (5,194)
Other (expenses) income:
Interest.................................... (1,140) (176) (355)(c) (1,671)
Other....................................... (70) (70)
Gain on disposal............................ 160 160
--------- ------ ------ ------
Net loss before benefit for income taxes and
extraordinary item.......................... (5,859) (295) (621) (6,775)
Income Taxes..................................
--------- ------ ------ ------
Loss before extraordinary item................ (5,859) (295) (621) (6,775)
Extraordinary loss from early retirement of
debt (net of income taxes of $0)............ (567) (567)
--------- ------ ------ ------
Net loss...................................... $ (6,426) $ (295) $ (621) $ (7,342)
========= ====== ====== ======
Net loss per share(d)......................... $ (3.54) $ 4.05
========= ======
Shares used in computing net loss per
share(d).................................... 1,815,042 1,815,042
========= ======
</TABLE>
See accompanying notes to pro forma condensed consolidated statements of
operations (unaudited).
F-21
<PAGE> 88
NOTES TO PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
JUNE 30, 1996
(a) See "Pro Forma Financial Information."
(b) Adjustments to amortization of acquired subscriber agreements and
non-complete agreements consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED, SIX MONTHS
DECEMBER 31, ENDED
1995 JUNE 30, 1996
------------ --------------
<S> <C> <C>
To record the amortization of acquired subscriber agreements
and non-compete agreements on a straight-line basis over 3
to 8 years based upon the lives of the respective
agreements................................................ $ 3,405 $ 747
To eliminate historical amortization expense of the Combined
Acquired Portfolios....................................... (1,968) (481)
------- -------
$ 1,437 $ 266
======= =======
(c) Adjustments to interest expense, net, consist of the following:
<CAPTION>
YEAR ENDED, SIX MONTHS
DECEMBER 31, ENDED
1995 JUNE 30, 1996
------- -------
<S> <C> <C>
To eliminate historical interest expense, net of the
Combined Acquired Portfolios.............................. $ 916 $ 176
To record interest expense for an increase borrowing under
the Company's Credit Facility totaling $29.2 million in
connection with the acquisition of the Combined Acquired
Portfolios................................................ (2,778) (531)
------- -------
$ (1,862) $ (355)
======= =======
</TABLE>
(d) Shares do not reflect the three for one share exchange provided for in
the plan of recapitalization.
F-22
<PAGE> 89
MASADA SECURITY (LOGO)
<PAGE> 90
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Estimated expenses (other than underwriting commissions) of the sale of the
shares of Common Stock are as follows:
<TABLE>
<S> <C>
Registration Fee.......................................................... $ 9,091
NASD Filing Fee........................................................... *
Nasdaq NMS Application Fee................................................ *
Blue Sky Fees and Expenses................................................ *
Printing and Engraving.................................................... *
Transfer Agent's Fees and Expenses........................................ *
Legal Fees and Expenses................................................... *
Accounting Fees and Expenses.............................................. *
Miscellaneous Disbursements............................................... *
--------
TOTAL........................................................... $
========
</TABLE>
- ---------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation of the Company contains a provision which,
subject to certain exceptions described below, eliminates the liability of a
director to the Company or its stockholders for monetary damages for any breach
of duty as a director. This provision does not eliminate the liability of the
director (i) for violations of his duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law (the "Delaware Corporation Law") relating
to unlawful dividends and distributions, or (iv) for any transaction from which
the director derived an improper personal benefit.
The Certificate of Incorporation of the Company requires the Company to
indemnify any person who was, is, or is threatened to be made a named defendant
or respondent in any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, by reason
of service by such person as a director of the Company or any other corporation,
including any subsidiary, for which he or she as such at the request of the
Company. Directors are entitled to be indemnified against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding, except that no payments may be made with respect
to liability which is not eliminated pursuant to the provision of the Company's
Certificate of Incorporation described in the preceding paragraph. Directors are
also entitled to have the Company advance any such expenses prior to final
disposition of the proceeding, upon delivery of a written affirmation by the
director of his good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to repay the amounts
advanced if it is ultimately determined that the standard of conduct has not
been met.
In addition to the Certificate of Incorporation of the Company, Section
145(c) of the Delaware Corporation Law requires the Company to indemnify any
director who has been successful on the merits or otherwise in defending any
proceeding described above. The Delaware Corporation Law also provides that a
court may order indemnification of a director if it determines that the director
is fairly and reasonably entitled to such indemnification. The ByLaws of the
Company specifically adopts Section 145(c).
II-1
<PAGE> 91
The Board of Directors of the Company also has the authority to extend to
officers, employees and agents the same indemnification rights held by
directors, subject to all of the accompanying conditions and obligations. The
Board of Directors has extended indemnification rights to all of its executive
officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three (3) years, the Company has consummated two
unregistered sales of its capital stock. On February 11, 1994, contemporaneously
with the merger of the Partnership into Security, the Company (i) issued 333,460
shares of the Company's Class A common stock to MSAM, a corporation owned by
Messrs. Johnson and Harms, in consideration of MSAM's limited partnership
interest in the Partnership valued by the Company at an amount equal to MSAM's
original cash contribution to the Partnership in February of 1993, $40,040; (ii)
sold 358,332 shares of Class B convertible preferred stock for cash and/or the
redemption of certain debentures issued by the Partnership equal to $24 per
share, or an aggregate offering price of approximately $8.6 million; and (iii)
sold Mr. Nordin 500 shares of Class A redeemable preferred stock for $50,000 and
3,739 shares of Class B common stock for $396. On May 31, 1995, the Company sold
486,111 shares of Class C convertible preferred stock for $36 cash per share, or
an aggregate offering price of approximately $17.5 million. See "Certain
Transactions" in Part I.
For each issuance, the Company relied on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933 based upon the following
facts: (i) there was no more than 15 purchasers in either issuance consisting
primarily of the same institutional investors; (ii) none of the purchasers was
solicited by means of any public advertising; (iii) each of the sales were
memorialized by negotiated stock purchase agreements; (iv) during such
negotiations, each purchaser was given access to the Company's books and records
and had the opportunity to meet and ask questions of the executive officers of
the Company; and (v) the Company believed and still believes that each purchaser
was a suitable investor.
On September 27, 1996, the Board of Directors and stockholders of the
Company unanimously adopted the Company's Plan of Recapitalization, which will
be implemented concurrently with the Offering and which provides, among other
things, for the automatic exchange of each share of Class A common stock, Class
B common stock and Class C common stock outstanding on the effective date for
three (3) shares of a new, single class of common stock. See "Certain
Transactions -- Recapitalization" in Part I for a more detailed description of
the transaction. The Company is relying upon the exemption from registration
provided in Section 3(a)(9) of the Securities Act of 1933 based upon the fact
that all shares of the new class of common stock will only be issued to existing
stockholders of the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as exhibits to this Registration
Statement as required by Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
<C> <S> <C>
1.1 -- Form of Underwriting Agreement.*
3.1 -- Masada Security Holdings, Inc. Third Restated Certificate of Incorporation dated
June 28, 1996.
3.2 -- Certificate of Amendment to the Certificate of Incorporation of Masada Security
Holdings, Inc. dated September 30, 1996.
3.3 -- Masada Security Holdings, Inc. Fourth Restated Certificate of Incorporation
(proposed).
3.4 -- Masada Security Holdings, Inc. ByLaws.
3.5 -- Masada Security Holdings, Inc. Plan of Reorganization dated September 27, 1996.
</TABLE>
II-2
<PAGE> 92
<TABLE>
<CAPTION>
<S> <C> <C>
4.1 -- Provisions in the Masada Security Holdings, Inc. Fourth Restated Certificate of
Incorporation and ByLaws defining the rights of holders of its Common Stock.
4.2 -- Second Amended and Restated Securities Purchase Agreement dated May 31, 1995
among Masada Security Holdings, Inc. and Certain Purchasers.
4.3 -- Third Amended and Restated Securities Purchase Agreement dated September 30, 1996
among Masada Security Holdings, Inc. and Certain Purchasers.
4.4 -- Specimen Stock Certificate
5.1 -- Opinion of Burr & Forman as to the legality of the securities being registered.*
9.1 -- MSAM, Inc. 1994 Voting Trust Agreement.
10.1 -- Restated and Amended Masada Security Holdings, Inc. 1996 Stock Option Plan
10.2 -- Stock Option/Purchase Plan of Masada Security Holdings, Inc., including First
Amendment and Second Amendment.
10.3 -- Sonitrol Dealer Franchise Agreement between Sonitrol Southeast, Inc. and Masada
Security Limited Partnership dated December 23, 1988 for Dade County, Florida.
10.3(a) -- Sonitrol Dealer Franchise Agreement between Sonitrol Southeast, Inc. and Masada
Security Limited Partnership dated February 26, 1993 for Broward County, Florida.
10.3(b) -- Agreement and Approval of the Assumption of the two Sonitrol Dealer Franchise
Agreements by Masada Security, Inc. effective February 11, 1994.
10.4 -- Lease Agreement by and between Birmingham-Jefferson Civic Center Authority and
Masada Security, Inc. dated June 7, 1994, including amendments (4).
10.5 -- Asset Purchase Agreement by and between Masada Security, Inc. and Kenmar
Electronics, Inc. d/b/a Houston Alarm dated October 27, 1994.
10.5(a) -- Escrow Agreement by and among Masada Security, Inc., Kenmar Electronics, Inc.
d/b/a Houston Alarm and Texas Commerce Bank, National Association, dated November
1, 1994.
10.5(b) -- Non-Competition Agreement by and between Masada Security, Inc. and Kenmar
Electronics, Inc. d/b/a Houston Alarm dated November 1, 1994.
10.5(c) -- Non-Competition Agreement by and between Masada Security, Inc. and Forrest W.
Jenkins dated November 1, 1994.
10.5(d) -- Non-Competition Agreement by and between Masada Security, Inc. and Robert E.
Jenkins dated November 1, 1994.
10.5(e) -- Non-Competition Agreement by and between Masada Security, Inc. and Russell S.
Vail dated November 1, 1994.
10.6 -- Asset Purchase Agreement by and between Masada Security, Inc. and Global
Security, Inc. dated April 14, 1995
10.6(a) -- Escrow Agreement by and between Masada Security, Inc. and Global Security, Inc.
dated May 5, 1995
10.6(b) -- Non-Solicitation Agreement by and between Masada Security, Inc. and Global
Security, Inc. dated May 5, 1995
10.6(c) -- Non-Solicitation Agreement by and between Masada Security, Inc. and Casey
Slawinski dated May 5, 1995
10.6(d) -- Non-Solicitation Agreement by and between Masada Security, Inc. and Tim C.
Mitchell dated May 5, 1995
10.6(e) -- Monitoring Agreement by and between Masada Security, Inc. and Global Security,
Inc. dated April 14, 1995
10.7 -- Asset Purchase Agreement by and between Masada Security, Inc. and Alert Centre,
Inc. dated June 15, 1995
</TABLE>
II-3
<PAGE> 93
<TABLE>
<CAPTION>
<S> <C> <C>
10.7(a) -- Non-Solicitation Agreement by and between Masada Security, Inc. and Alert Centre,
Inc. dated June 15, 1995
10.7(b) -- Escrow Agreement by and between Masada Security, Inc. and Buchannan Ingersol
Professional Corporation dated June 15, 1995
10.7(c) -- Subcontractor Agreement by and between Masada Security, Inc. and Alert Centre,
Inc. dated June 15, 1995
10.7(d) -- Third Party Monitoring Agreement by and between Masada Security, Inc. and Alert
Centre, Inc. dated June 15, 1995
10.7(e) -- Third Party Monitoring Agreement by and between Masada Security, Inc. and Alert
Centre, Inc. dated June 15, 1995
10.8 -- Asset Purchase Agreement by and between Masada Security, Inc. and GRB Security
Systems dated June 29, 1995
10.8(a) -- Escrow Agreement by and among Masada Security, Inc., GRB Security Systems and
SouthTrust Bank of Alabama, N.A. dated June 29, 1995
10.8(b) -- Non-Solicitation Agreement by and between Masada Security, Inc. and GRB Security
Systems dated June 29, 1995
10.9 -- Asset Purchase Agreement by and between Masada Security, Inc. and Deltron, Inc.
d/b/a San Antonio Alarm dated June 30, 1995
10.9(a) -- Escrow Agreement by and among Masada Security, Inc., Deltron, Inc. d/b/a San
Antonio Alarm and SouthTrust Bank of Alabama, N.A. dated June 30, 1995
10.9(b) -- Non-Solicitation Agreement by and between Masada Security, Inc. and Deltron, Inc.
d/b/a San Antonio Alarm dated June 30, 1995
10.9(c) -- Non-Solicitation Agreement by and between Masada Security, Inc. and Stephen W.
Biediger dated June 30, 1995
10.10 -- Asset Purchase Agreement by and between Masada Security, Inc. and Network Multi-
Family Security Corporation dated July 26, 1995
10.10(a) -- Escrow Agreement by and between Masada Security, Inc. and Network Multi-Family
Security Corporation dated July 26, 1995
10.10(b) -- Non-Solicitation Agreement by and between Masada Security, Inc. and Network
Multi-Family Security Corporation dated July 26, 1995
10.11 -- Asset Purchase Agreement by and between Masada Security, Inc. and Tel*Star
Cellular Corporation dated September 1, 1995
10.11(a) -- Escrow Agreement by and among Masada Security, Inc., Tel*Star Cellular
Corporation and SouthTrust Bank of Alabama, N.A. dated September 11, 1995
10.11(b) -- Noncompetition, Nonsolicitation and Nondisclosure Agreement by and among Masada
Security, Inc., Tel*Star Cellular Corporation, Guy W. Steele, John P. Thompson,
Kent McClure, David Sessions and Ron Serber dated September 11, 1995
10.12 -- Asset Purchase Agreement by and between Masada Security, Inc. and Alarm Data
Group, Inc. dated September 22, 1995
10.12(a) -- Escrow Agreement by and among Masada Security, Inc., Alarm Data Group, Inc. and
SouthTrust Bank of Alabama, N.A. dated September 29, 1995
10.12(b) -- Noncompetition, Nonsolicitation and Nondisclosure Agreement by and between Masada
Security, Inc., Alarm Data Group, Inc. and Dennis V. Riley dated September 22,
1995
10.12(c) -- Monitoring Agreement by and between Masada Security, Inc. and Alarm Data Group,
Inc. dated September 29, 1995
10.13 -- Asset Purchase Agreement by and between Masada Security, Inc. And LaFayette
Security And Electronics Systems, Inc. dated September 11, 1995
</TABLE>
II-4
<PAGE> 94
<TABLE>
<CAPTION>
<S> <C> <C>
10.13(a) -- Escrow Agreement by and between Masada Security, Inc., LaFayette Security And
Electronics Systems, Inc. and SouthTrust Bank of Alabama, N.A. dated October 10,
1995
10.13(b) -- Noncompetition, Nonsolicitation and Nondisclosure Agreement by and among Masada
Security, Inc., LaFayette Security And Electronics Systems, Inc. and Cliff C.
Northon dated October 10, 1995
10.13(c) -- Consulting Agreement by and between Masada Security, Inc. and Cliff C. Northon
dated October 10, 1995
10.13(d) -- Monitoring Agreement by and between Masada Security, Inc. and LaFayette Security
And Electronics Systems, Inc. dated October 10, 1995
10.14 -- Asset Purchase Agreement by and between Masada Security, Inc. and The 593
Corporation d/b/a Classic Alarms dated November 2, 1995
10.14(a) -- Tax Indemnity Escrow Agreement by and between Masada Security, Inc. and The 593
Corporation d/b/a Classic Alarms dated November 2, 1995
10.14(b) -- Attrition Escrow Agreement by and among Masada Security, Inc., The 593
Corporation d/b/a Classic Alarm and SouthTrust Bank of Alabama, N.A. dated
November 2, 1995
10.14(c) -- Non-Solicitation Agreement by and among Masada Security, Inc., The 593
Corporation d/b/a Classic Alarm, Anthony T. Mandina, Edgar Corey and Alvin C.
Beaudean dated November 2, 1995
10.15 -- Stock Purchase Agreement by and between Masada Security, Inc., Paul Kristynik and
Mary Kristynik dated January 8, 1996
10.15(a) -- Escrow Agreement by and among Masada Security, Inc., Paul Kristynik and Mary
Kristynik, and SouthTrust Bank of Alabama, N.A. dated January 9, 1996
10.15(b) -- Noncompetition, Nonsolicitation and Nondisclosure Agreement by and between Masada
Security, Inc., Paul Kristynik and Mary Kristynik dated January 8, 1996
10.15(c) -- Consulting Agreement by and between Masada Security, Inc. and Paul Kristynik
dated January 8, 1996
10.16 -- Asset Purchase and Sale Agreement by and between Masada Security, Inc. and Harvey
Sender, as trustee for the bankruptcy estates of InterCap Funds Joint Venture,
Security Data Group of California, Inc., and IMIF IV-C Service Corp. dated March
27, 1996
10.16(a) -- Escrow Agreement by and among Masada Security, Inc., Harvey Sender, as trustee
for the bankruptcy estates of InterCap Funds Joint Venture, Security Data Group
of California, Inc., and IMIV IV-C Service Corp., and SouthTrust Bank of Alabama,
N.A. dated March 28, 1996
10.16(b) -- Noncompetition, Nonsolicitation and Nondisclosure Agreement by and among Masada
Security, Inc. and Harvey Sender, as trustee for the bankruptcy estates of
InterCap Funds Joint Venture, Security Data Group of California, Inc., and IMIV
IV-C Service Corp. dated March 28, 1996.
10.16(c) -- Acquired Accounts Monitoring Agreement between Masada Security, Inc., Harvey
Sender, as Trustee for the bankruptcy estates of InterCap Joint Venture, Security
Data Group of California, Inc., and IMIF IV-C Service Corp. dated March 28, 1996.
10.16(d) -- Rejected Accounts Monitoring Agreement between Masada Security, Inc., Harvey
Sender, as Trustee for the bankruptcy estates of InterCap Joint Venture, Security
Data Group of California, Inc., and IMIF IV-C Service Corp. dated March 28, 1996.
10.17 -- Credit Agreement by and among Masada Security, Inc., CIBC Inc., SunTrust Bank,
Central Florida, N.A. and Canadian Imperial Bank of Commerce, New York Agency
dated March 28, 1996
10.17(a) -- Security and Pledge Agreement by and between Masada Security, Inc., and Canadian
Imperial Bank of Commerce, New York Agency dated March 28, 1996
</TABLE>
II-5
<PAGE> 95
<TABLE>
<CAPTION>
<S> <C> <C>
10.17(b) -- Pledge Agreement by and among Masada Security Holdings, Inc. and Canadian
Imperial Bank of Commerce, New York Agency dated March 28, 1996
10.17(c) -- Amendment to Credit Agreement and Certain Other Documents by and among Masada
Security, Inc., CIBC Inc., SunTrust Bank, Central Florida, N.A. and Canadian
Imperial Bank of Commerce, New York Agency dated June 4, 1996.
10.17(d) -- Second Amendment to Credit Agreement by and among Masada Security, Inc., CIBC
Inc., SunTrust Bank, Central Florida, N.A. and Canadian Imperial Bank of
Commerce, New York Agency dated August 9, 1996.
10.18 -- Stock Purchase Agreement by and among Masada Security, Inc. and Russell B. Jones,
Robert S. Moses, David R. Donnelly and Ronald G. Walters dated May 31, 1996.
10.18(a) -- Amendment to Stock Purchase Agreement by and among Masada Security, Inc. and
Russell B. Jones, Robert S. Moses, David R. Donnelly and Ronald G. Walters dated
June 4, 1996.
10.18(b) -- Escrow Agreement by and among Masada Security, Inc. and SunTrust Bank, Central
Florida, National Association, dated June 3, 1996.
10.19 -- Agreement between Masada Security, Inc. and Centennial Security, Inc. dated as of
June 10, 1994.
10.20 -- Purchase Agreement among Centennial Security, Inc., Masada Security, Inc. and
Certain Stockholders of Centennial Security, Inc. dated as of June 10, 1994.
10.21 -- Trademark and Intellectual Property Agreement between Masada Security, Inc. and
Centennial Security, Inc. dated as of June 10, 1994.
10.22 -- Amendment Agreement between Masada Security, Inc. and Centennial Security, Inc.
dated as of June 23, 1995.
10.23 -- Series B Preferred Stock Purchase Agreement by and among Centennial Security,
Inc. and Centennial Fund IV, L.P., Chemical Venture Capital Associates, Hancock
Venture Partners IV-Direct Fund L.P., Larimer & Co. and Masada Security, Inc.
dated July 11, 1995.
10.24 -- Registration Agreement by and among Centennial Security, Inc. and Centennial Fund
IV, L.P., Chemical Venture Capital Associates, Hancock Venture Partners IV-Direct
Fund L.P., Larimer & Co., Masada Security, Inc. and Robert J. Shiver dated July
11, 1995.
10.25 -- Stockholders Agreement by and among and Centennial Fund IV, L.P., Chemical
Venture Capital Associates, Hancock Venture Partners IV-Direct Fund L.P., Larimer
& Co., Masada Security, Inc., Robert J. Shiver, Catherine Merigold and Steven
Schovee dated July 11, 1995.
10.26 -- Masada Security Holdings, Inc. 1997 Stock Option Plan.
16.1 -- Letter from Coopers & Lybrand LLP (if any).*
21.1 -- Subsidiaries of Masada Security Holdings, Inc.
23.1 -- Consent of Ernst & Young LLP, independent auditors to Masada Security Holdings,
Inc.
23.2 -- Consent of Burr & Forman (contained in the opinion included at Exhibit 5.1)*
24.1 -- Power of Attorney of certain officers and directors of the Company (contained on
the signature page of the Registration Statement as originally filed on October
4, 1996)
27.1 -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
* To be filed by amendment.
(b) No Financial Statement Schedules of Item 11(e) of Regulation S-X are
required to be included in this Registration Statement.
II-6
<PAGE> 96
ITEM 17. UNDERTAKINGS
1. The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
2. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
registrant as described in Item 14 or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
3. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 97
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Birmingham, State of
Alabama, on October 1, 1996.
MASADA SECURITY HOLDINGS, INC.
By: /s/ TERRY W. JOHNSON
------------------------------------
Terry W. Johnson
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Terry W. Johnson and David P. Tomick, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement and any related registration statement filed pursuant to Rule 462 of
the Securities Act of 1933 or otherwise, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------- ---------------------------------- ----------------
<S> <C> <C>
/s/ TERRY W. JOHNSON Chairman of the Board, President October 1, 1996
- ------------------------------------------------- and Chief Executive Officer
Terry W. Johnson (principal executive officer)
/s/ DAVID P. TOMICK Vice President, Chief Financial October 1, 1996
- ------------------------------------------------- Officer and Treasurer (principal
David P. Tomick financial officer)
/s/ CATHY M. ANTEE Secretary (principal accounting October 1, 1996
- ------------------------------------------------- officer)
Cathy M. Antee
/s/ O. GENE GABBARD Director October 1, 1996
- -------------------------------------------------
O. Gene Gabbard
/s/ I. ROBERT GREENE Director October 1, 1996
- -------------------------------------------------
I. Robert Greene
/s/ STEVEN C. HALSTEDT Director October 1, 1996
- -------------------------------------------------
Steven C. Halstedt
/s/ DARYL E. HARMS Director October 1, 1996
- -------------------------------------------------
Daryl E. Harms
/s/ WILLIAM A. JOHNSTON Director October 1, 1996
- -------------------------------------------------
William A. Johnston
</TABLE>
II-8
<PAGE> 98
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------- ---------------------------------- ----------------
<S> <C> <C>
/s/ JOHN M. KARK Director October 1, 1996
- -------------------------------------------------
John M. Kark
/s/ BERTIL D. NORDIN Director October 1, 1996
- -------------------------------------------------
Bertil D. Nordin
/s/ GEORGE J. STILL, JR. Director October 1, 1996
- -------------------------------------------------
George J. Still, Jr.
</TABLE>
II-9
<PAGE> 1
Exhibit 3.1
THIRD RESTATED
CERTIFICATE OF INCORPORATION
OF
MASADA SECURITY HOLDINGS, INC.
Masada Security Holdings, Inc., a corporation organized and existing
under and by virtue of the Delaware General Corporation Law,
DOES HEREBY CERTIFY:
That Masada Security Holdings, Inc. was originally incorporated under
the name Masada Security, Inc., and the original Certificate of Incorporation
of the corporation was filed with the Secretary of State of Delaware on January
28, 1993;
That the Board of Directors of Masada Security Holdings, Inc., by
unanimous written consent, duly adopted resolutions setting forth the Third
Restated Certificate of Incorporation of the corporation, which would restate
and integrate and further amend the provisions of the Certificate of
Incorporation of the corporation, declaring that adoption of said Third
Restated Certificate of Incorporation to be advisable and in the best interest
of said corporation, and declaring that said Third Restated Certificate of
Incorporation be considered by the stockholders of said corporation at a
meeting of stockholders of said corporation called for that purpose;
That the stockholders of Masada Security Holdings, Inc., by unanimous
written consent, adopted and approved the said Third Restated Certificate of
Incorporation in accordance with the provisions of Section 228 of the Delaware
General Corporation Law;
That said Third Restated Certificate of Incorporation was duly adopted
in accordance with the provisions of Sections 242 and 245 of the Delaware
General Corporation Law;
That the capital of Masada Security Holdings, Inc. shall not be
reduced under or by reason of said Third Restated Certificate of Incorporation;
and,
That the text of the Third Restated Certificate of Incorporation of
Masada Security Holdings, Inc. is hereby restated and integrated and is further
amended to read in its entirety as follows:
1. NAME. The name of the Corporation is Masada Security
Holdings, Inc.
2. DURATION. The period of duration of the Corporation shall be
perpetual.
<PAGE> 2
3. PURPOSES. The nature of the business and the objects and
purposes proposed to be transacted, promoted and carried on are to do any or
all the things herein mentioned, as fully and to the same extent as natural
persons might or could do, and in any part of the world, and to engage in any
lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law.
4. CAPITAL STOCK.
(a) Authorized Capital Stock. The total number of shares of stock
which the Corporation shall have authority to issue is 2,818,326 shares,
consisting of 1,898,183 shares of Common Stock, par value $.01 per share (the
"Common Stock"), and 920,143 shares of Preferred Stock, par value $.01 per
share (the "Preferred Stock"). The Common Stock herein authorized shall be
divided into three classes as follows: 333,500 shares of Class A Common Stock;
1,078,572 shares of Class B Common Stock; and 486,111 shares of Class C Common
Stock. The Preferred Stock herein authorized shall be divided into three
classes as follows: 75,700 shares of Class A Preferred Stock; 358,332 shares of
Class B Convertible Preferred Stock; and 486,111 shares of Class C Convertible
Preferred Stock (the Class B Convertible Preferred Stock and the Class C
Convertible Preferred Stock are hereinafter collectively referred to as the
"Convertible Preferred Stock").
(b) Dividend and Redemption Rights.
(i) The holders of the issued and outstanding shares of
Class A Preferred Stock shall be entitled to receive out of the assets of the
Corporation that are available by law for the payment of dividends, when, as
and if declared by the board of directors, cumulative cash dividends payable
quarterly on March 31, June 30, September 30 and December 31 of each year, with
the first such payment date being March 31, 1995. Dividends shall commence to
accrue with reference to the liquidation preference value ($100.00) of each
share of Class A Preferred Stock on the second anniversary of the date of its
issuance (and shall be cumulative whether or not there shall be net profits,
net assets, earned surplus, paid-in surplus or surplus arising from reduction
of stated capital legally available for the payment of such dividends).
Dividends on the Class A Preferred Stock shall accrue at an annual rate of six
percent (6%) on and after the second anniversary through the fifth anniversary
of the date of issuance and at an annual rate of twelve percent (12%)
thereafter based upon the actual days elapsed over a three hundred sixty-five
(365) day year. All dividends declared and paid upon shares of Class A
Preferred Stock shall be declared and paid based on the relative dividends
accrued and unpaid thereon.
(ii) The shares of Class A Preferred Stock may be
redeemed, in whole or in part, at the option of the Corporation by vote of its
board of directors, at any time and from time to time, at $100.00 per share
plus accrued and unpaid dividends thereon. In the case of the redemption of
only a part of the outstanding shares of Class A Preferred Stock, such shares
are to be redeemed from the holders thereof pro rata.
2
<PAGE> 3
(iii) The shares of Class A Preferred Stock shall be
subject to mandatory redemption in the amounts and at the times described
below, unless such redemption is Contractually Precluded (as hereinafter
defined):
(A) All of the outstanding shares of Class A
Preferred Stock shall be redeemed following the occurrence of an Event of
Non-Compliance (as hereinafter defined) if demand for redemption is made by the
holders of sixty percent (60%) of the then outstanding shares of Class A
Preferred Stock;
(B) 37,850 shares of Class A Preferred Stock
(less all shares that have theretofore been redeemed) shall be redeemed on
December 31, 1998; and
(C) All of the then outstanding shares of Class A
Preferred Stock shall be redeemed on December 31, 1999.
The redemption price for each share of Class A Preferred Stock shall be equal
to $100.00 per share plus accrued and unpaid dividends through the date of
redemption. In the case of the redemption of only a part of the outstanding
shares of Class A Preferred Stock, such shares are to be redeemed from the
holders thereof pro rata.
(iv) At least thirty (30) days prior to any date fixed for
optional redemption under Article 4(b)(ii) or mandatory redemption under
Article 4(b)(iii), the board of directors shall cause a written notice to be
mailed to each holder of record of Class A Preferred Stock, postage prepaid,
addressed to such holder at his post office address as shown on the records of
the Corporation, notifying such holder of the election or requirement, as the
case may be, of the Corporation to redeem such shares, stating the date fixed
for redemption thereof, and calling upon such holder to surrender to the
Corporation on such date at the place designated his certificate or
certificates representing the number of shares of Class A Preferred Stock
specified in such notice of redemption. On or after the date fixed in such
notice of redemption, each holder of Class A Preferred Stock to be redeemed
shall present and surrender his certificate or certificates representing such
shares to the Corporation at the place designated in such notice, and thereupon
the redemption price for such shares shall be payable to or on the order of the
person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be canceled. In case less than
all of the shares of Class A Preferred Stock represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(v) So long as any shares of Class A Preferred Stock
shall remain outstanding and except as provided in Article 4(h), the
Corporation shall not redeem or purchase any shares of any class of Common
Stock or of any other class of stock or series thereof ranking junior to or on
a parity with Class A Preferred Stock in respect of liquidation preferences or
set aside or make available monies for any such redemption or purchase through
a sinking fund or otherwise, except
3
<PAGE> 4
as agreed to by the holders of sixty percent (60%) of the outstanding shares of
Class A Preferred Stock.
(vi) Notwithstanding any other provision in this Third
Restated Certificate of Incorporation to the contrary, so long as any Class A
Preferred Stock shall remain outstanding, no dividend or distribution of any
kind whatsoever shall be declared or paid upon or set apart for any class of
Common Stock or any other class of stock or series thereof ranking junior to or
on a parity with the Class A Preferred Stock in respect of liquidation
preferences by the Corporation, unless approved by the holders of sixty percent
(60%) of the outstanding shares of Class A Preferred Stock. Subject to the
foregoing provisions, the holders of any class of Common Stock shall be
entitled to receive dividends, when and as declared by the board of directors,
to the exclusion of the holders of Class A Preferred Stock. No class of Common
Stock shall have priority over any other class of Common Stock with respect to
dividends. Dividends may be declared on one class of Common Stock only
simultaneously with the declaration of dividends on all other classes of Common
Stock and the dividends on one class of Common Stock shall be equal to the
dividends declared on each of the other classes of Common Stock.
(vii) The holders of Class B Convertible Preferred Stock
shall be entitled to receive (x) dividends (other than liquidating dividends)
declared on Class B Common Stock as if such holders had exercised their options
to convert all of their shares of Class B Convertible Preferred Stock into
shares of Class B Common Stock as provided in Article 4(c) immediately before
the record date and (y) liquidating dividends payable in accordance with
Article 4(d).
(viii) The holders of Class C Convertible Preferred Stock
shall be entitled to receive (x) dividends (other than liquidating dividends)
declared on Class C Common Stock as if such holders had exercised their options
to convert all of their shares of Class C Convertible Preferred Stock into
shares of Class C Common Stock as provided in Article 4(c) immediately before
the record date and (y) liquidating dividends payable in accordance with
Article 4(d).
(c) Conversion of Convertible Preferred Stock.
(i) Class B Convertible Preferred Stock.
(1) Shares of Class B Convertible Preferred Stock
shall be convertible at any time, and from time to time, at the option of the
holder thereof, into shares of Class B Common Stock at the rate of one share of
Class B Common Stock for one share of Class B Convertible Preferred Stock,
subject to adjustment as provided herein.
(2) In case of the issuance of any shares of
stock as a dividend upon the shares of Class B Common Stock or in the case of
any subdivision, stock split or reverse stock split whose only effect is either
(1) to increase in the same proportion the outstanding number of shares of
Class B Common Stock then held or (2) to decrease in the same proportion the
outstanding number of shares of Class B Common Stock then held, the number of
shares of Class
4
<PAGE> 5
B Common Stock into which the shares of Class B Convertible Preferred Stock may
be converted shall be appropriately adjusted in such manner and to such extent
as the board of directors determines necessary to ensure that the rights of the
holders of Class B Common Stock and the holders of Class B Convertible
Preferred Stock will not be diluted as a result of any such stock dividend,
subdivision, stock split or reverse stock split.
(3) Except for issuances or sales of up to
150,000 shares of Class B Common Stock (subject to adjustment for stock
dividends, stock splits and reverse stock splits occurring after the date
hereof) pursuant to stock option plans or stock purchase plans adopted by the
board of directors for the management employees, consultants, and/or directors
of the Corporation and/or the management employees and/or consultants of Masada
(as hereinafter defined) (the "Stock Option Plans"), in the case of the sale of
any shares of any class of Common Stock or securities convertible into shares
of any class of Common Stock ("Common Stock Equivalents") after the date hereof
for a price less than $24.00 per share of Common Stock or its equivalent if
Common Stock Equivalents are sold (such $24.00 per share price to be adjusted
for stock dividends, stock splits and reverse stock splits occurring after the
date hereof), the number of shares of Class B Common Stock into which the
shares of Class B Convertible Preferred Stock may be converted shall be
adjusted in a manner that adjusts for the weighted average dilutive effect of
such sale as hereinafter provided. The number of shares of Class B Common
Stock into which each share of Class B Convertible Preferred Stock may be
converted (the "Class B Conversion Ratio") shall be determined by multiplying
the Class B Conversion Ratio in effect immediately prior to the sale giving
rise to the adjustment by a fraction, the numerator of which is the sum of (x)
the number of shares of Common Stock or Common Stock Equivalents outstanding
immediately prior to such sale and (y) the number of additional shares of
Common Stock or Common Stock Equivalents issued in respect of such sale, and
the denominator of which is the sum of (x) the number of shares of Common Stock
or Common Stock Equivalents outstanding immediately prior to such sale and (y)
the number of shares of Common Stock or Common Stock Equivalents which the
aggregate consideration received by the Corporation for such sale would
purchase at a price of $24.00 per share of Common Stock or Common Stock
Equivalent, provided that the Class B Conversion Ratio shall not be increased
such that the effective price paid per share of Common Stock upon conversion
would be less than $.01. No sale of Common Stock or Common Stock Equivalents
shall operate to decrease the Class B Conversion Ratio. The Class B Conversion
Ratio as of the date hereof is 1.0. The Corporation shall transmit to each
holder of Class B Convertible Preferred Stock notice of each change in the
Class B Conversion Ratio required by the provisions hereof, along with a
detailed computation of such change. The notice shall be certified as true and
correct by an officer of the Corporation and shall be transmitted no later than
ten (10) days after the applicable sale is authorized by the board of
directors.
(ii) Class C Convertible Preferred Stock.
(1) Shares of Class C Convertible Preferred Stock
shall be convertible at any time, and from time to time, at the option of the
holder thereof, into shares of Class C
5
<PAGE> 6
Common Stock at the rate of one share of Class C Common Stock for one share of
Class C Convertible Preferred Stock, subject to adjustment as provided herein.
(2) In case of the issuance of any shares of
stock as a dividend upon the shares of Class C Common Stock or in the case of
any subdivision, stock split or reverse stock split whose only effect is either
(1) to increase in the same proportion the outstanding number of shares of
Class C Common Stock then held or (2) to decrease in the same proportion the
outstanding number of shares of Class C Common Stock then held, the number of
shares of Class C Common Stock into which the shares of Class C Convertible
Preferred Stock may be converted shall be appropriately adjusted in such manner
and to such extent as the board of directors determines necessary to ensure
that the rights of the holders of Class C Common Stock and the holders of Class
C Convertible Preferred Stock will not be diluted as a result of any such stock
dividend, subdivision, stock split or reverse stock split.
(3) Except for issuances or sales of up to
150,000 shares of Class B Common Stock (subject to adjustment for stock
dividends, stock splits or reverse stock splits occurring after the date
hereof) pursuant to Stock Option Plans, in the case of the sale of any shares
of any class of Common Stock or Common Stock Equivalents after the date hereof
for a price less than $36.00 per share of Common Stock or its equivalent if
Common Stock Equivalents are sold (such $36.00 per share price to be adjusted
for stock dividends, stock splits and reverse stock splits occurring after the
date hereof), the number of shares of Class C Common Stock into which the
shares of Class C Convertible Preferred Stock may be converted shall be
adjusted in a manner that adjusts for the weighted average dilutive effect of
such sale as hereinafter provided. The number of shares of Class C Common
Stock into which each share of Class C Convertible Preferred Stock may be
converted (the "Class C Conversion Ratio") shall be determined by multiplying
the Class C Conversion Ratio in effect immediately prior to the sale giving
rise to the adjustment by a fraction, the numerator of which is the sum of (x)
the number of shares of Common Stock or Common Stock Equivalents outstanding
immediately prior to such sale and (y) the number of additional shares of
Common Stock or Common Stock Equivalents issued in respect of such sale, and
the denominator of which is the sum of (x) the number of shares of Common Stock
or Common Stock Equivalents outstanding immediately prior to such sale and (y)
the number of shares of Common Stock or Common Stock Equivalents which the
aggregate consideration received by the Corporation for such sale would
purchase at a price of $36.00 per share of Common Stock or Common Stock
Equivalent, provided that the Class C Conversion Ratio shall not be increased
such that the effective price paid per share of Common Stock upon conversion
would be less than $.01. No sale of Common Stock or Common Stock Equivalents
shall operate to decrease the Class C Conversion Ratio. For the avoidance of
doubt, the Class C Conversion Ratio as of the date hereof is 1.0. The
Corporation shall transmit to each holder of Class C Convertible Preferred
Stock notice of each change in the Class C Conversion Ratio required by the
provisions hereof, along with a detailed computation of such change. The
notice shall be certified as true and correct by an officer of the Corporation
and shall be transmitted no later than ten (10) days after the applicable sale
is authorized by the board of directors.
6
<PAGE> 7
(iii) General Provisions.
(1) The Corporation shall have the authority to
issue fractional shares of Class B Common Stock and Class C Common Stock, as
the case may be, in connection with the conversion of Convertible Preferred
Stock.
(2) So long as any shares of Convertible
Preferred Stock are outstanding, the board of directors and the stockholders
shall authorize and the Corporation shall reserve and keep available out of its
duly authorized but unissued stock such number of shares of Class B Common
Stock and/or Class C Common Stock as shall be sufficient to effect the
conversion of all outstanding shares of Convertible Preferred Stock.
(3) Convertible Preferred Stock shall be
automatically converted into Class B Common Stock or Class C Common Stock, as
the case may be, in the event the Corporation completes a Qualified Public
Offering (as hereinafter defined). The Corporation shall provide written
notice to the holders of Convertible Preferred Stock within thirty (30) days of
the events giving rise to such automatic conversion and instructing such
holders to surrender to the Corporation their certificates representing the
shares of Convertible Preferred Stock that have been converted, duly endorsed
in blank or accompanied by proper instruments of transfer. Upon receipt of
such certificates at the place where the Corporation shall maintain its
principal transfer agency for its capital stock, the Corporation shall issue to
the holders certificates for such number of shares of Class B Common Stock or
Class C Common Stock, as the case may be, to which such holders shall be
entitled, and the shares of Convertible Preferred Stock shall be cancelled and
shall not be reissued. Upon the occurrence of the events giving rise to
automatic conversion, shares of Convertible Preferred Stock shall be deemed to
be such number of shares of Class B Common Stock or Class C Common Stock, as
the case may be, into which the shares of Convertible Preferred Stock shall
have been automatically converted, notwithstanding any delay in completing the
procedures set forth above.
(4) The options to convert Convertible Preferred
Stock shall be exercised by surrendering for such purpose to the Corporation,
at the place where the Corporation shall maintain its principal transfer agency
for its capital stock, certificates representing the shares to be converted,
duly endorsed in blank or accompanied by proper instruments of transfer,
together with written notice of election to convert, and at the time of such
surrender of shares of Convertible Preferred Stock, the person exercising such
option to convert shall be deemed to be the holder of record of the shares of
Class B Common Stock or Class C Common Stock, as the case may be, issuable upon
such conversion, notwithstanding that the share register of the Corporation
shall then be closed or the certificates representing such shares of Class B
Common Stock or Class C Common Stock, as the case may be, shall not then be
actually delivered to such person.
(5) The Corporation shall, as soon as practicable
after such surrender of certificates for conversion, issue and deliver to the
person exercising the conversion option
7
<PAGE> 8
certificates for such number of shares of Class B Common Stock or Class C
Common Stock, as the case may be, to which such person shall be entitled.
Shares of Convertible Preferred Stock surrendered and converted shall be
cancelled and shall not be reissued.
(d) Rights on Liquidation and Other Events. In the event of (A)
the liquidation or dissolution of the Corporation, whether voluntary or
involuntary, (B) the sale of all or substantially all of the assets of the
Corporation, (C) the consolidation or merger of the Corporation with or into
another corporation wherein the Corporation does not survive, or (D) any other
form of business combination or reorganization in which more than fifty percent
(50%) of the voting control of the Corporation is transferred, the assets of
the Corporation (or the securities and assets of the surviving corporation
received in connection with any such merger or consolidation) remaining after
any required payment of liabilities or the establishment of reserves (as
required by generally accepted accounting principles, consistently applied) for
such purpose shall be distributed to the stockholders of the Corporation in the
following order of priority:
(i) first, to the holders of outstanding shares of Class
C Convertible Preferred Stock, in an amount equal to $36.00 per share, plus any
accrued and unpaid dividends thereon;
(ii) second, to the holders of outstanding shares of Class
B Convertible Preferred Stock, an amount equal to $24.00 per share, plus any
accrued and unpaid dividends thereon;
(iii) third, to the holders of outstanding shares of Class
A Preferred Stock, in an amount equal to $100.00 per share plus accumulated but
unpaid dividends calculated as provided in Article 4(b)(i);
(iv) fourth, to the holders of outstanding shares of Class
A Common Stock and the holders of Class B Common Stock, the aggregate sum of
$16,480,000, to be allocated among such holders proportionately based upon the
number of shares held (holders of Convertible Preferred Stock do not
participate in the distribution under this subparagraph (iv) on an as-converted
basis); and
(v) fifth, the remainder, if any, to the holders of any
class of Common Stock in proportion to the number of shares held; provided,
however, for the limited purpose of participating in the distribution under
this subparagraph (v), the holders of Convertible Preferred Stock shall be
deemed to have exercised their options to convert all of their Convertible
Preferred Stock into shares of Class B Common Stock or Class C Common Stock, as
the case may be, as provided in Article 4(c) immediately prior to such
distribution.
If the assets of the Corporation available for distribution to its
stockholders shall be insufficient to permit the payment in full of the amount
due within any of categories (i), (ii), (iii) or (iv) above, the assets
available for distribution shall be allocated proportionately among the holders
of the class or classes of stock identified in such applicable category based
upon the
8
<PAGE> 9
number of shares held. The fair market value of any assets of the Corporation
and the proportion of cash and other assets distributed by the Corporation to
the holders of the issued and outstanding shares of the Corporation's capital
stock shall be reasonably determined in good faith by the board of directors.
(e) Voting Rights.
(i) Except as otherwise provided by law or in this
Article 4 or otherwise expressly provided in this Third Restated Certificate of
Incorporation, voting rights for all purposes shall be vested exclusively in
the holders of the issued and outstanding shares of Common Stock; provided,
however, with respect to all matters to be voted upon by holders of Class B
Common Stock, whether separately as a class, or in conjunction with the holders
of other classes of Common Stock, the holders of the issued and outstanding
shares of Class B Convertible Preferred Stock shall be deemed to hold the
number of shares of Class B Common Stock into which the shares of Class B
Convertible Preferred Stock may be converted at the time any vote is taken; and
further provided, with respect to all matters to be voted upon by holders of
Class C Common Stock, whether separately as a class, or in conjunction with the
holders of other classes of Common Stock, the holders of the issued and
outstanding shares of Class C Convertible Preferred Stock shall be deemed to
hold the number of shares of Class C Common Stock into which the shares of
Class C Convertible Preferred Stock may be converted at the time any vote is
taken. Except as expressly specified otherwise, each reference in this Third
Restated Certificate of Incorporation or in the ByLaws to a vote by the holders
of Class B Common Stock shall include the vote of the holders of Class B
Convertible Preferred Stock, and each reference in this Third Restated
Certificate of Incorporation or in the ByLaws to a vote by the holders of Class
C Common Stock shall include the vote of the holders of Class C Convertible
Preferred Stock. Each holder of any shares of any class of Common Stock shall
have one (1) vote per share held. Except as otherwise required by law or in
this Article 4 or otherwise expressly provided in this Third Restated
Certificate of Incorporation, a majority vote of the holders of Common Stock
constituting a quorum shall be required to authorize, approve or take action
with respect to any matter brought before or requiring the consent or approval
of the stockholders. The holders of outstanding shares of Common Stock
constituting a majority of all votes represented by the issued and outstanding
shares of Common Stock at any time present in person or by proxy shall
constitute a quorum.
(ii) Notwithstanding the foregoing, and except as
otherwise provided in this Article 4, the board of directors shall consist of
nine (9) persons. In the event any holder of Class A Common Stock shall be
employed by or serve as a consultant to the Corporation or Masada, the board of
directors shall be comprised of (A) three (3) persons elected by the holders of
a majority of the issued and outstanding shares of Class A Common Stock voting
separately as a class, (B) two (2) persons elected by the holders of a majority
of the issued and outstanding shares of Class B Common Stock voting separately
as a class (without consideration of the shares of Class B Convertible
Preferred Stock on an "as converted" basis), (C) one (1) person elected by the
holders of a majority of the issued and outstanding shares of Class B
Convertible Preferred Stock voting separately as a class, (D) one (1) person
elected by the holders of a majority of the issued and
9
<PAGE> 10
outstanding shares of Class C Convertible Preferred Stock voting separately as
a class, and (E) two (2) Independent Directors (as hereinafter defined) elected
by the vote or consent of the holders of a majority of the issued and
outstanding shares of Class A Common Stock, Class B Common Stock and Class C
Common Stock, voting together as one class. In the event no holder of Class A
Common Stock shall be employed by or serve as a consultant to the Corporation
or Masada, the board of directors shall be comprised of (A) two (2) persons
elected by the holders of a majority of the issued and outstanding shares of
Class A Common Stock voting separately as a class, (B) three (3) persons
elected by the holders of a majority of the issued and outstanding shares of
Class B Common Stock voting separately as a class (without consideration of the
shares of Class B Convertible Preferred Stock on an "as converted" basis), (C)
one (1) person elected by the holders of a majority of the issued and
outstanding shares of Class B Convertible Preferred Stock voting separately as
a class, (D) one (1) person elected by the holders of a majority of the issued
and outstanding shares of Class C Convertible Preferred Stock voting separately
as a class, and (E) two (2) Independent Directors elected by the vote or
consent of the holders of a majority of the issued and outstanding shares of
Class A Common Stock, Class B Common Stock and Class C Common Stock, voting
together as one class.
(iii) The holders of a majority of the issued and
outstanding shares of Preferred Stock (who each shall have one vote per share
and cumulative voting rights in the designation and election thereof), voting
together as one class, may designate and elect additional directors in a number
not less than four (4) and not more than eight (8) (which number shall be
determined by the vote of the majority of the holders of the Preferred Stock)
if and when an Event of Non-Compliance (as hereinafter defined) occurs and
continues for a period of one hundred eighty (180) consecutive days.
Thereafter, the directors elected by the holders of Preferred Stock pursuant to
this Article 4(e)(iii) shall continue to serve (with any vacancy therein being
filled by the shares of Preferred Stock initially designating and electing each
such director) until one year shall have elapsed following the date on which no
Event of Non-Compliance shall have occurred or is continuing. The number of
additional directors to be designated and elected by the holders of Preferred
Stock shall be determined independently upon each occurrence and continuation
of an Event of Non-Compliance.
(iv) A director may be removed by the board of directors
or by the class or classes of stockholders that were empowered pursuant to this
Third Restated Certificate of Incorporation to elect such director. Any
vacancy created by removal or as a result of the death or resignation of a
director may be filled only by the class or classes of stockholders that were
empowered pursuant to this Third Restated Certificate of Incorporation to elect
such director. No class of stockholders shall have the power to remove, or to
fill any vacancy created by removal or as a result of the death or resignation
of, a director that was elected by the holders of a different class of stock.
(v) The number of directors present in person or by
telephone conference required to constitute a quorum shall be (A) six (6)
directors in the event that nine (9) or fewer directors are then serving and
(B) sixty percent (60%) of the directors then serving in the event
10
<PAGE> 11
additional directors have been appointed pursuant to Article 4(e)(iii), in each
case consisting of at least one (1) director elected by the Class A Common
Stock and at least two (2) of the directors elected by the holders of the Class
B Common Stock, the holders of the Class B Convertible Preferred Stock and/or
the holders of the Class C Convertible Preferred Stock. A vote by a majority
of all directors then serving on the board of directors at a meeting in which a
quorum has been constituted shall be required to authorize, approve or take
action with respect to any matter brought before or requiring the consent or
approval of the board of directors.
(vi) The director elected by the holders of Class B
Convertible Preferred Stock shall not be entitled to cast a vote on any
resolution which, if adopted, would result in a change in personnel then
serving as executive management of the Corporation.
(vii) The vote or consent of the holders of at least
sixty-seven percent (67%) of the outstanding shares of Class B Convertible
Preferred Stock shall be required to authorize, approve or take action with
respect to the authorization of any class of securities or series thereof
having preference over or being on parity with Class B Convertible Preferred
Stock in respect of liquidation preferences, unless such authorization would
lead to an automatic conversion of shares of Class B Convertible Preferred
Stock pursuant to Article 4(c)(iii)(3). The vote or consent of the holders of
at least fifty-seven percent (57%) of the outstanding shares of Class B
Convertible Preferred Stock shall be required to authorize, approve or take
action with respect to the following matters: (a) the issuance of any class of
Common Stock, any warrants, options or rights to acquire any class of Common
Stock (except for options or purchase rights to acquire up to 150,000 shares of
Class B Common Stock (subject to adjustment for stock dividends, stock splits
and reverse stock splits occurring after the date hereof) granted pursuant to
the Stock Option Plans and issuances of shares of Class B Common Stock upon the
exercise of such options or purchase rights) or any securities convertible into
any class of Common Stock; and (b) so long as at least 160,000 shares of Class
B Convertible Preferred Stock are outstanding (1) the issuance of any debt
securities possessing equity participation features, (2) the Corporation
engaging in any material way in a business other than the alarm security
business, (3) the redemption of any class of Common Stock other than
redemptions of Common Stock for the original issue price from the management
employees or consultants of the Corporation or its subsidiaries or from the
Independent Directors, (4) the acquisition by the Corporation or any of its
subsidiaries of the business of another person or entity, whether by merger or
the purchase of assets, involving total consideration of $500,000 or more, and
(5) the merger of the Corporation into, the consolidation of the Corporation
with, or the sale of all or substantially all of the assets of the Corporation
to any person or entity.
(viii) The vote or consent of the holders of at least
seventy-five percent (75%) of the outstanding shares of Class C Convertible
Preferred Stock shall be required to authorize, approve or take action with
respect to the following matters: (a) any adverse alteration or adverse change
of the rights, preferences or privileges of the Class C Convertible Preferred
Stock; (b) the authorization of any series or class or classes of capital stock
which is on a parity with or senior to the Class C Convertible Preferred Stock
with respect to dividends, voting redemption or
11
<PAGE> 12
liquidation, unless such authorization would lead to an automatic conversion of
shares of Class C Convertible Preferred Stock pursuant to Article 4(c)(iii)(3);
(c) except as expressly contemplated by this Third Restated Certificate of
Incorporation, any amendment of this Third Restated Certificate of
Incorporation or the certificate of incorporation of any subsidiary, or the
filing of any resolution of the board of directors of the Corporation with the
Delaware Secretary of State containing any provisions that would increase the
number of authorized shares of Class C Convertible Preferred Stock or Class C
Common Stock or adversely affect or otherwise impair the rights or relative
priority of the Class C Convertible Preferred Stock or the Class C Common
Stock; and (d) any amendment of this Article 4(e)(viii).
(ix) The vote or consent of the holders of at least
seventy percent (70%) of the outstanding shares of Class C Convertible
Preferred Stock shall be required to authorize, approve or take action with
respect to the following matters: (a) the repurchase of any shares of Common
Stock other than repurchases of Common Stock for the original issue price from
the management employees or consultants of the Corporation or its subsidiaries
or from the Independent Directors; (b) the merger of the Corporation into, the
consolidation of the Corporation with, or the sale of all or substantially all
of the assets of the Corporation to any person or entity; (c) the sale, lease
or other disposition by the Corporation or any subsidiary of more than ten
percent (10%) of the consolidated assets of the Corporation and its
subsidiaries in any transaction or series of related transactions (other than
sales in the ordinary course of business); (d) any liquidation, dissolution,
reorganization or recapitalization of the Corporation; (e) the declaration or
payment by the Corporation of any dividends or distributions upon any of its
capital stock other than dividends payable with respect to the Class A
Preferred Stock pursuant to Article 4(b)(i) hereof; (F) the acquisition by the
Corporation or any of its subsidiaries of the business of another person or
entity, whether by merger or the purchase of assets, involving total
consideration of $500,000 or more; and (G) any amendment to this Article
4(e)(ix).
(x) The vote or consent of the holders of at least
sixty-seven percent (67%) of the outstanding shares of Class C Convertible
Preferred Stock shall be required to authorize, approve or take action with
respect to the following matters: (a) the issuance of any shares of the
Corporation's capital stock, or any options, warrants, or rights to acquire
shares of the Corporation's capital stock, or any instrument convertible into
shares of the Corporation's capital stock, including convertible securities,
except (x) options or purchase rights to acquire up to 150,000 shares of Class
B Common Stock (subject to adjustment due to stock dividends, stock splits or
reverse stock splits occurring after the date hereof) granted pursuant to Stock
Option Plans and issuances of shares of Class B Common Stock upon the exercise
of such options or purchase rights, and (y) issuances of shares of Class B
Common Stock and Class C Common Stock, as the case may be, upon the conversion
of the Convertible Preferred Stock; and (b) so long as at least 125,000 shares
of Class C Convertible Preferred Stock are outstanding (1) the issuance of any
debt securities possessing equity participation features (except with respect
to bank financing), (2) the Corporation engaging in any material way in a
business other than the alarm security business, (3) the creation by the
Corporation of any subsidiary other than a wholly-owned subsidiary, provided
that the Corporation or any of its subsidiaries may invest in any person or
12
<PAGE> 13
entity involved in the alarm security business, (4) the commitment by the
Corporation or any of its subsidiaries to borrow in excess of $5,000,000 after
the date hereof (except for Masada's existing bank financing), or (5) the
acquisition, ownership or management (including joint ventures) by the
Corporation or any of its subsidiaries of any interest in any business (other
than the alarm security business), whether by a purchase of assets, purchase of
stock, merger, joint venture or otherwise, involving an aggregate consideration
(including the assumption of liabilities) in excess of $100,000.
(f) Status of Class A Preferred Stock. Notwithstanding any other
provision of this Third Restated Certificate of Incorporation to the contrary,
so long as any shares of Class A Preferred Stock shall remain outstanding, the
Corporation shall not authorize or issue any shares of any class of stock with
rights to receive dividend payments or obtain redemption rights or liquidation
rights being senior to or on a parity with those of the holders of the Class A
Preferred Stock, except for the Convertible Preferred Stock authorized herein.
(g) Stock Splits and Reclassification. The Corporation shall not
combine or split up the shares of any class of Common Stock unless at the same
time the same per share combination or split-up is made to the shares of all
other classes of Common Stock. The Corporation shall not reclassify the shares
of any class of Common Stock unless at the same time an identical
reclassification is made of the shares of all other classes of Common Stock.
(h) Class A Common Stock Forfeiture. The occurrence of a Johnson
Divestiture Event (as hereinafter defined), a Harms Divestiture Event (as
hereinafter defined) or both at any time from and after the date hereof to
January 31, 1998 shall separately create an option in favor of the Corporation
to redeem such number of shares of Class A Common Stock as indicated below from
the holders thereof pro rata in proportion to the number of shares held for a
price of $.12 per share, such price to be adjusted for stock dividends, stock
splits and reverse stock splits occurring after the date hereof. The option
shall be exercised, if at all, by the Corporation providing written notice
thereof to the holders of shares of Class A Common Stock within thirty (30)
days from the occurrence of the event creating the option. Such notice shall
inform each holder of Class A Common Stock of the total number of shares of
Class A Common Stock to which the notice relates, the number of shares of Class
A Common Stock to be redeemed from the holder, the place designated for
tendering certificates representing the shares to be redeemed and any other
information the Corporation at that time deems relevant. Within fifteen (15)
days after issuance of such notice by the Corporation, each holder of Class A
Common Stock shall tender to the Corporation at the place designated in the
notice the number of shares of Class A Common Stock to be redeemed from such
holder as so designated by surrendering certificates representing such number
of shares, duly endorsed in blank or accompanied by proper instruments of
transfer, and thereupon the redemption price for such shares shall be payable
to or on the order of the person whose name appears on such certificates as the
owner thereof and each surrendered certificate shall be cancelled. In the case
less than all of the shares of Class A Common Stock represented by any
certificate tendered are redeemed, a new certificate shall be issued
representing the unredeemed shares. A Johnson Divestiture Event occurring
within the time periods indicated below creates
13
<PAGE> 14
an option to redeem the corresponding number of shares of Class A Common Stock
as set forth in the following table:
<TABLE>
<CAPTION>
Number of Shares of
Class A Common Stock
Date of Occurrence Subject to Option
- ------------------ -----------------
<S> <C>
From May 30, 1995 to January 31, 1996 50,025
From February 1, 1996 to January 31, 1997 33,350
From February 1, 1997 to January 31, 1998 16,675
February 1, 1998 and thereafter -0-
</TABLE>
A Harms Divestiture Event occurring within the time periods indicated
below creates an option to redeem the corresponding number of shares of Class A
Common Stock as set forth in the following table:
<TABLE>
<CAPTION>
Number of Shares of
Class A Common Stock
Date of Occurrence Subject to Option
- ------------------ -----------------
<S> <C>
From May 30, 1995 to January 31, 1996 50,025
From February 1, 1996 to January 31, 1997 33,350
From February 1, 1997 to January 31, 1998 16,675
February 1, 1998 and thereafter -0-
</TABLE>
(i) Class B Common Stock Dilution Protection. Except for
issuances or sales of up to 150,000 shares of Class B Common Stock (subject to
adjustment for stock dividends, stock splits or reverse stock splits occurring
after the date hereof) pursuant to Stock Option Plans, in the case of the sale
of any shares of any class of Common Stock or Common Stock Equivalents, for a
price less than $13.38 per share of Common Stock or Common Stock Equivalents
(such per share price to be adjusted for stock dividends, stock splits and
reverse stock splits occurring after the date hereof), the board of directors
and the stockholders shall authorize and cause the Corporation to issue to the
holders of shares of Class B Common Stock outstanding on the date hereof
additional shares of Class B Common Stock in order that each holder of the
shares of Class B Common Stock outstanding on the date hereof will own the
number of shares of Class B Common Stock owned immediately prior to such sale
multiplied by a fraction, the numerator of which is the sum of (x) the number
of shares of Common Stock or Common Stock Equivalents outstanding immediately
prior to such sale and (y) the number of additional shares of Common Stock or
Common Stock Equivalents issued in respect of such sale, and the denominator of
which is the sum of (x) the number of shares of Common Stock or Common Stock
Equivalents outstanding immediately prior to such sale and (y) the number of
shares of Common Stock or Common Stock Equivalents which the aggregate
consideration received by the Corporation for such sale would purchase at a
price of $13.38 per share of Common Stock or Common Stock
14
<PAGE> 15
Equivalents (as adjusted), provided that the issuance of such additional shares
of Class B Common Stock shall not cause the effective original issue price
therefor to be less than $.01 per share. The Corporation shall have authority
to issue fractional shares of Class B Common Stock in order to carry out the
provisions hereof. The Corporation shall transmit to the holders of shares of
Class B Common Stock outstanding on the date hereof the computation of the
number of additional shares of Class B Common Stock to be issued pursuant to
this Article 4(i) certified as true and correct by an officer of the
Corporation no later than ten (10) days after the applicable sale is authorized
by the board of directors. The board of directors and the stockholders shall
authorize and the Corporation shall reserve and keep available out of its duly
authorized but unissued stock such number of shares of Class B Common Stock as
shall be sufficient to effect the provisions of this Article 4(i).
5. INITIAL REGISTERED OFFICE AND AGENT. The location and mailing
address of the initial registered office of the Corporation, and the name of
its initial registered agent at such address are as follows: The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801.
6. ISSUANCE AND DISPOSITION OF STOCK.
(a) Issuance of Stock. The Corporation may from time to time,
subject to the limitations specified herein, issue its shares of stock for such
consideration (not less than the par value respecting shares having a par
value) as may be fixed from time to time by the board of directors and may
receive in payment thereof, in whole or in part, money, labor done, services
actually performed, or real or personal property (tangible or intangible). In
the absence of fraud in the transaction, the judgment of the board of directors
as to the value of the consideration received for shares shall be conclusive.
Any and all shares of authorized capital stock issued by order of the board of
directors for which the consideration fixed by the board of directors in excess
of the par value thereof shall have been paid or delivered shall be deemed
fully-paid stock and shall not be liable to any further call or assessment
thereon, and the holders of such shares shall not be liable for any further
payment in respect thereof.
(b) Warrants, Stock Rights and Options. Subject to the
limitations specified herein, the Corporation may create and issue, whether or
not in connection with the issuance and sale of any of its shares or other
securities, warrants, rights or options entitling the holders thereof to
purchase from the Corporation shares of any authorized class or classes of its
stock.
(c) Stockholders' Preemptive Rights. If at any time after the
date hereof, the Corporation contemplates offering for sale any shares of its
capital stock, whether now or hereafter authorized, or any security convertible
into or exercisable for the purchase or other acquisition of shares of its
capital stock (collectively, the "New Stock"), the Corporation shall issue
written notice thereof to each of the holders of the Class C Equivalent Stock
(as hereinafter
15
<PAGE> 16
defined) and the holders of the Class B Equivalent Stock (as hereinafter
defined), such notice to contain a description of the New Stock offered for
sale, the number of shares of New Stock that are to be offered, and the price
at which such New Stock is to be offered for sale (the "Sale Notice"). For a
period of thirty (30) days following the issuance of the Sale Notice, the
holders of the Class C Equivalent Stock and the Class B Equivalent Stock may
elect, by written notice to the Corporation to purchase, on a pro rata basis
(based upon the aggregate investment in all capital stock of the Corporation of
each such holder relative to the aggregate investment in all capital stock of
the Corporation of all holders of Class C Equivalent Stock and/or Class B
Equivalent Stock), up to seventy percent (70%) of such shares of New Stock at
the price contained in the Sale Notice. Any holder of Class C Equivalent Stock
and/or Class B Equivalent Stock may, at its sole option, elect to participate
in any such offering through an Affiliated Person (as hereinafter defined). If
any holders of Class C Equivalent Stock and/or Class B Equivalent Stock elect
not to purchase their pro rata share of such New Stock, the remaining holders
of Class C Equivalent Stock and/or Class B Equivalent Stock who have elected to
purchase their pro rata share of such New Stock may purchase the shares of New
Stock for which no election to purchase has been exercised. If and to the
extent the holders of Class C Equivalent Stock and/or Class B Equivalent Stock,
or their Affiliated Persons, do not elect to purchase all of the New Stock
offered to them within forty-five (45) days following issuance of the Sale
Notice, then the Corporation may sell such unpurchased shares of New Stock free
of the restrictions hereby imposed, so long as the New Stock is sold for the
price and upon the terms stated in the Sale Notice within one hundred twenty
(120) days after issuance thereof. If the holders of Class C Equivalent Stock
and/or Class B Equivalent Stock elect to purchase any of the New Stock offered,
the Corporation shall deliver certificates for such New Stock to the electing
holders upon payment of the issue price, such delivery and payment to occur
within ninety (90) days of the issuance of the Sale Notice. The provisions of
this Article 6(c) shall not apply if the New Stock is to be sold in a public
offering for which a registration statement under the Securities Act of 1933,
as amended, is filed.
(d) Right of Corporation to Acquire and Dispose of its Own Shares.
Except as provided herein, the Corporation shall have the right to purchase,
take, receive or otherwise acquire, hold, own, pledge and transfer or otherwise
dispose of its own shares, but purchases of its own shares, whether direct or
indirect, shall be made only to the extent of unreserved and unrestricted
earned surplus and unreserved and unrestricted capital surplus available
therefor.
(e) Acquisition of Stock. All persons who shall acquire stock in
this Corporation shall acquire it subject to the provisions of this Third
Restated Certificate of Incorporation. So far as not otherwise expressly
provided by the laws of the State of Delaware or Article 4(c)(iii) hereof, the
Corporation shall be entitled to treat the person or entity in whose name any
share of its stock is registered as the owner thereof for all purposes and
shall not be bound to recognize any equitable or other claim to or interest in
said share on the part of any other person, whether or not the Corporation
shall have notice thereof.
(f) Restrictions on Transfer of Shares. The Corporation may, from
time to time, lawfully enter into any agreement to which all, or less than all,
of the holders of record of the
16
<PAGE> 17
issued and outstanding shares of any or all class or classes of its stock shall
be parties, restricting the transfer of any or all shares represented by
certificates therefor upon such terms and conditions as may be approved by the
board of directors of the Corporation.
7. BOARD OF DIRECTORS.
(a) Powers. Except as may be otherwise provided by law or in this
Third Restated Certificate of Incorporation, all corporate powers of the
Corporation shall be exercised by or under authority of, and the business and
affairs of the Corporation shall be managed under the direction of, the board
of directors. In furtherance and not in limitation of the powers conferred by
statute, the board of directors shall have the following powers:
(1) Except as otherwise expressly provided in this Third Restated
Certificate of Incorporation, to determine whether any, and if any,
part of any accumulated profits, earned surplus, paid-in surplus or
surplus arising from reduction of stated capital legally available for
the payment of dividends shall be declared and paid as dividends; to
determine the date or dates for the declaration and payment of
dividends; and to direct and determine the use and disposition of any
surplus or net profits over and above the capital stock paid in;
(2) To authorize the issuance and sale of warrants, in bearer or
registered form, or other instruments for the purchase of shares of
stock of any class of the Corporation within such period of time, or
without limit as to time, for such aggregate number of shares, and at
such price or prices per share, as the board of directors may in good
faith determine. Such warrants or other instruments may be issued
separately or in connection with the issue of any bonds, debentures,
notes or other evidences of indebtedness or shares of the capital
stock of any class of the Corporation and for such consideration and
on such terms and conditions as the board of directors may in good
faith determine to be desirable;
(3) To take any action required or permitted to be taken by the
board of directors at a meeting without a meeting if a consent in
writing, setting forth the action so taken, is signed by all of the
directors.
(4) To ratify and approve any action taken by or on behalf of the
Corporation's employees, agents, officers, directors or any other
party, and, upon such ratification and approval, any such actions so
taken shall be effective for and as the act of the Corporation as
though such act had been adopted and approved by the board of
directors at the time such action was taken.
The Corporation may, in its ByLaws, confer powers upon its board of directors
in addition to the foregoing, and in addition to the powers and authorities
expressly conferred upon directors by statute.
17
<PAGE> 18
(b) Conflicts of Interest. No contract or other transaction
between the Corporation and one or more of its directors, or any other
corporation, firm, association or entity in which one or more of its directors
are directors or officers or are financially interested, shall be either void
or voidable because of such relationship or interest or because such director
or directors are present at the meeting of the board of directors which
authorizes, approves or ratifies such contract or transaction, if the contract
or transaction is fair and reasonable to the Corporation and if the fact of
such relationship or interest is disclosed to the board of directors which
authorizes, approves or ratifies the contract or transaction by a vote or
consent sufficient for the purpose without counting the votes or consents of
such interested directors.
(c) Election. Elections of directors need not be by written
ballot unless the ByLaws of the Corporation so provide.
8. BYLAWS. The power to make, alter, amend or repeal ByLaws
shall be vested in the board of directors and the stockholders voting in the
manner provided in Article 12 for amendments to this Third Restated Certificate
of Incorporation. If any provision of the ByLaws conflicts with the provisions
of this Third Restated Certificate of Incorporation, the provisions of this
Third Restated Certificate of Incorporation shall govern and take precedence.
9. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS.
(a) The Corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation), by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, manager or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit
18
<PAGE> 19
by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, manager or agent of another corporation,
partnership, limited liability company, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or other court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subparagraph (a) or (b) of this
Article 9, or in defense or any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subparagraph (a) or (b) of this
Article 9 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subparagraph (a) or
(b) of this Article 9. Such determination shall be made (i) by a majority vote
of the directors of the Corporation who are not parties to such action, suit or
proceeding, even though less than a quorum of the board of directors, or (ii)
if there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (iii) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending a civil, criminal administrative or investigative action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount if it shall be
ultimately determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article 9. Such expenses (including
attorneys' fees) incurred by other employees and agents may also be so paid
upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article 9 shall not be deemed exclusive of and
shall be in addition to any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
19
<PAGE> 20
(g) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, manager or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
this Article 9 or by statute.
(h) For purposes of this Article 9, references to the
"Corporation" shall include, in addition to the Corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee,
manager or agent of another corporation, partnership, limited liability
company, joint venture, trust or other enterprise, shall stand in the same
position under this Article 9 with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its separate existence had continued.
(i) For purposes of this Article 9, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article 9.
(j) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article 9 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
10. WAIVER OF PERSONAL LIABILITY OF DIRECTORS. A director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for the breach of any fiduciary duty as a
director, except (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit.
20
<PAGE> 21
11. SUBSEQUENTLY ADOPTED CORPORATION LAWS. Any and every statute
of the State of Delaware hereinafter enacted whereby the rights, powers and
privileges of the stockholders of corporations organized under the general laws
of the State of Delaware are increased, diminished or in any way affected shall
apply to this Corporation and to every stockholder thereof, to the same extent
as if such statute had been in force at the date of the making and filing of
this Third Restated Certificate of Incorporation.
12. AMENDMENT. The provisions of this Third Restated Certificate
of Incorporation may be amended, altered, changed or repealed only upon the
vote or consent of the board of directors, the holders of a majority of the
outstanding shares of the Class A Common Stock, the holders of a majority of
the outstanding shares of Class B Common Stock (without consideration of the
shares of Convertible Preferred Stock on an "as converted" basis), the holders
of fifty-seven percent (57%) of the outstanding shares of Class B Convertible
Preferred Stock and the holders of sixty- seven percent (67%) of the
outstanding shares of Class C Convertible Preferred Stock, and with respect to
the increase in the number of authorized shares or any change in the rights,
preferences or terms of (i) the Class A Preferred Stock, without the vote or
consent of holders of eighty percent (80%) of the outstanding shares thereof,
(ii) the Class B Convertible Preferred Stock, without the vote or consent of
the holders of seventy-eight percent (78%) of the outstanding shares thereof
and (iii) the Class C Convertible Preferred Stock, without the vote or consent
of the holders of seventy-five percent (75%) of the outstanding shares thereof.
13. [INTENTIONALLY LEFT BLANK.]
14. CERTAIN DEFINITIONS. For purposes of this Third Restated
Certificate of Incorporation, the terms set forth below shall have the meanings
assigned to them, such meanings to be applicable to singular and plural nouns
and verbs of any tense:
"Affiliated Person" shall mean with respect to any specified person,
any other person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified person. For purposes of
this definition, "control," when used with respect to any specified person,
means the power to direct the management and policies of the specified person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and controlled shall have
meanings correlative to the foregoing.
"ByLaws" means the ByLaws of the Corporation as adopted by the
stockholders of the Corporation, as amended from time to time in accordance
with the requirements of this Third Restated Certificate of Incorporation.
21
<PAGE> 22
"Class B Equivalent Stock" means the sum of (i) the number of
outstanding shares of Class B Common Stock plus (ii) the number of shares of
Class B Common Stock issuable upon the conversion of the Class B Convertible
Preferred Stock at the then applicable conversion price.
"Class C Equivalent Stock" means the sum of (i) the number of
outstanding shares of Class C Common Stock plus (ii) the number of shares of
Class C Common Stock issuable upon the conversion of the Class C Convertible
Preferred Stock at the then applicable conversion price.
"Contractually Precluded" means the existence or presence of a
covenant in any loan agreement of the Corporation or any of its subsidiaries
that would be violated by the making of any dividend or redemption payment by
the Corporation with respect to the Class A Preferred Stock or by Masada with
respect to its Class S Preferred Stock.
"Event of Non-Compliance" means any of the following events: (a) any
representation or warranty made by or on behalf of the Corporation in this
Third Restated Certificate of Incorporation or in the Securities Purchase
Agreement or in any schedule or exhibit hereto or thereto or in any written
statement, list, certificate or other instrument, document or agreement entered
into or furnished pursuant hereto or thereto or otherwise in connection with
the transactions contemplated thereby shall prove to be false or misleading or
breached as of the date hereof; (b) the failure by the Corporation or Masada to
pay any dividend or make any redemption payment with respect to the
Corporation's Class A Preferred Stock or with respect to Masada's Class S
Preferred Stock in the amount and on the date when the same shall become due
and payable pursuant to this Third Restated Certificate of Incorporation or
Masada's certificate of incorporation, as amended, as the case may be, unless
such payment is Contractually Precluded; (c) material default in any respect in
the due observance or performance of any covenant or agreement on the part of
the Corporation to be observed or performed pursuant to the Securities Purchase
Agreement; (d) (i) default with respect to the performance by the Corporation
or its subsidiaries of any obligation for the payment of money to any person or
entity who is not an Affiliated Person of the Corporation or its subsidiaries
in excess of $100,000, (ii) notice shall be given under any indebtedness
involving in excess of $100,000 in the aggregate of the Corporation or its
subsidiaries of an event which, with the lapse of time, will become an event of
default thereunder, or (iii) the maturity of any indebtedness involving in
excess of $100,000 in the aggregate of the Corporation or its subsidiaries
shall be accelerated, in each case in which default shall remain unremedied for
thirty (30) days after the occurrence thereof; (e) the Corporation or any of
its subsidiaries shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, trustee, custodian or liquidator with
respect to itself or any of its properties, (ii) admit in writing its inability
to pay debts as they become due, (iii) make a general assignment for the
benefit of creditors, (iv) be adjudicated a bankrupt or insolvent or be the
subject of an order for relief under Title 11 of the United States Code, (v)
file a voluntary petition in bankruptcy or a petition or an answer seeking
reorganization or an arrangement with creditors or to take advantage of any
bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or
liquidation law or statute, (vi) file an answer admitting the material
allegations of a petition filed against it in any proceedings under any such
law, or (vii) take any action for the purpose of
22
<PAGE> 23
effecting any of the foregoing, which default shall continue unremedied for a
period of ninety (90) days after the occurrence thereof; (f) final judgment for
the payment of money which exceeds $100,000 shall be rendered against the
Corporation or any of its subsidiaries, and the same shall remain undischarged
or unbonded upon terms reasonably satisfactory to the holders of a majority of
the outstanding shares of Preferred Stock for a period of sixty (60)
consecutive days, during which execution shall not be effectively stayed; and
(g) material amendment or revocation of, or material default with respect to,
any of the terms of a certain Voting Trust Agreement dated February 1994
between Terry W. Johnson and Daryl E. Harms with respect to all of the voting
stock of MSAM, Inc.
"Harms Divestiture Event" shall occur if Daryl E. Harms resigns (other
than by reason of his death) or is removed from the position of a director of
the Corporation for failure to perform, theft, embezzlement, fraud or other
acts committed by him or which reflect adversely upon the reputation of the
Corporation or otherwise adversely affect the business interests of the
Corporation.
"Independent Director" means a person who is experienced in business
management and who does not have a personal or business relationship with any
holder of Common Stock or Preferred Stock at the time of such person's first
election to the Corporation's board of directors (except relationships approved
by the holders of ninety-five percent (95%) of the outstanding shares the
Common Stock).
"Johnson Divestiture Event" shall occur if Terry W. Johnson resigns
(other than by reason of his death) or is removed from the positions of
President and Chairman of the Board for failure to perform the responsibilities
of such offices, theft, embezzlement, fraud or other acts committed by him or
which reflect adversely upon the reputation of the Corporation or otherwise
adversely affect the business interests of the Corporation.
"Masada" means Masada Security, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Corporation.
"Qualified Public Offering" means a public offering of Common Stock or
Common Stock Equivalents through an underwriter, whether on a best efforts or a
firm commitment basis, pursuant to a registration statement filed in accordance
with the Securities Act of 1933, as amended, in which the gross proceeds
received by the Corporation (without regard to underwriting discounts or
commissions or offering expenses) are at least $15,000,000, and the offering
price is at least $75.00 per share of Common Stock or its equivalent if Common
Stock Equivalents are sold (adjusted for stock dividends, stock splits and
reverse stock splits occurring after the date hereof).
"Securities Purchase Agreement" means the Second Amended and Restated
Securities Purchase Agreement dated as of May 31, 1995 between and among the
Corporation, and certain other persons identified therein, as the same may be
amended from time to time.
23
<PAGE> 24
IN WITNESS WHEREOF, Masada Security Holdings, Inc. has caused this
Third Restated Certificate of Incorporation to be signed by its Vice President
and attested to by its Secretary on this the 28th day of June, 1996.
/s/ David P. Tomick
-----------------------------------
David P. Tomick, Vice President
Attest:
/s/ Cathy Antee
- ----------------------------------
Cathy Antee, Secretary
24
<PAGE> 1
Exhibit 3.2
CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF
INCORPORATION OF MASADA SECURITY HOLDINGS, INC.
Masada Security Holdings, Inc., a corporation organized and existing
under and by virtue of the Delaware General Corporation Law,
DOES HEREBY CERTIFY:
That Masada Security Holdings, Inc. was originally incorporated under
the name Masada Security, Inc., and the original Certificate of Incorporation
of the corporation was filed with the Secretary of State of Delaware on January
28, 1993;
That the Board of Directors of Masada Security Holdings, Inc., by
unanimous written consent, duly adopted resolutions which would further amend
the provisions of the Certificate of Incorporation of the corporation,
declaring that adoption of said amendment to be advisable and in the best
interest of said corporation, and declaring that said amendment be considered
by the stockholders of said corporation at a meeting of stockholders of said
corporation called for that purpose;
That the stockholders of Masada Security Holdings, Inc., by unanimous
written consent, adopted and approved said amendment in accordance with the
provisions of Section 228 of the Delaware General Corporation Law;
That said amendment was duly adopted in accordance with the provisions
of Section 242 of the Delaware General Corporation Law;
That the capital of Masada Security Holdings, Inc. shall not be
reduced under or by reason of said amendment;
That Article 4(a) of the Certificate of Incorporation of Masada
Security Holdings, Inc., as amended, is hereby further amended to read in its
entirety as follows:
(a) Authorized Capital Stock. The total number of shares
of stock which the Corporation shall have authority to issue is
2,879,090 shares, consisting of 1,958,947 shares of Common Stock, par
value $.01 per share (the "Common Stock"), and 920,143 shares of
Preferred Stock, par value $.01 per share (the "Preferred Stock").
The Common Stock herein authorized shall be divided into three classes
as follows: 333,500 shares of Class A Common Stock; 1,078,572 shares
of Class B Common Stock; and 546,875 shares of Class C Common Stock.
The Preferred Stock herein authorized shall be divided into three
classes as follows: 75,700 shares of Class A Preferred Stock; 358,332
shares of Class B Convertible Preferred Stock; and 486,111 shares of
Class C Convertible Preferred Stock (the Class B Convertible Preferred
Stock and the Class C Convertible Preferred Stock are hereinafter
collectively referred to as the "Convertible Preferred Stock").
IN WITNESS WHEREOF, Masada Security Holdings, Inc. has caused this
Certificate of Amendment to the Certificate of Incorporation to be signed by
its President and attested to by its Secretary on this the 30th day of
September, 1996.
--------------------------------
Terry W. Johnson, President
Attest:
- --------------------------------
Cathy Antee, Secretary
<PAGE> 1
Exhibit 3.3
FOURTH RESTATED
CERTIFICATE OF INCORPORATION OF
MASADA SECURITY HOLDINGS, INC.
Masada Security Holdings, Inc., a corporation organized and existing
under and by virtue of the Delaware General Corporation Law,
DOES HEREBY CERTIFY:
That Masada Security Holdings, Inc. was originally incorporated under
the name Masada Security, Inc., and the original Certificate of Incorporation
of the corporation was filed with the Secretary of State of Delaware on January
28, 1993;
That the Board of Directors of Masada Security Holdings, Inc., by
unanimous written consent, duly adopted resolutions setting forth the Fourth
Restated Certificate of Incorporation of the corporation, which would restate
and integrate and further amend the provisions of the Certificate of
Incorporation of the corporation, declaring that adoption of said Fourth
Restated Certificate of Incorporation to be advisable and in the best interest
of said corporation, and declaring that said Fourth Restated Certificate of
Incorporation be considered by the stockholders of said corporation at a
meeting of stockholders of said corporation called for that purpose;
That the stockholders of Masada Security Holdings, Inc., by unanimous
written consent, adopted and approved the said Fourth Restated Certificate of
Incorporation in accordance with the provisions of Section 228 of the Delaware
General Corporation Law;
That said Fourth Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Sections 242 and 245 of the
Delaware General Corporation Law;
That the capital of Masada Security Holdings, Inc. shall not be
reduced under or by reason of said Fourth Restated Certificate of
Incorporation; and,
That the text of the Fourth Restated Certificate of Incorporation of
Masada Security Holdings, Inc. is hereby restated and integrated and is further
amended to read in its entirety as follows:
1. NAME. The name of the Corporation is Masada Security
Holdings, Inc.
2. DURATION. The period of duration of the Corporation shall be
perpetual.
3. PURPOSES. The nature of the business and the objects and
purposes proposed to be transacted, promoted and carried on are to do any or
all the things herein mentioned, as fully and to the same extent as natural
persons might or could do, and in any part of the world, and to engage in any
lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law.
4. CAPITAL STOCK.
(a) Authorized Capital Stock. The total number of shares of stock
which the Corporation shall have authority to issue is 20,000,000 shares,
consisting of 15,000,000 shares of Common Stock, par value
<PAGE> 2
$.01 per share (the "Common Stock"), and 5,000,000 shares of Preferred Stock,
par value $1.00 per share (the "Preferred Stock").
(b) Preferred Stock. Shares of Preferred Stock may be issued from
time to time in one or more classes or series as may be determined from time to
time by the board of directors of the Corporation, each such class or series to
be distinctly designated. Except in respect of the particulars fixed by the
board of directors for classes or series provided for by the board of directors
as permitted hereby, all shares of Preferred Stock shall be of equal rank and
shall be identical. All shares of any one series of Preferred Stock so
designated by the board of directors shall be alike in every particular except
that shares of any one series issued at different times may differ as to the
dates from which dividends thereon shall be cumulative. The voting rights, if
any, of each such class or series and the preferences and relative,
participating, optional and other special rights of each such class or series
and the qualifications, limitations and restrictions thereof, if any, may
differ from those of any and all other classes or series at any time
outstanding; and the board of directors of the Corporation is hereby expressly
granted authority to fix, by resolutions duly adopted prior to the issuance of
any shares of a particular class or series of Preferred Stock so designated by
the board of directors, the voting powers of stock of such class or series, if
any, and the designations, preferences and relative, participating, optional
and other special rights and the qualifications, limitations and restrictions
of such class or series, including, but without limiting the generality of the
foregoing, the following:
(1) The distinctive designation of, and the number of
shares of Preferred Stock, which shall constitute such class or series, and
such number may be increased (except where otherwise provided by the board of
directors) or decreased (but not below the number of shares thereof then
outstanding) from time to time by like action of the board of directors;
(2) The rate and time at which, and the terms and
conditions upon which, dividends, if any, on Preferred Stock of such class or
series shall be paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes or series of
the same or other classes of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock
of such class or series to convert the same into, or exchange the same for
shares of any other class or classes or of any series of the same or any other
class or classes of stock and the terms and conditions of such conversion or
exchange;
(4) Whether or not Preferred Stock of such class or
series shall be subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions upon which, Preferred
Stock of such class or series may be redeemed;
(5) The rights, if any, of the holders of Preferred Stock
of such class or series upon the voluntary or involuntary liquidation of the
Corporation;
(6) The terms of the sinking fund or redemption or
purchase account, if any, to be provided for the Preferred Stock of such class
or series; and
(7) The voting powers, if any, of the holders of
Preferred Stock of such class or series.
(c) Issuance of Securities. Except as otherwise provided in this
Restated Certificate of Incorporation, the board of directors shall have
authority to authorize the issuance, from time to time without
2
<PAGE> 3
any vote or other action by the stockholders, of any or all shares of stock of
the Corporation of any class or series at any time authorized, and any
securities convertible into or exchangeable for any such shares, and any
options, rights or warrants to purchase or acquire any such shares, in each
case to such persons and on such terms (including as a dividend or distribution
on or with respect to, or in connection with a split or combination of, the
outstanding shares of stock of the same or any other class) as the board of
directors from time to time in its discretion lawfully may determine; provided,
however, that the consideration for the issuance of shares of stock of the
Corporation having par value (unless issued as such a dividend or distribution
or in connection with such a split or combination) shall not be less than such
par value. Shares so issued shall be fully paid stock, and the holders of such
stock shall not be liable to any further call or assessments thereon.
(d) Voting. Each holder of Common Stock shall be entitled to one
vote for each share of Common Stock held by him. The term "Voting Stock" shall
mean all stock of the Corporation which by its terms may be voted on all
matters submitted to the stockholders of the Corporation.
(e) Exchange, Reclassification or Cancellation of Stock. Each
issued and outstanding share of the previously authorized Class A preferred
stock of the Corporation has been redeemed and canceled, each issued and
outstanding share of the previously authorized Class B convertible preferred
stock of the Corporation has been converted into shares of previously
authorized Class B common stock of the Corporation, and each issued and
outstanding share of previously authorized Class C convertible preferred stock
of the Corporation has been converted into shares of previously authorized
Class C common stock of the Corporation. Effective upon the filing of this
Restated Certificate of Incorporation, (i) each issued and outstanding share of
the previously authorized Class A common stock, Class B common stock and Class
C common stock of the Corporation shall be exchanged for 3.0 shares of the
Common Stock and (ii) all shares of previously authorized Class A common stock,
Class B common stock, Class C common stock, Class A preferred stock, Class B
convertible preferred stock and Class C convertible preferred stock of the
Corporation not outstanding shall be canceled.
5. INITIAL REGISTERED OFFICE AND AGENT. The location and mailing
address of the initial registered office of the Corporation, and the name of
its initial registered agent at such address are as follows: The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801.
6. BOARD OF DIRECTORS.
(a) Number. The number of directors which shall constitute the
whole board of directors shall be as determined from time to time by resolution
adopted by the affirmative vote of a majority of the board of directors, but
shall not be less than seven (7) nor more than ten (10) directors; provided
that until otherwise determined by the board of directors in accordance
herewith, the number of directors shall be nine (9); provided further that the
number of directors shall not be decreased if such decrease would have the
effect of shortening the term of an incumbent director.
(b) Election. The directors comprising the board of directors
shall be and is divided into three classes, Class I, Class II and Class III,
each class to be as nearly equal in number as possible. If the number of
directors is not evenly divisible by three (3), one additional director shall
be allocated to Class III and, if necessary, to Class II. Each director shall
serve for a term ending on the date of the third annual meeting of the
Corporation's stockholders following the annual meeting at which such director
was elected; provided,
3
<PAGE> 4
however, that each director elected in Class I at the 1996 annual meeting, or
by consent in lieu thereof, shall serve for a term ending on the date of the
1997 annual meeting, each director elected in Class II at the 1996 annual
meeting shall serve for a term ending on the date of the 1998 annual meeting,
and each director elected in Class III at the 1996 annual meeting shall serve
for a term ending on the date of the 1999 annual meeting, or at such later date
as any director's successor is elected and qualified, subject to his earlier
death, resignation or removal from office.
(c) Powers. Except as may be otherwise provided by law or in this
Restated Certificate of Incorporation, all corporate powers of the Corporation
shall be exercised by or under authority of, and the business and affairs of
the Corporation shall be managed under the direction of, the board of
directors. In furtherance and not in limitation of the powers conferred by
statute, the board of directors shall have the following powers:
(1) To determine whether any, and if any, part of any accumulated
profits, earned surplus, paid-in surplus or surplus arising from
reduction of stated capital legally available for the payment of
dividends shall be declared and paid as dividends; to determine the
date or dates for the declaration and payment of dividends; and to
direct and determine the use and disposition of any surplus or net
profits over and above the capital stock paid in;
(2) To take any action required or permitted to be taken by the
board of directors at a meeting without a meeting if a consent in
writing, setting forth the action so taken, is signed by all of the
directors.
(3) To ratify and approve any action taken by or on behalf of the
Corporation's employees, agents, officers, directors or any other
party, and, upon such ratification and approval, any such actions so
taken shall be effective for and as the act of the Corporation as
though such act had been adopted and approved by the board of
directors at the time such action was taken.
The Corporation may, in its ByLaws, confer powers upon its board of directors
in addition to the foregoing, and in addition to the powers and authorities
expressly conferred upon directors by statute.
(d) Conflicts of Interest. No contract or other transaction
between the Corporation and one or more of its directors, or any other
corporation, firm, association or entity in which one or more of its directors
are directors or officers or are financially interested, shall be either void
or voidable because of such relationship or interest or because such director
or directors are present at the meeting of the board of directors which
authorizes, approves or ratifies such contract or transaction, if the contract
or transaction is fair and reasonable to the Corporation and if the fact of
such relationship or interest is disclosed to the board of directors which
authorizes, approves or ratifies the contract or transaction by a vote or
consent sufficient for the purpose without counting the votes or consents of
such interested directors.
(e) Removal. The stockholders shall not have the right to remove
any one or all of the directors prior to the end of his or their term of office
except by the affirmative vote of the holders of at least sixty-seven percent
(67%) of the votes entitled to be cast by the holders of Voting Stock voting
together as a single class.
4
<PAGE> 5
7. BYLAWS. The power to make, alter, amend or repeal ("Amend")
the ByLaws shall be vested in the board of directors and the stockholders. The
board of directors may Amend the Bylaws by the affirmative vote of a majority
of the directors. The stockholders may Amend the Bylaws only upon the
affirmative vote of the holders of at least sixty-seven percent (67%) of the
votes entitled to be cast by the holders of all outstanding shares of the
Voting Stock, voting together as a single class.
8. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS.
(a) The Corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation), by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, manager or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee, manager or
agent of another corporation, partnership, limited liability company, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or other court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subparagraph (a) or (b) of this
Article 8, or in defense or any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subparagraph (a) or (b) of this
Article 8 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subparagraph (a) or
(b) of this Article 8. Such determination
5
<PAGE> 6
shall be made (i) by a majority vote of the directors of the Corporation who
are not parties to such action, suit or proceeding, even though less than a
quorum of the board of directors, or (ii) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion, or
(iii) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending a civil, criminal administrative or investigative action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount if it shall be
ultimately determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article 8. Such expenses (including
attorneys' fees) incurred by other employees and agents may also be so paid
upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article 8 shall not be deemed exclusive of and
shall be in addition to any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, manager or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
this Article 8 or by statute.
(h) For purposes of this Article 8, references to the
"Corporation" shall include, in addition to the Corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee,
manager or agent of another corporation, partnership, limited liability
company, joint venture, trust or other enterprise, shall stand in the same
position under this Article 8 with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its separate existence had continued.
(i) For purposes of this Article 8, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article 8.
(j) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article 8 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased
6
<PAGE> 7
to be a director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
9. WAIVER OF PERSONAL LIABILITY OF DIRECTORS. A director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for the breach of any fiduciary duty as a
director, except (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit.
Neither the repeal or modification of this Article 9 nor the adoption of any
provisions of this Restated Certificate of Incorporation inconsistent with this
Article 9 shall adversely affect the rights of any director of the Corporation
with respect to any matter occurring, or any cause of action, suit or claim
that, but for this Article 9, would accrue or arise, prior to such repeal,
modification or adoption of an inconsistent provision.
10. SUBSEQUENTLY ADOPTED CORPORATION LAWS. Any and every statute
of the State of Delaware hereinafter enacted whereby the rights, powers and
privileges of the stockholders of corporations organized under the general laws
of the State of Delaware are increased, diminished or in any way affected shall
apply to this Corporation and to every stockholder thereof, to the same extent
as if such statute had been in force at the date of the making and filing of
this Restated Certificate of Incorporation.
11. AMENDMENT. Notwithstanding any other provisions of this
Restated Certificate of Incorporation or the Bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate class vote may be
specified by law, this Restated Certificate of Incorporation or the ByLaws),
the affirmative vote of the holders of at least sixty-seven percent (67%) of
the votes entitled to be cast by the holders of all outstanding shares of
Voting Stock, voting together as a single class, shall be required to amend
Article 6(b), Article 7 or Article 11 of this Restated Certificate of
Incorporation or to adopt any provision inconsistent with Article 6(b), Article
7 or Article 11 of this Restated Certificate of Incorporation.
IN WITNESS WHEREOF, Masada Security Holdings, Inc. has caused this
Restated Certificate of Incorporation to be signed by its ________ President
and attested to by its _________Secretary on this the _____ day of __________,
1996.
----------------------------------
----------------------------------
------------------President
Attest:
- ----------------------------------
- ----------------------------------
- ----------------Secretary
7
<PAGE> 1
Exhibit 3.4
AMENDED AND RESTATED
DELAWARE BYLAWS
OF
MASADA SECURITY HOLDINGS, INC.
* * * *
ARTICLE I
OFFICES
Section 1. The registered office of Masada Security Holding,
Inc. ("Corporation") shall be in the City of Wilmington, County of Newcastle,
State of Delaware.
Section 2. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such place as may be fixed from time to time by the
Board of Directors, or at such other place either within or without the State
of Delaware as shall be designated from time to time by the Board of Directors
and stated in the notice of the meeting. Meetings of stockholders for any
other purpose may be held at such time and place, within or without the State
of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the
year 1993, shall be held on the last day of May if not a legal holiday, and if
a legal holiday, then on the next secular day following, at 10:00 a.m., or at
such other date and time as shall be designated from time to time by the Board
of Directors and stated in the notice of the meeting, at which they shall elect
by a plurality vote a Board of Directors, and transact such other business as
may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each Stockholder entitled
to vote at such meeting not less than ten (10) nor more than sixty (60) days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
Stockholder and the number of shares registered in the name of each
Stockholder. Such list shall be open to the examination of any Stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
Stockholder who is present.
<PAGE> 2
Section 5. Special meetings of the stockholders, for any purpose
or purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the Corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given not less than ten (10) nor more than sixty
(60) days before the date of the meeting, to each Stockholder entitled to vote
at such meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty (30) days, or
if after the adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each Stockholder of record
entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the Certificate of Incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. No proxy shall be voted on after three (3) years from
its date, unless the proxy provides for a longer period.
ARTICLE III
DIRECTORS
Section 1. The directors shall be elected at the annual meeting
of the stockholders in the manner provided in the Certificate of Incorporation.
Except as provided in the Certificate of Incorporation, each director elected
shall hold office until his successor is elected and qualified. Directors need
not be stockholders.
Section 2. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors shall be filled as
provided in the Certificate of Incorporation and any directors so chosen to
fill a vacancy shall hold office for the remainder of the term and until their
successors are duly elected and shall qualify, unless sooner displaced. Any
directors so chosen to fill a
2
<PAGE> 3
newly created directorship shall hold office until the next annual election and
until their successors are duly elected and shall qualify, unless sooner
displaced. If there are no directors in office, then an election of directors
may be held in the manner provided by statute. If, at the time of filling any
vacancy or any newly created directorship, the directors then in office shall
constitute less than a majority of the whole board (as constituted immediately
prior to any such increase), the Court of Chancery may, upon application of any
Stockholder or stockholders holding at least ten percent (10%) of the total
number of the shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies or
newly created directorships, or to replace the directors chosen by the
directors then in office.
Section 3. The business of the Corporation shall be managed by
or under the direction of its Board of Directors which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these ByLaws directed or
required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. Regular meetings of the Board of Directors may be
held without notice at such time and at such place as shall from time to time
be determined by the Board of Directors.
Section 6. Special meetings of the board may be called by or at
the request of the Chairman of the Board and shall be called by the Chairman of
the Board at the request of at least three (3) of the directors then serving on
the Board of Directors.
Section 7. Notice of any special meeting shall be given at least
three (3) days previously thereto of written notice delivered personally or
mailed to each director at his business address, or by telegram. If mailed,
such notice shall be deemed to be delivered when deposited in the U.S. Mail, so
addressed, with postage thereon prepaid. If notice is given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. Any
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither business to be transacted, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Section 8. At all meetings of the Board of Directors, a majority
of the directors shall constitute a quorum for the transaction of business and
the act of a majority of the directors present at any meeting at which there is
a quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than an announcement at the meeting, until a quorum shall be
present.
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these ByLaws, any action required or permitted to be taken at
any meeting of the Board of Directors or any committee
3
<PAGE> 4
thereof may be taken without a meeting, if all members of the board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the Certificate of
Incorporation or these ByLaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
Section 11. In the event of a vacancy occurring in the Board of
Directors, whether as a result of a creation of a new directorship pursuant to
Paragraph 6(a) of the Certificate of Incorporation or the death, resignation,
retirement, disqualification or removal of a director, the Nominating
Committee, pursuant to Article IV, Section 2, of these By-Laws, shall propose
to the remaining directors a slate of candidates for the vacant position.
COMPENSATION OF DIRECTORS
Section 12. The directors elected by stockholders of the
Corporation as provided in the Certificate of Incorporation shall be paid their
expenses, if any, of attendance at each meeting of the Board of Directors. The
directors shall be compensated for serving as directors and as members of
special or standing committees of the Board of Directors in such amounts as
determined by the Board of Directors.
ARTICLE IV
COMMITTEES OF DIRECTORS
Section 1.
(a) The Board of Directors may create an Executive Committee
of the Board of Directors to be comprised of at least three (3) directors
appointed by a majority of the Board of Directors. The Executive Committee
shall be appointed at any meeting of the Board of Directors held after the
annual meeting of stockholders. Each member of the Executive Committee shall
hold office until the first meeting of the Board of Directors after the annual
meeting of stockholders next following his election and until his successor
member of the Executive Committee is elected and qualified, or until his death,
resignation or removal, or until he shall cease to be a director.
(b) During the intervals between the meetings of the
Board of Directors, the Executive Committee shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided,
however, that the Executive Committee shall not have the power to amend or
repeal any resolution of the Board of Directors that by its terms shall not be
subject to amendment or repeal by the Executive Committee, or any resolution of
the Board of Directors concerning the establishment or membership of the
Executive Committee, and the Executive Committee shall not have the authority
of the Board of Directors in reference to matters required by law to be passed
upon by the full Board.
4
<PAGE> 5
(c) The Executive Committee shall meet from time to time
on call of the Chairman. Meetings of the Executive Committee may be held at
such place or places, within or without the State of Delaware, as the Executive
Committee shall determine or as may be specified or fixed in the respective
notices or waivers of such meetings. The Executive Committee may fix its own
rules of procedure, including provision for notice of its meetings. It shall
keep a record of its proceedings and shall report these proceedings to the
Board of Directors at the meeting thereof held next after they have been taken.
(d) The Executive Committee shall act by majority vote of
its members.
Section 2.
(a) There is hereby created a Nominating Committee of the
Board of Directors to be comprised of at least three (3) directors appointed by
a majority of the Board of Directors. The Nominating Committee shall be
appointed at the first meeting of the Board of Directors following the annual
meeting of the stockholders. Each member of the Nominating Committee shall
hold office until the first meeting of the Board of Directors after the annual
meeting of stockholders next following his election and until his successor
member of the Nominating Committee is elected and qualified, or until his
death, resignation, or removal, or until he shall cease to be a director.
(b) The Nominating Committee so appointed will be
authorized to field a slate of candidates for positions on the Board of
Directors becoming vacant at the next annual meeting of the stockholders of the
Corporation or becoming vacant as a result of a vacancy on the Board of
Directors. The Nominating Committee so appointed shall be further authorized
to field a slate of candidates for positions as officers of the Corporation
becoming vacant at the next annual meeting of the Board of Directors of the
Corporation or becoming vacant as a result of a vacancy in such officer's
position.
(c) The Nominating Committee shall meet from time to time
on call of the Chairman. Meetings of the Nominating Committee may be held at
such place or places, within or without the State of Delaware, as the
Nominating Committee shall determine or as may be specified or fixed in the
respective notices or waivers of such meetings. The Nominating Committee may
fix its own rules of procedure, including provision for notice of its meetings.
It shall keep a record of its proceedings and shall report these proceedings to
the Board of Directors at the meeting thereof held next after they have been
taken.
(d) The Nominating Committee shall act by a majority vote
of its members.
Section 3.
(a) There is hereby created a Audit Committee of the
Board of Directors to be comprised of at least three (3) directors appointed by
a majority of the Board of Directors. The Audit Committee shall be appointed
at the first meeting of the Board of Directors following the annual meeting of
the stockholders. Each member of the Audit Committee shall hold office until
the first meeting of the Board of Directors after the annual meeting of
stockholders next following his election and until his successor member of the
Audit Committee is elected and qualified, or until his death, resignation, or
removal, or until he shall cease to be a director.
5
<PAGE> 6
(b) The Audit Committee so appointed will be authorized
to recommend to the Board of Directors each year the appointment of independent
public accountants to audit the books, records, and accounts of the
Corporation, to discuss with the independent accountants the plan and scope of
their examination of the books and records of the Corporation and review the
results thereof prior to publication, to review all recommendations made by the
independent accountants regarding accounting methods used and the system of
internal controls utilized by the Corporation and advise the Board of Directors
with respect thereto, to evaluate the independence of the independent auditors
by reviewing, prior to rendition, the plan for and scope of non-audit services
and the cost thereof proposed to be rendered by the independent auditors, to
review with the Corporation's financial officers and internal auditor the scope
and adequacy of the Corporation's internal controls and staff and the results
of the internal audit investigations, and to perform such other functions and
duties and render such reports as may be from time to time prescribed by the
Board of Directors.
(c) The Audit Committee shall meet from time to time on
call of the Chairman. Meetings of the Audit Committee may be held at such
place or places, within or without the State of Delaware, as the Audit
Committee shall determine or as may be specified or fixed in the respective
notices or waivers of such meetings. The Audit Committee may fix its own rules
of procedure, including provision for notice of its meetings. It shall keep a
record of its proceedings and shall report these proceedings to the Board of
Directors at the meeting thereof held next after they have been taken.
(d) The Audit Committee shall act by a majority vote of
its members.
Section 4.
(a) There is hereby created a Compensation Committee of the
Board of Directors to be comprised of at least three (3) directors appointed by
a majority of the Board of Directors, one of whom shall be designated by the
Board of Directors as Chairman of the Compensation Committee. The Compensation
Committee shall be appointed at the first meeting of the Board of Directors
following the annual meeting of the shareholders. Each member of the
Compensation Committee shall hold office until the first meeting of the Board
of Directors after the annual meeting of shareholders next following his
election and until his successor member of the Compensation Committee is
elected and qualified, or until his death, resignation, or removal, or until he
shall cease to be a director.
(b) The Compensation Committee so appointed will be
authorized to recommend to the Board of Directors from time to time the
compensation to be made to all officers, directors and committee members
(hereinafter "Executive Compensation") of the Corporation. The Executive
Compensation policy of the Compensation Committee is to offer competitive
salaries in comparison to market prices. The compensation may include but is
not limited to salary, bonus, stock options, stock appreciation rights,
restricted stock awards, other annual compensation, and any mixture thereof as
the Compensation Committee deems appropriate in light of the performance of the
Corporation. The Compensation Committee is to determine Executive Compensation
based on individual performance and responsibility, the average of comparable
executive salaries in other bank holding companies of comparable size, and
other factors which the Compensation Committee deems relevant to the
determination of Executive Compensation. In comparing the Corporation's
Executive Compensation with comparable companies, the Compensation Committee
may use any published survey of bank holding companies deemed reliable by the
Compensation Committee. In analyzing the surveys, the Compensation Committee
may take into consideration ratios that provide a correlation between the
salaries of various executive positions and the
6
<PAGE> 7
total assets and total gross revenues of the companies in the survey as well as
other ratios that the Compensation Committee deems relevant to the
determination of Executive Compensation.
(c) The Compensation Committee shall meet from time to
time on call of its Chairman. Meetings of the Compensation Committee may be
held at such place or places, within or without the State of Delaware, as the
Compensation Committee shall determine or as may be specified or fixed in the
respective notices or waivers of such meetings. The Compensation Committee may
fix its own rules of procedure, including provision for notice of its meetings.
It shall keep a record of its proceedings and shall report these proceedings to
the Board of Directors at the meeting thereof held next after they have been
taken.
(d) The Compensation Committee shall act by a majority
vote of its members.
Section 5. The Board of Directors, by resolution adopted by a
majority of the entire Board, may designate one or more additional committees,
each committee to consist of three or more of the directors of the Corporation,
which shall have such name or names and shall have and may exercise such powers
of the Board of Directors, except the powers denied to the Executive Committee,
as may be determined from time to time by the Board of Directors.
ARTICLE V
NOTICES
Section 1. Whenever, under the provisions of the statutes or of
the Certificate of Incorporation or of these ByLaws, notice is required to be
given to any director or Stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or Stockholder, at his address as it appears on the records of
the Corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
ByLaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE VI
OFFICERS
Section 1. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a Chairman of the Board of Directors, a
President, an Executive Vice-President or a Vice-President, a Secretary and a
Treasurer. The Board of Directors may also choose additional Executive
Vice-Presidents or Vice-Presidents, and one or more Assistant Secretaries and
Assistant Treasurers. Any number of offices may be held by the same person,
unless the Certificate of Incorporation or these ByLaws otherwise provide.
Section 2. The officers of the Corporation shall be elected
annually by the Board of Directors at the regular meetings of the Board of
Directors held after each annual meeting of the stockholders. If
7
<PAGE> 8
the election of officers shall not be held at such meeting, such election shall
be held as soon thereafter as conveniently may be. Each officer shall hold
office until his successor shall have been duly elected and shall have
qualified, or until his death, or until he shall resign or shall have been
removed in the manner hereinafter provided. The Board of Directors at any
meeting may appoint agents and employees to serve for such time and to have
such duties and authority as the Board of Directors may determine. All agents
and employees of the Corporation not appointed by the Board of Directors may be
appointed by the Chairman of the Board, or by persons authorized by him to do
so, to serve for such time and to have such duties as the appointing authority
may determine.
Section 3. Any officer or agent elected or appointed by the
Board of Directors may be removed, with or without cause, at any time, by the
affirmative vote of the Board of Directors, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election
or appointment of an officer or agent shall not of itself create any contract
right in favor of such officer or agent.
Section 4. Vacancies occurring in any office filled by the Board
of Directors because of death, resignation, removal, disqualification or
otherwise, may be filled by the Board of Directors for the unexpired portion of
the term. A vacancy in any other office for any reason shall be filled by the
Board of Directors or any superior officer to whom authority in the premises
may have been delegated by these By-Laws or by resolution of the Board of
Directors.
Section 5. The Chairman of the Board of Directors shall be the
chief executive officer of the Corporation and, subject to the control of the
Board of Directors, shall in general supervise and control the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the stockholders and of the Board of Directors. He may sign, with the
Secretary or an Assistant Secretary, certificates for shares of the
Corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these By-Laws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or executed;
and in general shall perform all duties incident to the office of the chief
executive officer and such other duties as may be prescribed by the Board of
Directors from time to time.
Section 6. The President of the Corporation, subject to the
control of the Board of Directors and the Chairman of the Board, shall in
general supervise and control the day to day business and affairs of the
Corporation. The President shall, in the absence of the Chairman of the Board
of Directors, preside at all meetings of the stockholders and of the Board of
Directors. He may sign, with the Secretary or an Assistant Secretary,
certificates for shares of the Corporation, any deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has authorized to
be executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these By-Laws to some other
officers or agent of the Corporation, or shall be required by law to be
otherwise signed or executed; and in general shall perform all duties incident
to the office of President and such other duties as may be prescribed by the
Board of Directors from time to time.
Section 7. In the absence of the President or in the event of
his death, inability or refusal to act, the Executive Vice President (or in the
event there be more than one Executive Vice President, the Executive Vice
Presidents in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting
8
<PAGE> 9
shall have all the powers of and be subject to all the restrictions upon the
President. Any Executive Vice President may sign, with the Secretary or an
Assistant Secretary, certificates for shares of the Corporation; and perform
such other duties as from time to time may be assigned to him by the Chairman
of the Board, by the President, or by the Board of Directors.
Section 8. In the absence of the President and the Executive
Vice President(s) (if any) or in the event of his and their death, inability or
refusal to act, the Vice President (or in the event there be more than one Vice
President, the Vice Presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting shall
have all the powers of and be subject to all the restrictions upon the
President. Any Vice President may sign, with the Secretary or an Assistant
Secretary, certificates for shares of the Corporation, and shall perform such
other duties as from time to time may be assigned to him by the Chairman of the
Board, by the President, or by the Board of Directors.
Section 9. The Secretary shall: (a) keep the minutes of the
proceedings of the stockholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents the execution of
which on behalf of the Corporation under its seal is duly authorized; (d) keep
a register of the post office address of each stockholder which shall be
furnished to the Secretary by such stockholder; (e) sign with the Chairman of
the Board, President, an Executive Vice President, or a Vice President,
certificates for shares of the Corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors; (f) have general
charge of the stock transfer books of the Corporation; and (g) in general
perform all duties incident to the office of Secretary and such other duties as
from time to time may be assigned to him by the Chairman of the Board, by the
President, or by the Board of Directors.
Section 10. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the Corporation; (b) receive
and give receipts for moneys due and payable to the Corporation from any source
whatsoever, and deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected by the Board
of Directors; and (c) in general perform all of the duties as from time to time
may be assigned to him by the Chairman of the Board, by the President, or by
the Board of Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board of Directors shall determine.
Section 11. The Assistant Treasurers shall perform the duties of
the Treasurer during his absence or incapacity. The Assistant Secretaries
shall perform the duties of the Secretary during his absence or incapacity.
The Assistant Secretaries may sign with the Chairman of the Board, the
President, an Executive Vice President, or a Vice President certificates for
shares of the Corporation the issuance of which shall have been authorized by
a resolution of the Board of Directors, give bonds for the faithful discharge
of their duties in such sums and with such sureties as the Board of Directors
shall determine. The Assistant Secretaries and Assistant Treasurers, in
general, shall perform such duties as shall be assigned to them by the
Secretary or the Treasurer, respectively, or by the Chairman of the Board, by
the President, or by the Board of Directors.
9
<PAGE> 10
Section 12. The salaries of the officers shall be fixed from time
to time by the Board of Directors upon recommendation by the Compensation
Committee of the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE VII
CERTIFICATES FOR SHARES
Section 1. The shares of the Corporation shall be represented by
a certificate or shall be uncertificated. Certificates shall be signed by, or
in the name of the Corporation by the Chairman of the Board or the President or
a Vice-President and the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation.
Upon the face or back of each stock certificate issued to represent
any partly paid shares, or upon the books and records of the Corporation in the
case of uncertificated partly paid shares, shall be set forth the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights or
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware,
in lieu of the foregoing requirements, there may be set forth on the face or
back of the Certificate which the Corporation shall issue to represent such
class or series of stock, a statement that the Corporation will furnish without
charge to each Stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the Corporation shall send to the registered owner
thereof a written notice containing the information required to be set forth or
stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions or such
preferences and/or rights.
Section 2. Where a certificate is countersigned (l) by a transfer
agent other than the Corporation or its employee, or, (2) by a registrar other
than the Corporation or its employee, any other signature on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate
or certificates or uncertificated shares to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged
10
<PAGE> 11
to have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates or
uncertified shares, the Board of Directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative,
to advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertificated shares such uncertificated shares shall
be canceled and issuance of new equivalent uncertificated shares or
certificated shares shall be made to the person entitled thereto and the
transaction shall be recorded upon the books of the Corporation.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VIII
GENERAL PROVISIONS, DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
11
<PAGE> 12
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interests
of the Corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
12
<PAGE> 1
Exhibit 3.5
MASADA SECURITY HOLDINGS, INC.
PLAN OF RECAPITALIZATION
1. SUMMARY
Masada Security Holdings, Inc. (the "Company") is a corporation
organized and existing under the laws of the State of Delaware. The Company
has obtained equity financing through a series of three private placements of
equity securities, principally to venture capital investors. As a result of
these equity financings, the Company's authorized capital structure consists of
three classes of common stock and three classes of preferred stock.
The Company intends to raise additional equity financing through a
public offering of equity securities of the Company that will be registered
with the United States Securities and Exchange Commission and pursuant to the
securities laws of applicable states. To facilitate the anticipated public
offering, the Board of Directors believes that it is in the best interests of
the Company and its stockholders (i) to simplify the Company's capital
structure by effecting the redemption and/or conversion of all existing shares
of preferred stock and creating a single class of common stock, (ii) to
eliminate certain existing stockholder rights that are not typically held by
stockholders of a corporation whose securities are publicly traded, (iii) to
adopt certain anti-takeover devices, and (iv) to elect directors to a
classified Board of Directors. The Board of Directors of the Company has
therefore adopted this Plan of Recapitalization.
2. DEFINITIONS
Capitalized terms used in the Plan shall have the meanings assigned to
them in this Section 2. Singular terms shall include the plural as well as the
singular, and vice versa. Use of the masculine gender shall include the
feminine as well. The terms "herein," "hereof" and "hereunder," and other
words of similar import, refer to the Plan as a whole and not to any particular
Section or other subdivision.
"Board" means the Board of Directors of the Company.
"Certificate Amendment" means the Certificate of Amendment to the
Certificate of Incorporation of the Company in the form attached hereto as
Exhibit A.
"Commission" means the United States Securities and Exchange
Commission.
"Company" means Masada Security Holdings, Inc., a Delaware
corporation.
"Custody Letter" means the Letter of Transmittal and Custody Agreement
to the Stock Transfer Agent in the form attached hereto as Exhibit B.
"DGCL" means the Delaware General Corporation Law (Title 8), as
amended.
"Effective Date" means the date upon which the Fourth Restated
Certificate is filed with the Delaware Secretary of State pursuant to Section
4(c) of the Plan.
"Existing Common Stock" means the Existing A Common Stock, Existing B
Common Stock and Existing C Common Stock.
"Existing A Common Stock" means the 333,500 shares of Class A common
stock of the Company authorized to be issued by the Third Restated Certificate,
all of which are presently issued and outstanding.
<PAGE> 2
"Existing B Common Stock" means the 1,078,572 shares of Class B common
stock of the Company authorized to be issued by the Third Restated Certificate,
570,240 of which are presently issued and outstanding.
"Existing C Common Stock" means the 546,875 shares of Class C common
stock of the Company which will be authorized to be issued upon the filing of
the Certificate Amendment, none of which are presently issued and outstanding;
486,111 shares of Class C common stock of the Company are presently authorized
to be issued by the Third Restated Certificate.
"Existing Preferred Stock" means the Existing A Preferred Stock,
Existing B Preferred Stock and the Existing C Preferred Stock.
"Existing A Preferred Stock" means the 75,700 shares of Class A
preferred stock of the Company authorized to be issued by the Third Restated
Certificate, all of which are presently issued and outstanding.
"Existing B Preferred Stock" means the 358,332 shares of Class B
convertible preferred stock of the Company authorized to be issued by the Third
Restated Certificate, all of which are presently issued and outstanding.
"Existing C Preferred Stock" means the 486,111 shares of Class C
convertible preferred stock of the Company authorized to be issued by the Third
Restated Certificate, all of which are presently issued and outstanding.
"Existing Convertible Preferred Stock" means the Existing B Preferred
Stock and the Existing C Preferred Stock.
"Fourth Restated Certificate" means the Fourth Restated Certificate of
Incorporation of the Company in the form attached hereto as Exhibit C.
"Managing Underwriters" means Robertson Stephens & Company LLC and
Lehman Brothers Inc., who are the managing underwriter and co-managing
underwriter, respectively, of the Public Offering.
"New ByLaws" means the ByLaws in the form attached hereto as Exhibit
D.
"New Common Stock" means the new, single class of common stock of the
Company to be authorized upon the filing of the Fourth Restated Certificate
with the Delaware Secretary of State.
"Plan" means this Plan of Recapitalization, as it may hereafter be
amended.
"Public Offering" means the proposed public offering of New Common
Stock by the Company pursuant to the Registration Statement.
"Purchase Agreement" means the Second Amended and Restated Securities
Purchase Agreement dated as of May 31, 1995 among the Company and all of its
stockholders.
"Purchase Agreement Amendment" means the Third Amended and Restated
Securities Purchase Agreement among the Company and its stockholders in the
form attached hereto as Exhibit E.
"Registration Statement" means the Registration Statement on Form S-1
to be filed by the Company with the Commission for the Public Offering.
2
<PAGE> 3
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Transfer Agent" means SunTrust Bank, Atlanta, which has been
selected by the Company to serve as the stock transfer agent for the New Common
Stock.
"Stockholders" means, at any particular time prior to the Effective
Date, the holders of the Existing Common Stock and/or Existing Preferred Stock.
"Third Restated Certificate" means the Third Restated Certificate of
Incorporation of the Company filed with the Delaware Secretary of State on July
10, 1996 as it may be amended hereafter and prior to the Effective Date.
"1994 Stock Plan" means the Stock Option/Purchase Plan of Masada
Security Holdings, Inc. adopted and approved in 1994, as amended.
"1996 Stock Plan" means the 1996 Stock Option Plan of Masada Security
Holdings, Inc. adopted and approved in 1996, as amended.
3. CONDITIONS TO IMPLEMENTATION OF THE PLAN
The Plan will not be effective and will not be implemented until each
of the following conditions has been satisfied:
(a) Unanimous Approval by the Stockholders. The
Stockholders must unanimously vote for and approve the Plan in accordance with
the DGCL, either by written consent or at a special meeting of the
Stockholders. As a condition to approving the Plan, the Stockholders must also
vote for and approve the Fourth Restated Certificate.
(b) Increase in Authorized Shares. The Certificate
Amendment, which increases the number of authorized shares of Existing C Common
Stock from 486,111 to 546,875, must be approved by the Stockholders in
accordance with the DGCL, either by written consent or at a special meeting of
the Stockholders, and the Certificate Amendment must be executed on behalf of
the Company and filed with the Delaware Secretary of State.
(c) Execution of Purchase Agreement Amendment. The
Company and each of the Stockholders must execute and deliver the Purchase
Agreement Amendment.
(d) Delivery of Certificates and Custody Letter. Each of
the Stockholders must deliver to the Company all certificates for shares of
Existing Preferred Stock or Existing Common Stock owned by such Stockholder,
duly endorsed in blank, and must execute and deliver to the Company the Custody
Letter. The Company will deliver the stock certificates and Custody Letters to
the Stock Transfer Agent, who will hold them in trust in accordance with the
Custody Letter terms.
(e) Receipt of Favorable No-Action Letter from
Commission. The Company must receive a no-action letter from the Commission to
the effect that for purposes of computing the Rule 144(d) holding period for
shares of New Common Stock to be issued pursuant to the Plan, each share of the
New Common Stock shall be deemed to have been acquired on the same date as the
underlying issued and outstanding shares of Existing Common Stock or Existing
Convertible Preferred Stock, as the case may be, were acquired.
3
<PAGE> 4
(f) Registration Statement Declared Effective. The
Registration Statement must be declared effective by the Commission.
(g) Closing of Public Offering. The Managing
Underwriters and the Company shall have executed and delivered the underwriting
agreement for the Public Offering, and the Managing Underwriters shall have
notified the Company that the Managing Underwriters are prepared to close the
Public Offering.
4. IMPLEMENTATION OF THE PLAN
Subject to satisfaction of the conditions set forth in Section 3, the
Plan will be implemented as follows:
(a) Redemption of Existing A Preferred Stock. Following
satisfaction of all conditions set forth in Section 3 and so long as the Plan
of Recapitalization has not terminated, all 75,700 issued and outstanding
shares of Existing A Preferred Stock shall be automatically redeemed at the
redemption price provided for in Article 4(b) of the Third Restated Certificate
and thereafter canceled. The Company shall have no obligation to comply with
any redemption procedures set forth in Article 4(b) of the Third Restated
Certificate, including, without limitation, the written notice requirement set
forth in Article 4(b)(iv).
(b) Conversion of Existing Convertible Preferred Stock.
Following satisfaction of all conditions set forth in Section 3 and so long as
the Plan of Recapitalization has not terminated, each issued and outstanding
share of Existing B Preferred Stock shall be automatically converted into 1.0
share of Existing B Common Stock, and each issued and outstanding share of
Existing C Preferred Stock shall be automatically converted into 1.125 shares
of Existing C Common Stock and cash in lieu of fractional shares of Existing C
Common Stock at $32 per share. The Company shall have no obligation to comply
with any conversion procedures set forth in Article 4(c) of the Third Restated
Certificate.
(c) Filing of Fourth Restated Certificate. Following the
redemption of the Existing A Preferred Stock in accordance with Section 4(a)
and the conversion of the Existing Convertible Preferred Stock in accordance
with Section 4(b), the Company shall execute and file the Fourth Restated
Certificate with the Delaware Secretary of State.
(d) Exchange of Existing Common Stock for New Common
Stock. As of the Effective Date, each issued and outstanding share of Existing
Common Stock, including the shares of Existing B Common Stock and Existing C
Common Stock issued upon the conversion of the Existing Convertible Preferred
Stock in accordance with Section 4(b), shall be automatically exchanged for 3.0
shares of New Common Stock.
(e) Cancellation of Shares of Existing Common Stock and
Existing Preferred Stock not Outstanding. As of the Effective Date, all shares
of Existing Common Stock and Existing Preferred Stock not outstanding shall be
automatically canceled.
(f) Approval of New ByLaws. As of the Effective Date,
the New ByLaws are adopted as the official bylaws of the Company.
(g) Classes of Directors. Effective upon the filing of
the Fourth Restated Certificate there will be approximately 5,426,826 shares of
New Common Stock issued and outstanding as a result of the automatic exchange
of the Existing Common Stock in accordance with Section 4(d) hereof. Effective
upon filing of the Fourth Restated Certificate, the following persons are
hereby unanimously elected by the holders of all such 5,426,826 shares of New
Common Stock as Class I, Class II or Class III directors of the Company, as set
forth
4
<PAGE> 5
below, in accordance with Article 6(b) of the Fourth Restated Certificate, in
lieu of the 1996 annual meeting of stockholders of the Company:
<TABLE>
<S> <C>
Class I (term expiring in 1997): Steven C. Halstedt, John M. Kark, William A. Johnston
Class II (term expiring in 1998): George J. Still, Jr., I. Robert Greene, O. Gene Gabbard
Class III (term expiring in 1999): Terry W. Johnson, Daryl E. Harms, Bertil D. Nordin
</TABLE>
(h) Stock Plans and Stock Options. As of the Effective
Date, the stock subject to the 1994 Stock Plan shall be 300,000 shares of New
Common Stock instead of 100,000 shares of Existing B Common Stock, and the
stock subject to the 1996 Stock Plan shall be 150,000 shares of New Common
Stock instead of 50,000 shares of Existing B Common Stock. As of the Effective
Date, each stock option agreement entered into by the Company pursuant to the
1994 Stock Plan or the 1996 Stock Plan shall effectively be amended such that
(i) the shares underlying the options shall be shares of New Common Stock
instead of shares of Existing B Common Stock, (ii) the number of New Common
Stock shares underlying the options shall be the number of shares originally
covered by the options multiplied by three, and (iii) the exercise price for
the options shall be the original exercise price divided by three.
5. MISCELLANEOUS
(a) Termination of the Plan. At any time prior to the
Effective Date, the Board may, in its sole discretion, elect to terminate the
Plan. If all conditions set forth in Section 3 are not satisfied on or before
February 28, 1997, or if the Board should sooner determine, for any reason, not
to proceed with the Plan, this Plan will terminate. No person shall have any
rights or claims against the Company, the Board or any officers, employees or
representatives of the Company or any subsidiaries of the Company in the event
the Plan is terminated.
(b) Amendment to the Plan. The Plan may not be amended
by the Board without the unanimous approval of the Stockholders in accordance
with the DGCL, either by written consent or at a special meeting of the
Stockholders.
(c) Right to Rely upon Documents Deemed Genuine. The
Company, the Board, and the directors, officers and employees of the Company or
its subsidiaries shall have the right to rely upon documents and records deemed
in good faith to be genuine, authorized or properly executed and shall incur no
liability or obligation for acting in reliance thereon.
(d) Governing Law. The Plan, and the rights and
obligations of all parties under the Plan, will be governed by and construed in
accordance with the internal laws of the State of Delaware.
Dated as of September 27, 1996.
MASADA SECURITY HOLDINGS, INC.
By:
--------------------------------
Terry W. Johnson, President
5
<PAGE> 6
Exhibit A
CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF
INCORPORATION OF MASADA SECURITY HOLDINGS, INC.
Masada Security Holdings, Inc., a corporation organized and existing
under and by virtue of the Delaware General Corporation Law,
DOES HEREBY CERTIFY:
That Masada Security Holdings, Inc. was originally incorporated under
the name Masada Security, Inc., and the original Certificate of Incorporation
of the corporation was filed with the Secretary of State of Delaware on January
28, 1993;
That the Board of Directors of Masada Security Holdings, Inc., by
unanimous written consent, duly adopted resolutions which would further amend
the provisions of the Certificate of Incorporation of the corporation,
declaring that adoption of said amendment to be advisable and in the best
interest of said corporation, and declaring that said amendment be considered
by the stockholders of said corporation at a meeting of stockholders of said
corporation called for that purpose;
That the stockholders of Masada Security Holdings, Inc., by unanimous
written consent, adopted and approved said amendment in accordance with the
provisions of Section 228 of the Delaware General Corporation Law;
That said amendment was duly adopted in accordance with the provisions
of Section 242 of the Delaware General Corporation Law;
That the capital of Masada Security Holdings, Inc. shall not be
reduced under or by reason of said amendment;
That Article 4(a) of the Certificate of Incorporation of Masada
Security Holdings, Inc., as amended, is hereby further amended to read in its
entirety as follows:
(a) Authorized Capital Stock. The total number of shares
of stock which the Corporation shall have authority to issue is
2,879,090 shares, consisting of 1,958,947 shares of Common Stock, par
value $.01 per share (the "Common Stock"), and 920,143 shares of
Preferred Stock, par value $.01 per share (the "Preferred Stock").
The Common Stock herein authorized shall be divided into three classes
as follows: 333,500 shares of Class A Common Stock; 1,078,572 shares
of Class B Common Stock; and 546,875 shares of Class C Common Stock.
The Preferred Stock herein authorized shall be divided into three
classes as follows: 75,700 shares of Class A Preferred Stock; 358,332
shares of Class B Convertible Preferred Stock; and 486,111 shares of
Class C Convertible Preferred Stock (the Class B Convertible Preferred
Stock and the Class C Convertible Preferred Stock are hereinafter
collectively referred to as the "Convertible Preferred Stock").
IN WITNESS WHEREOF, Masada Security Holdings, Inc. has caused this
Certificate of Amendment to the Certificate of Incorporation to be signed by
its _____________ President and attested to by its ________ Secretary on this
the _____ day of ______________________________, 1996.
-----------------------------
---------------President
Attest:
- ------------------------------
- ---------------Secretary
<PAGE> 7
Exhibit B
LETTER OF TRANSMITTAL AND CUSTODY AGREEMENT
FOR THE DEPOSIT INTO CUSTODY OF CERTIFICATE(S) REPRESENTING SHARES OF CLASS
A COMMON STOCK, CLASS B COMMON STOCK, CLASS A REDEEMABLE PREFERRED STOCK,
CLASS B CONVERTIBLE PREFERRED STOCK AND/OR CLASS C CONVERTIBLE PREFERRED
STOCK
OF
MASADA SECURITY HOLDINGS, INC.
IN CONNECTION WITH THE REDEMPTION OF THE CLASS A REDEEMABLE PREFERRED STOCK,
THE CONVERSION OF CLASS B CONVERTIBLE PREFERRED STOCK AND CLASS C
CONVERTIBLE PREFERRED STOCK INTO CLASS B COMMON
STOCK AND CLASS C COMMON STOCK, RESPECTIVELY, AND THE
EXCHANGE OF THE THEN OUTSTANDING CLASS A COMMON STOCK, CLASS B COMMON
STOCK, AND CLASS C COMMON STOCK
INTO A SINGLE CLASS OF COMMON STOCK
SunTrust Bank, Atlanta
Stock Transfer Department
58 Edgewood Avenue, Room 225A
Atlanta, GA 30303
<TABLE>
<CAPTION>
====================================================================================================================
DESCRIPTION OF SHARES DEPOSITED
- --------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS
OF REGISTERED HOLDER(S) CERTIFICATE(S) DEPOSITED
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES
TITLE OF REPRESENTED
SHARES CERTIFICATE BY
REPRESENTED NUMBER(S) CERTIFICATE(S)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
====================================================================================================================
</TABLE>
Ladies and Gentlemen:
Pursuant to the Plan of Recapitalization of Masada Security Holdings,
Inc. ("MSH") dated September 27, 1996 ("Plan of Recapitalization") and
unanimously approved by MSH's Board of Directors and stockholders, the
undersigned hereby elects, if applicable, to convert each share of the
undersigned's Class B Convertible Preferred Stock into 1.0 share of Class B
Common Stock and to convert each share of the undersigned's Class C Convertible
Preferred Stock into 1.125 shares of Class C Common Stock and cash in lieu of
fractional shares of Class C Common Stock at $32 per share (the "Conversion
Election"). There are delivered to you herewith, as described in the above
table, certificates representing all of the undersigned's shares, as
applicable, of MSH Class A Common Stock, Class B Common Stock, Class A
Preferred Stock, Class B Convertible Preferred Stock and/or Class C Convertible
Preferred Stock (hereinafter collectively referred to as the "Shares"), each
to be held in custody by you until the date on which all of the conditions to
implementation of the Plan of Recapitalization, as set forth in Section 3 of
the Plan of Recapitalization, have been satisfied so long as the Plan of
Recapitalization has not terminated ("Implementation Date"). In the event the
<PAGE> 8
undersigned does not currently have possession of such stock certificates, the
undersigned will immediately deliver such certificates to you at such time as
the undersigned obtains possession of such certificates. Each of the Shares so
delivered is accompanied by a duly executed assignment form, duly endorsed for
transfer and is in negotiable form bearing the signature of the undersigned
guaranteed by any commercial bank or trust company. The stock certificates are
to be held by you as Custodian for the account of the undersigned and are to be
disposed of by you in accordance with this Letter of Transmittal and Custody
Agreement (the "Custody Letter").
The undersigned agrees to deliver to you such additional documentation
as MSH or you or respective counsel may request to effectuate or confirm
compliance with any of the provisions hereof, all of the foregoing to be in
form and substance satisfactory in all respects to MSH, you or respective
counsel. The undersigned understands that the method of delivery of the
certificates representing the Shares, the Custody Letter and any other required
documents is at the undersigned's option and risk.
You are hereby authorized and directed, as MSH's transfer agent, to
hold theShares deposited by the undersigned with you hereunder in your custody
until the Implementation Date, at which time you shall take all necessary
action, including endorsements of certificates and entries on MSH's books, (i)
to retire the Class A Preferred Stock on the books of MSH against payment for
such Class A Preferred Stock into your account and to give receipt for such
payment, (ii) on the business day following your receipt of such payment into
your account, to transmit to the undersigned, in the manner requested by the
undersigned at the end of this Custody Letter, the amount received by you as
payment for the undersinged's Class A Preferred Stock, and (iii) pursuant to
the undersigned's Conversion Election, (a) to convert each share of the
undersigned's Class B Convertible Preferred Stock into 1.0 share of Class B
Common Stock and to retire the undersigned's Class B Convertible Preferred
Stock, (b) to convert each share of the undersigned's Class C Convertible
Preferred Stock into 1.125 shares of Class C Common Stock and retire the Class
C Convertible Preferred Stock, and (c) to disburse to the undersigned a check
for the cash in lieu of fractional shares of Class C Common Stock in accordance
with the Plan of Recapitalization, if applicable (the "Preferred Stock
Conversion"). After the Preferred Stock Conversion and upon the effective date
of the Plan of Recapitalization as defined in Section 2 thereof ("Effective
Date"), you shall (i) take all necessary action, including endorsements of
certificates and entries on MSH's books, in accordance with the
power-of-attorney granted below, to exchange all outstanding shares of Class A
Common Stock, Class B Common Stock and Class C Common Stock deposited hereunder
with you in your custody into shares of a new class of common stock ("New
Common Stock"), $.01 par value per share, registered in the name of the
undersigned in such amount as provided by the Plan of Recapitalization, and
(ii) promptly deliver a new certificate representing the undersigned's shares
of New Common Stock to the undersigned. The undersigned understands that the
certificate(s) representing the New Common Stock will contain a legend which
states as follows:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH NOR APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION NOR BY THE SECURITIES REGULATORY AUTHORITY IN ANY
STATE AND SUCH REGISTRATION IS NOT CONTEMPLATED. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, IN WHOLE OR IN
PART, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR AN
OPINION OF COUNSEL SATISFACTORY TO MASADA SECURITY HOLDINGS, INC. THAT
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
To effect the transactions contemplated by the Plan of
Recapitalization, the undersigned hereby constitutes and appoints you, SunTrust
Bank, Atlanta, as his, her or its true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him, her or it and in
his, her or its name, place and stead, in any and all capacities, to sign and
endorse any and all stock certificates necessary to exchange into New Common
Stock all shares of Class B Common Stock and Class C Common Stock issued to the
undersigned by MSH pursuant to the conversion of the Class B Convertible
Preferred Stock and Class C Convertible Preferred Stock.
2
<PAGE> 9
You shall be entitled to act and rely upon any statement, request,
notice or instructions respecting this Custody Letter, given to you on behalf of
the undersigned, as if the same shall have been made or given to you by the
undersigned; provided, however, that you shall not be entitled to act on any
statement or notice to you with respect to the Implementation Date or the
Effective Date of the Plan of Recapitalization or with respect to the
non-effectiveness or termination of the Plan of Recapitalization, or advising
you that the Plan of Recapitalization has not been effected, unless such
statement or notice shall have been confirmed in writing to you by MSH or the
undersigned.
It is understood that you assume no responsibility or liability to any
person other than to hold the certificate(s) deposited into custody with you
hereunder until the Effective Date of the Plan of Recapitalization and to
perform the tasks described in this Custody Letter, and the undersigned agrees
to indemnify and hold you harmless with respect to anything done by you in good
faith in accordance with the foregoing instructions.
The undersigned represents and warrants that:
(i) the undersigned is the true and lawful owner of the Shares,
and has full capacity, power and authority to exchange the Shares, free and
clear of all liens, restrictions and encumbrances of any kind whatsoever, and
the Shares will not be subject to any adverse claim;
(ii) the execution and delivery of this Custody Letter and the
enclosures herewith by or on behalf of the undersigned will not require any
consent, authorization or other order of any court or regulatory body,
administrative agency or other governmental body (except as such may be
required under the Securities Act of 1993, the state securities laws or Blue
Sky laws) and will not conflict with or constitute breach of any of the terms
or provisions of, or default under, any organizational documents of the
undersigned, if not an individual, or any agreement, indenture or instrument to
which the undersigned is a party or by which the undersigned or property of the
undersigned is bound, or violate or conflict with any laws, administrative
regulations, ruling or court decree applicable to the undersigned or property
of the undersigned; and
(iii) this Custody Letter signed by the undersigned, which appoints
you as attorney-in-fact for the undersigned, has been duly authorized, executed
and delivered by or on behalf of the undersigned and is a valid and binding
instrument of the undersigned enforceable in accordance with its terms, and,
pursuant to this Custody Letter, the undersigned has authorized you to execute
and delivery on the undersigned's behalf any documents necessary or desirable
to effect the transactions contemplated by this Custody Letter.
The foregoing representations, warranties and agreements, are made for
the benefit of, and may be relied upon by you, MSH and respective counsel.
The authority conferred in this Custody Letter shall not be affected
by and shall survive, the undersigned's death or incapacity, and any obligation
the undersigned may have hereunder shall be binding upon the undersigned's
successors, assigns, heirs, administrators, trustees in bankruptcy and personal
and legal representatives. THE UNDERSIGNED ACKNOWLEDGES THAT THE PLACEMENT OF
THE SHARES INTO CUSTODY WITH YOU AND ALL ELECTIONS AND INSTRUCTIONS MADE OR
GIVEN BY THE UNDERSIGNED HEREIN ARE IRREVOCABLE UNLESS THE PLAN OF
RECAPITALIZATION IS NOT IMPLEMENTED ON OR BEFORE FEBRUARY 28, 1997.
The Custody Letter shall be governed by the laws of the State of
Alabama, without regard to principles of conflicts of laws.
Please acknowledge your acceptance hereof as custodian, and receipt of
the certificate(s) deposited with you hereunder, by executing and returning the
enclosed copy hereof to the undersigned.
3
<PAGE> 10
Please acknowledge your acceptance hereof as custodian, and receipt of
the certificate(s) deposited with you hereunder, by executing and returning the
enclosed copy hereof to David P. Tomick, Chief Financial Officer, MSH Security
Holdings, Inc., 950 North 22nd Street, Suite 800, Birmingham, Alabama, 35203.
Dated: Stockholder:
-----------------------------
Print Address: ---------------------------
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
Taxpayer I.D.#:
-----------------------------
Telephone Number:
---------------------------
4
<PAGE> 11
MANNER OF PAYMENT
Instruction: Indicate how you wish to receive payment for the Class A
Redeemable Preferred Stock redeemed pursuant to the Plan of Recapitalization.
Please note that if you hold securities that are held by a corporation or other
association or in the name of a trust, payment will be made only to the
corporation or other association or trust. A wire transfer can be made only to
an account standing in exactly the same name as the person or entity, including
trusts, corporations or other associations, holding the securities being
redeemed.
I request that payment of the net proceeds from the redemption of the
Class A Redeemable Preferred Stock be made in the following manner (CHECK ONE):
<TABLE>
<S> <C> <C>
1. ( ) CHECK made payable to:
---------
-----------------------------------------
to be sent to the following address:
-----------------------------------------
-----------------------------------------
Phone
---------------------------------
Please send by (check one):
( ) First Class Mail
---------
( ) Federal Express
---------
Federal Express Account Number:
--------------------------------
2. ( ) WIRE TRANSFER to the following account:
---------
Account No.
------------------------------
Bank
--------------------------------------
(Name)
-----------------------------------------
-----------------------------------------
-----------------------------------------
(Address)
ABA No.
----------------------------------
Phone ( )
----------------------------------
3. ( ) OTHER (please specify):
---------
-----------------------------------------
-----------------------------------------
-----------------------------------------
</TABLE>
5
<PAGE> 12
CUSTODIAN'S ACKNOWLEDGMENT AND RECEIPT
SunTrust Bank, Atlanta, as Custodian, acknowledges acceptance of the
duties of the custodian under the foregoing Letter of Transmittal and Custody
Agreement and receipt of the certificate(s) referred to therein.
Dated:________________, 1996.
SUNTRUST BANK, ATLANTA
By:
----------------------------
Its:
---------------------------
6
<PAGE> 13
Exhibit C
FOURTH RESTATED
CERTIFICATE OF INCORPORATION OF
MASADA SECURITY HOLDINGS, INC.
Masada Security Holdings, Inc., a corporation organized and existing
under and by virtue of the Delaware General Corporation Law,
DOES HEREBY CERTIFY:
That Masada Security Holdings, Inc. was originally incorporated under
the name Masada Security, Inc., and the original Certificate of Incorporation
of the corporation was filed with the Secretary of State of Delaware on January
28, 1993;
That the Board of Directors of Masada Security Holdings, Inc., by
unanimous written consent, duly adopted resolutions setting forth the Fourth
Restated Certificate of Incorporation of the corporation, which would restate
and integrate and further amend the provisions of the Certificate of
Incorporation of the corporation, declaring that adoption of said Fourth
Restated Certificate of Incorporation to be advisable and in the best interest
of said corporation, and declaring that said Fourth Restated Certificate of
Incorporation be considered by the stockholders of said corporation at a
meeting of stockholders of said corporation called for that purpose;
That the stockholders of Masada Security Holdings, Inc., by unanimous
written consent, adopted and approved the said Fourth Restated Certificate of
Incorporation in accordance with the provisions of Section 228 of the Delaware
General Corporation Law;
That said Fourth Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Sections 242 and 245 of the
Delaware General Corporation Law;
That the capital of Masada Security Holdings, Inc. shall not be
reduced under or by reason of said Fourth Restated Certificate of
Incorporation; and,
That the text of the Fourth Restated Certificate of Incorporation of
Masada Security Holdings, Inc. is hereby restated and integrated and is further
amended to read in its entirety as follows:
1. NAME. The name of the Corporation is Masada Security
Holdings, Inc.
2. DURATION. The period of duration of the Corporation shall be
perpetual.
3. PURPOSES. The nature of the business and the objects and
purposes proposed to be transacted, promoted and carried on are to do any or
all the things herein mentioned, as fully and to the same extent as natural
persons might or could do, and in any part of the world, and to engage in any
lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law.
4. CAPITAL STOCK.
(a) Authorized Capital Stock. The total number of shares of stock
which the Corporation shall have authority to issue is 20,000,000 shares,
consisting of 15,000,000 shares of Common Stock, par value
<PAGE> 14
$.01 per share (the "Common Stock"), and 5,000,000 shares of Preferred Stock,
par value $1.00 per share (the "Preferred Stock").
(b) Preferred Stock. Shares of Preferred Stock may be issued from
time to time in one or more classes or series as may be determined from time to
time by the board of directors of the Corporation, each such class or series to
be distinctly designated. Except in respect of the particulars fixed by the
board of directors for classes or series provided for by the board of directors
as permitted hereby, all shares of Preferred Stock shall be of equal rank and
shall be identical. All shares of any one series of Preferred Stock so
designated by the board of directors shall be alike in every particular except
that shares of any one series issued at different times may differ as to the
dates from which dividends thereon shall be cumulative. The voting rights, if
any, of each such class or series and the preferences and relative,
participating, optional and other special rights of each such class or series
and the qualifications, limitations and restrictions thereof, if any, may
differ from those of any and all other classes or series at any time
outstanding; and the board of directors of the Corporation is hereby expressly
granted authority to fix, by resolutions duly adopted prior to the issuance of
any shares of a particular class or series of Preferred Stock so designated by
the board of directors, the voting powers of stock of such class or series, if
any, and the designations, preferences and relative, participating, optional
and other special rights and the qualifications, limitations and restrictions
of such class or series, including, but without limiting the generality of the
foregoing, the following:
(1) The distinctive designation of, and the number of
shares of Preferred Stock, which shall constitute such class or series, and
such number may be increased (except where otherwise provided by the board of
directors) or decreased (but not below the number of shares thereof then
outstanding) from time to time by like action of the board of directors;
(2) The rate and time at which, and the terms and
conditions upon which, dividends, if any, on Preferred Stock of such class or
series shall be paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes or series of
the same or other classes of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock
of such class or series to convert the same into, or exchange the same for
shares of any other class or classes or of any series of the same or any other
class or classes of stock and the terms and conditions of such conversion or
exchange;
(4) Whether or not Preferred Stock of such class or
series shall be subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions upon which, Preferred
Stock of such class or series may be redeemed;
(5) The rights, if any, of the holders of Preferred Stock
of such class or series upon the voluntary or involuntary liquidation of the
Corporation;
(6) The terms of the sinking fund or redemption or
purchase account, if any, to be provided for the Preferred Stock of such class
or series; and
(7) The voting powers, if any, of the holders of
Preferred Stock of such class or series.
(c) Issuance of Securities. Except as otherwise provided in this
Restated Certificate of Incorporation, the board of directors shall have
authority to authorize the issuance, from time to time without any vote or
other action by the stockholders, of any or all shares of stock of the
Corporation of any class or
2
<PAGE> 15
series at any time authorized, and any securities convertible into or
exchangeable for any such shares, and any options, rights or warrants to
purchase or acquire any such shares, in each case to such persons and on such
terms (including as a dividend or distribution on or with respect to, or in
connection with a split or combination of, the outstanding shares of stock of
the same or any other class) as the board of directors from time to time in its
discretion lawfully may determine; provided, however, that the consideration
for the issuance of shares of stock of the Corporation having par value (unless
issued as such a dividend or distribution or in connection with such a split or
combination) shall not be less than such par value. Shares so issued shall be
fully paid stock, and the holders of such stock shall not be liable to any
further call or assessments thereon.
(d) Voting. Each holder of Common Stock shall be entitled to one
vote for each share of Common Stock held by him. The term "Voting Stock" shall
mean all stock of the Corporation which by its terms may be voted on all
matters submitted to the stockholders of the Corporation.
(e) Exchange, Reclassification or Cancellation of Stock. Each
issued and outstanding share of the previously authorized Class A preferred
stock of the Corporation has been redeemed and canceled, each issued and
outstanding share of the previously authorized Class B convertible preferred
stock of the Corporation has been converted into shares of previously
authorized Class B common stock of the Corporation, and each issued and
outstanding share of previously authorized Class C convertible preferred stock
of the Corporation has been converted into shares of previously authorized
Class C common stock of the Corporation. Effective upon the filing of this
Restated Certificate of Incorporation, (i) each issued and outstanding share of
the previously authorized Class A common stock, Class B common stock and Class
C common stock of the Corporation shall be exchanged for 3.0 shares of the
Common Stock and (ii) all shares of previously authorized Class A common stock,
Class B common stock, Class C common stock, Class A preferred stock, Class B
convertible preferred stock and Class C convertible preferred stock of the
Corporation not outstanding shall be canceled.
5. INITIAL REGISTERED OFFICE AND AGENT. The location and mailing
address of the initial registered office of the Corporation, and the name of
its initial registered agent at such address are as follows: The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801.
6. BOARD OF DIRECTORS.
(a) Number. The number of directors which shall constitute the
whole board of directors shall be as determined from time to time by resolution
adopted by the affirmative vote of a majority of the board of directors, but
shall not be less than seven (7) nor more than ten (10) directors; provided
that until otherwise determined by the board of directors in accordance
herewith, the number of directors shall be nine (9); provided further that the
number of directors shall not be decreased if such decrease would have the
effect of shortening the term of an incumbent director.
(b) Election. The directors comprising the board of directors
shall be and is divided into three classes, Class I, Class II and Class III,
each class to be as nearly equal in number as possible. If the number of
directors is not evenly divisible by three (3), one additional director shall
be allocated to Class III and, if necessary, to Class II. Each director shall
serve for a term ending on the date of the third annual meeting of the
Corporation's stockholders following the annual meeting at which such director
was elected; provided, however, that each director elected in Class I at the
1996 annual meeting, or by consent in lieu thereof, shall serve for a term
ending on the date of the 1997 annual meeting, each director elected in Class
II at the 1996
3
<PAGE> 16
annual meeting shall serve for a term ending on the date of the 1998 annual
meeting, and each director elected in Class III at the 1996 annual meeting
shall serve for a term ending on the date of the 1999 annual meeting, or at
such later date as any director's successor is elected and qualified, subject
to his earlier death, resignation or removal from office.
(c) Powers. Except as may be otherwise provided by law or in this
Restated Certificate of Incorporation, all corporate powers of the Corporation
shall be exercised by or under authority of, and the business and affairs of
the Corporation shall be managed under the direction of, the board of
directors. In furtherance and not in limitation of the powers conferred by
statute, the board of directors shall have the following powers:
(1) To determine whether any, and if any, part of any accumulated
profits, earned surplus, paid-in surplus or surplus arising from
reduction of stated capital legally available for the payment of
dividends shall be declared and paid as dividends; to determine the
date or dates for the declaration and payment of dividends; and to
direct and determine the use and disposition of any surplus or net
profits over and above the capital stock paid in;
(2) To take any action required or permitted to be taken by the
board of directors at a meeting without a meeting if a consent in
writing, setting forth the action so taken, is signed by all of the
directors.
(3) To ratify and approve any action taken by or on behalf of the
Corporation's employees, agents, officers, directors or any other
party, and, upon such ratification and approval, any such actions so
taken shall be effective for and as the act of the Corporation as
though such act had been adopted and approved by the board of
directors at the time such action was taken.
The Corporation may, in its ByLaws, confer powers upon its board of directors
in addition to the foregoing, and in addition to the powers and authorities
expressly conferred upon directors by statute.
(d) Conflicts of Interest. No contract or other transaction
between the Corporation and one or more of its directors, or any other
corporation, firm, association or entity in which one or more of its directors
are directors or officers or are financially interested, shall be either void
or voidable because of such relationship or interest or because such director
or directors are present at the meeting of the board of directors which
authorizes, approves or ratifies such contract or transaction, if the contract
or transaction is fair and reasonable to the Corporation and if the fact of
such relationship or interest is disclosed to the board of directors which
authorizes, approves or ratifies the contract or transaction by a vote or
consent sufficient for the purpose without counting the votes or consents of
such interested directors.
(e) Removal. The stockholders shall not have the right to remove
any one or all of the directors prior to the end of his or their term of office
except by the affirmative vote of the holders of at least sixty-seven percent
(67%) of the votes entitled to be cast by the holders of Voting Stock voting
together as a single class.
7. BYLAWS. The power to make, alter, amend or repeal ("Amend")
the ByLaws shall be vested in the board of directors and the stockholders. The
board of directors may Amend the Bylaws by the affirmative vote of a majority
of the directors. The stockholders may Amend the Bylaws only upon the
4
<PAGE> 17
affirmative vote of the holders of at least sixty-seven percent (67%) of the
votes entitled to be cast by the holders of all outstanding shares of the
Voting Stock, voting together as a single class.
8. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS.
(a) The Corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation), by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, manager or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee, manager or
agent of another corporation, partnership, limited liability company, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or other court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subparagraph (a) or (b) of this
Article 8, or in defense or any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subparagraph (a) or (b) of this
Article 8 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subparagraph (a) or
(b) of this Article 8. Such determination shall be made (i) by a majority vote
of the directors of the Corporation who are not parties to such action, suit or
proceeding, even though less than a quorum of the board of directors, or (ii)
if there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (iii) by the stockholders.
5
<PAGE> 18
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending a civil, criminal administrative or investigative action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount if it shall be
ultimately determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article 8. Such expenses (including
attorneys' fees) incurred by other employees and agents may also be so paid
upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article 8 shall not be deemed exclusive of and
shall be in addition to any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, manager or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
this Article 8 or by statute.
(h) For purposes of this Article 8, references to the
"Corporation" shall include, in addition to the Corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee,
manager or agent of another corporation, partnership, limited liability
company, joint venture, trust or other enterprise, shall stand in the same
position under this Article 8 with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its separate existence had continued.
(i) For purposes of this Article 8, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article 8.
(j) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article 8 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
9. WAIVER OF PERSONAL LIABILITY OF DIRECTORS. A director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for the breach of any fiduciary duty as a
director, except (i) for any breach of the director's duty of loyalty to the
Corporation
6
<PAGE> 19
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law or (iv) for any transaction
from which the director derived an improper personal benefit. Neither the
repeal or modification of this Article 9 nor the adoption of any provisions of
this Restated Certificate of Incorporation inconsistent with this Article 9
shall adversely affect the rights of any director of the Corporation with
respect to any matter occurring, or any cause of action, suit or claim that,
but for this Article 9, would accrue or arise, prior to such repeal,
modification or adoption of an inconsistent provision.
10. SUBSEQUENTLY ADOPTED CORPORATION LAWS. Any and every statute
of the State of Delaware hereinafter enacted whereby the rights, powers and
privileges of the stockholders of corporations organized under the general laws
of the State of Delaware are increased, diminished or in any way affected shall
apply to this Corporation and to every stockholder thereof, to the same extent
as if such statute had been in force at the date of the making and filing of
this Restated Certificate of Incorporation.
11. AMENDMENT. Notwithstanding any other provisions of this
Restated Certificate of Incorporation or the Bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate class vote may be
specified by law, this Restated Certificate of Incorporation or the ByLaws),
the affirmative vote of the holders of at least sixty-seven percent (67%) of
the votes entitled to be cast by the holders of all outstanding shares of
Voting Stock, voting together as a single class, shall be required to amend
Article 6(b), Article 7 or Article 11 of this Restated Certificate of
Incorporation or to adopt any provision inconsistent with Article 6(b), Article
7 or Article 11 of this Restated Certificate of Incorporation.
IN WITNESS WHEREOF, Masada Security Holdings, Inc. has caused this
Restated Certificate of Incorporation to be signed by its ________ President
and attested to by its _________Secretary on this the _____ day of __________,
1996.
----------------------------------
----------------------------------
------------------President
Attest:
- ---------------------------------
- ---------------------------------
- ----------------Secretary
7
<PAGE> 20
Exhibit D
AMENDED AND RESTATED
DELAWARE BYLAWS
OF
MASADA SECURITY HOLDINGS, INC.
* * * *
ARTICLE I
OFFICES
Section 1. The registered office of Masada Security Holding,
Inc. ("Corporation") shall be in the City of Wilmington, County of Newcastle,
State of Delaware.
Section 2. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such place as may be fixed from time to time by the
Board of Directors, or at such other place either within or without the State
of Delaware as shall be designated from time to time by the Board of Directors
and stated in the notice of the meeting. Meetings of stockholders for any
other purpose may be held at such time and place, within or without the State
of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the
year 1993, shall be held on the last day of May if not a legal holiday, and if
a legal holiday, then on the next secular day following, at 10:00 a.m., or at
such other date and time as shall be designated from time to time by the Board
of Directors and stated in the notice of the meeting, at which they shall elect
by a plurality vote a Board of Directors, and transact such other business as
may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each Stockholder entitled
to vote at such meeting not less than ten (10) nor more than sixty (60) days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
Stockholder and the number of shares registered in the name of each
Stockholder. Such list shall be open to the examination of any Stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
Stockholder who is present.
<PAGE> 21
Section 5. Special meetings of the stockholders, for any purpose
or purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the Corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given not less than ten (10) nor more than sixty
(60) days before the date of the meeting, to each Stockholder entitled to vote
at such meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty (30) days, or
if after the adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each Stockholder of record
entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the Certificate of Incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. No proxy shall be voted on after three (3) years from
its date, unless the proxy provides for a longer period.
ARTICLE III
DIRECTORS
Section 1. The directors shall be elected at the annual meeting
of the stockholders in the manner provided in the Certificate of Incorporation.
Except as provided in the Certificate of Incorporation, each director elected
shall hold office until his successor is elected and qualified. Directors need
not be stockholders.
Section 2. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors shall be filled as
provided in the Certificate of Incorporation and any directors so chosen to
fill a vacancy shall hold office for the remainder of the term and until their
successors are duly elected and shall qualify, unless sooner displaced. Any
directors so chosen to fill a newly created directorship shall hold office
until the next annual election and until their successors are duly
2
<PAGE> 22
elected and shall qualify, unless sooner displaced. If there are no directors
in office, then an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any Stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in office.
Section 3. The business of the Corporation shall be managed by
or under the direction of its Board of Directors which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these ByLaws directed or
required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. Regular meetings of the Board of Directors may be
held without notice at such time and at such place as shall from time to time
be determined by the Board of Directors.
Section 6. Special meetings of the board may be called by or at
the request of the Chairman of the Board and shall be called by the Chairman of
the Board at the request of at least three (3) of the directors then serving on
the Board of Directors.
Section 7. Notice of any special meeting shall be given at least
three (3) days previously thereto of written notice delivered personally or
mailed to each director at his business address, or by telegram. If mailed,
such notice shall be deemed to be delivered when deposited in the U.S. Mail, so
addressed, with postage thereon prepaid. If notice is given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. Any
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither business to be transacted, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Section 8. At all meetings of the Board of Directors, a majority
of the directors shall constitute a quorum for the transaction of business and
the act of a majority of the directors present at any meeting at which there is
a quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than an announcement at the meeting, until a quorum shall be
present.
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these ByLaws, any action required or permitted to be taken at
any meeting of the Board of Directors or any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may
be,
3
<PAGE> 23
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the Certificate of
Incorporation or these ByLaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
Section 11. In the event of a vacancy occurring in the Board of
Directors, whether as a result of a creation of a new directorship pursuant to
Paragraph 6(a) of the Certificate of Incorporation or the death, resignation,
retirement, disqualification or removal of a director, the Nominating
Committee, pursuant to Article IV, Section 2, of these By-Laws, shall propose
to the remaining directors a slate of candidates for the vacant position.
COMPENSATION OF DIRECTORS
Section 12. The directors elected by stockholders of the
Corporation as provided in the Certificate of Incorporation shall be paid their
expenses, if any, of attendance at each meeting of the Board of Directors. The
directors shall be compensated for serving as directors and as members of
special or standing committees of the Board of Directors in such amounts as
determined by the Board of Directors.
ARTICLE IV
COMMITTEES OF DIRECTORS
Section 1.
(a) The Board of Directors may create an Executive Committee
of the Board of Directors to be comprised of at least three (3) directors
appointed by a majority of the Board of Directors. The Executive Committee
shall be appointed at any meeting of the Board of Directors held after the
annual meeting of stockholders. Each member of the Executive Committee shall
hold office until the first meeting of the Board of Directors after the annual
meeting of stockholders next following his election and until his successor
member of the Executive Committee is elected and qualified, or until his death,
resignation or removal, or until he shall cease to be a director.
(b) During the intervals between the meetings of the
Board of Directors, the Executive Committee shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided,
however, that the Executive Committee shall not have the power to amend or
repeal any resolution of the Board of Directors that by its terms shall not be
subject to amendment or repeal by the Executive Committee, or any resolution of
the Board of Directors concerning the establishment or membership of the
Executive Committee, and the Executive Committee shall not have the authority
of the Board of Directors in reference to matters required by law to be passed
upon by the full Board.
(c) The Executive Committee shall meet from time to time
on call of the Chairman. Meetings of the Executive Committee may be held at
such place or places, within or without the State of Delaware, as the Executive
Committee shall determine or as may be specified or fixed in the respective
4
<PAGE> 24
notices or waivers of such meetings. The Executive Committee may fix its own
rules of procedure, including provision for notice of its meetings. It shall
keep a record of its proceedings and shall report these proceedings to the
Board of Directors at the meeting thereof held next after they have been taken.
(d) The Executive Committee shall act by majority vote of its members.
Section 2.
(a) There is hereby created a Nominating Committee of the
Board of Directors to be comprised of at least three (3) directors appointed by
a majority of the Board of Directors. The Nominating Committee shall be
appointed at the first meeting of the Board of Directors following the annual
meeting of the stockholders. Each member of the Nominating Committee shall
hold office until the first meeting of the Board of Directors after the annual
meeting of stockholders next following his election and until his successor
member of the Nominating Committee is elected and qualified, or until his
death, resignation, or removal, or until he shall cease to be a director.
(b) The Nominating Committee so appointed will be
authorized to field a slate of candidates for positions on the Board of
Directors becoming vacant at the next annual meeting of the stockholders of the
Corporation or becoming vacant as a result of a vacancy on the Board of
Directors. The Nominating Committee so appointed shall be further authorized
to field a slate of candidates for positions as officers of the Corporation
becoming vacant at the next annual meeting of the Board of Directors of the
Corporation or becoming vacant as a result of a vacancy in such officer's
position.
(c) The Nominating Committee shall meet from time to time
on call of the Chairman. Meetings of the Nominating Committee may be held at
such place or places, within or without the State of Delaware, as the
Nominating Committee shall determine or as may be specified or fixed in the
respective notices or waivers of such meetings. The Nominating Committee may
fix its own rules of procedure, including provision for notice of its meetings.
It shall keep a record of its proceedings and shall report these proceedings to
the Board of Directors at the meeting thereof held next after they have been
taken.
(d) The Nominating Committee shall act by a majority vote
of its members.
Section 3.
(a) There is hereby created a Audit Committee of the
Board of Directors to be comprised of at least three (3) directors appointed by
a majority of the Board of Directors. The Audit Committee shall be appointed
at the first meeting of the Board of Directors following the annual meeting of
the stockholders. Each member of the Audit Committee shall hold office until
the first meeting of the Board of Directors after the annual meeting of
stockholders next following his election and until his successor member of the
Audit Committee is elected and qualified, or until his death, resignation, or
removal, or until he shall cease to be a director.
(b) The Audit Committee so appointed will be authorized
to recommend to the Board of Directors each year the appointment of independent
public accountants to audit the books, records, and accounts of the
Corporation, to discuss with the independent accountants the plan and scope of
their examination of the books and records of the Corporation and review the
results thereof prior to publication, to review all recommendations made by the
independent accountants regarding accounting methods used
5
<PAGE> 25
and the system of internal controls utilized by the Corporation and advise the
Board of Directors with respect thereto, to evaluate the independence of the
independent auditors by reviewing, prior to rendition, the plan for and scope
of non-audit services and the cost thereof proposed to be rendered by the
independent auditors, to review with the Corporation's financial officers and
internal auditor the scope and adequacy of the Corporation's internal controls
and staff and the results of the internal audit investigations, and to perform
such other functions and duties and render such reports as may be from time to
time prescribed by the Board of Directors.
(c) The Audit Committee shall meet from time to time on
call of the Chairman. Meetings of the Audit Committee may be held at such
place or places, within or without the State of Delaware, as the Audit
Committee shall determine or as may be specified or fixed in the respective
notices or waivers of such meetings. The Audit Committee may fix its own rules
of procedure, including provision for notice of its meetings. It shall keep a
record of its proceedings and shall report these proceedings to the Board of
Directors at the meeting thereof held next after they have been taken.
(d) The Audit Committee shall act by a majority vote of
its members.
Section 4.
(a) There is hereby created a Compensation Committee of the
Board of Directors to be comprised of at least three (3) directors appointed by
a majority of the Board of Directors, one of whom shall be designated by the
Board of Directors as Chairman of the Compensation Committee. The Compensation
Committee shall be appointed at the first meeting of the Board of Directors
following the annual meeting of the shareholders. Each member of the
Compensation Committee shall hold office until the first meeting of the Board
of Directors after the annual meeting of shareholders next following his
election and until his successor member of the Compensation Committee is
elected and qualified, or until his death, resignation, or removal, or until he
shall cease to be a director.
(b) The Compensation Committee so appointed will be
authorized to recommend to the Board of Directors from time to time the
compensation to be made to all officers, directors and committee members
(hereinafter "Executive Compensation") of the Corporation. The Executive
Compensation policy of the Compensation Committee is to offer competitive
salaries in comparison to market prices. The compensation may include but is
not limited to salary, bonus, stock options, stock appreciation rights,
restricted stock awards, other annual compensation, and any mixture thereof as
the Compensation Committee deems appropriate in light of the performance of the
Corporation. The Compensation Committee is to determine Executive Compensation
based on individual performance and responsibility, the average of comparable
executive salaries in other bank holding companies of comparable size, and
other factors which the Compensation Committee deems relevant to the
determination of Executive Compensation. In comparing the Corporation's
Executive Compensation with comparable companies, the Compensation Committee
may use any published survey of bank holding companies deemed reliable by the
Compensation Committee. In analyzing the surveys, the Compensation Committee
may take into consideration ratios that provide a correlation between the
salaries of various executive positions and the total assets and total gross
revenues of the companies in the survey as well as other ratios that the
Compensation Committee deems relevant to the determination of Executive
Compensation.
(c) The Compensation Committee shall meet from time to
time on call of its Chairman. Meetings of the Compensation Committee may be
held at such place or places, within or without the State of Delaware, as the
Compensation Committee shall determine or as may be specified or
6
<PAGE> 26
fixed in the respective notices or waivers of such meetings. The Compensation
Committee may fix its own rules of procedure, including provision for notice of
its meetings. It shall keep a record of its proceedings and shall report these
proceedings to the Board of Directors at the meeting thereof held next after
they have been taken.
(d) The Compensation Committee shall act by a majority
vote of its members.
Section 5. The Board of Directors, by resolution adopted by a
majority of the entire Board, may designate one or more additional committees,
each committee to consist of three or more of the directors of the Corporation,
which shall have such name or names and shall have and may exercise such powers
of the Board of Directors, except the powers denied to the Executive Committee,
as may be determined from time to time by the Board of Directors.
ARTICLE V
NOTICES
Section 1. Whenever, under the provisions of the statutes or of
the Certificate of Incorporation or of these ByLaws, notice is required to be
given to any director or Stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or Stockholder, at his address as it appears on the records of
the Corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
ByLaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE VI
OFFICERS
Section 1. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a Chairman of the Board of Directors, a
President, an Executive Vice-President or a Vice-President, a Secretary and a
Treasurer. The Board of Directors may also choose additional Executive
Vice-Presidents or Vice-Presidents, and one or more Assistant Secretaries and
Assistant Treasurers. Any number of offices may be held by the same person,
unless the Certificate of Incorporation or these ByLaws otherwise provide.
Section 2. The officers of the Corporation shall be elected
annually by the Board of Directors at the regular meetings of the Board of
Directors held after each annual meeting of the stockholders. If the election
of officers shall not be held at such meeting, such election shall be held as
soon thereafter as conveniently may be. Each officer shall hold office until
his successor shall have been duly elected and shall have qualified, or until
his death, or until he shall resign or shall have been removed in the manner
hereinafter provided. The Board of Directors at any meeting may appoint agents
and employees to serve for such time and to have such duties and authority as
the Board of Directors may determine. All agents and employees of the
Corporation not appointed by the Board of Directors may be appointed by the
7
<PAGE> 27
Chairman of the Board, or by persons authorized by him to do so, to serve for
such time and to have such duties as the appointing authority may determine.
Section 3. Any officer or agent elected or appointed by the
Board of Directors may be removed, with or without cause, at any time, by the
affirmative vote of the Board of Directors, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election
or appointment of an officer or agent shall not of itself create any contract
right in favor of such officer or agent.
Section 4. Vacancies occurring in any office filled by the Board
of Directors because of death, resignation, removal, disqualification or
otherwise, may be filled by the Board of Directors for the unexpired portion of
the term. A vacancy in any other office for any reason shall be filled by the
Board of Directors or any superior officer to whom authority in the premises
may have been delegated by these By-Laws or by resolution of the Board of
Directors.
Section 5. The Chairman of the Board of Directors shall be the
chief executive officer of the Corporation and, subject to the control of the
Board of Directors, shall in general supervise and control the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the stockholders and of the Board of Directors. He may sign, with the
Secretary or an Assistant Secretary, certificates for shares of the
Corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these By-Laws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or executed;
and in general shall perform all duties incident to the office of the chief
executive officer and such other duties as may be prescribed by the Board of
Directors from time to time.
Section 6. The President of the Corporation, subject to the
control of the Board of Directors and the Chairman of the Board, shall in
general supervise and control the day to day business and affairs of the
Corporation. The President shall, in the absence of the Chairman of the Board
of Directors, preside at all meetings of the stockholders and of the Board of
Directors. He may sign, with the Secretary or an Assistant Secretary,
certificates for shares of the Corporation, any deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has authorized to
be executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these By-Laws to some other
officers or agent of the Corporation, or shall be required by law to be
otherwise signed or executed; and in general shall perform all duties incident
to the office of President and such other duties as may be prescribed by the
Board of Directors from time to time.
Section 7. In the absence of the President or in the event of
his death, inability or refusal to act, the Executive Vice President (or in the
event there be more than one Executive Vice President, the Executive Vice
Presidents in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting shall have all the powers of
and be subject to all the restrictions upon the President. Any Executive Vice
President may sign, with the Secretary or an Assistant Secretary, certificates
for shares of the Corporation; and perform such other duties as from time to
time may be assigned to him by the Chairman of the Board, by the President, or
by the Board of Directors.
Section 8. In the absence of the President and the Executive
Vice President(s) (if any) or in the event of his and their death, inability or
refusal to act, the Vice President (or in the event there be more
8
<PAGE> 28
than one Vice President, the Vice Presidents in the order designated at the
time of their election, or in the absence of any designation, then in the order
of their election) shall perform the duties of the President, and when so
acting shall have all the powers of and be subject to all the restrictions upon
the President. Any Vice President may sign, with the Secretary or an Assistant
Secretary, certificates for shares of the Corporation, and shall perform such
other duties as from time to time may be assigned to him by the Chairman of the
Board, by the President, or by the Board of Directors.
Section 9. The Secretary shall: (a) keep the minutes of the
proceedings of the stockholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents the execution of
which on behalf of the Corporation under its seal is duly authorized; (d) keep
a register of the post office address of each stockholder which shall be
furnished to the Secretary by such stockholder; (e) sign with the Chairman of
the Board, President, an Executive Vice President, or a Vice President,
certificates for shares of the Corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors; (f) have general
charge of the stock transfer books of the Corporation; and (g) in general
perform all duties incident to the office of Secretary and such other duties as
from time to time may be assigned to him by the Chairman of the Board, by the
President, or by the Board of Directors.
Section 10. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the Corporation; (b) receive
and give receipts for moneys due and payable to the Corporation from any source
whatsoever, and deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected by the Board
of Directors; and (c) in general perform all of the duties as from time to time
may be assigned to him by the Chairman of the Board, by the President, or by
the Board of Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board of Directors shall determine.
Section 11. The Assistant Treasurers shall perform the duties of
the Treasurer during his absence or incapacity. The Assistant Secretaries
shall perform the duties of the Secretary during his absence or incapacity.
The Assistant Secretaries may sign with the Chairman of the Board, the
President, an Executive Vice President, or a Vice President certificates for
shares of the Corporation the issuance of which shall have been authorized by
a resolution of the Board of Directors, give bonds for the faithful discharge
of their duties in such sums and with such sureties as the Board of Directors
shall determine. The Assistant Secretaries and Assistant Treasurers, in
general, shall perform such duties as shall be assigned to them by the
Secretary or the Treasurer, respectively, or by the Chairman of the Board, by
the President, or by the Board of Directors.
Section 12. The salaries of the officers shall be fixed from time
to time by the Board of Directors upon recommendation by the Compensation
Committee of the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE VII
CERTIFICATES FOR SHARES
9
<PAGE> 29
Section 1. The shares of the Corporation shall be represented by
a certificate or shall be uncertificated. Certificates shall be signed by, or
in the name of the Corporation by the Chairman of the Board or the President or
a Vice-President and the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation.
Upon the face or back of each stock certificate issued to represent
any partly paid shares, or upon the books and records of the Corporation in the
case of uncertificated partly paid shares, shall be set forth the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights or
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware,
in lieu of the foregoing requirements, there may be set forth on the face or
back of the Certificate which the Corporation shall issue to represent such
class or series of stock, a statement that the Corporation will furnish without
charge to each Stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the Corporation shall send to the registered owner
thereof a written notice containing the information required to be set forth or
stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions or such
preferences and/or rights.
Section 2. Where a certificate is countersigned (l) by a transfer
agent other than the Corporation or its employee, or, (2) by a registrar other
than the Corporation or its employee, any other signature on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate
or certificates or uncertificated shares to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates or
uncertified shares, the Board of Directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative,
to advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
10
<PAGE> 30
Section 4. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertificated shares such uncertificated shares shall
be canceled and issuance of new equivalent uncertificated shares or
certificated shares shall be made to the person entitled thereto and the
transaction shall be recorded upon the books of the Corporation.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VIII
GENERAL PROVISIONS, DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interests
of the Corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
11
<PAGE> 31
CHECKS
Section 3. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
12
<PAGE> 1
Exhibit 4.1
EXHIBIT 4.1
FOURTH RESTATED
CERTIFICATE OF INCORPORATION OF
MASADA SECURITY HOLDINGS, INC.
4. CAPITAL STOCK.
(a) Authorized Capital Stock. The total number of shares of stock
which the Corporation shall have authority to issue is 20,000,000 shares,
consisting of 15,000,000 shares of Common Stock, par value
<PAGE> 2
EXHIBIT 4.1
$.01 per share (the "Common Stock"), and 5,000,000 shares of Preferred Stock,
par value $1.00 per share (the "Preferred Stock").
(b) Preferred Stock. Shares of Preferred Stock may be issued from
time to time in one or more classes or series as may be determined from time to
time by the board of directors of the Corporation, each such class or series to
be distinctly designated. Except in respect of the particulars fixed by the
board of directors for classes or series provided for by the board of directors
as permitted hereby, all shares of Preferred Stock shall be of equal rank and
shall be identical. All shares of any one series of Preferred Stock so
designated by the board of directors shall be alike in every particular except
that shares of any one series issued at different times may differ as to the
dates from which dividends thereon shall be cumulative. The voting rights, if
any, of each such class or series and the preferences and relative,
participating, optional and other special rights of each such class or series
and the qualifications, limitations and restrictions thereof, if any, may
differ from those of any and all other classes or series at any time
outstanding; and the board of directors of the Corporation is hereby expressly
granted authority to fix, by resolutions duly adopted prior to the issuance of
any shares of a particular class or series of Preferred Stock so designated by
the board of directors, the voting powers of stock of such class or series, if
any, and the designations, preferences and relative, participating, optional
and other special rights and the qualifications, limitations and restrictions
of such class or series, including, but without limiting the generality of the
foregoing, the following:
(1) The distinctive designation of, and the number of
shares of Preferred Stock, which shall constitute such class or series, and
such number may be increased (except where otherwise provided by the board of
directors) or decreased (but not below the number of shares thereof then
outstanding) from time to time by like action of the board of directors;
(2) The rate and time at which, and the terms and
conditions upon which, dividends, if any, on Preferred Stock of such class or
series shall be paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes or series of
the same or other classes of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock
of such class or series to convert the same into, or exchange the same for
shares of any other class or classes or of any series of the same or any other
class or classes of stock and the terms and conditions of such conversion or
exchange;
(4) Whether or not Preferred Stock of such class or
series shall be subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions upon which, Preferred
Stock of such class or series may be redeemed;
(5) The rights, if any, of the holders of Preferred Stock
of such class or series upon the voluntary or involuntary liquidation of the
Corporation;
(6) The terms of the sinking fund or redemption or
purchase account, if any, to be provided for the Preferred Stock of such class
or series; and
(7) The voting powers, if any, of the holders of
Preferred Stock of such class or series.
2
<PAGE> 3
EXHIBIT 4.1
(c) Issuance of Securities. Except as otherwise provided in this
Restated Certificate of Incorporation, the board of directors shall have
authority to authorize the issuance, from time to time without any vote or
other action by the stockholders, of any or all shares of stock of the
Corporation of any class or series at any time authorized, and any securities
convertible into or exchangeable for any such shares, and any options, rights
or warrants to purchase or acquire any such shares, in each case to such
persons and on such terms (including as a dividend or distribution on or with
respect to, or in connection with a split or combination of, the outstanding
shares of stock of the same or any other class) as the board of directors from
time to time in its discretion lawfully may determine; provided, however, that
the consideration for the issuance of shares of stock of the Corporation having
par value (unless issued as such a dividend or distribution or in connection
with such a split or combination) shall not be less than such par value.
Shares so issued shall be fully paid stock, and the holders of such stock shall
not be liable to any further call or assessments thereon.
(d) Voting. Each holder of Common Stock shall be entitled to one
vote for each share of Common Stock held by him. The term "Voting Stock" shall
mean all stock of the Corporation which by its terms may be voted on all
matters submitted to the stockholders of the Corporation.
(e) Exchange, Reclassification or Cancellation of Stock. Each
issued and outstanding share of the previously authorized Class A preferred
stock of the Corporation has been redeemed and canceled, each issued and
outstanding share of the previously authorized Class B convertible preferred
stock of the Corporation has been converted into shares of previously
authorized Class B common stock of the Corporation, and each issued and
outstanding share of previously authorized Class C convertible preferred stock
of the Corporation has been converted into shares of previously authorized
Class C common stock of the Corporation. Effective upon the filing of this
Restated Certificate of Incorporation, (i) each issued and outstanding share of
the previously authorized Class A common stock, Class B common stock and Class
C common stock of the Corporation shall be exchanged for 3.0 shares of the
Common Stock and (ii) all shares of previously authorized Class A common stock,
Class B common stock, Class C common stock, Class A preferred stock, Class B
convertible preferred stock and Class C convertible preferred stock of the
Corporation not outstanding shall be canceled.
6. BOARD OF DIRECTORS.
(a) Number. The number of directors which shall constitute the
whole board of directors shall be as determined from time to time by resolution
adopted by the affirmative vote of a majority of the board of directors, but
shall not be less than seven (7) nor more than ten (10) directors; provided
that until otherwise determined by the board of directors in accordance
herewith, the number of directors shall be nine (9); provided further that the
number of directors shall not be decreased if such decrease would have the
effect of shortening the term of an incumbent director.
3
<PAGE> 4
EXHIBIT 4.1
(b) Election. The directors comprising the board of directors
shall be and is divided into three classes, Class I, Class II and Class III,
each class to be as nearly equal in number as possible. If the number of
directors is not evenly divisible by three (3), one additional director shall
be allocated to Class III and, if necessary, to Class II. Each director shall
serve for a term ending on the date of the third annual meeting of the
Corporation's stockholders following the annual meeting at which such director
was elected; provided, however, that each director elected in Class I at the
1996 annual meeting, or by consent in lieu thereof, shall serve for a term
ending on the date of the 1997 annual meeting, each director elected in Class
II at the 1996 annual meeting shall serve for a term ending on the date of the
1998 annual meeting, and each director elected in Class III at the 1996 annual
meeting shall serve for a term ending on the date of the 1999 annual meeting,
or at such later date as any director's successor is elected and qualified,
subject to his earlier death, resignation or removal from office.
(c) Powers. Except as may be otherwise provided by law or in this
Restated Certificate of Incorporation, all corporate powers of the Corporation
shall be exercised by or under authority of, and the business and affairs of
the Corporation shall be managed under the direction of, the board of
directors. In furtherance and not in limitation of the powers conferred by
statute, the board of directors shall have the following powers:
(1) To determine whether any, and if any, part of any accumulated
profits, earned surplus, paid-in surplus or surplus arising from
reduction of stated capital legally available for the payment of
dividends shall be declared and paid as dividends; to determine the
date or dates for the declaration and payment of dividends; and to
direct and determine the use and disposition of any surplus or net
profits over and above the capital stock paid in;
(2) To take any action required or permitted to be taken by the
board of directors at a meeting without a meeting if a consent in
writing, setting forth the action so taken, is signed by all of the
directors.
(3) To ratify and approve any action taken by or on behalf of the
Corporation's employees, agents, officers, directors or any other
party, and, upon such ratification and approval, any such actions so
taken shall be effective for and as the act of the Corporation as
though such act had been adopted and approved by the board of
directors at the time such action was taken.
The Corporation may, in its ByLaws, confer powers upon its board of directors
in addition to the foregoing, and in addition to the powers and authorities
expressly conferred upon directors by statute.
(d) Conflicts of Interest. No contract or other transaction
between the Corporation and one or more of its directors, or any other
corporation, firm, association or entity in which one or more of its directors
are directors or officers or are financially interested, shall be either void
or voidable because of such relationship or interest or because such director
or directors are present at the meeting of the board of directors which
authorizes, approves or ratifies such contract or transaction, if the contract
or transaction is fair and reasonable to the Corporation and if the fact of
such relationship or interest is disclosed to the board
4
<PAGE> 5
EXHIBIT 4.1
of directors which authorizes, approves or ratifies the contract or transaction
by a vote or consent sufficient for the purpose without counting the votes or
consents of such interested directors.
(e) Removal. The stockholders shall not have the right to remove
any one or all of the directors prior to the end of his or their term of office
except by the affirmative vote of the holders of at least sixty-seven percent
(67%) of the votes entitled to be cast by the holders of Voting Stock voting
together as a single class.
7. BYLAWS. The power to make, alter, amend or repeal ("Amend")
the ByLaws shall be vested in the board of directors and the stockholders. The
board of directors may Amend the Bylaws by the affirmative vote of a majority
of the directors. The stockholders may Amend the Bylaws only upon the
affirmative vote of the holders of at least sixty- seven percent (67%) of the
votes entitled to be cast by the holders of all outstanding shares of the
Voting Stock, voting together as a single class.
8. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS.
(a) The Corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation), by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, manager or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee, manager or
agent of another corporation, partnership, limited liability company, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or other court in which such action or suit was brought shall
determine upon application that, despite the
5
<PAGE> 6
EXHIBIT 4.1
adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subparagraph (a) or (b) of this
Article 8, or in defense or any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subparagraph (a) or (b) of this
Article 8 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subparagraph (a) or
(b) of this Article 8. Such determination shall be made (i) by a majority vote
of the directors of the Corporation who are not parties to such action, suit or
proceeding, even though less than a quorum of the board of directors, or (ii)
if there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (iii) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending a civil, criminal administrative or investigative action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount if it shall be
ultimately determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article 8. Such expenses (including
attorneys' fees) incurred by other employees and agents may also be so paid
upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article 8 shall not be deemed exclusive of and
shall be in addition to any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, manager or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
this Article 8 or by statute.
(h) For purposes of this Article 8, references to the
"Corporation" shall include, in addition to the Corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee,
manager or agent of another corporation, partnership,
6
<PAGE> 7
EXHIBIT 4.1
limited liability company, joint venture, trust or other enterprise, shall
stand in the same position under this Article 8 with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this Article 8, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article 8.
(j) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article 8 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
9. WAIVER OF PERSONAL LIABILITY OF DIRECTORS. A director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for the breach of any fiduciary duty as a
director, except (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit.
Neither the repeal or modification of this Article 9 nor the adoption of any
provisions of this Restated Certificate of Incorporation inconsistent with this
Article 9 shall adversely affect the rights of any director of the Corporation
with respect to any matter occurring, or any cause of action, suit or claim
that, but for this Article 9, would accrue or arise, prior to such repeal,
modification or adoption of an inconsistent provision.
10. SUBSEQUENTLY ADOPTED CORPORATION LAWS. Any and every statute
of the State of Delaware hereinafter enacted whereby the rights, powers and
privileges of the stockholders of corporations organized under the general laws
of the State of Delaware are increased, diminished or in any way affected shall
apply to this Corporation and to every stockholder thereof, to the same extent
as if such statute had been in force at the date of the making and filing of
this Restated Certificate of Incorporation.
11. AMENDMENT. Notwithstanding any other provisions of this
Restated Certificate of Incorporation or the Bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate class vote may be
specified by law, this Restated Certificate of Incorporation or the ByLaws),
the affirmative vote of the holders of at least sixty-seven percent (67%) of
the votes entitled to be cast by the holders of all outstanding shares of
Voting Stock, voting together as a single class, shall be required to amend
Article 6(b), Article 7 or Article 11 of this Restated Certificate of
Incorporation or to adopt any provision inconsistent with Article 6(b), Article
7 or Article 11 of this Restated Certificate of Incorporation.
7
<PAGE> 8
EXHIBIT 4.1
AMENDED AND RESTATED
DELAWARE BYLAWS
OF
MASADA SECURITY HOLDINGS, INC.
* * * *
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such place as may be fixed from time to time by the
Board of Directors, or at such other place either within or without the State
of Delaware as shall be designated from time to time by the Board of Directors
and stated in the notice of the meeting. Meetings of stockholders for any
other purpose may be held at such time and place, within or without the State
of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the
year 1993, shall be held on the last day of May if not a legal holiday, and if
a legal holiday, then on the next secular day following, at 10:00 a.m., or at
such other date and time as shall be designated from time to time by the Board
of Directors and stated in the notice of the meeting, at which they shall elect
by a plurality vote a Board of Directors, and transact such other business as
may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each Stockholder entitled
to vote at such meeting not less than ten (10) nor more than sixty (60) days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
Stockholder and the number of shares registered in the name of each
Stockholder. Such list shall be open to the examination of any Stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
Stockholder who is present.
8
<PAGE> 9
EXHIBIT 4.1
Section 5. Special meetings of the stockholders, for any purpose
or purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the Corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given not less than ten (10) nor more than sixty
(60) days before the date of the meeting, to each Stockholder entitled to vote
at such meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty (30) days, or
if after the adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each Stockholder of record
entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the Certificate of Incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. No proxy shall be voted on after three (3) years from
its date, unless the proxy provides for a longer period.
9
<PAGE> 10
EXHIBIT 4.1
ARTICLE V
NOTICES
Section 1. Whenever, under the provisions of the statutes or of
the Certificate of Incorporation or of these ByLaws, notice is required to be
given to any director or Stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or Stockholder, at his address as it appears on the records of
the Corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
ByLaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE VII
CERTIFICATES FOR SHARES
Section 1. The shares of the Corporation shall be represented by
a certificate or shall be uncertificated. Certificates shall be signed by, or
in the name of the Corporation by the Chairman of the Board or the President or
a Vice-President and the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation.
Upon the face or back of each stock certificate issued to represent
any partly paid shares, or upon the books and records of the Corporation in the
case of uncertificated partly paid shares, shall be set forth the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights or
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware,
in lieu of the foregoing requirements, there may be set forth on the face or
back of the Certificate which the Corporation shall issue to represent such
class or series of stock, a statement that the Corporation will furnish without
charge to each Stockholder who so requests the powers, designations,
preferences and relative, participating, optional
10
<PAGE> 11
EXHIBIT 4.1
or other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the Corporation shall send to the registered owner
thereof a written notice containing the information required to be set forth or
stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions or such
preferences and/or rights.
Section 2. Where a certificate is countersigned (l) by a transfer
agent other than the Corporation or its employee, or, (2) by a registrar other
than the Corporation or its employee, any other signature on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate
or certificates or uncertificated shares to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates or
uncertified shares, the Board of Directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative,
to advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution
11
<PAGE> 12
EXHIBIT 4.1
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty (60) nor less than ten (10) days before the date
of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
12
<PAGE> 1
SECOND AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
dated as of May 31, 1995
among
MASADA SECURITY HOLDINGS, INC.
and
CERTAIN PURCHASERS NAMED HEREIN.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. Authorized Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Class B Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Class C Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Class A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) Class B Convertible Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Class C Convertible Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3. Acquisition of Class C Convertible Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 5. Representations and Warranties of MSH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Organization and Corporate Power of MSH and Masada . . . . . . . . . . . . . . . . . . . . 10
(b) Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(c) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(d) Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(e) Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(g) Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(h) Pro Forma Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(i) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(j) Events Subsequent to the Date of the Balance Sheet . . . . . . . . . . . . . . . . . . . . 13
(k) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(l) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(m) Patents, Trademarks, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(n) Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(o) Assumptions, Guaranties, etc. of Indebtedness of Other Persons . . . . . . . . . . . . . . 15
(p) Significant Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(q) Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(r) Small Business Concern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(s) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(a) Fulfillment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(b) Accounts and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(c) Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(d) Conduct of Business; Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) Notice of Meetings and Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . 18
(f) General Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(g) Key Man Life Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(h) Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(j) Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(k) Reserve for Conversion Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(l) Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(m) ByLaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(n) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Amendment to Masada Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Restrictions on Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(d) Restrictions in Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(e) Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(f) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(g) Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(h) Use of Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8. Representations and Covenants of Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 9. Events of Non-Compliance and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 10. Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Opinion of Counsel for MSH and Masada . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(c) Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(d) Amendment of Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(e) Amendment of ByLaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(f) Preemptive and Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(g) Issuance of Class C Convertible Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 25
(h) Purchasers Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(i) Purchasers' Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(j) SBA Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 11. Waivers, Amendments and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 12. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 13. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Demand Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Piggy-Back Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(c) Limitations, Conditions and Qualifications to Obligations of MSH under
Registration Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(d) Customary Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(e) Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 14. Dilution Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 15. Transferability of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(a) No Transfer of Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(b) Transfers to Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(c) Right of Co-Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(d) Death of Harms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(e) Repurchase Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(f) Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(g) Repurchase Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(h) Redemption Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 16. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 17. Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 18. Pledge or Transfer of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 19. Understanding Among the Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 20. Banks' Security Interest in Masada Stock; Subordination . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 21. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 22. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 23. Third Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 24. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 25. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 26. Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 27. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 28. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 29. Authority of Signatories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 30. Non-Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 31. Rights of Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Exhibit A - Historical Financial Data
</TABLE>
-iv-
<PAGE> 6
SECOND AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
THIS SECOND AMENDED AND RESTATED SECURITIES PURCHASE
AGREEMENT made as of the 31st day of May, 1995, by and among MASADA SECURITY
HOLDINGS, INC., a Delaware corporation formerly known as Masada Security, Inc.
("MSH"), CENTENNIAL FUND III, L.P., a Delaware limited Partnership ("Centennial
III"), CRITERION VENTURE PARTNERS III, LIMITED, a Texas limited partnership
("Criterion"), NORWEST EQUITY PARTNERS IV, A MINNESOTA LIMITED PARTNERSHIP
("Norwest IV"), SOUTH ATLANTIC VENTURE FUND II, LIMITED PARTNERSHIP, a Delaware
limited partnership ("South Atlantic II"), and THE O. GENE GABBARD REVOCABLE
TRUST, U/T/A dated September 4, 1992 ("Gabbard"), as successor in interest to
O. Gene Gabbard, an individual residing in the State of North Carolina
(Centennial III, Criterion, Norwest IV, South Atlantic II and Gabbard being
hereinafter sometimes collectively referred to as the "Initial Purchasers" and
individually as an "Initial Purchaser"), TERRY W. JOHNSON, an individual
residing in the State of Alabama ("Johnson"), and DARYL E. HARMS, an individual
residing in the State of Alabama ("Harms") (Johnson and Harms being hereinafter
sometimes collectively referred to as the "Management Purchasers" and
individually as a "Management Purchaser"), MSAM, INC., a Florida corporation
("MSAM") and HANCOCK VENTURE PARTNERS IV-DIRECT FUND L.P., a Delaware
partnership ("Hancock"), CENTENNIAL FUND IV, L.P., a Delaware limited
partnership ("Centennial IV"), BERTIL D. NORDIN, an individual residing in the
State of Georgia ("Nordin"), CAROL DEB. WHITAKER, an individual residing in the
State of Colorado ("Whitaker"), NORWEST EQUITY PARTNERS V, A MINNESOTA LIMITED
LIABILITY PARTNERSHIP ("Norwest V"), SOUTH ATLANTIC VENTURE FUND III, LIMITED
PARTNERSHIP, a Delaware limited partnership ("South Atlantic III"), and
CHEMICAL VENTURE CAPITAL ASSOCIATES, a California partnership ("CVCA")
(Hancock, Nordin, Whitaker, Centennial IV, Norwest V, South Atlantic III and
CVCA, together with the Initial Purchasers and the Management Purchasers, being
hereinafter sometimes collectively referred to as "Purchasers" and individually
as a "Purchaser").
WHEREAS, MSH was organized to serve as the sole general
partner of Masada Security Limited Partnership, a Delaware limited partnership
(the "Partnership"), which was formed to serve as the initial investment
vehicle for the acquisition, construction, ownership, operation and management
of security alarm systems by MSH throughout the United States (the "Masada
Business");
WHEREAS, MSH, the Initial Purchasers, the Management
Purchasers and MSAM entered into a certain Securities Purchase Agreement, dated
as of February 1, 1993 (the "Original Securities Purchase Agreement"), whereby
MSH agreed to sell and each of the Initial Purchasers and the Management
Purchasers agreed to purchase certain securities of MSH described therein upon
the terms and conditions set forth therein;
<PAGE> 7
WHEREAS, MSH changed its name from Masada Security, Inc.
to Masada Security Holdings, Inc. pursuant to a Certificate of Amendment filed
with the Delaware Secretary of State on February 7, 1994;
WHEREAS, MSH formed Masada Security, Inc. ("Masada"), a
Delaware close corporation and wholly owned Subsidiary of MSH, for the purpose
of effectuating a merger between the Partnership and Masada, whereby MSH, in
its capacity as the sole general partner and a limited partner of the
Partnership, received shares of stock of Masada in exchange for its Partnership
interests and MSAM, as a limited partner of the Partnership, and the holders of
debt securities of the Partnership received shares of stock of MSH in exchange
for their Partnership interests;
WHEREAS, pursuant to a certain Agreement of Merger between
Masada, MSH and the Partnership, dated February 10, 1994, and a Certificate of
Merger filed with the Delaware Secretary of State on February 10, 1994, the
Partnership was merged into Masada and Masada became the surviving entity with
respect to the Masada Business;
WHEREAS, to amend and restate the Original Securities
Purchase Agreement, MSH, the Initial Purchasers, the Management Purchasers,
MSAM, Hancock, Centennial IV, Nordin and Whitaker entered into an Amended and
Restated Securities Purchase Agreement, dated as of February 11, 1994 (the
"First Amended and Restated Securities Purchase Agreement") in order to reflect
the creation of Masada, the merger of the Partnership into Masada, the issuance
of additional securities of MSH to the Purchasers and the addition of Hancock,
Centennial IV, Nordin and Whitaker as parties to that agreement;
WHEREAS, to further capitalize MSH, who in turn will
capitalize Masada, the Purchasers have agreed to purchase certain securities of
MSH upon the terms and subject to the conditions hereinafter set forth; and
WHEREAS, MSH, the Purchasers, the Management Purchasers
and MSAM desire to amend and restate the First Amended and Restated Securities
Purchase Agreement to reflect the issuance of additional securities of MSH to
certain of the Purchasers and the addition of Norwest V, South Atlantic III,
and CVCA to this Agreement.
NOW, THEREFORE, based upon the foregoing and mutual
covenants herein contained, and for other good and sufficient consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
SECTION 1. Definitions. For purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires: (a) the terms defined in this Section 1 shall have the meanings
assigned to them below, such meanings to be applicable to singular and plural
nouns and verbs of any tense; (b) all references in this Agreement to
designated Sections and other subdivisions are to the designated Sections and
other
-2-
<PAGE> 8
subdivisions of this Agreement as originally executed and as amended from time
to time; and (c) the words "herein", "hereof", "hereunder" and other words of
similar import refer to this Agreement as a whole.
"Affiliate" shall mean with respect to any specified
Person, any other Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified Person. For
purposes of this definition, (i) "control", when used with respect to any
specified Person, means the power to direct the management and policies of the
specified Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise, and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing and (ii) the
officers, directors and shareholders of MSH shall be deemed to be Affiliates of
Masada.
"Agreement" shall mean the Original Securities Purchase
Agreement, as amended and restated by the First Amended and Restated Securities
Purchase Agreement, as further amended and restated as of the date hereof, and
any further amendment, modification or restatement thereof made in accordance
with the provisions of Section 11.
"ByLaws" shall mean the Amended and Restated Bylaws of MSH
as adopted by the stockholders of MSH, as amended from time to time in
accordance with the requirements of the Certificate.
"Certificate" shall mean the Second Restated Certificate
of Incorporation of MSH and any amendments or restatements which are made in
accordance with the requirements thereof.
"Change of Control" shall mean the acquisition by any
Person or group of a direct or indirect majority in interest (more than 50%) of
the Voting Stock of MSH by way of merger or consolidation or otherwise.
"Class B Equivalent Stock" shall mean the sum of (i) the
number of shares of outstanding Class B Common Stock plus (ii) the number of
shares of Class B Common Stock issuable upon the conversion of the Class B
Convertible Preferred Stock at the then applicable conversion price.
"Class C Equivalent Stock" shall mean the sum of (i) the
number of shares of outstanding Class C Common Stock plus (ii) the number of
shares of Class C Common Stock issuable upon the conversion of the Class C
Convertible Preferred Stock at the then applicable conversion price.
"Class S Preferred Stock" shall mean seventy-five thousand
two hundred (75,200) shares of the Class S Preferred Stock, Series A of Masada,
$.01 par value, and five hundred (500) shares of the Class S Preferred Stock,
Series B of Masada, $.01 par value, each having
-3-
<PAGE> 9
the rights and preferences set forth in the Masada Certificate, all of which
are issued and outstanding in the name of MSH.
"Common Stock" shall mean the Class A Common Stock, Class
B Common Stock, Class C Common Stock and any other classes of the common stock
of MSH hereafter authorized.
"Contractually Precluded" shall mean the existence or
presence of a covenant in any Loan Agreement which would be violated by the
making of any dividend or redemption payment in respect of the Class A
Preferred Stock, the Class S Preferred Stock or the Convertible Preferred
Stock. In the event any such payment is Contractually Precluded, MSH shall,
and shall cause Masada to, use their reasonable best efforts to cause the
removal or waiver of such covenant that results in any such payment being
Contractually Precluded, and upon such removal or waiver, such payment shall be
immediately due; provided, however, that the parties to this Agreement
acknowledge and consent to the restrictions with respect to such payments set
forth in Section 4.07 of the Term Loan Agreement as in effect as of the date
hereof and any substantially similar restriction contained in any amendment to
the Term Loan Agreement.
"Convertible Preferred Stock" shall mean any of the
outstanding shares of the Class B Convertible Preferred Stock and the Class C
Convertible Preferred Stock.
"Interests" shall mean any evidence of equity ownership of
any Person, whether represented by common stock, preferred stock, securities
convertible into or exercisable for the purchase or other acquisition of common
stock (including convertible debentures, warrants and options), trust
certificates or general or limited partnership interests.
"Loan Agreement" shall mean any note, security agreement,
loan agreement or other document evidencing or securing funded indebtedness of
MSH or any of its Subsidiaries which is secured by a security interest or lien
on a significant part of the assets of MSH or any of its Subsidiaries. The
Loan Agreement in effect as of the date hereof is that certain Revolving Credit
and Term Loan Agreement among State Street Bank and Trust Company ("State
Street"), Citizens Savings Bank (together with State Street, the "Banks") and
Masada, dated as of February 11, 1994, as amended (the "Term Loan Agreement").
"Masada Bylaws" shall mean the Bylaws of Masada as adopted
by the sole shareholder of Masada, as amended from time to time in accordance
with the requirements of the Masada Certificate.
"Masada Certificate" shall mean the Certificate of
Incorporation of Masada and any amendments or restatements which are made in
accordance with the requirements thereof.
-4-
<PAGE> 10
"Masada Stock" shall mean ten thousand (10,000) shares of
the common stock of Masada, $1.00 par value, having the rights and preferences
set forth in the Masada Certificate, all of which have been issued and are
outstanding in the name of MSH.
"Merger" shall mean the merger of the Partnership and
Masada pursuant to the Merger Documents, whereby Masada is the surviving
Person.
"Merger Documents" shall mean the Agreement of Merger
between Masada, MSH and the Partnership, dated as of February 10, 1994, the
Certificate of Merger filed with the Delaware Secretary of State on February
10, 1994, and such other documents and instruments executed and delivered in
connection with the Merger.
"Partners Presentation" shall mean, collectively, (i) the
Partners Presentation, dated March 1995, as delivered by MSH and Masada to the
Purchasers and (ii) the historical financial data of MSH in the form attached
as Exhibit A hereto.
"Person" shall mean any individual, corporation, general
or limited partnership, joint venture, association, limited liability company,
joint stock company, trust, business trust bank, trust company or estate
(including any beneficiaries thereof), unincorporated organization, cooperation
or association or government or any agency or political subdivision thereof.
"Preferred Stock" shall mean any of the outstanding shares
of Class A Preferred Stock, Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock.
"Qualified Public Offering" means a public offering of
Common Stock or Common Stock Equivalents (as defined in the Certificate)
through an underwriter, whether on a best efforts or a firm commitment basis,
pursuant to a registration statement filed in accordance with the Act in which
the gross proceeds received by MSH (without regard to underwriting discounts or
commissions or offering expenses) are at least $15,000,000, and the offering
price is at least $75.00 per share of Common Stock or its equivalent if Common
Stock Equivalents (as defined in the Certificate) are sold (adjusted for stock
dividends, stock splits and reverse stock splits occurring after the date
hereof).
"Registerable Securities" shall mean all shares of Class B
Common Stock (other than shares issued pursuant to the 1994 Stock Option Plan
or 1995 Stock Option Plan and held by management of MSH or Masada) or Class C
Common Stock, and as otherwise indicated in Section 13, which are not then
covered by a currently effective registration statement under the Act.
"Requisite Holders" shall mean the holders of seventy-five
percent (75%) of either the shares of Class C Equivalent Stock or the shares of
Class B Equivalent Stock, as the case may be.
-5-
<PAGE> 11
"Shares" shall mean any of the outstanding shares of
Preferred Stock issued to the Purchasers.
"Subsidiary" shall mean any Person in which MSH or any of
its Subsidiaries, directly or indirectly, owns any Interests such that MSH,
directly or indirectly, has majority voting control over such Person.
"Transaction Documents" shall mean this Second Amended and
Restated Securities Purchase Agreement, the Certificate, and all other
documents and instruments executed and delivered on or about the date hereof in
connection with the issuance of the Class C Convertible Preferred Stock, and
all amendments, modifications or restatements to the foregoing which are made
in accordance with the respective requirements thereof.
"Voting Stock" shall mean, relative to any Person, one or
more classes of capital stock of such Person having general voting power to
elect the board of directors, managers or trustees of such Person (irrespective
of whether or not at the time capital stock of any other class or classes has
or might have voting power by reason of the happening of any contingency).
"1994 Stock Option Plan" shall mean the Stock
Option/Purchase Plan of Masada Security Holdings, Inc. adopted by the MSH board
of directors effective February 11, 1994, which permits the granting of stock
options and stock purchase awards for as many as 100,000 shares of Class B
Common Stock to key employees and/or non-employee directors of MSH and Masada.
The following terms shall have the meanings indicated or
referred to in the following Sections of this Agreement:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Act 5(c)
Balance Sheet 5(i)
Blue Sky Laws 5(c)
Business Enterprise 15(f)
Centennial III Introduction
Centennial IV Introduction
Class A Common Stock 2(a)
Class A Preferred Stock 2(d)
Class B Common Stock 2(b)
Class B Convertible
Preferred Stock 2(e)
Class C Common Stock 2(c)
Class C Convertible
Preferred Stock 2(f)
</TABLE>
-6-
<PAGE> 12
<TABLE>
<S> <C>
Class B Redemption Price 16(b)
Class C Redemption Price 16(a)
Closing 3
Closing Date 3
Code 5(l)
Criterion Introduction
CVCA Introduction
Demand Registration 13(a)
Event of Non-Compliance 9
Fair Market Value 15(f)
Financial Statements 5(i)
First Amended and Restated
Securities Purchase Agreement Recitals
force majeure event 27
Gabbard Introduction
Hancock Introduction
Harms Introduction
Initial Public Offering 13(a)
Initial Purchaser(s) Introduction
Intellectual Property 5(m)
Johnson Introduction
Management Purchasers Introduction
Masada Recitals
Masada Business Recitals
MSAM Introduction
MSH Introduction
MSH Expenses 13(c)(i)
Nordin Introduction
Norwest IV Introduction
Norwest V Introduction
Offered Shares 15(b)
Original Securities Purchase
Agreement Recitals
Partnership Recitals
Piggy-Back Registration 13(b)
Purchaser(s) Introduction
Qualified Appraiser 15(g)
Repurchase Event 15(e)
SBA 5(e)
Senior Obligations 20
South Atlantic II Introduction
South Atlantic III Introduction
Term Loan Agreement 1
Third Party Offer 15(b)
</TABLE>
-7-
<PAGE> 13
<TABLE>
<S> <C>
Voting Trust 9(g)
Whitaker Introduction
1995 Stock Option Plan 6(j)
</TABLE>
SECTION 2. Authorized Securities.
(a) Class A Common Stock. MSH has the authority to issue up to three
hundred thirty-three thousand five hundred (333,500) shares of Class A Common
Stock (the "Class A Common Stock"), $.01 par value, having the rights and
preferences set forth in the Certificate, all of which are issued and are
outstanding as set forth below:
<TABLE>
<CAPTION>
Number of Certificate
Shareholders Shares Number
------------ --------- -----------
<S> <C> <C>
Johnson 20 A1
Harms 20 A2
MSAM 333,460 A3
</TABLE>
(b) Class B Common Stock. MSH has the authority to issue up to one
million seventy-eight thousand five hundred seventy-two (1,078,572) shares of
Class B Common Stock (the "Class B Common Stock"), $.01 par value, having the
rights and preferences set forth in the Certificate, five hundred seventy
thousand two hundred forty (570,240) of which are issued and outstanding as set
forth below:
<TABLE>
<CAPTION>
Number of Certificate
Shareholders Shares Number
------------ --------- -----------
<S> <C> <C>
Centennial III 209,435 B6
Norwest IV 188,305 B7
South Atlantic II 104,746 B8
Criterion 60,276 B9
Gabbard 3,739 B10
Nordin 3,739 B11
</TABLE>
(c) Class C Common Stock. MSH has the authority to issue up to four
hundred eighty-six thousand one hundred eleven (486,111) shares of Class C
Common Stock (the "Class C Common Stock"), $.01 par value, having the rights
and preferences set forth in the Certificate, none of which shall be
outstanding prior to the Closing.
(d) Class A Preferred Stock. MSH has the authority to issue up to
seventy-five thousand seven hundred (75,700) shares of Class A Preferred Stock
(the "Class A Preferred Stock"), $.01 par value, having the rights and
preferences set forth in the Certificate, all of which are issued and
outstanding as set forth below:
-8-
<PAGE> 14
<TABLE>
<CAPTION>
Number of Certificate
Shareholders Shares Number
------------ ---------- ------------
<S> <C> <C>
Centennial III 27,800 P1
Norwest IV 25,000 P2
South Atlantic II 13,900 P3
Criterion 8,000 P4
Gabbard 500 PA7
Nordin 500 PA6
</TABLE>
(e) Class B Convertible Preferred Stock. MSH has the authority to
issue up to three hundred fifty-eight thousand three hundred thirty-two
(358,332) shares of Class B Convertible Preferred Stock (the "Class B
Convertible Preferred Stock"), $.01 par value, having the rights and
preferences set forth in the Certificate, all of which are issued and
outstanding as set forth below:
<TABLE>
<CAPTION>
Number of Certificate
Shareholders Shares Number
------------ ---------- ----------
<S> <C> <C>
Johnson 11,630 PB1
Harms 11,630 PB2
Centennial III 25,020 PB3
Centennial IV 87,745 PB4
Norwest IV 83,149 PB5
South Atlantic II 46,221 PB6
Criterion 6,285 PB7
Gabbard 1,399 PB8
Nordin 1,399 PB9
Whitaker 521 PB10
Hancock 83,333 PB11
</TABLE>
(f) Class C Convertible Preferred Stock. MSH has the authority to
issue up to four hundred eighty-six thousand one hundred eleven (486,111)
shares of Class C Convertible Preferred Stock (the "Class C Convertible
Preferred Stock"), $.01 par value, having the rights and preferences set forth
in the Certificate, which shall be issued to the Purchasers as set forth in
Section 3.
SECTION 3. Acquisition of Class C Convertible Preferred Stock. The
closing shall take place at the offices of Burr & Forman, 3100 SouthTrust Tower,
420 North 20th Street, Birmingham, Alabama 35203, at 10:00 a.m., Birmingham
time, on May 31, 1995, or at such other location, date and time as may be agreed
upon between the Purchasers and the MSH (such closing being called the "Closing"
and such date and time being called the "Closing Date"). At the Closing, MSH
shall authorize the issuance of, and the Purchasers
-9-
<PAGE> 15
shall purchase in the aggregate, all of the authorized shares of Class C
Convertible Preferred Stock for a price equal to thirty-six dollars ($36.00)
per share, payable in immediately available federal funds wired to an account
designated by MSH. The purchase and issuance of the Class C Convertible
Preferred Stock shall occur concurrently with the execution and delivery of
this Agreement, and the number of shares to be acquired by each Purchaser, the
certificates representing such shares and the consideration paid therefor are
set forth below:
<TABLE>
<CAPTION>
Number of Certificate
Shareholders Shares Number Cash
------------ ---------- ---------- ----
<S> <C> <C> <C>
Johnson 5,715 PC1 $ 205,740
Harms 5,715 PC2 $ 205,740
Centennial III 8,464 PC3 $ 304,704
Centennial IV 110,214 PC4 $ 3,967,704
Criterion 1,190 PC5 $ 42,840
Norwest V 83,724 PC6 $ 3,014,064
South Atlantic II 23,267 PC7 $ 837,612
South Atlantic III 23,267 PC8 $ 837,612
Gabbard 472 PC9 $ 16,992
Nordin 472 PC10 $ 16,992
Whitaker 1,389 PC11 $ 50,004
Hancock 83,333 PC12 $ 2,999,988
CVCA 138,889 PC13 $ 5,000,004
</TABLE>
SECTION 4. Use of Proceeds. MSH shall contribute the cash proceeds
from the sale of its securities, as described in Section 3, to the capital of
Masada to be used as follows: to repay as much as approximately $16,000,000 of
revolving indebtedness under the Term Loan Agreement; to invest as much as
$1,200,000 in Centennial Security, Inc.; for general corporate purposes and for
the expansion of the Masada Business; provided, however, that no proceeds shall
be used to repay any non-revolving portion of the Term Loan Agreement or to
repay any other long-term, non-revolving indebtedness.
SECTION 5. Representations and Warranties of MSH. MSH represents and
warrants to each of the holders of Shares as follows:
(a) Organization and Corporate Power of MSH and Masada. Each of MSH
and Masada has been duly incorporated under the laws of the State of Delaware
and is validly existing and in good standing as a corporation under the laws of
the State of Delaware with full corporate power and corporate authority to own
its properties, and to conduct its business as such business is proposed to be
conducted and to carry out the transactions contemplated hereby. MSH is duly
qualified and in good standing as a foreign corporation in the States of
Alabama, Florida and Georgia. Masada is duly qualified and in good standing as
a foreign corporation in the States of Louisiana, Texas, Virginia, California,
Maryland, Oklahoma, Florida, Alabama and Georgia, which states constitute the
only states
-10-
<PAGE> 16
in which Masada maintains any offices, stations any employees or possesses any
assets. Except as set forth in Schedule 5(a) hereto, MSH has no Subsidiaries
or Interests in any Person other than Masada and does not engage in any
activity other than serving as the sole shareholder of Masada and such other
activities which are incidental thereto. Masada is the successor-in-interest
by merger to the Partnership and the Masada Business and, except as set forth
on Schedule 5(a), does not engage in any activity in any material way other
than the Masada Business. As of the Closing Date, MSH is in material
compliance with all of the terms and provisions of the Certificate and ByLaws,
and Masada is in material compliance with all of the terms and provisions of
the Masada Certificate and the Masada Bylaws.
(b) Authorization. Each of MSH and Masada, as applicable, has all
requisite corporate authority to execute and deliver the Transaction Documents
to which it is a party, and the Transaction Documents when so executed and
delivered shall be legal, valid and binding obligations of MSH and Masada, as
applicable, enforceable in accordance with their terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the rights and remedies of creditors
generally or the application of principles of equity, whether applied in a
proceeding at law or in equity.
(c) Capitalization. The capitalization of each of MSH and Masada,
assuming the consummation of the transactions referenced herein, is as set
forth in Schedule 5(c) hereof. Neither MSH nor Masada has issued any Interests
except as set forth in Schedule 5(c) and there are no outstanding warrants,
options or other rights to purchase or acquire any such Interests, except as
set forth on Schedule 5(c), and except as may be specifically set forth in the
Certificate and this Agreement. The Class C Convertible Preferred Stock to be
delivered to the Purchasers will be duly authorized, validly issued, fully paid
and non-assessable and will be delivered to the Purchasers free and clear of
any liens, pre-emptive rights, escrows, options, rights of first refusal or
other agreements, arrangements, commitments, understandings or obligations,
whether written or oral, or any other restrictions affecting rights and other
incidents of record and beneficial ownership, other than restrictions on
transferability imposed generally under the Securities Act of 1933, as amended,
and the rules and regulations issued in respect thereto (collectively, the
"Act"), and under the securities laws of the several states and the rules and
regulations issued in respect thereto (collectively, the "Blue Sky Laws") with
respect to securities acquired in a transaction exempt from registration under
such laws and the restrictions set forth in the Certificate, the Masada
Certificate or this Agreement. The issuance and delivery of the Class C
Convertible Preferred Stock is exempt from the registration requirements of the
Act and Blue Sky Laws or has been qualified as may be necessary.
(d) Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement or any of the Transaction Documents based upon
any arrangement or agreement made by or on behalf of MSH. MSH shall indemnify
and hold the holders of the Shares harmless against any liability or expense
(including legal, travel and out-of-pocket expenses) incurred by any of the
Purchasers arising out of claims for such commissions or fees.
-11-
<PAGE> 17
(e) Consents and Approvals. Subject to the accuracy of the
representations and warranties of the Purchasers set forth in Section 8, the
execution and delivery of the Transaction Documents by MSH, the issuance, sale
and delivery of the Class C Convertible Preferred Stock or the issuance and
delivery of the Class C Common Stock upon the conversion of the Class C
Convertible Preferred Stock and the performance of the obligations of MSH
hereunder, except as specifically provided herein or in Schedule 5(e) hereto,
do not require any consent or approval of, filing or taking of any other action
with, or notice to, any Person. All governmental filings required to
consummate the transactions contemplated hereby have been duly made and are
effective as of the date hereof, other than (i) filings pursuant to Federal and
state securities laws (all of which filings have been or will be made by MSH)
in connection with the sale of the Class C Convertible Preferred Stock, (ii)
any filings required to be made with the U.S. Small Business Administration
(the "SBA") (all of which have been or will be made by the Purchasers, as
applicable) and (iii) with respect to Section 13, the registration of the
shares covered thereby with the Securities and Exchange Commission and filings
pursuant to state securities laws.
(f) No Conflicts. The execution, delivery and performance of this
Agreement by MSH and the consummation of the transactions contemplated hereby
do not and will not, upon the consummation thereof: (i) except as set forth in
Schedule 5(f) hereto, conflict with or result in a breach of any provision of,
or constitute a default of (or an event which with the giving of notice, the
lapse of time, or both would constitute such a breach or default), or result in
the creation or imposition of a lien on any property or assets of MSH or Masada
pursuant to the terms of, the Certificate, ByLaws, Masada Certificate or Masada
Bylaws or of any note, bond, mortgage, security agreement, indenture, license,
permit, agreement or other instrument or obligation to which either MSH or
Masada is a party or is bound or to which its assets or business are subject,
or (ii) violate any order, writ, judgment, injunction, decree, statute, rule or
regulation of any court or other governmental entity applicable to or bearing
upon MSH, Masada or their assets or business, as the same shall exist upon
consummation of the transactions contemplated by this Agreement.
(g) Legal Proceedings. There are no suits, actions, or legal,
administrative, arbitration or other proceedings or governmental investigations
pending or, to the best knowledge of MSH and Masada, threatened against MSH or
Masada or otherwise affecting the transactions contemplated by this Agreement
or the assets or business of MSH or Masada as presently existing or conducted
or will exist or be conducted upon the consummation of the transactions
contemplated by this Agreement, which could reasonably be expected,
individually or in the aggregate, to have a material adverse effect upon the
Masada Business or the financial condition of MSH.
(h) Pro Forma Balance Sheet. The pro forma balance sheet set forth
in Schedule 5(h) fairly represents the financial condition of MSH and Masada on
a consolidated basis upon consummation of the transactions contemplated hereby.
-12-
<PAGE> 18
(i) Financial Statements. MSH has furnished to the Purchasers the
May 23, 1995 draft of MSH's audited consolidated financial statements for the
year ended December 31, 1994 (including the management letter, if any, issued
therewith) consisting of the audited consolidated balance sheet as of December
31, 1994 and the related, audited statements of operations, stockholders'
equity and cash flows for the year ended December 31, 1994, and the unaudited
consolidated balance sheet of MSH as of March 31, 1995 (the "Balance Sheet")
and the related, unaudited statements of operations, stockholders' equity and
cash flows for the fiscal quarter ended March 31, 1995 (all of the preceding
statements, together with the Balance Sheet, being, collectively, the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
and fairly present the financial position of MSH and Masada and the results of
their operations and cash flows for the periods covered by such Financial
Statements except, in the case of the March 31, 1995 Financial Statements, for
normal year-end adjustments and the omission of certain footnote disclosures.
Except as set forth on Schedule 5(i), since the date of the Balance Sheet, (i)
there has been no adverse change in the assets, liabilities or financial
condition of MSH and Masada (on a consolidated basis) from that reflected in
the Balance Sheet except for changes in the ordinary course of business which
in the aggregate have not been materially adverse and (ii) none of the
business, prospects, financial condition, operations, property or affairs of
MSH and Masada (on a consolidated basis) has been materially adversely affected
by any occurrence or development, individually or in the aggregate, whether or
not insured against.
(j) Events Subsequent to the Date of the Balance Sheet. Since the
date of the Balance Sheet, except as contemplated by this Agreement or as set
forth on Schedule 5(j), neither MSH or Masada has (i) issued any stock, bond or
other corporate security, (ii) borrowed any amount or incurred or become
subject to any liability (absolute, accrued or contingent), except current
liabilities incurred and liabilities under contracts entered into in the
ordinary course of business or under the Term Loan Agreement, (iii) discharged
or satisfied any lien or encumbrance or incurred or paid any obligation or
liability (absolute, accrued or contingent) other than current liabilities
shown on the Balance Sheet and current liabilities incurred since the date of
the Balance Sheet in the ordinary course of business, (iv) declared or made any
payment or distribution to stockholders or purchased or redeemed any of its
capital stock, (v) mortgaged, pledged or subjected to any lien or encumbrance
any of its assets, tangible or intangible, other than liens of current real
property taxes not yet due and payable, (vi) sold, assigned or transferred any
of its tangible assets except in the ordinary course of business, or cancelled
any debt or claim owed to MSH or Masada except in the ordinary course of
business, (vii) sold, assigned, transferred or granted any exclusive license
with respect to any patent, trademark, trade name, service mark, copyright,
trade secret or other intangible asset, (viii) suffered any substantial loss of
property or waived any right of substantial value other than in the ordinary
course of business, (ix) made any change in officer compensation except in the
ordinary course of business and consistent with past practice, (x) made any
material change in the manner of business or operations of MSH or Masada, (xi)
entered into any transaction except in the ordinary course of business or as
-13-
<PAGE> 19
otherwise contemplated hereby or (xii) entered into any commitment (contingent
or otherwise) to effect, directly or indirectly, any of the foregoing.
(k) Insurance. Except as set forth on Schedule 5(k), each of MSH or
Masada holds valid policies covering all of the insurance required to be
maintained by it under clauses (f) and (g) of Section 6.
(l) Taxes. Each of MSH and Masada has filed all income tax returns,
Federal, state, county, local and foreign, required to be filed by it, all
taxes shown as due on all such returns have been paid, each such return and
filing is true and correct and each of MSH or Masada neither has nor will have
any additional liability for taxes with respect to any such return, other than
as reflected as liabilities on the Balance Sheet. To the best knowledge of MSH
and Masada, except as set forth on Schedule 5(l) attached hereto and except for
matters that will not have a material adverse effect on MSH or Masada or their
financial condition, each of MSH and Masada has filed all other tax returns,
Federal, state, county, local and foreign, required to be filed by it, all
taxes shown as due on all such returns have been paid, and each such return and
filing is true and correct. To the best knowledge of MSH and Masada, except as
set forth on Schedule 5(l) attached hereto and except for matters that will not
have a material adverse effect on MSH or Masada or their financial condition,
all taxes which each of MSH or Masada is required by law to withhold or
collect, including without limitation, sales and use taxes, and amounts
required to be withheld for taxes of employees, have been duly withheld or
collected and, to the extent required, have been paid over to the proper
governmental authorities or are held in separate bank accounts for such
purpose. The Federal income tax returns of both MSH and Masada have never been
audited by the Internal Revenue Service. Except as set forth in Schedule 5(l)
attached hereto, no deficiency assessment with respect to or proposed
adjustment of Federal, state, county or local taxes of either MSH or Masada is,
to the best knowledge of MSH and Masada, pending or threatened, and each of MSH
or Masada is not aware of any fact which would constitute grounds for the
assessment of any additional taxes by any taxing authority with respect to the
taxable years of MSH or Masada, as the case may be, beginning on or before the
Closing Date. Each of MSH or Masada has not granted or been requested to grant
waivers of any statutes of limitations applicable to any claim for taxes. To
the best knowledge of MSH and Masada, there is no material tax lien, whether
imposed by any Federal, state, county or local taxing authority, outstanding
against the assets, properties or business of either MSH or Masada. Neither
MSH nor Masada has ever filed an election pursuant to Section 1362 of the
Internal Revenue Code of 1986, as amended (the "Code"), that either of them be
taxed as an S corporation.
(m) Patents, Trademarks, etc. Set forth in Schedule 5(m) is a list
and brief description of all material patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names and copyrights, and all applications for such which
are in the process of being prepared, owned by or registered in the name of MSH
and Masada, or of which MSH or Masada is a licensor or licensee or in which MSH
or Masada has any right, and in each case a brief description of the nature of
-14-
<PAGE> 20
such right. To the best knowledge of MSH and Masada, each of MSH and Masada
owns or possesses adequate licenses or other rights to use all material
patents, patent applications, trademarks, trademark applications, service
marks, service mark applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets and know-how (collectively, "Intellectual
Property") necessary to the conduct of its business as conducted and, except as
described in the Partners Presentation, to the best knowledge of MSH and
Masada, as proposed to be conducted in accordance with the Partners
Presentation, and, to the best knowledge of MSH and Masada, no claim is pending
or threatened to the effect that the operations of either MSH or Masada
infringe upon or conflict with the asserted rights of any other Person under
any Intellectual Property, and to MSH's and Masada's best knowledge, there is
no basis for any such claim (whether or not pending or threatened), except as
set forth on Schedule 5(m) hereto. To the best knowledge of MSH and Masada, no
claim is pending or threatened to the effect that any such Intellectual
Property owned or licensed by either MSH or Masada, or which either MSH or
Masada otherwise has the right to use, is invalid or unenforceable by either
MSH or Masada, as the case may be, and to the best knowledge of either MSH or
Masada, as the case may be, there is no basis for any such claim (whether or
not pending or threatened), except as set forth on Schedule 5(m) hereto.
Except as set forth on Schedule 5(m), all Intellectual Property developed by
and belonging to either MSH or Masada, as the case may be, which has not been
patented has been subject to reasonable measures to maintain the
confidentiality of such property. Except as set forth on Schedule 5(m),
neither MSH nor Masada has granted or assigned to any other Person any right to
manufacture, have manufactured, assemble or sell the products or proposed
products or to provide the services or proposed services of either MSH or
Masada.
(n) Loans and Advances. Other than as reflected in the Financial
Statements, neither MSH nor Masada have any outstanding loans or advances to
any Person and neither MSH nor Masada is obligated to make any such loans or
advances, except, in each case, for advances to employees of either MSH or
Masada, as the case may be, in respect of reimbursable business expenses
anticipated to be incurred by them in connection with their performance of
services for either MSH or Masada, as the case may be.
(o) Assumptions, Guaranties, etc. of Indebtedness of Other Persons.
Except as set forth on Schedule 5(o), neither MSH nor Masada has assumed,
guaranteed, endorsed or otherwise become directly or contingently liable on any
indebtedness of any other Person (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in any debtor, or otherwise to
assure any creditor against loss), except for guaranties by endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business.
(p) Significant Customers and Suppliers. Except as set forth on
Schedule 5(p), to the best knowledge of MSH and Masada no customer or supplier
which accounted for more than 10% of the sales, purchases, assets or
liabilities to Masada during the period covered by the Financial Statements or
which has been significant to either MSH or Masada thereafter, has
-15-
<PAGE> 21
terminated, materially reduced or threatened to terminate or materially reduce
its purchases from or provision of products or services to MSH or Masada.
(q) Transactions With Affiliates. Except as set forth on Schedule
5(q), to the best knowledge of MSH and Masada, no director, officer, employee
or stockholder of MSH, or member of the family of any such Person, or any
corporation, partnership, trust or other entity in which any such Person, or
any member of the family of any such Person, has a substantial Interest or is
an officer, director, trustee, partner or holder of more than 5% of the
outstanding capital stock thereof, is a party to any transaction with MSH or
Masada, including any contract, agreement or other arrangement providing for
the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to any such Person or firm.
(r) Small Business Concern. MSH is a "Small Concern" as defined in
Section 107.3 of Title 13 of the Code of Federal Regulations. MSH has
heretofore furnished to each Purchaser that is a Small Business Investment
Company the following completed forms: Size Status Declaration on SBA Form
480, Assurance of Compliance on SBA Form 652D and Portfolio Financing Report on
SBA Form 1031, and represents and warrants the completeness and correctness of
each of said forms; provided, that each representation of MSH in this Section
5(r) is based upon the assumption that Centennial Security, Inc. is not an
"Affiliate" (as that term is defined in Section 121.401 of Title 13 of the Code
of Federal Regulations) of MSH.
(s) Representations and Warranties. Subject to the last three
sentences of this Section 5(s), no representation or warranty made by or on
behalf of MSH or Masada to the Purchasers in this Agreement, in any Schedule or
Exhibit hereto, in the Partners Presentation, or in any written statement,
list, certificate or other instrument, document or agreement entered into or
furnished or to be entered into or furnished by MSH or Masada to any Purchaser
in connection with the transactions contemplated hereby contains or constitutes
or will contain or constitute, when given or delivered, any untrue statement of
a material fact, or fails or will fail to state, when given or delivered, a
material fact necessary to make the statements contained herein or therein not
misleading. The financial projections and other estimates contained in the
Partners Presentation were prepared by MSH based on MSH's experience in the
industry and on assumptions of fact and opinion as to future events which MSH,
at the date of the issuance of the Partners Presentation believed to be
reasonable, but which MSH cannot and does not assure or guarantee the
attainment of in any manner. The independent auditors of MSH have had no
involvement with, and provide no assurances related to, the financial
projections and other estimates contained in the Partners Presentation. As of
the date hereof no facts have come to the attention of MSH which would, in its
opinion, require MSH to revise or amplify, in any material manner, the
assumptions underlying the Partners Presentation or the conclusions derived
therefrom.
SECTION 6. Affirmative Covenants. So long as the Purchasers or any
permitted assignees thereof are holders of any Shares:
-16-
<PAGE> 22
(a) Fulfillment of Obligations. MSH shall, and shall cause Masada
to, observe and comply with all of the terms, conditions, restrictions and
covenants to be observed or performed by either of them under the Certificate
or the Masada Certificate, as appropriate, and all of the Transaction Documents
and any other material agreements to which either of them is a party.
(b) Accounts and Reports. MSH will maintain, and shall cause Masada
to maintain, a standard system of accounts, records and accounting controls and
systems in accordance with generally accepted accounting principles
consistently applied, and will keep complete, detailed and accurate financial
records. So long as any Purchaser continues to hold at least fifteen thousand
(15,000) Shares, MSH will furnish to each such holder of Shares the following
reports: (i) within thirty (30) days after the end of each of the first eleven
(11) months of each fiscal year, a copy of the consolidated balance sheet,
statement of income, and statement of changes in retained earnings with regard
to MSH and Masada; (ii) within forty-five (45) days after the end of each of
the first three quarters of each fiscal year, a copy of the consolidated
statement of cash flows with regard to MSH and Masada; (iii) as soon as
reasonably possible, and in any event within forty-five (45) days after the end
of each quarter, a statement signed by the chief executive officer of MSH as to
whether MSH is or is not in compliance with the covenants and agreements
contained in this Agreement and those pertaining to the Preferred Stock set
forth in the Certificate; (iv) within ninety (90) days after the end of each
fiscal year, a copy of the consolidating and consolidated balance sheets,
statements of income, cash flows and changes in retained earnings with regard
to MSH and Masada for such year, together with supporting schedules, and an
unqualified opinion issued by one of the six (6) largest nationally recognized
firms of independent certified public accountants with respect to such
statements (including any management letter issued in connection with such
financial statements outlining recommendations or observations of such
accountants with respect to the books and records or accounting controls and
systems of MSH or Masada), including a statement to the effect that such
accountants have examined the provisions of the Loan Agreements to which either
MSH or Masada is a party, or by which either of them is bound, and that nothing
has come to the attention of such accountants that would indicate that MSH or
Masada is not in material compliance with any of the provisions thereof; (v) at
least thirty (30) days prior to the end of each fiscal year, a monthly
operating and capital expenditure budget for Masada for the ensuing fiscal
year, and a five-year strategic business plan; (vi) within ten (10) days of
issuance, copies of any material written communications regarding the Masada
Business with stockholders, directors, executive committees, lenders or the
financial community, and any reports filed by MSH or Masada with any security
exchanges or with the Securities and Exchange Commission, including any notice
to any of the foregoing that an event has occurred which may have a material
effect upon MSH's or Masada's business prospects or financial condition or on
the Purchasers' investment; and (vii) within five (5) days after discovery by
or notification to MSH that it is not in compliance with the covenants and
agreements herein contained or in any other material agreement affecting MSH or
Masada, a detailed statement outlining such non-compliance or default and any
steps being taken by MSH or Masada to cure or otherwise deal with such non-
compliance or default. Anything herein to the contrary notwithstanding,
-17-
<PAGE> 23
the obligation of MSH to deliver reports under this Section 6(b) shall
terminate at such time as MSH becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended.
(c) Payment of Taxes. MSH shall, and shall cause its Subsidiaries
to, pay and discharge all lawful taxes, assessments and governmental charges or
levies imposed upon them or upon their income or property before the same shall
become in default, as well as all lawful claims for labor, material and
supplies which, if not paid when due, might become a lien or charge upon their
property or any part thereof; provided, however, that MSH and Masada shall not
be required to pay and discharge any such tax, assessment, charge, levy or
claim so long as the validity thereof is being contested in good faith by
appropriate proceedings and an adequate reserve therefor has been established
on their books.
(d) Conduct of Business; Compliance with Laws. MSH shall keep, and
shall cause its Subsidiaries to keep, their properties in such repair, working
order and condition and will from time to time make such repairs, renewals,
replacements, additions and improvements thereto so that the business carried
on in connection therewith may be properly conducted at all times in a
commercially reasonable manner and in material compliance with all applicable
statutes, rules and regulations and material obligations; and MSH shall, and
shall cause its Subsidiaries to, otherwise comply with all applicable statutes,
rules, regulations and other material obligations.
(e) Notice of Meetings and Payment of Expenses. MSH shall notify
each holder of Shares in writing at least ten (10) days prior to the occurrence
of all meetings of its board of directors or committees thereof. MSH shall
afford each holder of more than fifteen thousand (15,000) Shares, that is not
otherwise represented by a designee on the board of directors, the opportunity
to send a representative to attend all meetings of its board of directors or
committees thereof, and the travel and related out-of-pocket expenses for the
attendance by such representatives at such meetings shall be paid by MSH.
There shall be no fewer than four (4) meetings of MSH's board of directors in
each fiscal year that occur at least sixty (60) days apart from each other.
(f) General Insurance. MSH shall keep all of its insurable
properties and all of the insurable properties of its Subsidiaries now or
hereafter owned adequately insured at all times against loss or damage by fire
or other casualty to the extent customary with respect to like properties of
companies conducting similar businesses; maintain public liability, workman's
compensation and other liability coverage (including so-called errors and
omissions, products or service liability coverage) insuring MSH and its
Subsidiaries to the extent customary with respect to companies conducting
similar businesses, all by financially sound and reputable insurance companies
and, upon request of the Purchasers, furnish to the Purchasers satisfactory
evidence of the same.
(g) Key Man Life Insurance. MSH shall maintain, so long as any
shares of Preferred Stock are outstanding, a life insurance policy insuring the
life of Johnson having a
-18-
<PAGE> 24
death benefit equal to two million dollars ($2,000,000). Such policy shall at
all times reflect MSH as the owner and sole beneficiary thereof.
(h) Intellectual Property. MSH shall, and shall cause its
Subsidiaries to, possess, maintain and comply with all necessary patents,
trademarks tradenames, copyrights and licenses to conduct their businesses as
now or hereafter operated, without conflicting with the valid patents,
trademarks, tradenames, copyrights and licenses of others. MSH shall use its
best efforts to ensure that all patents that are awarded to current or past
employees of MSH or any of its Subsidiaries based upon developments made while
such Persons were employed by MSH or any of its Subsidiaries will be the
property of MSH.
(i) Inspection. Each holder of more than ten percent (10%) of the
issued and outstanding shares of any class of Shares may inspect the
properties, books and other records (and make copies and extracts thereof) of
MSH and its Subsidiaries and may interview directors, officers, employees and
independent accountants regarding the affairs of MSH and its Subsidiaries, in
any manner and at such times as may be reasonably requested.
(j) Stock Option Plans. MSH shall maintain the 1994 Stock Option
Plan for the benefit of key employees and non-employee directors of MSH and
Masada and reserve up to 100,000 shares of Class B Common Stock for issuance
pursuant to options granted under the 1994 Stock Option Plan. This Agreement
shall not restrict or otherwise control the exercise price of options granted
pursuant to the 1994 Stock Option Plan. MSH shall establish and maintain an
additional stock option plan (the "1995 Stock Option Plan") for the benefit of
key employees and non-employee directors of MSH and Masada and reserve up to
50,000 shares of Class B Common Stock for issuance pursuant to options granted
under the 1995 Stock Option Plan; provided, however, that the exercise price
for any options granted pursuant to the 1995 Stock Option Plan shall not be
less than $36.00 (such $36.00 minimum per share exercise price to be adjusted
for stock dividends, stock splits and reverse stock splits occurring after the
date hereof). All grants of stock options under the 1994 Stock Option Plan and
the 1995 Stock Option Plan shall require the approval of the Compensation
Committee of the board of directors of MSH.
(k) Reserve for Conversion Shares. MSH shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
for the purpose of effecting the conversion of Convertible Preferred Stock and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the
conversion of Convertible Preferred Stock or otherwise to comply with the terms
of this Agreement. If at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of the
Convertible Preferred Stock or otherwise to comply with the terms of this
Agreement, MSH will forthwith use its best efforts to take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes.
MSH will use its best efforts to obtain any authorization, consent, approval or
other action by or make any filing with any court or
-19-
<PAGE> 25
administrative body that may be required under applicable state securities laws
in connection with the issuance of shares of Common Stock upon conversion of
Convertible Preferred Stock.
(l) Corporate Existence. MSH shall maintain and cause each of its
Subsidiaries to maintain their respective corporate existence, rights and
franchises in full force and effect.
(m) ByLaws. MSH shall at all times cause its ByLaws to provide that,
unless otherwise required by the laws of the State of Delaware, any two
directors shall have the right to call a meeting of the Board of Directors.
MSH shall at all times maintain provisions in its ByLaws and/or Certificate
indemnifying all directors against liability and absolving all directors from
liability to MSH and its stockholders to the maximum extent permitted under the
laws of the State of Delaware.
(n) Further Assurances. MSH will cure promptly or will cause any or
all of its Subsidiaries to cure promptly any defects in the creation and
issuance of the Class C Convertible Preferred Stock, and in the execution and
delivery of the Transaction Documents. MSH at its expense, will promptly
execute and deliver or will cause any or all of its Subsidiaries to execute and
deliver promptly to each Purchaser, following receipt of a reasonable request
in writing from a Purchaser, all such other and further documents, agreements
and instruments in compliance with or pursuant to its covenants and agreements
herein, and will make any recordings, file any notices, and obtain any consents
as may be necessary or appropriate in connection therewith.
SECTION 7.
Negative Covenants. So long as the Purchasers or any
permitted assignees thereof are holders of any shares of Class A Preferred
Stock, an aggregate of one hundred sixty thousand (160,000) shares of Class B
Convertible Preferred Stock or an aggregate of one hundred twenty-five thousand
(125,000) shares of Class C Convertible Preferred Stock:
(a) Amendment to Masada Certificate. MSH shall not amend or permit
the amendment of the Masada Certificate.
(b) Restrictions on Activities. MSH shall not engage in any business
activity other than acting as the sole shareholder of Masada (so long as Masada
remains in existence), nor shall MSH permit Masada or any of Masada's
Subsidiaries to engage in any business in any material way other than the
Masada Business, except as otherwise permitted by this Agreement. If Masada is
merged or liquidated into MSH, thereafter, MSH, either directly or through its
Subsidiaries, shall engage in no other business in any material way other than
the Masada Business.
(c) Loans and Investments. MSH shall not, and shall not permit any
Subsidiary to, make any investments in, loans or advances to, or guaranty the
obligations of, any Person, except (i) investments in Persons involved in the
acquisition, construction, ownership,
-20-
<PAGE> 26
operation or management of security alarm systems, (ii) investments in
Subsidiaries, the capital stock or general partnership interests of which are
wholly-owned by MSH or Masada, (iii) commercial paper rated prime (P-1) by any
national rating organization, direct obligations of or obligations guaranteed
by the United States of America, and certificates of deposit of United States
banks having capital, surplus and retained earnings in excess of $100,000,000,
in each case having a maturity of not in excess of one (1) year, (iv) the
extension of normal credit in the ordinary course of business in connection
with the sale of its products or services, (v) making advances to employees of
MSH or any Subsidiary in the ordinary course of its business in amounts not
exceeding $10,000 in the aggregate outstanding at any one time, and (vi)
overnight investments in repurchase agreements using excess cash in or from
deposit accounts of MSH or any Subsidiary pursuant to the agreement with State
Street, dated July 13, 1993, as amended or otherwise modified, or any successor
agreement thereto.
(d) Restrictions in Other Agreements. MSH shall not and shall not
permit any Subsidiary to, enter into any (i) agreement with any person which
would restrict the dividend or redemption payments required by the Certificate
to be paid to the holders of Preferred Stock or the Masada Certificate to be
paid to the holders of the Class S Preferred Stock, other than such
restrictions as may be contained in the Term Loan Agreement or any amendments,
renewals or extensions thereof, (ii) Loan Agreement, other than the Term Loan
Agreement or any amendments, renewals or extensions thereof unless prior to the
execution thereof all accrued and unpaid dividends or redemption amounts with
respect to the Preferred Stock and the Class S Preferred Stock shall be paid in
full, or (iii) agreement which by its terms restricts MSH's performance of the
Certificate or the Transaction Documents.
(e) Transactions with Affiliates. MSH shall not, and shall not
permit any Subsidiary to, enter into any transaction with any holders of the
capital stock of MSH, any Affiliate of a holder of the capital stock of MSH or
any officer or director of MSH, except for transactions on terms which have
been approved by MSH's board of directors relating to (i) employment or (ii)
the provision of property, goods or services to MSH or any of its Subsidiaries;
provided, that, the price and terms for such property, goods or services are
not less favorable than those obtainable from non-related parties for
comparable property, goods or services in the same geographic area.
(f) Subsidiaries. MSH shall not, and shall not permit any Subsidiary
to, form, invest in or acquire the Interests of any Subsidiary unless all of
the Interests in such Subsidiary are wholly-owned by MSH or Masada; provided,
however, that MSH and any Subsidiary may invest in or acquire Interests of
Persons involved in the acquisition, construction, ownership, operation or
management of security alarm systems.
(g) Auditors. MSH shall engage one of the six (6) largest nationally
recognized firms of certified public accountants to audit and report on the
financial condition of MSH and its Subsidiaries.
-21-
<PAGE> 27
(h) Use of Name. MSH shall not, and shall not permit any Subsidiary
to, use the tradename "Masada" except in connection with the security alarm
business conducted by MSH and its Subsidiaries or by Centennial Security, Inc.;
provided, however, that nothing herein shall preclude the use of the tradename
"Masada" by Johnson and Harms in any business in which they are engaged, other
than the security alarm business, so long as the name "Security" is not used in
connection therewith; and, provided, further, that Johnson and Harms by
entering into this Agreement specifically recognize the right of MSH and its
Subsidiaries to use such tradename as set forth herein.
SECTION 8. Representations and Covenants of Purchasers.
(a) The Purchasers, individually, and not jointly, represent, warrant
and covenant to MSH as follows:
(i) Investment. Each Purchaser, by acceptance of shares of
Class C Convertible Preferred Stock, represents that it has purchased
such shares, not with a view to, or for sale in connection with, any
distribution thereof in violation of the Act.
(ii) Brokerage. There are no claims for brokerage
commissions, finder's fees or similar compensation in connection with
the transactions contemplated by this Agreement based upon any
arrangement or agreement made by or on behalf of any Purchaser. The
Purchasers, individually, and not jointly, shall indemnify and hold
MSH harmless against any liability or expense (including legal, travel
and other out-of-pocket expenses) incurred by MSH or any of its
Subsidiaries arising out of claims for such commissions or fees.
(iii) Use of Name. The Purchasers shall not permit MSH, any
of MSH's Subsidiaries or any other Person which is an Affiliate of any
of the Purchasers to use the tradename "Masada" except in connection
with the security alarm business conducted by MSH and its Subsidiaries
or as otherwise provided in Section 7(l) of this Agreement.
(iv) Each Purchaser has had an opportunity to ask questions
of and receive answers from MSH and Masada, or any person or persons
acting on their behalf, concerning the terms and conditions of the
investment represented by the purchase of the Class C Convertible
Preferred Stock and concerning the business of MSH and Masada, and all
such questions have been answered to the full satisfaction of each of
the Purchasers.
(v) Each Purchaser has such knowledge and experience in
financial and business matters that it is capable of evaluating the
merits and risks of an investment in the Class C Convertible Preferred
Stock.
-22-
<PAGE> 28
(vi) Each Purchaser is aware of the fact that the shares of
Class C Convertible Preferred Stock have not been registered under the
Act or any state securities laws, and that the shares of Class C
Convertible Preferred Stock purchased in accordance with this
Agreement may not be sold, transferred, or otherwise disposed of in
the absence of registration under the Act and applicable state
securities laws or an opinion of counsel, satisfactory to MSH, to the
effect that such registration is not required due to the availability
of registration exemptions.
(b) Each of the following Purchasers - Centennial III, Centennial IV,
Criterion, Norwest V, South Atlantic II, South Atlantic III, Hancock and CVCA -
individually, and not jointly, represent, warrant and covenant to MSH as
follows:
(i) Each such Purchaser has total assets of at least
$5,000,000 and net worth of at least $1,000,000;
(ii) Each such Purchaser is in the business of providing
venture capital financing, and its principal purpose is investing in
securities issued by other entities;
(iii) Each such Purchaser has one or more individual
partners, managers, and/or employees who regularly make investment
decisions on behalf of such Purchaser, and such individual(s), as a
result of education and/or experience, is highly sophisticated with
respect to investments in securities.
SECTION 9. Events of Non-Compliance and Remedies. In each case of
the happening of any of the following events (each of which is herein sometimes
called an "Event of Non-Compliance"):
(a) any representation or warranty made by or on behalf of MSH in
this Agreement or any of the other Transaction Documents or in any Schedule or
Exhibit hereto or thereto, or in any written statement, list, certificate or
other instrument, document or agreement entered into or furnished pursuant
hereto or thereto or otherwise in connection with the transactions contemplated
hereby shall prove to be false or misleading or breached as of the date hereof;
(b) the failure by MSH or Masada to pay any dividend or make any
redemption payment with respect to the Class A Preferred Stock, with respect to
MSH, or the Class S Preferred Stock, with respect to Masada, in the amount and
on the date when the same shall become due and payable pursuant to the terms of
the Certificate or the Masada Certificate, as the case may be, unless such
payment is Contractually Precluded;
(c) a material default in any respect in the due observance or
performance of any covenant or agreement on the part of MSH to be observed or
performed pursuant to the terms hereof;
-23-
<PAGE> 29
(d) (i) a default with respect to the performance by MSH or any its
Subsidiaries of any obligation for the payment of money to any Person who is
not an Affiliate of MSH or any of its Subsidiaries involving in excess of
$100,000, (ii) notice shall be given under any indebtedness involving in excess
of $100,000 in the aggregate of MSH or any of its Subsidiaries of an event
which, with the lapse of time, will become an event of default thereunder, or
(iii) the maturity of any indebtedness involving in excess of $100,000 in the
aggregate of MSH or any of its Subsidiaries shall be accelerated, in each case
in which default shall remain unremedied for thirty (30) days after the
occurrence thereof;
(e) MSH or any of its Subsidiaries shall (i) apply for or consent to
the appointment of, or the taking of possession by, a receiver, trustee,
custodian or liquidator with respect to itself or any of its properties, (ii)
admit in writing its inability to pay debts as they become due, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt
or insolvent or be the subject of an order for relief under Title 11 of the
United States Code, (v) file a voluntary petition in bankruptcy or a petition
or an answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, (vi) file an answer admitting the
material allegations of a petition filed against it in any proceedings under
any such law or (vii) take any action for the purpose of effecting any of the
foregoing, which default shall continue unremedied for a period of ninety (90)
days after the occurrence thereof;
(f) final judgment for the payment of money which exceeds $100,000
shall be rendered against MSH or any of its Subsidiaries, and the same shall
remain undischarged or unbonded upon terms reasonably satisfactory to the
holders of a majority of the outstanding Shares for a period of sixty (60)
consecutive days, during which execution shall not be effectively stayed; or
(g) material amendment or revocation of, or material default with
respect to, any of the terms of a certain Voting Trust Agreement dated February
1994 (the "Voting Trust") among Johnson and Harms with respect to all of the
voting stock of MSAM;
then and in every such Event of Non-Compliance and at any time thereafter
during the continuance of any such Event of Non-Compliance, in addition to all
other remedies available at law or in equity, by statute or otherwise, the
holders of Preferred Stock shall have the following remedies:
(1) if the Event of Non-Compliance continues for a period of one
hundred eighty (180) consecutive days, and if the holders of sixty percent
(60%) of all of the issued and outstanding shares of Class A Preferred Stock so
elect, the holders of Class A Preferred Stock may demand immediate redemption
of all or a portion of the shares of issued and outstanding Class A Preferred
Stock and Class S Preferred Stock, unless such redemption is Contractually
Precluded; and
-24-
<PAGE> 30
(2) if the Event of Non-Compliance continues for a period of one
hundred eighty (180) consecutive days, the holders of the Shares voting
together as a class shall have the right to elect additional directors to the
board of directors of MSH in a number not less than four (4) or more than eight
(8) pursuant to Article 4(e)(iii) of the Certificate.
SECTION 10. Closing Deliveries. In connection with the purchase of
the shares of Class C Convertible Preferred Stock by the Purchasers hereunder,
the following deliveries and other matters have taken place:
(a) Opinion of Counsel for MSH and Masada. The Purchasers have
received from Burr & Forman, counsel for MSH and Masada, a favorable opinion,
in form and substance satisfactory to the Purchasers as to certain matters
covered in Sections 5(a), 5(b), 5(c) (other than the last sentence thereof),
5(e) and 5(f) hereof (with such exceptions and qualifications as are reasonably
acceptable to counsel for the Purchasers).
(b) Officers' Certificate. The Purchasers have received a
certificate from the president of MSH to the effect that all of the
representations and warranties made by MSH in connection with this Agreement
are true and correct, all closing deliveries pursuant to this Section 10 have
taken place, and all closing conditions have been met as of the date hereof.
(c) Transaction Documents. Each of the Transaction Documents has
been executed, delivered and performed to the satisfaction of the Purchasers.
(d) Amendment of Certificate. The Certificate has been amended to
authorize the issuance of the Class C Convertible Preferred Stock, reflect the
capitalization of MSH as set forth in Schedule 5(c) and implement the other
agreements of the parties set forth herein and in the Transaction Documents,
and has been filed with the Delaware Secretary of State and is effective as of
the date hereof.
(e) Amendment of ByLaws. The ByLaws have been amended to reflect the
issuance of the Class C Convertible Preferred Stock and implement the other
agreements of the parties set forth herein and in the Transaction Documents.
(f) Preemptive and Other Rights. All stockholders of MSH (i) having
any preemptive, first refusal, anti-dilution or other rights with respect to
the issuance of the Class C Convertible Preferred Stock or the Class C Common
Stock or (ii) whose consent and/or waiver is required in connection with the
(x) Amendment of the Certificate, (y) the execution and delivery of the
Transaction Documents or (z) any outstanding defaults of MSH or Masada shall
have irrevocably waived the same in writing.
(g) Issuance of Class C Convertible Preferred Stock. MSH shall have
duly issued and delivered certificates to each of the Purchasers for the number
shares of the Class C Convertible Preferred Stock purchased by each such
Purchaser as provided in Section 3.
-25-
<PAGE> 31
(h) Purchasers Review. The Purchasers, their advisors and their
representatives shall have completed their review of, and shall be satisfied
with their conclusions regarding, MSH's markets, business and projected
operations, including, but not limited to, the Partners Presentation.
(i) Purchasers' Expenses. MSH shall have paid, in accordance with
Section 12, the fees, costs and expenses (including reasonable attorney's costs
and expenses) of the Purchasers invoiced at the Closing; provided, that, the
maximum aggregate fees and expenses of the Purchasers' attorneys payable in
connection with the execution and delivery of this Agreement, and the
consummation of the transactions contemplated thereby on or prior to the
Closing, shall be $80,000.
(j) SBA Forms. MSH shall have delivered SBA Forms 480, 652 and 1031
to the Purchasers who are Small Business Investment Companies.
SECTION 11. Waivers, Amendments and Termination.
(a) Unless a greater or lesser number shall be specifically provided
for herein, MSH's compliance with the covenants contained herein may be waived
only with the written consent of holders of at least (i) seventy percent (70%)
of the aggregate issued and outstanding shares of Class C Equivalent Stock,
(ii) fifty-seven percent (57%) of the aggregate issued and outstanding shares
of Class B Equivalent Stock, and (iii) a majority of the aggregate issued and
outstanding shares of Class A Preferred Stock, or if no shares of Class A
Preferred Stock are outstanding, then a majority of the issued and outstanding
shares of Class B Common Stock, other than shares issued upon the conversion of
Class B Convertible Preferred Stock. Notwithstanding the foregoing, no waiver
may be granted with respect to (i) the payment of dividends on the Class A
Preferred Stock or the making of mandatory redemption payments with respect
thereto, each requirement being set forth in Article 4(b) of the Certificate,
or (ii) the payment of dividends on the Class S Preferred Stock or the making
of mandatory redemption payments with respect thereto, each requirement being
set forth in Article 4(b) of the Masada Certificate, without the prior written
consent of holders of at least eighty percent (80%) of the issued and
outstanding shares of Class A Preferred Stock. Compliance by the Purchasers
with the covenants contained herein may be waived only with the written consent
of the holders of a majority of the issued and outstanding shares of Class A
Common Stock. No waiver of compliance with respect to any covenant granted in
any one instance pursuant to the provisions hereof shall be effective to waive
compliance with the same or any other covenant in any other instance.
(b) The terms of this Agreement may not be amended orally or by
course of dealing, but only in a writing executed by each of (i) MSH, (ii) the
holders of seventy percent (70%) of the aggregate issued and outstanding shares
of Class C Equivalent Stock, (iii) the holders of fifty-seven percent (57%) of
the aggregate issued and outstanding shares of Class B Equivalent Stock, (iv)
the holders of a majority of issued and outstanding shares of Class A Preferred
Stock, and (v) the holders of a majority of the issued and outstanding shares
of
-26-
<PAGE> 32
Class A Common Stock; provided, however, that with respect to any provision of
this Agreement that requires a higher percentage of any class of stock for the
authorization or approval of any action, such higher percentage of such class
shall be required to amend such provision. The obligations imposed by this
Agreement shall continue until there are no Shares outstanding or until this
Agreement is terminated in the manner required for the making of amendments
hereto as specified in this paragraph (b).
SECTION 12. Expenses. MSH shall pay or cause the payment of on
demand:
(a) subject to the provisions of Section 10(i), all costs and
expenses incurred by Purchasers (including reasonable attorneys' fees and
expenses) that are incidental to the preparation, execution, performance and
interpretation of the Transaction Documents and the consummation of the
transactions contemplated therein and any such costs and expenses incurred by
the Purchasers incidental to and any future modifications or proposed
modifications of the Transaction Documents;
(b) all reasonable expenses (including legal, travel and
out-of-pocket expenses), charges, court costs and attorneys' fees which may be
incurred by the Purchasers in connection with or arising out of (i) any default
by MSH under the Transaction Documents, (ii) any breach by MSH of any of its
representations or warranties under the Transaction Documents, (iii) any
amendment, modification or reorganization of the terms of any of the
Transaction Documents, (iv) any proceedings with respect to the bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation of
MSH or any of its Subsidiaries or (v) the filing of any Transaction Documents
by any Purchaser with any government agency; and
(c) all reasonable costs and expenses incurred by the Purchasers
(including reasonable attorneys' fees and amounts payable to third parties) in
connection with curing or attempting to cure any default by MSH or any of its
Subsidiaries under any of the Transaction Documents.
SECTION 13. Registration Rights.
(a) Demand Registration.
(i) Class B Common Stock. At any time after MSH has effected
a registration statement under the Act of any of its shares of Common
Stock (the "Initial Public Offering"), the holders of fifty percent
(50%) or more of the aggregate issued and outstanding shares of Class
B Equivalent Stock may, upon the delivery of a written notice to MSH,
request to register under the Act any of their shares of Class B
Common Stock, in the case of holders of Class B Common Stock, or the
number of shares of Class B Common Stock into which their shares of
Class B Convertible Preferred Stock are convertible, in the case of
the holders of Class B Convertible Preferred Stock, which are not then
covered by a currently effective
-27-
<PAGE> 33
registration statement under the Act; provided, however, that the
proceeds of any such offering shall not be less than ten million
dollars ($10,000,000), without regard to underwriting or brokerage
commissions and discounts and offering expenses. For purposes of this
Section 13, a holder of shares of Class B Convertible Preferred Stock
shall be deemed to be a holder of Registerable Securities. Such
written notice shall specify the number of shares of Registerable
Securities intended to be offered by such electing holders, shall
express such holders' present intent to convert shares of Class B
Convertible Preferred Stock into shares of Class B Common Stock, shall
express such holders' present intent to offer such shares for
distribution, shall describe the nature or method of the proposed offer
and sale thereof and shall contain an undertaking of each such holder
to provide all such information and materials and take all such action
as may be required in order to permit MSH to comply with all applicable
requirements of the Securities and Exchange Commission and applicable
securities commissions of the several states and to obtain acceleration
of the effective date of such registration statement. Upon receipt of
such request MSH shall use all reasonable efforts to cause the shares
so specified in such request to be so registered to permit the sale by
each electing holder of the number of shares of Registerable Securities
specified in the holder's request under the Act and to permit their
trading on the NASDAQ National Market System, subject to notice of
issuance. The holders of the Class B Equivalent Stock shall have one
(1) Demand Registration pursuant to this Section 13(a)(i) only;
provided, however, that in the event MSH qualifies for the use of a
Form S-3 (or successor form) registration statement, the number of
requests that may be made for a Demand Registration shall be unlimited
so long as each such request is made by the holders of twenty-five
percent (25%) or more of the Class B Equivalent Stock; and provided,
further, that a registration requested pursuant to this Section
13(a)(i) shall not constitute a Demand Registration unless the holders
of Class B Equivalent Stock shall have registered and sold 75% of the
Registerable Securities requested to be sold in such offering.
(ii) Class C Common Stock. At any time after MSH has
effected an Initial Public Offering, the holders of thirty percent
(30%) or more of the aggregate issued and outstanding shares of Class
C Equivalent Stock may, upon the delivery of a written notice to MSH,
request to register under the Act any of their shares of Class C
Common Stock, in the case of holders of Class C Common Stock, or the
number of shares of Class C Common Stock into which their shares of
Class C Convertible Preferred Stock are convertible, in the case of
the holders of Class C Convertible Preferred Stock, which are not then
covered by a currently effective registration statement under the Act;
provided, however, that the proceeds of any such offering shall not be
less than ten million dollars ($10,000,000), without regard to
underwriting or brokerage commissions and discounts and offering
expenses. For purposes of this Section 13, a holder of shares of
Class C Convertible Preferred Stock shall be deemed to be a holder of
Registerable Securities. Such written notice shall specify the number
of shares of Registerable Securities intended to be offered by such
electing holders, shall express such holders' present intent to
convert shares of
-28-
<PAGE> 34
Class C Convertible Preferred Stock into shares of Class C Common
Stock, shall express such holders' present intent to offer such shares
for distribution, shall describe the nature or method of the proposed
offer and sale thereof and shall contain an undertaking of each such
holder to provide all such information and materials and take all such
action as may be required in order to permit MSH to comply with all
applicable requirements of the Securities and Exchange Commission and
applicable securities commissions of the several states and to obtain
acceleration of the effective date of such registration statement.
Upon receipt of such request MSH shall use all reasonable efforts to
cause the shares so specified in such request to be so registered to
permit the sale by each electing holder of the number of shares of
Registerable Securities specified in the holder's request under the
Act and to permit their trading on the NASDAQ National Market System,
subject to notice of issuance. The holders of the Class C Equivalent
Stock shall have two (2) Demand Registrations pursuant to this Section
13(a)(ii) only; provided, however, that in the event MSH qualifies for
the use of a Form S-3 (or successor form) registration statement, the
number of requests that may be made for a Demand Registration shall be
unlimited so long as each such request is made by the holders of
twenty-five percent (25%) or more of the Class C Equivalent Stock; and
provided, further, that a registration requested pursuant to this
Section 13(a)(ii) shall not constitute a Demand Registration unless
the holders of Class C Equivalent Stock shall have registered and sold
75% of the Registerable Securities requested to be sold in such
offering.
(iii) Any registration accomplished pursuant to the
provisions of this Section 13(a) shall be referred to as a "Demand
Registration".
(b) Piggy-Back Registrations. If MSH at any time proposes to file a
registration statement (other than an exchange offering of securities solely to
existing holders of MSH's securities or a registration statement on Form S-8)
with respect to any class of Common Stock now or hereafter authorized and the
form to be used for such registration may be used for the registration of
Registerable Securities, MSH shall give written notice of such proposed
registration to each holder of shares of Registerable Securities (which shall
include, with respect to a Piggy-Back Registration, holders of Class A Common
Stock as of the Closing Date) not then subject to an effective registration
statement at least thirty (30) days before the anticipated filing date of such
registration statement. The notice shall offer the holders of such
Registerable Securities the opportunity to include all or a portion of their
shares of Registerable Securities in the registration statement proposed to be
filed by MSH. Subject to the provisions which follow, the shares of
Registerable Securities designated in writing by the holders thereof within
fifteen (15) days of the sending of such notice shall be included in the
registration statement on the same terms and conditions applicable to the
Common Stock proposed to be registered by MSH or such other terms and
conditions which may be recommended by MSH's managing underwriters (provided
that any such shares may be withdrawn from any such registration statement at
any time if the holder thereof is not satisfied with the terms of the
offering).
-29-
<PAGE> 35
The number of outstanding shares of Registerable Securities to be
included in the registration statement shall be reduced pro rata among all
selling stockholders according to the number of shares requested to be included
in the registration statement if the managing underwriters advise MSH in
writing that in their opinion the number of shares of Registerable Securities
to be included in the registration statement exceeds the number of shares which
can be sold in the offering without detrimental effect on the success of the
offering or the price obtained for the shares; provided, however, that there
shall be no reduction of the number of shares of Common Stock proposed for
registration by MSH in an offering other than pursuant to a Demand
Registration. Any registration of Registerable Securities accomplished
pursuant to the provisions of this Section 13(b) shall be referred to as a
"Piggy-Back Registration".
(c) Limitations, Conditions and Qualifications to Obligations of MSH
under Registration Covenants. The obligations of MSH to use reasonable efforts
to cause certain shares of Registerable Securities to be registered under the
Act and to prepare and file registration statements under the Act to effect
such registration are subject to the following limitations, conditions and
qualifications:
(i) In connection with any Demand Registration or Piggy-Back
Registration, all expenses incurred in connection therewith, including, without
limitation, all Securities and Exchange Commission registration and filing
fees, Blue Sky filing fees, all fees of the National Association of Securities
Dealers, Inc., printing expenses, fees and disbursements of legal counsel for
MSH, fees and disbursements of experts used by MSH in connection with such
registration and expenses of any special audits incidental to or required by
such registration ("MSH Expenses"), shall be borne by MSH. In all
registrations of MSH's securities pursuant to Section 13(a), MSH shall bear the
fees and disbursements of legal counsel to the holders of Registrable Stock,
transfer taxes on the sale of the shares of Registerable Stock and any expenses
of their brokers or underwriters which are not borne directly by such brokers
or underwriters; provided, that such expenses shall not include underwriting or
brokerage discounts and commissions.
(ii) In connection with any Demand Registration, MSH shall be
entitled to include in any such registration other securities of MSH; provided,
however, that MSH shall also agree to execute and deliver the underwriting
agreement, if any, to be executed and delivered by the holders of Registerable
Securities requesting such registration; and, provided, further, that the
holders of Registerable Securities requesting such registration may request
that any such other securities of MSH not be included in the registration if
such holders of Registerable Securities are advised by the managing underwriter
that in their opinion the inclusion of such other securities by MSH would
adversely affect the offering of the shares of Registerable Securities to be
sold pursuant to such registration, and MSH shall comply with such request.
(iii) MSH shall be entitled to postpone for reasonable periods of
time, not to exceed ninety (90) days in any one instance, the filing of any
registration statement in connection
-30-
<PAGE> 36
with any Demand Registration if MSH is, at the time it receives a request for
registration, (i) conducting or is about to conduct an offering of its
securities and MSH reasonably believes that such offering by MSH would be
adversely affected by the registration so demanded or (ii) if there exists at
the time material non-public information relating to MSH which, in the
reasonable opinion of the board of directors of MSH, should not be disclosed.
Additionally, MSH shall be entitled to postpone, in accordance with this
Section 13(a)(iii), the filing of such a registration statement for multiple,
consecutive ninety (90) day periods.
(iv) In the case of any Demand Registration, MSH shall be required to
file the registration statement within ninety (90) days after the request is
made, unless such request is made within ninety (90) days prior to the close of
its fiscal year, in which event, the registration statement shall be filed by
MSH within ninety (90) days after the close of its fiscal year. Once filed,
MSH shall use all reasonable efforts to cause a registration statement to
become effective and shall cause any such registration statement to remain
effective (including the filing of necessary supplements or post-effective
amendments) during the period commencing on the effective date of such
registration statement and ending sixty (60) days thereafter; provided,
however, that in the event the registration statement is on Form S-3 and
constitutes a shelf registration covering resales of securities and requested
by the holders of Registerable Securities, MSH's obligation to maintain such
Form S-3 registration statement shall expire 180 days following the effective
date of such registration statement. During the effective period of any such
offering or any Piggy-Back Registration, MSH will furnish to each participating
seller of Registerable Securities such number of copies of any prospectus
(including any preliminary or summary prospectus) as such holders of
Registerable Securities may reasonably request in order to effect the offering
and sale of the Registerable Securities to be offered and sold.
(v) In respect of any proposed disposition by the holders of
Registerable Securities pursuant to any Demand Registration, each participating
holder of Registerable Securities shall have arranged for the plan of
distribution of his shares which are to be registered and shall have made all
pertinent marketing arrangements for such shares and shall have advised MSH of
such distribution and marketing arrangements. If any such plan of distribution
shall involve an investment banking firm as an underwriter, such firm shall be
reasonably satisfactory to MSH.
(vi) MSH's obligations to use all reasonable efforts to effect
registration of shares for holders of Registerable Securities pursuant to any
Demand Registration shall include such qualification under applicable Blue Sky
Laws as may be necessary to enable the holders of Registerable Securities in
whose behalf such registration is to be effected to offer and sell the shares
which are the subject matter of their requests; provided, however, that MSH
shall not be obligated to qualify as a foreign corporation to do business under
the laws of any jurisdiction in which it is not then qualified or to file any
general consent to service of process.
-31-
<PAGE> 37
(vii) In connection with any Demand Registration or Piggy-Back
Registration, the holders of Registerable Securities requesting such
registration may request that securities held by Johnson and Harms not be
included in the registration if such holders of Registerable Securities are
advised by the investment banking firm managing any underwritten offering that
such firm reasonably believes that the inclusion of such securities would
adversely affect the offering of the shares of Registerable Securities to be
sold pursuant to such registration, and Johnson and Harms shall comply with
such request.
(viii) (A) In connection with any registration statement in which
the holders of Registerable Securities are selling stockholders, MSH shall
indemnify and hold harmless such selling stockholders and their officers,
directors, employees and agents against and in respect of any losses, claims,
damages or liabilities, joint or several (including legal or other fees and
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action) to which any such
Person may become subject under the Act or otherwise insofar as such losses,
claims, damages or liabilities (or actions with respect thereto) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except to the extent that any such untrue statement or omission
is based upon written information supplied by the selling stockholders or any
of their respective representatives for use in such registration statement.
(B) In connection with the filing of any registration
statement in which the holders of Registerable Securities participate as
selling stockholders, each such selling stockholder (pursuant to agreements to
be executed prior to the effectiveness of such registration statements) shall
individually, and not jointly, indemnify and hold harmless MSH and its
officers, directors, employees and agents against and in respect of any losses,
claims, damages or liabilities, joint or several (including legal or other fees
and expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action)
which MSH or any such Persons may become subject under the Act or otherwise
insofar as such losses, claims, damages or liabilities (or actions with respect
thereto) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any such registration statement, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that any such untrue
statement or omission is based upon written information supplied by the selling
stockholder or its respective representatives for use in such registration
statements; provided, further, that the liability of each selling stockholder
hereunder shall be limited to the proportion of any such loss, claim, damage,
liability or expense which is equal to the proportion that the public offering
price of the shares sold by such selling stockholder under such registration
statement bears to the total public offering price of all securities sold
thereunder, but not in any event to exceed the proceeds received by such
selling stockholder from the sale of securities covered by such registration
statement.
-32-
<PAGE> 38
(C) If for any reason the indemnification provided for in the
preceding clauses is unavailable to an indemnified party as contemplated by the
preceding clauses, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only
the relative benefits received by the indemnified party and the indemnifying
party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations.
(d) Customary Agreements. MSH and each seller agree to enter into a
written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions, including lock-up
provisions with respect to sales of MSH's Common Stock, as are reasonable and
customary in the securities business for such an arrangement between such
underwriter and companies of MSH's size and investment stature.
(e) Cooperation. The parties to this Agreement acknowledge that it
is their understanding that MSH will engage in an Initial Public Offering at
such time as the board of directors of MSH deems appropriate. The parties
further acknowledge that certain restrictive provisions of the Certificate and
this Agreement may not be consistent with the consummation of such Initial
Public Offering. The parties to this Agreement agree to take all steps
reasonably necessary to effectuate such Initial Public Offering, including the
amendment of the Certificate and this Agreement or the merger of MSH with its
Subsidiaries on such terms and conditions as may be reasonably recommended by
MSH's managing underwriters as approved by the board of directors of MSH.
Without limiting the foregoing, to effectuate a Qualified Public Offering, the
parties agree to adopt and/or to execute amendments to the Certificate and/or
this Agreement to eliminate all preemptive rights and antidilution rights in
favor of any stockholder, to combine or convert the three classes of Common
Stock into a single class of Common Stock, to provide for the election of all
directors by the holders of the single class of Common Stock, and to eliminate
the forfeiture of Class A Common Stock upon a Johnson Divestiture Event (as
defined in the Certificate) or a Harms Divestiture Event (as defined in the
Certificate).
SECTION 14. Dilution Protection. The parties to this Agreement
acknowledge their understanding and agreement that the Certificate will provide
antidilution protection with respect to the Class B Common Stock, and the
Convertible Preferred Stock in the event MSH sells any shares of its Common
Stock, or securities convertible into or exercisable for the purchase or other
acquisition of shares of Common Stock, at a purchase price below certain
threshold levels specified in the Certificate. The Purchasers agree to take
all steps necessary to effectuate the intent of such provisions, including, if
required, the amendment of the Certificate to increase the number of shares of
Common Stock authorized thereunder.
-33-
<PAGE> 39
SECTION 15. Transferability of Stock.
(a) No Transfer of Class A Common Stock. None of the shares of Class
A Common Stock shall be subject to a voluntary or involuntary transfer,
including, but not by way of limitation, encumbrance, sale, assignment, gift,
pledge, disposal, hypothecation, bankruptcy, legal process, assignment for the
benefit of creditors, devise or any other transfer or disposition, in any
manner whatsoever, to any person, trustee, receiver, corporation, partnership,
joint venture, association, charity or any other entity or person whatsoever,
except in accordance with and as provided in this Agreement.
(b) Transfers to Third Parties. In the event a holder of Class A
Common Stock shall receive a bona fide written offer from a third party (the
"Third Party Offer") to purchase issued and outstanding shares of MSH capital
stock (the "Offered Shares") at a specified price and upon specified terms and
conditions, such holder shall give written notice and a copy of such offer to
MSH and to each holder of the then issued and outstanding shares of Class B
Equivalent Stock and Class C Equivalent Stock, which written notice shall
include a complete written description of the Third Party Offer, including
without limitation, the number of shares, the purchase price and the identity
of the third party. Upon receipt of such written notice, MSH shall have the
right, but not the obligation, to purchase the Offered Shares for the purchase
price and upon the terms and conditions set forth in the Third Party Offer,
which option may be exercised within thirty (30) days of the receipt of notice
of the Third Party Offer by giving notice of such exercise to the holder of the
Offered Shares. If the option for the purchase of the Offered Shares is not
exercised by MSH, then the holders of the Class B Equivalent Stock and Class C
Equivalent Stock shall have the right, but not the obligation, to purchase the
Offered Shares, on a pro rata basis (based upon the aggregate number of shares
of Class B and Class C Common Stock then outstanding, assuming the conversion
of all outstanding Convertible Preferred Stock into Common Stock at the then
applicable conversion price) for the purchase price and upon the terms and
conditions set forth in the Third Party Offer, which option may be exercised
within fifteen (15) days of the first to occur of the receipt of notice from
MSH of its intention not to exercise its purchase option or the expiration of
the MSH option period. In the event any holder elects not to purchase its pro
rata share, the other holders of Class B Equivalent Stock and Class C
Equivalent Stock shall have the right, but not the obligation, to purchase such
portion on a pro rata basis. If the option for the purchase of the Offered
Shares is not exercised by MSH or the holders of Class B Equivalent Stock or
Class C Equivalent Stock with respect to all of the Offered Shares, the
transferor shall have the right to sell the Offered Shares pursuant to the
Third Party Offer, subject to the right of co-sale as provided in Section
15(c). The purchaser of the Offered Shares shall be bound by, and take the
Offered Shares subject to, the terms of this Agreement, including without
limitation, restrictions relating to voluntary and involuntary transfers, and
no transfer of the Offered Shares shall be recorded in the stock records of MSH
until MSH shall receive the written agreement of the purchaser to such effect.
-34-
<PAGE> 40
(c) Right of Co-Sale. In the event a holder of MSH capital stock
receives a Third Party Offer, and if (i) neither of the options set forth in
Section 15(b) has been exercised and (ii) shares representing more than 20% of
the capital stock of MSH have been previously transferred (or would be
transferred, giving effect to the proposed transfer of the Offered Shares;
provided, however, that any transfer by a Purchaser pursuant to a dissolution
or other winding up of its investment portfolio within one (1) year of its
scheduled date of liquidation, termination or dissolution shall not be applied
against such 20% limitation unless such transfer has the effect of constituting
a Change of Control of MSH) following the Closing Date, the sale of the Offered
Shares shall be subject to the right of the holders of Class C Equivalent Stock
and Class B Equivalent Stock to sell a pro rata amount of their Class C
Equivalent Stock and Class B Equivalent Stock, based on the number of shares of
Class B and Class C Common Stock of each such holder relative to the aggregate
number of shares of Class B and Class C Common Stock then outstanding (assuming
the conversion of all outstanding Convertible Preferred Stock into Common Stock
at the then applicable conversion price), to such third party, upon the same
terms and conditions as provided in the Third Party Offer. The holder of
shares of MSH capital stock who receives a Third Party Offer shall give notice
to all of the Purchasers who are holders of the Class B Equivalent Stock and
the Class C Equivalent Stock within fifteen (15) days of the first to occur of
(x) the receipt of notice by the holders of Class A Common Stock that neither
of the options set forth in Section 15(b) have been exercised, (y) the
expiration of both such option periods, or (z) upon receipt of the Third Party
Offer, in the event that Section 15(b) is inapplicable. The Purchasers who are
holders of Class B Equivalent Stock and Class C Equivalent Stock shall then
have fifteen (15) days to exercise their option under this Section 15(c). The
rights of the Purchasers under this Section 15(c) shall not be assignable and
shall expire with respect to each individual Purchaser at such time as such
Purchaser holds less than fifty percent (50%) of the aggregate number of shares
of Class C Equivalent Stock and/or Class B Equivalent Stock, as the case may
be, held by such Purchaser as of the Closing Date.
(d) Death of Harms. Upon the death of Harms, the shares of Class A
Common Stock held by Harms may be transferred by testamentary transfer or
intestate succession; provided, however, that any transferee of such shares
shall be bound by, and take such shares subject to, the terms of this
Agreement, including without limitation, restrictions relating to voluntary and
involuntary transfers, and no transfer of such shares shall be recorded in the
stock transfer books of MSH until MSH shall receive the written agreement of
the transferee to such effect.
(e) Repurchase Event. Upon (i) the death of Johnson, (ii) at such
time as Johnson no longer holds a fifty percent (50%) interest in the voting
stock of MSAM, or (iii) upon termination or material amendment of the Voting
Trust (each a "Repurchase Event"), MSH, subject to the approval of the holders
of seventy percent (70%) of the Class C Equivalent Stock, a majority of the
shares of the Class B Common Stock and fifty-seven percent (57%) of the holders
of Class B Equivalent Stock, shall have the right, but not the obligation, to
purchase all of the Class A Common Stock and all other shares of MSH capital
stock held by Johnson, Harms or their transferees for a purchase price equal to
the Fair Market Value
-35-
<PAGE> 41
thereof. In the event MSH does not elect to exercise such option within thirty
(30) days of the occurrence of a Repurchase Event, the holders of the Class B
Equivalent Stock and Class C Equivalent Stock shall have the right, but not the
obligation, to purchase all of the Class A Common Stock and all other Shares
held by Johnson, Harms or their transferees on a pro rata basis (based upon the
number of shares of Class B and Class C Common Stock then outstanding, assuming
the conversion of all outstanding Convertible Preferred Stock into Common Stock
at the then applicable conversion price), for a purchase price equal to the
Fair Market Value thereof. In the event any holder of Class B Equivalent Stock
or Class C Equivalent Stock elects not to purchase its pro rata portion of the
Class A Common Stock and all other shares of MSH capital stock held by Johnson,
Harms or their transferees, the other holders shall have the right, but not the
obligation, to purchase such portion on a pro rata basis. The holders of Class
B Equivalent Stock and Class C Equivalent Stock shall elect to exercise their
option by the delivery of written notice to all of the holders of Class A
Common Stock and all other shares of MSH capital stock held by Johnson, Harms
or their transferees within thirty (30) days of the occurrence of a Repurchase
Event. The closing of such sale shall occur at a time and place designated by
the purchaser; provided, that such closing shall occur within thirty (30) days
of the determination of Fair Market Value.
(f) Fair Market Value. For purposes of this Agreement, the "Fair
Market Value" of the MSH capital stock shall first be determined based on the
total amount at which MSH's entire Business Enterprise would exchange on the
closing date of the purchase, without giving effect to discounts for minority
interests or premiums for control, between a willing buyer and a willing
seller, each having reasonable knowledge of all relevant facts, and neither
being under compulsion to buy or sell. The Fair Market Value of MSH as a whole
so determined shall then be allocated among all of the Interests in MSH in a
manner which fairly recognizes and apportions their relative rights, interests
and obligations, and allocates the Fair Market Value of MSH as a whole among
them. For such purposes, a "Business Enterprise" shall mean all of the assets
of the business of MSH and its Subsidiaries, both tangible and intangible and
real and personal, after allowance for all associated liabilities. For the
purposes hereof, the appraiser determining the Fair Market Value of the MSH
capital stock shall not give consideration to lack of market demand for or
marketability of such shares of MSH capital stock or to the fact that such
shares of MSH capital stock may be subject to purchase or sale options or other
provisions of this Agreement or any other agreement.
(g) Repurchase Appraisals. The Fair Market Value of the Class A
Common Stock and all other shares of MSH capital stock held by Johnson, Harms
or their transferees will be determined as follows:
(i) The Purchasers holding sixty-seven percent (67%) of the
issued and outstanding shares of the Class C Equivalent Stock and
fifty-seven percent (57%) of the issued and outstanding shares of the
Class B Equivalent Stock shall select an appraiser (which shall be an
independent accounting, investment banking or appraisal firm actively
engaged and generally recognized in the business of making appraisals
-36-
<PAGE> 42
of business enterprises of the same type as the Masada Business,
hereinafter a "Qualified Appraiser") who shall determine the Fair
Market Value of the Masada Business, within thirty (30) days following
the notice under Section 15(e). Such Purchasers shall notify MSAM of
the appraised value(s) so determined by delivering to MSAM a copy of
the appraisal(s) within the thirty (30) day period. The Fair Market
Value of the Masada Business shall be such appraised value(s) unless
MSAM notifies such Purchasers within ten (10) days of receipt of the
appraisal that it will have a second appraisal(s) performed in
accordance with clause (ii) below;
(ii) MSAM may elect to name a second Qualified Appraiser who
shall determine the Fair Market Value of the business of MSH within
thirty (30) days after the notice to such Purchasers of the election
to have a second appraisal made. The Fair Market Value of the Masada
Business shall be the average of the two appraisals obtained by the
Purchasers and MSAM if they differ in amount by no more than five
percent (5%) of the lower of the two appraisals; and
(iii) If the appraisals made under clauses (i) and (ii)
differ by more than five percent (5%) of the lower appraisal, the Fair
Market Value shall be the average of the two appraisals obtained by
the Purchasers and MSAM unless either party notifies the other within
seven (7) days of receipt of the appraisal under clause (ii) that it
wishes a third appraisal, in which case the two Qualified Appraisers
shall select the third Qualified Appraiser who shall determine the
Fair Market Value of the Masada Business within an additional thirty
(30) days. The Fair Market Value of the Masada Business, if
applicable, shall be the average of the Fair Market Value(s)
determined by the third Qualified Appraiser and the other of the two
appraisals from which the third appraisal differs the least. If the
third appraisal is equidistant from the first and second appraisals,
the third appraisal shall be the Fair Market Value.
(h) Redemption Appraisals. The Fair Market Value of the Class C
Convertible Preferred Stock pursuant to Section 16(a) and the Class B
Convertible Preferred Stock pursuant to Section 16(b) will be determined as
follows:
(i) The Requisite Holders of the class of Convertible
Preferred Stock requesting redemption shall select a Qualified
Appraiser who shall determine the Fair Market Value of the Masada
Business, within thirty (30) days following MSH's receipt of a written
demand for redemption pursuant to Sections 16(a) or 16(b). Such
Purchasers shall notify MSH of the appraised value(s) so determined by
delivering to MSH a copy of the appraisal(s) within the thirty (30)
day period. The Fair Market Value of the Masada Business shall be
such appraised value(s) unless MSH notifies such Requisite Holders
within ten (10) days of receipt of the appraisal that it will have a
second appraisal(s) performed in accordance with clause (ii) below;
(ii) MSH may elect to name a second Qualified Appraiser who
shall determine the Fair Market Value of the business of MSH within
thirty (30) days after
-37-
<PAGE> 43
the notice to such Requisite Holders of the election to have a second
appraisal made. The Fair Market Value of the Masada Business shall be
the average of the two appraisals obtained by the Requisite Holders
and MSH if they differ in amount by no more than five percent (5%) of
the lower of the two appraisals; and
(iii) If the appraisals made under clauses (i) and (ii)
differ by more than five percent (5%) of the lower appraisal, the Fair
Market Value shall be the average of the two appraisals obtained by
the Requisite Holders and MSH unless either party notifies the other
within seven (7) days of receipt of the appraisal under clause (ii)
that it wishes a third appraisal, in which case the two Qualified
Appraisers shall select the third Qualified Appraiser who shall
determine the Fair Market Value of the Masada Business within an
additional thirty (30) days. The Fair Market Value of the Masada
Business, if applicable, shall be the average of the Fair Market
Value(s) determined by the third Qualified Appraiser and the other of
the two appraisals from which the third appraisal differs the least.
If the third appraisal is equidistant from the first and second
appraisals, the third appraisal shall be the Fair Market Value.
(i) MSH shall make available to the appraisers all of the books and
records of MSH and such other information as the appraisers shall reasonably
request and shall be in the possession of MSH. The determination of Fair
Market Value so made shall be binding upon the parties hereto and may not be
challenged in the absence of evidence of fraud, bad faith or material factual
mistake.
(j) MSH shall bear the cost of the appraisals under this Section 15.
(k) All rights under this Section 15 (other than with regard to
redemption appraisals) shall terminate upon the first to occur of February 11,
1998 or the effective date of the Initial Public Offering.
SECTION 16. Optional Redemption. (a) Upon the earlier to occur of
(i) holders of 60% of all of the issued and outstanding shares of Class A
Preferred Stock making a demand for redemption of all or a portion of the
shares of issued and outstanding Class A Preferred or Class S Preferred
pursuant to Section 9(1), or (ii) on or at any time after May 31, 2001, upon
the receipt by MSH from the Requisite Holders of Class C Equivalent Stock of
their written demand delivered at least 30 days prior to the redemption
hereunder of their Class C Convertible Preferred Stock, MSH shall (unless
otherwise prevented by law or Contractually Precluded) redeem in whole, but not
in part, the Class C Convertible Preferred Stock by paying in cash therefor an
amount equal to its Fair Market Value (such amount being hereinafter sometimes
referred to as the "Class C Redemption Price").
(i) The holders of record of shares of Class C Convertible
Preferred Stock to be redeemed in accordance with this Section 16
shall be entitled to receive the Class C Redemption Price upon actual
delivery to MSH or its agents of the certificates representing the
shares entitled to be redeemed. If upon any redemption
-38-
<PAGE> 44
the assets of MSH available for redemption shall be insufficient to
pay the holders of the Class C Convertible Preferred Stock the full
amounts to which they are entitled, the Class C Convertible Preferred
Stock then entitled to redemption shall participate ratably in the
redemption, on a pro-rata basis with all other holders of the Class C
Convertible Preferred Stock based upon the Class C Redemption Price.
(ii) Any shares of Class C Convertible Preferred Stock
redeemed pursuant to this Section 16 or otherwise acquired by MSH in
any manner whatsoever shall be cancelled and shall not under any
circumstances be reissued; and MSH may from time to time take such
appropriate corporate action as may be necessary to reduce accordingly
the number of authorized shares of Class C Convertible Preferred
Stock.
(iii) Following the Closing Date, MSH shall not, without the
consent of the holders of at least seventy percent (70%) of the
outstanding shares of the Class C Equivalent Stock, which consent
shall not be unreasonably withheld, enter into any agreement,
instrument, commitment or transaction pursuant to which MSH shall be
subject to, or make any covenant, representation or warranty which
would prevent or contractually impair the exercise of the optional
redemption rights provided for in this Section 16 or the obligation or
ability of MSH to repurchase the Class C Convertible Preferred Stock.
If MSH is unable, pursuant to any borrowing agreements of MSH, or in
accordance with applicable corporation statutes, to purchase all of
the Class C Convertible Preferred Stock which are the subject of a
redemption notice, MSH shall, if so requested in writing by the
Requisite Holders, (x) purchase in accordance with the redemption
notice the maximum number of shares of Class C Convertible Preferred
Stock which MSH may purchase and (y) in one or more installments, at
the earliest time that MSH may lawfully and contractually do so,
purchase all remaining of Class C Convertible Preferred Stock and pay
interest at the then applicable prime rate of interest published in
The Wall Street Journal on the amount of the aggregate Class C
Redemption Price attributable to such remaining shares of Class C
Convertible Preferred Stock to the date on which such amount is paid
in full.
(b) Upon the earlier to occur of (i) holders of 60% of all of the
issued and outstanding shares of Class A Preferred Stock making a demand for
redemption of all or a portion of the shares of issued and outstanding Class A
Preferred or Class S Preferred pursuant to Section 9(1), or (ii) on or at any
time after May 31, 2001, upon the receipt by MSH from the Requisite Holders of
Class B Equivalent Stock of their written demand delivered at least 30 days
prior to the redemption hereunder of their shares of Class B Convertible
Preferred Stock, MSH shall (unless otherwise prevented by law or Contractually
Precluded) redeem in whole, but not in part, the Class B Convertible Preferred
Stock by paying in cash therefor an amount equal to its Fair Market Value (such
amount being hereinafter sometimes referred to as the "Class B Redemption
Price").
(i) The holders of record of shares of Class B Convertible
Preferred Stock to be redeemed in accordance with this Section 16
shall be entitled to receive the
-39-
<PAGE> 45
Class B Redemption Price upon actual delivery to MSH or its agents of
the certificates representing the shares entitled to be redeemed. If
upon any redemption the assets of MSH available for redemption shall
be insufficient to pay the holders of the Class B Convertible
Preferred Stock the full amounts to which they are entitled, the Class
B Convertible Preferred Stock then entitled to redemption shall
participate ratably in the redemption, on a pro-rata basis with all
other holders of the Class B Convertible Preferred Stock based upon
the Class B Redemption Price.
(ii) Any shares of Class B Convertible Preferred Stock
redeemed pursuant to this Section 16 or otherwise acquired by MSH in
any manner whatsoever shall be cancelled and shall not under any
circumstances be reissued; and MSH may from time to time take such
appropriate corporate action as may be necessary to reduce accordingly
the number of authorized shares of Class B Convertible Preferred
Stock.
(iii) Following the Closing Date, MSH shall not, without the
consent of the holders of at least fifty-seven percent (57%) of the
outstanding shares of the Class B Equivalent Stock, which consent
shall not be unreasonably withheld, enter into any agreement,
instrument, commitment or transaction pursuant to which MSH shall be
subject to, or make any covenant, representation or warranty which
would prevent or contractually impair the exercise of the optional
redemption rights provided for in this Section 16 or the obligation or
ability of MSH to repurchase the Class B Convertible Preferred Stock.
If MSH is unable, pursuant to any borrowing agreements of MSH, or in
accordance with applicable corporation statutes, to purchase all of
the Class B Convertible Preferred Stock which are the subject of a
redemption notice, MSH shall, if so requested in writing by the
Requisite Holders, (x) purchase in accordance with the redemption
notice the maximum number of shares of Class B Convertible Preferred
Stock which MSH may purchase and (y) in one or more installments, at
the earliest time that MSH may lawfully and contractually do so,
purchase all remaining of Class B Convertible Preferred Stock and pay
interest at the then applicable prime rate of interest as published in
The Wall Street Journal on the amount of the aggregate Class B
Redemption Price attributable to such remaining shares of Class B
Convertible Preferred Stock to the date on which such amount is paid
in full.
(c) In the event that MSH is (i) unable to redeem the Class B
Convertible Preferred Stock as the result of a request for redemption by the
Requisite Holders of Class C Convertible Preferred Stock or (ii) unable to
redeem the Class C Convertible Preferred Stock as the result of a request for
redemption by the Requisite Holders of Class B Convertible Preferred Stock, MSH
shall purchase, in accordance with the Redemption Notices, the maximum amount
of Convertible Preferred Stock which it is otherwise permitted, pro-rata from
the holders of Convertible Preferred Stock (based upon the number of shares of
Class B and Class C Common Stock then outstanding, assuming the conversion of
all outstanding Convertible Preferred Stock into Common Stock at the then
applicable conversion prices) and (ii) in one or more installments, at the
earliest time that MSH may lawfully and contractually do so, purchase all
remaining of Convertible Preferred Stock and pay interest at the then
-40-
<PAGE> 46
applicable prime rate of interest as published in The Wall Street Journal on
the amount of the aggregate Redemption Price attributable to such remaining
shares of Class C Convertible Preferred Stock and Class B Convertible Preferred
Stock, as the case may be, to the date on which such amount is paid in full.
SECTION 17. Election of Directors. The Purchasers agree that so long
as: (a) the holders of the Class B Common Stock shall have the right to elect
two (2) directors pursuant to the Certificate, one (1) such director shall be
nominated by Centennial III and one (1) such director shall be nominated by
Norwest IV, and in the event the holders of the Class B Common Stock shall have
the right to elect more than two (2) directors, the first two (2) directors
shall be nominated by Centennial III and Norwest IV, respectively, and any
additional directors shall be nominated by a vote of all of the holders of the
Class B Common Stock; (b) the holders of the Class B Convertible Preferred
Stock shall have the right to elect one (1) director pursuant to the
Certificate, such director shall be nominated by Hancock; and (c) the holders
of Class C Convertible Preferred Stock shall have the right to elect one (1)
director pursuant to the Certificate, such director shall be nominated by CVCA.
SECTION 18. Pledge or Transfer of Interests. Each of the Purchasers
(other than Gabbard, Nordin and Whitaker) agree to refrain from pledging,
encumbering or transferring more than fifty percent (50%) of the Interests held
by such Purchaser, respectively, in MSH as of the date of this Agreement for so
long as such pledge, encumbrance or transfer shall constitute an event of
default under Article VII of the Term Loan Agreement.
SECTION 19. Understanding Among the Purchasers. The determination of
each Purchaser to purchase the shares of MSH capital stock pursuant to this
Agreement has been made by such Purchaser independent of any other Purchaser
and independent of any statements (including any projections) or opinions as to
the advisability of such purchase or as to the properties, business, prospects
or condition (financial or otherwise) of MSH which may have been made or given
by any other Purchaser or by any agent or employee of any other Purchaser. In
addition, it is acknowledged by each Purchaser that no other Purchaser has
acted as an agent of such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as an agent of such
Purchaser in connection with monitoring its investment hereunder.
SECTION 20. Banks' Security Interest in Masada Stock; Subordination.
The Purchasers hereby acknowledge that MSH has pledged the Masada Stock to the
Banks to secure Masada's obligations to the Banks under the Term Loan Agreement
and to secure MSH's obligations as the guarantor of such obligations. Each of
the Purchasers covenants and agrees that any rights which it may have in
respect of the Masada Stock are hereby subordinated in all respects (whether in
a liquidation, reorganization or otherwise) to the prior perfected security
interest of the Banks therein and to the prior payment in cash in full of all
of Masada's and MSH's obligations to the Banks (the "Senior Obligations"). The
Purchasers further agree that they shall not be entitled to exercise their
remedies, if any, with
-41-
<PAGE> 47
respect to the Masada Stock, or be entitled to any of the proceeds from the
sale thereof, unless and until the Senior Obligations shall have been paid in
cash in full.
SECTION 21. Counterparts. This Agreement may be executed in one or
more counterparts and by the different parties hereto under separate
counterparts, any one of which need not contain the signatures of more than one
party, but all of which when taken together shall constitute one and the same
instrument notwithstanding that all parties have not signed the same
counterpart hereof.
SECTION 22. Headings. The Section headings contained in this
Agreement are inserted as a matter of convenience and shall not affect in any
way the construction of the terms of this Agreement.
SECTION 23. Third Party Rights. It is the intention of the parties
that nothing in this Agreement shall be deemed to create any right in favor of
or with respect to any Person not a party to this Agreement.
SECTION 24. Survival. The representations, warranties, covenants and
agreements made herein or in any certificate or document executed in connection
herewith shall survive the execution and delivery thereof for the period of the
statute of limitations applicable thereto, including any periods of waiver or
extension thereof, and all statements contained in any certificate or document
delivered by any party hereto shall be deemed to constitute a representation
and warranty made herein by such party.
SECTION 25. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware,
without regard to principles of conflicts of law.
SECTION 26. Partial Invalidity. If any provision of this Agreement
is found by any competent authority to be void or unenforceable, such provision
shall be modified, if possible, so as to effect the intent of the parties
expressed herein, or if it cannot be so modified, it shall be deemed to be
deleted from this Agreement and the remaining provisions of this Agreement
shall continue in full force and effect.
SECTION 27. Force Majeure. No party to this Agreement shall be
deemed to be in breach or in violation of this Agreement if such party is
prevented from performing any of its obligations hereunder (except obligations
to pay sums of money due hereunder) for any reason beyond its control,
including without limitation, acts of God, fire, flood, earthquake, unusually
severe weather conditions, explosion, accident, riot, war, sabotage,
requirements or actions or failure to act on the part of governmental
authorities preventing performance, damage to or break down of necessary
facilities beyond the control of the respective party (a "force majeure
event"). Lack of financial resources shall not under any circumstances
constitute a force majeure event. Upon the occurrence of any one or more such
events, the party subject to such force majeure event shall promptly notify the
other party of such event.
-42-
<PAGE> 48
If such party is rendered unable, wholly or in part, by the force majeure event
to carry out its obligations under this Agreement, the obligations of such
party (except obligations to pay sums of money due hereunder), so far as they
are affected by such force majeure event, shall be suspended during, but no
longer than the continuance of, such force majeure event. The party affected
by such force majeure event shall use all reasonable diligence to remedy the
effect upon its ability to perform its obligations hereunder caused by such
force majeure event as promptly as possible.
SECTION 28. Notices. All notices and other official communicationS
between the parties shall be in writing and shall be given by hand delivery or
by a recognized overnight courier who maintains verification of delivery
(deemed to be duly received on a date delivered), or by Express, certified or
registered mail, postage prepaid, return receipt requested (deemed to be duly
received seven (7) days after such mailing) or by telecopy (deemed to be
received on the date sent, provided that the facsimile was properly addressed
and disclosed the number of pages transmitted on its front sheet and that the
transmission report produced indicates that each of the pages of the facsimile
was received at the correct facsimile number) to each of the respective parties
as follows:
If to MSH to:
MASADA SECURITY HOLDINGS, INC.
950 22nd Street N., Suite 800
Birmingham, AL 35203
Attn: Terry W. Johnson
Telecopy: (800) 531-3293
With a copy to:
BURR & FORMAN
Suite 3100, SouthTrust Tower
420 North 20th Street
Birmingham, AL 35203-3202
Attn: W. Lee Thuston
David D. Dowd, III
Telecopy: (205) 458-5100
-43-
<PAGE> 49
If to Purchasers to:
CENTENNIAL FUND III, L.P.
CENTENNIAL FUND IV, L.P.
1999 Broadway, Suite 2100
Denver, CO 80201-3977
Attn: Steven C. Halstedt
Catharine Merigold
David C. Hull, Jr.
Telecopy: (303) 292-3512
CHEMICAL VENTURE CAPITAL ASSOCIATES
c/o Chemical Venture Partners
270 Park Avenue, 5th Floor
New York, NY 10017-2070
Attn: Arnold L. Chavkin
I. Robert Greene
Jonathan A. Lynch
Telecopy: (212) 270-2327
CRITERION VENTURE PARTNERS III, LIMITED
Five Post Oak Park, Suite 2650
Houston, TX 77027
Attn: David C. Hull, Jr.
Telecopy: (713) 627-9292
NORWEST EQUITY PARTNERS IV
NORWEST EQUITY PARTNERS V
3000 Sand Hill Road
Building 3, Suite 245
Menlo Park, CA 94025
Attn: George J. Still, Jr.
Telecopy: (415) 854-6652
SOUTH ATLANTIC VENTURE FUND II, LIMITED PARTNERSHIP
SOUTH ATLANTIC VENTURE FUND III, LIMITED PARTNERSHIP
614 West Bay Street, Suite 200
Tampa, FL 33606-2704
Attn: Donald W. Burton
Telecopy: (813) 253-2360
-44-
<PAGE> 50
O. GENE GABBARD, Trustee
102 Marseille Place
Cary, North Carolina 27511
Telecopy: (919) 319-0026
HANCOCK VENTURE PARTNERS IV-DIRECT FUND L.P.
One Financial Center
44th Floor
Boston, MA 02111
Attn: William A. Johnston
Telecopy: (617) 350-0305
BERTIL D. NORDIN
14 Bald Creek Way
Dunwoody, Georgia 30350-4402
Telecopy: (404) 551-8968
CAROL deB. WHITAKER
Whitko & Company
3200 Cherry Creek South Drive, Suite 410
Denver, CO 80209
Telecopy: (303) 733-7480
With a copy to:
Gallop, Johnson & Neuman, L.C.
101 South Hanley Road, Suite 1600
St. Louis, MO 63105
Attn: Alan G. Johnson, Esq.
Telecopy: (314) 862-1219
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Attn: Mark S. Wojciechowski
Telecopy: (212) 262-1910
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attn: David Schwartz
Telecopy: (212) 909-6836
-45-
<PAGE> 51
If to Management Purchasers or MSAM to:
TERRY W. JOHNSON
950 22nd Street N., Suite 800
Birmingham, AL 35213
Telecopy: (800) 531-3293
DARYL E. HARMS
3900 Montclair Road, Suite 301
Birmingham, AL 35213
Telecopy: (205) 871-3574
With a copy to:
BURR & FORMAN
Suite 3100, SouthTrust Tower
420 North 20th Street
Birmingham, AL 35203-3202
Attn: W. Lee Thuston
David D. Dowd, III
Telecopy: (205) 458-5100
or to such other address for any of the parties hereto as from time to time
shall be designated by notice given by such party to the other party in the
manner hereinabove provided.
SECTION 29. Authority of Signatories. Each signatory to this
Agreement in a representative capacity, whether as an officer, trustee or
partner, represents and warrants that the execution and delivery of this
Agreement by such representative and the performance of the covenants and
agreements herein contained by the Person for whom such representative is
acting have been duly authorized by all necessary action.
SECTION 30. Non-Recourse. Notwithstanding anything contained in this
Agreement to the contrary, it is expressly understood and agreed that each and
every covenant, undertaking and agreement made herein by a party hereto that is
not an individual was not made or intended to be made as a personal or
individual undertaking or agreement on the part of any past, present or future
officer, director, shareholder, partner or agent of any party hereto, and no
personal or individual liability or responsibility is assumed by, nor shall any
recourse at any time be asserted or enforced against any such past, present or
future officer, director, shareholder, employee, partner or agent of any party
hereto, or any of them, all such recourse (whether in common law, in equity, by
statute or otherwise), is hereby forever waived and released, and the sole
recourse being to the assets and property of the parties hereto.
-46-
<PAGE> 52
SECTION 31. Rights of Assignment. (a) All of the terms, covenants
and undertakings contained in this Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of the parties hereto.
Except as specifically provided otherwise herein, the Purchasers may assign
their rights and delegate their obligations, in whole or in part, to any Person
in connection with the transfer of any shares of capital stock of MSH;
provided, however, that any transfer of such shares may be made only upon the
transferor providing MSH satisfactory assurance that the provisions of the Act
would not be violated thereby, such assurance to be in the form of an opinion
of counsel for the transferor, reasonably satisfactory to MSH, or a no action
letter from the Securities and Exchange Commission; and, provided, further,
that it shall also be a condition to any such transfer that the transferee
agree in writing to be bound by the covenants herein contained applicable to
the Purchasers. If any transfer is made in accordance with the foregoing
requirements, the transferee shall be thereafter deemed and considered as a
Purchaser under this Agreement.
(b) It is agreed and acknowledged that all certificates representing
shares of capital stock of MSH shall contain the following legend until such
time as such shares shall be registered pursuant to the Act:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH NOR APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION NOR BY THE SECURITIES REGULATORY AUTHORITY OF ANY
STATE AND SUCH REGISTRATION IS NOT CONTEMPLATED. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED IN WHOLE OR IN
PART IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
(c) It is further agreed and acknowledged that all certificates
representing shares of capital stock of MSH shall contain the following legend
until such time as this Agreement is terminated in accordance with the
provisions hereof:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS AND THE HOLDERS OF THIS CERTIFICATE ARE SUBJECT TO
CERTAIN COVENANTS AND AGREEMENTS, ALL AS SET FORTH IN THAT CERTAIN
SECURITIES PURCHASE AGREEMENT DATED AS OF FEBRUARY 1, 1993, AS AMENDED
AND RESTATED ON FEBRUARY 11, 1994 AND AS FURTHER AMENDED AND RESTATED
ON MAY 31, 1995, A COPY OF WHICH IS MAINTAINED AT THE PRINCIPAL OFFICE
OF THE CORPORATION.
(d) It is further agreed and acknowledged that all certificates
representing the shares of capital stock of MSH shall contain the following
legend as required by the General Corporation Law of Delaware:
-47-
<PAGE> 53
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL, OR OTHER SPECIAL RIGHTS OF EACH CLASS OF
STOCK OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
-48-
<PAGE> 54
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
MASADA SECURITY HOLDINGS, INC.
By: /s/ Terry W. Johnson
-----------------------------------------------
Terry W. Johnson, President
CHEMICAL VENTURE CAPITAL ASSOCIATES
By: Chemical Ventures Partners
Its General Partner
By: /s/ I. Robert Greene
-----------------------------------------------
General Partner
CENTENNIAL FUND III, L.P.
By: Centennial Holdings III, L.P.,
Its General Partner
By: /s/ Steven C. Halstedt
-----------------------------------------------
Steven C. Halstedt, General Partner
CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.
Its General Partner
By: /s/ Steven C. Halstedt
-----------------------------------------------
Steven C. Halstedt, General Partner
CRITERION VENTURE PARTNERS III,
LIMITED
By: Criterion Venture Partners III, General
Partner, Its General Partner
By: Criterion Investments, Inc., Its Corporate
General Partner
By: /s/ David C. Hull, Jr.
-----------------------------------------------
David C. Hull, Jr., Senior Vice President
<PAGE> 55
NORWEST EQUITY PARTNERS IV,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners, General Partner
By: /s/ George J. Still, Jr.
-----------------------------------------------
George J. Still, Jr., General Partner
NORWEST EQUITY PARTNERS V,
A MINNESOTA LIMITED LIABILITY PARTNERSHIP
By: Itasca Partners II, General Partner
By: /s/ George J. Still, Jr.
-----------------------------------------------
George J. Still, Jr., General Partner
SOUTH ATLANTIC VENTURE FUND II,
LIMITED PARTNERSHIP
By: South Atlantic Venture Partners II, Limite
Partnership, General Partner
By: /s/ Donald W. Burton
-----------------------------------------------
General Partner
SOUTH ATLANTIC VENTURE FUND III,
LIMITED PARTNERSHIP
By: South Atlantic Venture Partners III, Limit
Partnership, General Partner
By: /s/ Donald W. Burton
-----------------------------------------------
General Partner
THE O. GENE GABBARD REVOCABLE TRUST
By: /s/ O. Gene Gabbard
-----------------------------------------------
O. Gene Gabbard, Trustee
<PAGE> 56
HANCOCK VENTURE PARTNERS IV-DIRECT
FUND L.P.
By: Back Bay Partners XII L.P.
Its General Partner
By: Hancock Venture Partners, Inc.
Its General Partner
By: /s/ William A. Johnston
-----------------------------------------------
General Partner
-------------------------------
/s/ Bertil D. Nordin
--------------------------------------------------
BERTIL D. NORDIN
/s/ Carol Deb. Whitaker
--------------------------------------------------
CAROL DEB. WHITAKER
/s/ Terry W. Johnson
--------------------------------------------------
TERRY W. JOHNSON
/s/ Daryl E. Harris
--------------------------------------------------
DARYL E. HARMS
MSAM, INC.
By: /s/ Terry W. Johnson
-----------------------------------------------
Terry W. Johnson, President
<PAGE> 1
Exhibit 4.3
THIRD AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
THIS THIRD AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT made as
of the 30th day of September, 1996, by and among MASADA SECURITY HOLDINGS,
INC., a Delaware corporation formerly known as Masada Security, Inc. ("MSH"),
CENTENNIAL FUND III, L.P., a Delaware limited partnership ("Centennial III"),
CRITERION VENTURE PARTNERS III, LIMITED, a Texas limited partnership
("Criterion"), NORWEST EQUITY PARTNERS IV, A MINNESOTA LIMITED PARTNERSHIP
("Norwest IV"), SOUTH ATLANTIC VENTURE FUND II, LIMITED PARTNERSHIP, a Delaware
limited partnership ("South Atlantic II"), and THE O. GENE GABBARD REVOCABLE
TRUST, U/T/A dated September 4, 1992 ("Gabbard"), as successor in interest to
O. Gene Gabbard, an individual residing in the State of North Carolina
(Centennial III, Criterion, Norwest IV, South Atlantic II and Gabbard being
hereinafter sometimes collectively referred to as the "Initial Purchasers" and
individually as an "Initial Purchaser"), TERRY W. JOHNSON, an individual
residing in the State of Alabama ("Johnson"), and DARYL E. HARMS, an individual
residing in the State of Alabama ("Harms") (Johnson and Harms being hereinafter
sometimes collectively referred to as the "Management Purchasers" and
individually as a "Management Purchaser"), MSAM, INC., a Florida corporation
("MSAM"), HANCOCK VENTURE PARTNERS IV-DIRECT FUND L.P., a Delaware partnership
("Hancock"), CENTENNIAL FUND IV, L.P., a Delaware limited partnership
("Centennial IV"), BERTIL D. NORDIN, an individual residing in the State of
Georgia ("Nordin"), CAROL DEB. WHITAKER, an individual residing in the State of
Colorado ("Whitaker"), NORWEST EQUITY PARTNERS V, A MINNESOTA LIMITED LIABILITY
PARTNERSHIP ("Norwest V"), SOUTH ATLANTIC VENTURE FUND III, LIMITED
PARTNERSHIP, a Delaware limited partnership ("South Atlantic III"), and CHASE
VENTURE CAPITAL ASSOCIATES, a California partnership formerly known as Chemical
Venture Capital Associates ("CVCA") (Hancock, Nordin, Whitaker, Centennial IV,
Norwest V, South Atlantic III and CVCA, together with the Initial Purchasers
and the Management Purchasers, being hereinafter sometimes collectively
referred to as "Purchasers" and individually as a "Purchaser").
WHEREAS, MSH was organized to serve as the sole general partner of
Masada Security Limited Partnership, a Delaware limited partnership (the
"Partnership"), which was formed to serve as the initial investment vehicle for
the acquisition, construction, ownership, operation and management of security
alarm systems by MSH throughout the United States (the "Masada Business");
WHEREAS, MSH, the Initial Purchasers, the Management Purchasers and
MSAM entered into a certain Securities Purchase Agreement, dated as of February
1, 1993 (the "Original Purchase Agreement"), whereby MSH agreed to sell and
each of the Initial Purchasers and the Management Purchasers agreed to purchase
certain securities of MSH described therein upon the terms and conditions set
forth therein;
WHEREAS, MSH changed its name from Masada Security, Inc. to Masada
Security Holdings, Inc. pursuant to a Certificate of Amendment filed with the
Delaware Secretary of State on February 7, 1994;
WHEREAS, MSH formed Masada Security, Inc. ("Masada"), a Delaware close
corporation and wholly-owned subsidiary of MSH, for the purpose of effecting a
merger between the Partnership and Masada, whereby MSH, in its capacity as the
sole general partner and a limited partner of the Partnership, received shares
of stock of Masada in exchange for its Partnership interests, and MSAM, as a
limited
<PAGE> 2
partner of the Partnership, and the holders of debt securities of the
Partnership received shares of stock of MSH in exchange for their Partnership
interests;
WHEREAS, pursuant to a certain Agreement of Merger between Masada, MSH
and the Partnership dated February 10, 1994, and a Certificate of Merger filed
with the Delaware Secretary of State on February 10, 1994, the Partnership was
merged into Masada and Masada became the surviving entity with respect to the
Masada Business;
WHEREAS, to amend and restate the Original Purchase Agreement, MSH,
the Initial Purchasers, the Management Purchasers, MSAM, Hancock, Centennial
IV, Nordin and Whitaker entered into an Amended and Restated Securities
Purchase Agreement dated as of February 11, 1994 (the "First Restated Purchase
Agreement") in order to reflect the creation of Masada, the merger of the
Partnership into Masada, the issuance of additional securities of MSH to
certain of the Purchasers and the addition of Hancock, Centennial IV, Nordin
and Whitaker as parties to that agreement;
WHEREAS, to amend and restate the First Restated Purchase Agreement,
MSH, the Initial Purchasers, the Management Purchasers, MSAM, Hancock,
Centennial IV, Nordin, Whitaker, Norwest V, South Atlantic III, and CVCA
entered into a Second Amended and Restated Securities Purchase Agreement dated
as of May 31, 1995 (the "Second Restated Purchase Agreement") in order to
reflect the issuance of additional securities of MSH to certain of the
Purchasers and the addition of Norwest V, South Atlantic III and CVCA as
parties to that agreement;
WHEREAS, to further capitalize MSH, which will in turn capitalize
Masada, the Board of Directors of MSH have determined that it is in the best
interest of MSH to issue common stock in the public marketplace ("Initial
Public Offering");
WHEREAS, the Board of Directors of MSH has determined that, in order
to effectuate the Initial Public Offering, MSH must (i) simplify its capital
structure by creating a single class of common stock and effecting the
redemption and/or conversion into common stock of all outstanding shares of
preferred stock and (ii) eliminate certain existing stockholders rights, and to
adopt certain anti-takeover provisions, including a classified board of
directors;
WHEREAS, the Board of Directors of MSH has proposed a Plan of
Recapitalization (the "Plan of Recapitalization"), which provides for (i) the
redemption of all issued and outstanding shares of MSH Class A preferred stock,
(ii) the conversion of all issued and outstanding shares of MSH Class B
convertible preferred stock into shares of MSH Class B common stock, (iii) the
conversion of all issued and outstanding shares of MSH Class C convertible
preferred stock into shares of MSH Class C common stock, (iv) the exchange of
all issued and outstanding shares of MSH Class A common stock, Class B common
stock and Class C common stock (including the Class B common stock and Class C
common stock issued upon the conversion of the Class B Convertible preferred
stock and the Class C convertible preferred stock, respectively) for shares of
a new, single class of MSH common stock, (v) the amendment of MSH's charter to
eliminate certain shareholder rights and to adopt certain anti-takeover
provisions, including a classified board of directors, (vi) the election of
three classes of directors, and (vii) the adoption of new ByLaws for MSH;
WHEREAS, implementation of the Plan of Recapitalization is subject to
satisfaction of several conditions, including the unanimous approval of the
Plan of Recapitalization by the MSH stockholders, the
2
<PAGE> 3
approval by the stockholders and the filing with the Delaware Secretary of
State of the Certificate of Amendment to the Certificate of Incorporation of
MSH, a copy of which is attached to the Plan of Recapitalization as Exhibit B
(the "Certificate Amendment"), the unanimous approval of the proposed Fourth
Restated Certificate of Incorporation of MSH, a copy of which is attached to
the Plan of Recapitalization as Exhibit C (the "Fourth Restated Certificate"),
and the execution and delivery of this Agreement by MSH and all MSH
stockholders;
WHEREAS, MSH, MSAM and the Purchasers desire, subject to the
implementation of the Plan of Recapitalization, to amend the Second Restated
Purchase Agreement to reflect the Plan of Recapitalization and the consummation
of the Initial Public Offering;
NOW, THEREFORE, based upon the foregoing and mutual covenants herein
contained, and for other good and sufficient consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby, subject to implementation of the Plan of
Recapitalization, agree to amend and restate the Second Restated Purchase
Agreement as follows:
SECTION 1. DEFINITIONS.
For purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires: (a) the terms defined in this
Section 1 shall have the meanings assigned to them below, such meanings to be
applicable to singular and plural nouns and verbs of any tense; (b) all
references in this Agreement to designated Sections and other subdivisions are
to the designated Sections and other subdivisions of this Agreement as amended
from time to time; and (c) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole.
"A Shares" shall mean the 1,000,500 shares of Common Stock to be
issued pursuant to the Plan of Recapitalization in exchange for the 333,500
shares of Existing A Common Stock presently issued and outstanding; such
1,000,500 A Shares will be issued to the following Persons pursuant to the Plan
of Recapitalization:
<TABLE>
<S> <C>
Johnson 60
Harms 60
MSAM 1,000,380
</TABLE>
"Act" shall mean the Securities Act of 1933, as amended.
"Agreement" shall mean the Original Securities Purchase Agreement, as
amended and restated by the First Amended and Restated Securities Purchase
Agreement, as further amended and restated by the Second Amended and Restated
Securities Purchase Agreement, as further amended and restated, as of the date
hereof, and any further amendment, modification or restatement thereof made in
accordance with the provisions of Section 3.
"B Shares" shall mean the 2,785,716 shares of New Common Stock to be
issued pursuant to the Plan of Recapitalization in exchange for (i) the 570,240
shares of Existing B Common Stock presently issued and outstanding and (ii) the
358,332 shares of Existing B Common Stock which will be issued pursuant to the
Plan of Recapitalization as a result of the conversion of the 358,332 shares of
Existing B Preferred Stock presently issued and outstanding; such 2,785,716 B
Shares will be issued to the following Persons pursuant to the Plan of
Recapitalization:
3
<PAGE> 4
<TABLE>
<S> <C>
Johnson 34,890
Harms 34,890
Centennial III 703,365
Centennial IV 263,235
Criterion 199,683
Norwest IV 814,362
South Atlantic II 452,901
Gabbard 15,414
Nordin 15,414
Whitaker 1,563
Hancock 249,999
</TABLE>
"ByLaws" shall mean the Amended and Restated ByLaws of MSH as adopted
by the stockholders of MSH, as amended from time to time.
"C Shares" shall mean the 1,640,610 shares of New Common Stock to be
issued pursuant to the Plan of Recapitalization in exchange for 546,870 shares
of Existing C Common Stock, which will be issued pursuant to the Plan of
Recapitalization as a result of the conversion of the 486,111 shares of
Existing C Preferred Stock presently issued and outstanding; such 1,640,610 C
Shares will be issued to the following Persons pursuant to the Plan of
Recapitalization:
<TABLE>
<S> <C>
Johnson 19,287
Harms 19,287
Centennial III 28,566
Centennial IV 371,970
Criterion 4,014
Norwest V 282,567
South Atlantic II 78,525
South Atlantic III 78,525
Gabbard 1,593
Nordin 1,593
Whitaker 4,686
Hancock 281,247
CVCA 468,750
</TABLE>
"Demand Shares" shall mean the B Shares and/or the C Shares, to the
extent they are involved in a Demand Registration.
"Effective Date" shall mean the date on which the Fourth Restated
Certificate is filed with the Delaware Secretary of State pursuant to the Plan
of Recapitalization.
"Existing A Common Stock" shall mean the 333,500 shares of Class A
common stock of MSH authorized to be issued by the Third Restated Certificate,
all of which are issued and outstanding.
"Existing B Common Stock" shall mean the 1,078,572 shares of Class B
common stock of MSH authorized to be issued by the Third Restated Certificate,
570,240 of which are issued and outstanding.
"Existing C Common Stock" shall mean the 546,875 shares of Class C
common stock of MSH which will be authorized to be issued upon the filing of
the Certificate Amendment, none of which are presently issued and outstanding;
486,111 shares of Class C common stock of MSH are presently authorized to be
issued by the Third Restated Certificate.
4
<PAGE> 5
"Existing B Preferred Stock" shall mean the 358,332 shares of Class B
convertible preferred stock of MSH authorized to be issued by the Third
Restated Certificate, all of which are issued and outstanding.
"Existing C Preferred Stock" shall mean the 486,111 shares of Class C
convertible preferred stock of MSH authorized to be issued by the Third
Restated Certificate, all of which are issued and outstanding.
"New Common Stock" shall mean the new, single class of common stock of
MSH to be authorized upon the filing of the Fourth Restated Certificate with
the Delaware Secretary of State.
"Option Shares" shall mean MSH common stock or other securities issued
or issuable pursuant to any stock purchase awards or stock option awards
granted under the 1994 Stock Plan or the 1996 Stock Plan.
"Person" shall mean any individual, corporation, general or limited
partnership, joint venture, association, limited liability company, joint stock
company, trust, business trust bank, trust company or estate (including any
beneficiaries thereof), unincorporated organization, cooperation or association
or government or any agency or political subdivision thereof.
"Shares" shall mean the A Shares, B Shares and C Shares.
"Third Restated Certificate" shall mean the Third Restated Certificate
of Incorporation of MSH filed with the Delaware Secretary of State on July 10,
1996 as it may be amended hereafter and prior to the Effective Date.
"1994 Stock Plan" shall mean the Stock Option/Purchase Plan of Masada
Security Holdings, Inc. adopted and approved in 1994, as amended.
"1996 Stock Plan" shall mean the 1996 Stock Option Plan of Masada
Security Holdings, Inc. adopted and approved in 1996, as amended.
SECTION 2. REGISTRATION RIGHTS.
(a) Demand Registration.
(i) B Shares. The holders of fifty percent (50%) or more
of the aggregate issued and outstanding B Shares may, upon the delivery of a
written notice to MSH, request to register under the Act any of their B Shares
which are not then covered by a currently effective registration statement
under the Act; provided, however, that the proceeds of any such offering shall
not be less than ten million dollars ($10,000,000), without regard to
underwriting or brokerage commissions and discounts and offering expenses.
Such written notice shall specify the number of B Shares intended to be offered
by such electing holders, shall express such holders' present intent to offer
such shares for distribution, shall describe the nature or method of the
proposed offer and sale thereof and shall contain an undertaking of each such
holder to provide all such information and materials and take all such action
as may be required in order to permit MSH to comply with all applicable
requirements of the Securities and Exchange Commission and applicable
securities commissions of the several states and to obtain acceleration of the
effective date of such registration statement. Upon receipt of such request
MSH shall use all reasonable efforts to cause the B Shares so specified in such
request to be so registered to permit the sale by each electing holder of the
number of B Shares specified in the holder's request under the Act and to
permit their trading on the
5
<PAGE> 6
NASDAQ National Market System, subject to notice of issuance. The holders of
the B Shares shall have one (1) Demand Registration pursuant to this Section
2(a)(i) only; provided, however, that in the event MSH qualifies for the use of
a Form S-3 (or successor form) registration statement, the number of requests
that may be made for a Demand Registration shall be unlimited so long as each
such request is made by the holders of twenty-five percent (25%) or more of the
B Shares; and provided, further, that a registration requested pursuant to this
Section 2(a)(i) shall not constitute a Demand Registration unless the holders
of B Shares shall have registered and sold 75% of the B Shares requested to be
sold in such offering.
(ii) C Shares. The holders of thirty percent (30%) or
more of the aggregate issued and outstanding C Shares may, upon the delivery of
a written notice to MSH, request to register under the Act any of their shares
of C Shares which are not then covered by a currently effective registration
statement under the Act; provided, however, that the proceeds of any such
offering shall not be less than ten million dollars ($10,000,000), without
regard to underwriting or brokerage commissions and discounts and offering
expenses. Such written notice shall specify the number of C Shares intended to
be offered by such electing holders, shall express such holders' present intent
to offer such shares for distribution, shall describe the nature or method of
the proposed offer and sale thereof and shall contain an undertaking of each
such holder to provide all such information and materials and take all such
action as may be required in order to permit MSH to comply with all applicable
requirements of the Securities and Exchange Commission and applicable
securities commissions of the several states and to obtain acceleration of the
effective date of such registration statement. Upon receipt of such request
MSH shall use all reasonable efforts to cause the C Shares so specified in such
request to be so registered to permit the sale by each electing holder of the
number of C Shares specified in the holder's request under the Act and to
permit their trading on the NASDAQ National Market System, subject to notice of
issuance. The holders of the C Shares shall have two (2) Demand Registrations
pursuant to this Section 2(a)(ii) only; provided, however, that in the event
MSH qualifies for the use of a Form S-3 (or successor form) registration
statement, the number of requests that may be made for a Demand Registration
shall be unlimited so long as each such request is made by the holders of
twenty-five percent (25%) or more of the C Shares; and provided, further, that
a registration requested pursuant to this Section 2(a)(ii) shall not constitute
a Demand Registration unless the holders of C Shares shall have registered and
sold 75% of the C Shares requested to be sold in such offering.
(iii) Any registration accomplished pursuant to the
provisions of this Section 2(a) shall be referred to as a "Demand
Registration."
(b) Piggy-Back Registration. If MSH at any time proposes to file
a registration statement (other than an exchange offering of securities solely
to existing holders of MSH's securities or a registration statement on Form S-4
or Form S-8) with respect to any class of common stock now or hereafter
authorized and the form to be used for such registration may be used for the
registration of Shares, MSH shall give written notice of such proposed
registration to each holder of Shares not then subject to an effective
registration statement at least thirty (30) days before the anticipated filing
date of such registration statement. The notice shall offer the holders of
such Shares the opportunity to include all or a portion of their Shares in the
registration statement proposed to be filed by MSH. Subject to the provisions
which follow, the Shares designated in writing by the holders thereof within
fifteen (15) days of the sending of such notice shall be included in the
registration statement on the same terms and conditions applicable to the
common stock proposed to be registered by MSH or such other terms and
conditions which may be recommended by MSH's managing underwriters (provided
that any such shares may be withdrawn from any such registration statement at
any time if the holder thereof is not satisfied with the terms of the
offering).
6
<PAGE> 7
The number of outstanding shares of Shares to be included in the
registration statement shall be reduced pro rata among all selling stockholders
according to the number of Shares requested to be included in the registration
statement if the managing underwriters advise MSH in writing that in their
opinion the number of Shares to be included in the registration statement
exceeds the number of shares which can be sold in the offering without
detrimental effect on the success of the offering or the price obtained for the
shares; provided, however, that there shall be no reduction of the number of
shares of common stock proposed for registration by MSH in an offering other
than pursuant to a Demand Registration. Any registration of Shares
accomplished pursuant to the provisions of this Section 2(b) shall be referred
to as a "Piggy-Back Registration."
(c) Limitations, Conditions and Qualifications to Obligations of
MSH under Registration Covenants. The obligations of MSH to use reasonable
efforts to cause certain Shares to be registered under the Act and to prepare
and file registration statements under the Act to effect such registration are
subject to the following limitations, conditions and qualifications:
(i) In connection with any Demand Registration or
Piggy-Back Registration, all expenses incurred in connection therewith,
including, without limitation, all Securities and Exchange Commission
registration and filing fees, blue sky filing fees, all fees of the National
Association of Securities Dealers, Inc., printing expenses, fees and
disbursements of legal counsel for MSH, fees and disbursements of experts used
by MSH in connection with such registration and expenses of any special audits
incidental to or required by such registration ("MSH Expenses"), shall be borne
by MSH. In all registrations of Demand Shares pursuant to Section 2(a), MSH
shall bear the fees and disbursements of legal counsel to the holders of Demand
Shares requesting registration, transfer taxes on the sale of Demand Shares and
any expenses of the brokers or underwriters of the holders of Demand Shares
requesting registration that are not borne directly by such brokers or
underwriters; provided, that such expenses shall not include underwriting or
brokerage discounts and commissions.
(ii) In connection with any Demand Registration, MSH shall
be entitled to include in any such registration other securities of MSH;
provided, however, that MSH shall also agree to execute and deliver the
underwriting agreement, if any, to be executed and delivered by the holders of
Demand Shares requesting such registration; and, provided, further, that the
holders of Demand Shares requesting such registration may request that any such
other securities of MSH not be included in the registration if such holders of
Demand Shares are advised by the managing underwriter that in their opinion the
inclusion of such other securities by MSH would adversely affect the offering
of the Demand Shares to be sold pursuant to such registration, and MSH shall
comply with such request.
(iii) MSH shall be entitled to postpone for reasonable
periods of time, not to exceed ninety (90) days in any one instance, the filing
of any registration statement in connection with any Demand Registration if MSH
is, at the time it receives a request for registration, (i) conducting or is
about to conduct an offering of its securities and MSH reasonably believes that
such offering by MSH would be adversely affected by the registration so
demanded or (ii) if there exists at the time material non-public information
relating to MSH which, in the reasonable opinion of the board of directors of
MSH, should not be disclosed. Additionally, MSH shall be entitled to postpone,
in accordance with this Section 2(c)(iii), the filing of such a registration
statement for multiple, consecutive ninety (90) day periods.
(iv) In the case of any Demand Registration, MSH shall be
required to file the registration statement within ninety (90) days after the
request is made, except as otherwise provided herein
7
<PAGE> 8
or unless such request is made within ninety (90) days prior to the close of
its fiscal year, in which event the registration statement shall be filed by
MSH within ninety (90) days after the close of its fiscal year. Once filed,
MSH shall use all reasonable efforts to cause a registration statement to
become effective and shall cause any such registration statement to remain
effective (including the filing of necessary supplements or post-effective
amendments) during the period commencing on the effective date of such
registration statement and ending sixty (60) days thereafter; provided,
however, that in the event the registration statement is on Form S-3 and
constitutes a shelf registration covering resales of securities and requested
by the holders of Demand Shares, MSH's obligation to maintain such Form S-3
registration statement shall expire 180 days following the effective date of
such registration statement. During the effective period of any such offering
or any Piggy-Back Registration, MSH will furnish to each participating seller
of Shares, such number of copies of any prospectus (including any preliminary
or summary prospectus) as such holders of Shares may reasonably request in
order to effect the offering and sale of the Shares to be offered and sold.
(v) In respect of any proposed disposition by the holders
of Demand Shares pursuant to any Demand Registration, each participating holder
of Demand Shares shall have arranged for the plan of distribution of his Demand
Shares which are to be registered and shall have made all pertinent marketing
arrangements for such Demand Shares and shall have advised MSH of such
distribution and marketing arrangements. If any such plan of distribution
shall involve an investment banking firm as an underwriter, such firm shall be
reasonably satisfactory to MSH.
(vi) MSH's obligations to use all reasonable efforts to
effect registration of Demand Shares pursuant to any Demand Registration shall
include such qualification under applicable blue sky laws as may be necessary
to enable the holders of Demand Shares in whose behalf such registration is to
be effected to offer and sell the Demand Shares which are the subject matter of
their requests; provided, however, that MSH shall not be obligated to qualify
as a foreign corporation to do business under the laws of any jurisdiction in
which it is not then qualified or to file any general consent to service of
process.
(vii) In connection with any Demand Registration or
Piggy-Back Registration, the holders of Shares requesting such registration may
request that securities held by Management Purchasers not be included in the
registration if such holders of Shares are advised by the investment banking
firm managing any underwritten offering that such firm reasonably believes that
the inclusion of such securities would adversely affect the offering of the
Shares to be sold pursuant to such registration, and Johnson and Harms shall
comply with such request.
(viii) (A) In connection with any registration statement
in which the holders of Shares are selling stockholders, MSH shall indemnify
and hold harmless such selling stockholders and their officers, directors,
employees and agents against and in respect of any losses, claims, damages or
liabilities, joint or several (including legal or other fees and expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action) to which any such Person may
become subject under the Act or otherwise insofar as such losses, claims,
damages or liabilities (or actions with respect thereto) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any such registration statement, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except to the extent that any such untrue statement or omission is
based upon written information supplied by the selling stockholders or any of
their respective representatives for use in such registration statement.
8
<PAGE> 9
(B) In connection with the filing of any
registration statement in which the holders of Shares participate as selling
stockholders, each such selling stockholder shall individually, and not
jointly, indemnify and hold harmless MSH and its officers, directors, employees
and agents against and in respect of any losses, claims, damages or
liabilities, joint or several (including legal or other fees and expenses
reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action) which MSH or any
such Persons may become subject under the Act or otherwise insofar as such
losses, claims, damages or liabilities (or actions with respect thereto) arise
out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in any such registration statement, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that any such untrue statement or
omission is based upon written information supplied by the selling stockholder
or its respective representatives for use in such registration statements;
provided, further, that the liability of each selling stockholder hereunder
shall be limited to the proportion of any such loss, claim, damage, liability
or expense which is equal to the proportion that the public offering price of
the shares sold by such selling stockholder under such registration statement
bears to the total public offering price of all securities sold thereunder, but
not in any event to exceed the proceeds received by such selling stockholder
from the sale of securities covered by such registration statement.
(C) If for any reason the indemnification
provided for in the preceding clauses is unavailable to an indemnified party as
contemplated by the preceding clauses, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result
of such loss, claim, damage or liability in such proportion as is appropriate
to reflect not only the relative benefits received by the indemnified party and
the indemnifying party, but also the relative fault of the indemnified party
and the indemnifying party, as well as any other relevant equitable
considerations.
(d) Customary Agreements. MSH and each selling stockholder agree
to enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions, including
lock-up provisions with respect to sales of MSH's common stock, as are
reasonable and customary in the securities business for such an arrangement
between such underwriter and companies of MSH's size and investment stature.
(e) Option Shares. The Shares do not include any Option Shares
and the registration covenants set forth in this Section 2 hereof do not apply
to the Option Shares.
SECTION 3. MISCELLANEOUS.
(a) Amendments. The terms of this Agreement may not be amended
orally or by course of dealing, but only in a writing executed by each of (i)
MSH and (ii) the holders of eighty (80%) of the Shares. The obligations
imposed by this Agreement with respect to, or in favor of, any particular
selling stockholder shall continue until the first to occur of (I) the
termination of this Agreement in the manner required for the making of
amendments hereto as specified in this Section 3(a), (II) all of the remaining
Shares owed by such selling stockholder are freely transferable under Rule 144
of the Act, and (III) December 31, 1998.
(b) Counterparts. This Agreement may be executed in one or more
counterparts and by the different parties hereto under separate counterparts,
any one of which need not contain the signatures of
9
<PAGE> 10
more than one party, but all of which when taken together shall constitute one
and the same instrument notwithstanding that all parties have not signed the
same counterpart hereof.
(c) Headings. The Section headings contained in this Agreement
are inserted as a matter of convenience and shall not affect in any way the
construction of the terms of this Agreement.
(d) Third Party Rights. It is the intention of the parties that
nothing in this Agreement shall be deemed to create any right in favor of or
with respect to any Person not a party to this Agreement.
(e) Survival. The representations, warranties, covenants and
agreements made herein or in any certificate or document executed in connection
herewith shall survive the execution and delivery thereof for the period of the
statute of limitations applicable thereto, including any periods of waiver or
extension thereof, and all statements contained in any certificate or document
delivered by any party hereto shall be deemed to constitute a representation
and warranty made herein by such party.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware,
without regard to principles of conflicts of law.
(g) Partial Invalidity. If any provision of this Agreement is
found by any competent authority to be void or unenforceable, such provision
shall be modified, if possible, so as to effect the intent of the parties
expressed herein, or if it cannot be so modified, it shall be deemed to be
deleted from this Agreement and the remaining provisions of this Agreement
shall continue in full force and effect.
(h) Force Majeure. No party to this Agreement shall be deemed to
be in breach or in violation of this Agreement if such party is prevented from
performing any of its obligations hereunder (except obligations to pay sums of
money due hereunder) for any reason beyond its control, including without
limitation, acts of God, fire, flood, earthquake, unusually severe weather
conditions, explosion, accident, riot, war, sabotage, requirements or actions
or failure to act on the part of governmental authorities preventing
performance, damage to or break down of necessary facilities beyond the control
of the respective party (a "force majeure event"). Lack of financial resources
shall not under any circumstances constitute a force majeure event. Upon the
occurrence of any one or more such events, the party subject to such force
majeure event shall promptly notify the other party of such event. If such
party is rendered unable, wholly or in part, by the force majeure event to
carry out its obligations under this Agreement, the obligations of such party
(except obligations to pay sums of money due hereunder), so far as they are
affected by such force majeure event, shall be suspended during, but no longer
than the continuance of, such force majeure event. The party affected by such
force majeure event shall use all reasonable` diligence to remedy the effect
upon its ability to perform its obligations hereunder caused by such force
majeure event as promptly as possible.
(i) Notices. All notices and other official communications
between the parties shall be in writing and shall be given by hand delivery or
by a recognized overnight courier who maintains verification of delivery
(deemed to be duly received on a date delivered), or by Express, certified or
registered mail, postage prepaid, return receipt requested (deemed to be duly
received seven (7) days after such mailing) or by telecopy (deemed to be
received on the date sent, provided that the facsimile was properly addressed
and disclosed the number of pages transmitted on its front sheet and that the
transmission report produced indicates that each of the pages of the facsimile
was received at the correct facsimile number) to each of the respective parties
as set forth on Exhibit A attached hereto, or to such other address for any of
the
10
<PAGE> 11
parties hereto as from time to time shall be designated by notice given by such
party to the other party in the manner hereinabove provided.
(j) Authority of Signatories. Each signatory to this Agreement in
a representative capacity, whether as an officer, trustee or partner,
represents and warrants that the execution and delivery of this Agreement by
such representative and the performance of the covenants and agreements herein
contained by the Person for whom such representative is acting have been duly
authorized by all necessary action.
(k) Non-Recourse. Notwithstanding anything contained in this
Agreement to the contrary, it is expressly understood and agreed that each and
every covenant, undertaking and agreement made herein by a party hereto that is
not an individual was not made or intended to be made as a personal or
individual undertaking or agreement on the part of any past, present or future
officer, director, shareholder, partner or agent of any party hereto, and no
personal or individual liability or responsibility is assumed by, nor shall any
recourse at any time be asserted or enforced against any such past, present or
future officer, director, shareholder, employee, partner or agent of any party
hereto, or any of them, all such recourse (whether in common law, in equity, by
statute or otherwise), is hereby forever waived and released, and the sole
recourse being to the assets and property of the parties hereto.
(l) Rights of Assignment. All of the terms, covenants and
undertakings contained in this Agreement shall be binding upon and shall inure
to the benefit of the successors and assigns of the parties hereto. Except as
specifically provided otherwise herein, holders of Shares may assign their
rights and delegate their obligations, in whole or in part, to any Person in
connection with the transfer of Shares; provided, however, that any transfer of
such Shares may be made only upon the transferor providing MSH satisfactory
assurance that the provisions of the Act would not be violated thereby, such
assurance to be in the form of an opinion of counsel for the transferor,
reasonably satisfactory to MSH, or a no-action letter from the Securities and
Exchange Commission; and, provided, further, that it shall also be a condition
to any such transfer that the transferee agree in writing to be bound by this
Agreement. If any transfer is made in accordance with the foregoing
requirements, the transferee shall be thereafter deemed and considered as a
holder of Shares under this Agreement.
(m) Legend. It is agreed and acknowledged that all certificates
representing Shares shall contain the following legend until such time as such
Shares are freely transferable, without restriction, under Rule 144(k) of the
Act or shall be registered pursuant to the Act:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH NOR APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION NOR BY THE SECURITIES REGULATORY AUTHORITY OF ANY
STATE AND SUCH REGISTRATION IS NOT CONTEMPLATED. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, IN WHOLE OR IN
PART, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR AN
OPINION OF COUNSEL SATISFACTORY TO MASADA SECURITY HOLDINGS, INC. THAT
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
(n) Effectiveness. This Third Amended and Restated Securities
Purchase Agreement shall not become effective unless and until the Effective
Date of the Plan of Recapitalization. In the event the Plan of
Recapitalization is terminated, this Third Amended and Restated Securities
Purchase Agreement shall be void.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Third Amended and
Restated Securities Purchase Agreement as of the day and year first above
written.
<TABLE>
<S> <C>
CENTENNIAL FUND III, L.P. SOUTH ATLANTIC VENTURE FUND II,
By: Centennial Holdings III, L.P., LIMITED PARTNERSHIP
Its General Partner By: South Atlantic Venture Partners II,
Limited Partnership, General Partner
By: /s/ Steven C. Halstedt
----------------------------------------
General Partner By: /s/ Donald W. Burton
--------------------------------------------------
General Partner
CENTENNIAL FUND IV, L.P. SOUTH ATLANTIC VENTURE FUND III,
By: Centennial Holdings IV, L.P., LIMITED PARTNERSHIP
Its General Partner By: South Atlantic Venture Partners III,
Limited Partnership, General Partner
By: /s/ Steven C. Halstedt By: /s/ Donald W. Burton
---------------------------------------- --------------------------------------------------
General Partner General Partner
CHASE VENTURE CAPITAL ASSOCIATES THE O. GENE GABBARD REVOCABLE TRUST
By: Chase Capital Partners
Its General Partner
By: /s/ Arnold L. Chavkin By: /s/ O. Gene Gabbard
---------------------------------------- --------------------------------------------------
General Partner Trustee
CRITERION VENTURE PARTNERS III, HANCOCK VENTURE PARTNERS IV-DIRECT
LIMITED FUND, L.P.
By: CVP III General Partner, By: Back Bay Partners XII, L.P.
Its General Partner Its General Partner
By: Criterion Investments, Inc., By: Hancock Venture Partners, Inc.
Its Corporate General Partner Its General Partner
By: /s/ David C. Hull, Jr. By: /s/ Robert M. Wadsworth
---------------------------------------- --------------------------------------------------
Executive Vice President Vice President
---------------------------------------- --------------------------------------------------
NORWEST EQUITY PARTNERS IV, NORWEST EQUITY PARTNERS V, A
A MINNESOTA LIMITED PARTNERSHIP MINNESOTA LIMITED LIABILITY PARTNERSHIP
By: Itasca Partners, General Partner By: Itasca Partners, General Partner
By: /s/ George J. Still, Jr. By: /s/ George J. Still, Jr.
---------------------------------------- -------------------------------------------------
General Partner General Partner
</TABLE>
<PAGE> 13
<TABLE>
<S> <C>
/s/ Bertil D. Nordin /s/ Terry W. Johnson
- ------------------------------------------- -----------------------------------------------------
BERTIL D. NORDIN TERRY W. JOHNSON
/s/ Carol deb. Whitaker /s/ Daryl E. Harms
- ------------------------------------------- -----------------------------------------------------
CAROL DEB. WHITAKER DARYL E. HARMS
MSAM, INC. MASADA SECURITY HOLDINGS, INC.
By: /s/ Terry W. Johnson By: /s/ Terry W. Johnson
---------------------------------------- --------------------------------------------------
President President
---------------------------------------- --------------------------------------------------
</TABLE>
<PAGE> 1
COMMON STOCK
MASADA
SECURITY
NUMBER SHARES
MASADA SECURITY HOLDINGS, INC.
COMMON STOCK PAR VALUE $.01 EACH
This is to Certify that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
MASADA SECURITY HOLDINGS, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this Certificate properly
endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and to be sealed with the Seal of the
Corporation.
Dated
/s/ Cathy M. Antee /s/ Gerry E. Johnson
SEAL
Secretary Chairman
Countersigned:
SunTrust Bank, Atlanta
Atlanta, Georgia
Transfer Agent and Registrar
By
Authorized Officer
<PAGE> 2
MASADA SECURITY HOLDINGS, INC.
The Corporation will furnish without charge to each stockholder who so
requests a copy of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof, and the qualifications, limitations, or restrictions of such
preferences and/or rights.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
------ -------
TEN ENT - as tenants by the entireties (Cust) (Minor)
under Uniform Gifts to Minors
JT TEN - as joint tenants with right Act
of survivorship and not as -----------------------
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For value received ____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- ---------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------
represented by the within Certificate, and do hereby irrevocably constitute
and appoint ____________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________ 19____
In presence of -----------------------------------------
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the certificate, in
every particular, without alteration or
enlargement, or any change whatever.
_____________________________
<PAGE> 1
VOTING TRUST AGREEMENT
This Agreement is made and entered into this _____ day of
____________, 1994, by and between TERRY W. JOHNSON and DARYL E. HARMS in their
capacity as holders of all the Class A Voting Common Stock in MSAM, Inc., a
Florida corporation, (collectively, the "Shareholders") and TERRY W. JOHNSON
and DARYL E. HARMS in their capacity as trustees of the voting trust created
herein (collectively, the "Trustees").
RECITALS
The authorized, issued and outstanding common stock of MSAM consists
of two (2) shares of Class A Voting Common Stock (the "Voting Stock") and Nine
Hundred Ninety-Eight (998) shares of Class B Non-Voting Common Stock.
Terry W. Johnson and Daryl E. Harms each own one (1) share of the
Class A Voting Common Stock of MSAM.
The Shareholders desire to secure the continuity and stability of
MSAM's policies and management in the event of the death of either Terry W.
Johnson or Daryl E. Harms.
The Shareholders deem it advisable to create a voting trust pursuant
to this Agreement and assign and deliver the Voting Stock to the Trustees who
have agreed to act upon the terms, provisions and conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto in consideration of the mutual
covenants, agreements and specific considerations set forth below, the adequacy
and sufficiency of which is hereby acknowledged, and intending to be legally
bound, agree as follows:
SECTION 1. TRANSFER OF SHARES TO TRUSTEES. Simultaneous with the
execution of this Agreement, the Shareholders shall transfer and deliver to the
Trustees stock certificates representing all of the Voting Stock to be held in
trust pursuant to the terms, provisions and conditions of this Agreement and
shall immediately deposit with the Trustees any and all certificates for
additional shares of voting stock that subsequently may be acquired by them
during the term of this Agreement. All such stock certificates shall be
properly endorsed, or accompanied by such instruments of transfer as to enable
the Trustees to cause such stock certificates to be
1
<PAGE> 2
transferred into the name of the Trustees, as hereinafter provided. All stock
certificates transferred and delivered by the Shareholders to the Trustees
pursuant to this Agreement shall be immediately surrendered by the Trustees to
MSAM and cancelled, and new stock certificates therefor shall be issued to and
held by the Trustees in the name of "Terry W. Johnson and Daryl E. Harms as
Trustees of the MSAM, Inc. Voting Trust". Upon transfer of such stock
certificates into the names of the Trustees, the Trustees shall hold such stock
certificates subject to the terms of this Agreement and shall thereupon issue
and deliver to the Shareholders voting trust certificates (the "Trust
Certificates") for the stock certificates transferred and delivered to the
Trustees by the Shareholders.
SECTION 2. TRUST CERTIFICATES. The Trustees shall issue and deliver
to the Shareholders Trust Certificates for the same number of shares of the
Voting Stock transferred by each individual Shareholder to the Trustees in
substantially the same form as set forth below:
Trust Certificate
No. _____ ____ Shares
Terry W. Johnson and Daryl E. Harms, Trustees of all the Class A
Voting Common Stock of MSAM, Inc., under a Voting Trust Agreement dated
February __, 1994 (the "Voting Trust Agreement"), having received all stock
certificates representing the Class A Voting Common Stock of MSAM, Inc.,
pursuant to such Voting Trust Agreement, hereby certify that
_______________________ will be entitled to receive a stock certificate for
________ shares of fully paid Class A Voting Common Stock of MSAM, Inc. at the
par value of $1.00 each, on the termination of such Voting Trust Agreement.
Until the Trustees have delivered the stock held by them under the
Voting Trust Agreement to the holders of trust certificates, the Trustees shall
possess and be entitled to exercise all rights and powers of an absolute owner
of such stock, including the right to vote thereon for every purpose, and to
execute consents in respect thereof for every purpose, it being expressly
stipulated that no voting right passes to the above-named owner hereof, or his
assigns, by or under this trust certificate or by or under any agreement,
expressed or implied.
This trust certificate is transferable only with the consent of the
Trustees. Until so transferred, the Trustees shall treat the registered holder
as owner hereof for all purposes whatsoever.
Copies of the Voting Trust Agreement and a list of the names and
addresses of all owners of beneficial interests in the trust and the number and
class of shares transferred to the Trustees, are maintained at the principal
office of MSAM, Inc. in Birmingham, Alabama. Such list and Voting Trust
Agreement are open to the inspection of MSAM's shareholders or any beneficiary
of the trust daily during normal business hours.
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this Agreement this
___ day of _____________________, 1994.
---------------------------------
TERRY W. JOHNSON, Trustee
---------------------------------
DARYL E. HARMS, Trustee
SECTION 3. TRANSFERABILITY OF TRUST CERTIFICATE. The Trust
Certificates shall be transferable by the registered holders thereof only with
the consent of the Trustees, which shall not be unreasonably withheld. A
transfer of a Trust Certificate shall vest in the transferee all right, title
and interest of the transferor in, to and under such Trust Certificate, and
upon such transfer and the surrender to the Trustees of the Trust Certificate
which is transferred, by the transferee thereof, the Trustees shall deliver to
the transferee a Trust Certificate of the same number of shares of stock
reflected by the Trust Certificate so transferred. Until such transfer, the
Trustees shall treat the registered holder of the Trust Certificate as owner
thereof for all purposes whatsoever. All transferees of a Trust Certificate
issued hereunder shall by acceptance of a Trust Certificate become a party
hereto as though an original signatory hereof.
SECTION 4. DIVIDENDS. The registered holder of the Trust Certificate
shall be entitled to receive payments equal to the cash dividends, if any, that
may be collected by the Trustees upon the number of shares of Class A Voting
Common Stock of MSAM in respect of which the Trust Certificate is issued. In
the event that stock certificates for any Class A Voting Common Stock of MSAM
shall be issued to the Trustees as stock dividends, the Trustees shall hold
such stock subject to the provisions of this Agreement, provided however, the
registered holder of each Trust Certificate shall be entitled to receive from
the Trustees a Trust Certificate for the number of shares received by the
Trustees as the stock dividend on the shares represented by each Trust
Certificate.
SECTION 5. VOTING. The Trustees shall have the exclusive right to
vote the Voting Stock in all proceedings wherein the vote or written consent of
MSAM's shareholders may be required or authorized by law.
SECTION 6. TERM.
(a) The term of this Agreement shall commence on the date hereof and
shall terminate on the tenth (10th) anniversary date of the date hereof. At
any time before the
3
<PAGE> 4
termination of this Agreement one or more holders of Trust Certificates
hereunder may by an extension agreement in writing and with the Trustees'
written consent extend the duration of this Agreement for a period not
exceeding ten (10) years. In the event of such extension, the Trustees shall
deliver copies of the extension agreement and list of beneficial owners to
MSAM's principal office.
(b) Notwithstanding the term of this Agreement set forth in (a)
above, this Agreement shall immediately terminate in the event (i) Masada
Security Holdings, Inc., a Delaware corporation, is dissolved, liquidated or
all or substantially all of its issued and outstanding stock or assets are
sold, conveyed, transferred or assigned to another entity, or (ii) both Terry
W. Johnson and Daryl E. Harms shall die, resign or otherwise fail or cease to
serve as Trustee hereunder.
SECTION 7. TRUSTEES. In the event either Terry W. Johnson or Daryl
E. Harms shall die, resign or otherwise fail or cease to serve as Trustee, then
and in any of such events, the other or survivor shall serve as sole Trustee
hereunder. In the event both Terry W. Johnson and Daryl E. Harms shall die,
resign or otherwise fail or cease to serve as Trustee, then and in any of such
events, this Agreement shall immediately terminate.
SECTION 8. TRUSTEES' LIABILITY. The Voting Trustees shall exercise
their best judgment in the interests of MSAM in voting the Voting Stock or
doing any act with respect to the control or management of MSAM as holders of
the Voting Stock. The Trustees shall not be liable for any error of judgment
or mistakes of law incurred in connection with the discharge of their duties
hereunder. The Trustees shall serve in such capacities without compensation.
SECTION 9. TERMINATION. Upon the termination of this Agreement, as
herein provided, the Trustees shall, upon surrender of the Trust Certificates
by the Shareholders or their assigns, deliver to the holders thereof stock
certificates representing the shares of stock of MSAM equivalent in amount to
the shares represented by the Trust Certificates surrendered.
SECTION 10. BINDING EFFECT. All covenants and agreements contained
in this Agreement by or on behalf of any of the parties to this Agreement shall
bind and inure to the benefit of their respective heirs, next-of-kin,
executors, administrators, personal representatives and assigns.
SECTION 11. RECORDS. Copies of this Agreement and a list of the
names and addresses of all registered holders of
4
<PAGE> 5
Trust Certificates and the number and class of shares transferred to the
Trustees shall be maintained at the principal office of MSAM in Birmingham,
Alabama. Such list and Agreement shall be open to the inspection of MSAM's
shareholders or any beneficiary of the voting trust created herein daily during
normal business hours.
SECTION 12. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Florida, without
regard to principles of conflicts of law.
[signatures on following page]
5
<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this Agreement this
___ day of _____________________, 1994.
/s/ Terry W. Johnson
------------------------------------
TERRY W. JOHNSON
individually and as Trustee
/s/ Daryl E. Harms
------------------------------------
DARYL E. HARMS
individually and as Trustee
6
<PAGE> 1
Exhibit 10.1
AMENDED AND RESTATED
MASADA SECURITY HOLDINGS, INC.
1996 STOCK OPTION PLAN
<PAGE> 2
AMENDED AND RESTATED
MASADA SECURITY HOLDINGS, INC.
1996 STOCK OPTION PLAN
TABLE OF CONTENTS
Page
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "Board" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 "Committee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 "Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 "Eligible Participants" and "Eligible Participant" . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 "Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 "Exercise Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 "Fair Market Value" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.9 "Incentive Stock Options" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.10 "Non-Qualified Stock Options" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 "Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 "Optionee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 "Purchasable" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 "Qualified Domestic Relations Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 "Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.17 "Stock Option Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.18 "Stock Purchase Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.19 "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 Duties and Powers of the Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Interpretation; Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.3 No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.4 Majority Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.5 Company Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V SHARES OF STOCK SUBJECT TO PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.1 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.2 Antidilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE VI OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.1 Types of Options Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.2 Option Grant and Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
6.3 Optionee Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.4 $100,000 Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.5 Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.6 Exercise Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.7 Option Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.8 Nontransferability of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.9 Termination of Employment or Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.10 Employment Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.11 Certain Successor Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VII STOCK CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VIII TERMINATION AND AMENDMENT OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IX RELATIONSHIP TO OTHER COMPENSATION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.1 Replacement or Amended Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.2 Forfeiture for Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.3 Plan Binding on Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.4 Singular, Plural; Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.5 Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exhibit A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2
</TABLE>
ii
<PAGE> 4
AMENDED AND RESTATED
MASADA SECURITY HOLDINGS, INC.
1996 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings unless
the context clearly indicates to the contrary:
1.1 "Board" means the Board of Directors of the Company.
1.2 "Code" means the Internal Revenue Code of 1986, as amended,
including effective date and transition rules (whether or not codified). Any
reference herein to a specific section of the Code shall be deemed to include a
reference to any corresponding provision of future law.
1.3 "Committee" means the Compensation Committee of the Board,
consisting of at least two directors of the Company appointed from time to time
by the Board, having the duties and authority set forth herein in addition to
any other authority granted by the Board.
1.4 "Company" means Masada Security Holdings, Inc., a Delaware
corporation.
1.5 "Eligible Participants" and "Eligible Participant" means those
persons within the classes of persons identified in Article III of the Plan.
1.6 "Employee" means an employee of the Company or a Subsidiary of
the Company.
1.7 "Exercise Price" means the price at which an Optionee may
purchase a share of Stock under a Stock Option Agreement.
1.8 "Fair Market Value" on any date means the fair market value of
a share of the Stock as determined in good faith by the Committee based on such
relevant facts as may be available to the Committee, as applicable, which may
include, without limitation, the price at which shares of the Stock have been
reacquired, if applicable, by the Company, opinions of independent experts, the
price at which recent sales have been made, book value, restrictions to which
the Stock may be subject, the Company's current and future earnings, and the
existence of merger proposals or offers affecting the Company.
1.9 "Incentive Stock Options" means Options which comply with and
are subject to the terms, limitations and conditions of Section 422 of the Code
and any regulations promulgated with respect thereto.
1.10 "Non-Qualified Stock Options" means Options which do not
comply with the provisions of Section 422 of the Code.
1.11 "Option" means an option, whether or not an Incentive Stock
Option, to purchase Stock granted pursuant to the provisions of Article VI
hereof.
1.12 "Optionee" means a person to whom an Option has been granted
hereunder.
1
<PAGE> 5
1.13 "Plan" means the Amended and Restated Masada Secutity Holdings,
Inc. 1996 Stock Option Plan, the terms of which are set forth herein.
1.14 "Purchasable" refers to Stock which may be purchased by an
Optionee under the terms of this Plan on or after a certain date specified in
the applicable Stock Option Agreement.
1.15 "Qualified Domestic Relations Order" means an order with the
meaning set forth in the Code or in the Employee Retirement Income Security Act
of 1974, or the rules and regulations promulgated under the Code or such Act.
1.16 "Stock" means the common stock, par value $.01 per share, of
the Company, as adjusted pursuant to Section 5.2 hereof.
1.17 "Stock Option Agreement" means an agreement between the
Company and an Optionee under which the Optionee may purchase Stock hereunder,
a sample form of which is attached hereto as Exhibit "A" (which form, subject
to the provisions of the Plan, may be varied by the Committee in granting an
Option).
1.18 "Stock Purchase Agreement" means any agreement which the
Committee, in its own discretion, may require the Optionee to execute and
deliver to the Company before such Optionee exercises an Option.
1.19 "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the grant of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
ARTICLE II
THE PLAN
2.1 Purpose. The purpose of the Plan is to advance the interests
of the Company, its Subsidiaries, and the Company's stockholders by affording
certain employees and directors of the Company and the certain employees of its
Subsidiaries an opportunity to acquire or increase their proprietary interests
in the Company. The objective of the issuance of the Options is to promote the
growth and profitability of the Company and its Subsidiaries because the
Optionees will be provided with an additional incentive to achieve the
Company's objectives through participation in its success and growth and by
encouraging their continued association with or service to the Company or its
Subsidiaries.
2.2 Effective Date. The Plan shall become effective on April 25,
1996; provided, however, that the Plan shall terminate, and all Options
theretofore granted shall become void and may not be exercised, if the
stockholders of the Company shall not by April 24, 1997, have approved the
Plan's adoption.
ARTICLE III
PARTICIPANTS
The class of persons eligible to participate in the Plan shall consist
of those non-employee directors and employees of the Company and employees of
its Subsidiaries, whose participation in the Plan the Committee determines to
be in the best interests of the Company.
2
<PAGE> 6
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be
administered by the Committee. The Committee shall select one of its members
as its Chairman and shall hold its meetings at such times and places as it may
determine. The Committee shall keep minutes of its meetings and actions by
unanimous written consent and shall make such rules and regulations for the
conduct of its business as it may deem necessary. The Committee shall have the
power to act by unanimous written consent in lieu of a meeting and to meet
telephonically. In administering the Plan, the Committee's actions and
determinations shall be binding on all interested parties. The Committee shall
have the power to grant Options in accordance with the provisions of the Plan
and may grant Options singly, in combination, or in tandem. Subject to the
provisions of the Plan, the Committee shall have the discretion and authority
to determine those individuals to whom Options will be granted, the number of
shares of Stock subject to each Option, such other matters as are specified
herein, and any other terms and conditions of a Stock Option Agreement. To the
extent not inconsistent with the provisions of the Plan, the Committee may give
an Optionee an election to surrender an Option in exchange for the grant of a
new Option, and shall have the authority to amend or modify an outstanding
Stock Option Agreement, or to waive any provision thereof, provided that the
Optionee consents to such action.
4.2 Interpretation; Rules. Subject to the express provisions of
the Plan, the Committee also shall have authority to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to it, to
determine the details and provisions of each Stock Option Agreement and to make
all other determinations necessary or advisable for the administration of the
Plan, including, without limitation, amending or altering the Plan and any
Options granted hereunder as may be required to comply with or to conform to
any federal, state, or local laws or regulations.
4.3 No Liability. Neither any member of the Board nor any member
of the Committee shall be liable to any person for any act or determination
made in good faith with respect to the Plan or any Option granted hereunder.
4.4 Majority Rule. A majority of the members of the Committee
shall constitute a quorum, and any action taken by a majority at a meeting at
which a quorum is present, or any action taken without a meeting evidenced by a
writing executed by all the members of the Committee, shall constitute the
action of the Committee.
4.5 Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to Eligible Participants,
their employment, death, retirement, disability, or other termination of
employment, and such other pertinent facts as the Committee may require. The
Company shall furnish the Committee with such clerical and other assistance as
is necessary in the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to any antidilution adjustment pursuant
to the provisions of Section 5.2 hereof, the maximum number of shares of Stock
that may be issued hereunder shall be One Hundred Fifty Thousand (150,000).
Shares subject to an Option may be either authorized and unissued shares or
shares issued and later acquired by the Company. The shares covered by any
unexercised portion of an Option that has terminated for any reason (except as
set forth in the following paragraph), may again be
3
<PAGE> 7
optioned under the Plan, and such shares shall not be considered as having been
optioned or issued in computing the number of shares of Stock remaining
available for option hereunder.
5.2 Antidilution.
(a) In the event that the outstanding shares of Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of merger, consolidation, reorganization,
recapitalization, reclassification, combination or exchange of shares, stock
split or stock dividend, or in the event that any spin-off, split-up,
split-off, or other distribution of assets materially affects the Fair Market
Value of the Stock:
(i) The aggregate number and kind of shares of
Stock for which Options may be granted hereunder shall be
adjusted proportionately by the Committee; and
(ii) The rights of Optionees (concerning the
number of shares subject to Options and the Exercise Price)
under outstanding Options shall be adjusted proportionately by
the Committee.
(b) If the Company shall be a party to any reorganization
in which it does not survive, involving merger, consolidation, or acquisition
of the stock or substantially all the assets of the Company, the Committee, in
its discretion, may:
(i) notwithstanding other provisions hereof,
declare that all Options granted under the Plan shall become
exercisable immediately notwithstanding the provisions of the
respective Stock Option Agreements regarding exercisability
and that all such Options shall terminate 30 days after the
Committee gives written notice of the immediate right to
exercise all such Options and of the decision to terminate all
Options not exercised within such 30-day period; and/or
(ii) notify all Optionees that all Options granted
under the Plan shall be assumed by the successor corporation
or substituted on an equitable basis with options issued by
such successor corporation.
(c) If the Company is to be liquidated or dissolved in
connection with a reorganization described in Section 5.2(b), the provisions of
such section shall apply. In all other instances, the adoption of a plan of
dissolution or liquidation of the Company shall, notwithstanding other
provisions hereof, cause every Option outstanding under the Plan to terminate
to the extent not exercised prior to the adoption of the plan of dissolution or
liquidation by the stockholders; provided that, notwithstanding other
provisions hereof, the Committee may declare all Options granted under the Plan
to be exercisable at any time on or before the fifth business day following
such adoption notwithstanding the provisions of the respective Stock Option
Agreements regarding exercisability.
(d) The adjustments described in paragraphs (a) through
(c) of this section, and the manner of their application, shall be determined
by the Committee, and any such adjustment may provide for the elimination of
fractional share interests; provided, however, that any adjustment made by the
Committee shall be made in a manner that will not cause an Incentive Stock
Option to be other than an incentive stock option under applicable statutory
and regulatory provisions. The adjustments required under this Article shall
apply to any successors of the Company and shall be made regardless of the
number or type of successive events requiring such adjustments.
4
<PAGE> 8
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. The Committee may, under this Plan,
grant either Incentive Stock Options or Non-Qualified Stock Options. Within
the limitations provided in this Plan, both types of Options may be granted to
the same person at different times, under different terms and conditions, as
long as the terms and conditions of each Option are consistent with the
provisions of the Plan. Without limitation of the foregoing, Options may be
granted subject to conditions based on the financial performance of the Company
or any other factor the Committee deems relevant.
6.2 Option Grant and Agreement. Each Option granted hereunder
shall be evidenced by minutes of a meeting or the written consent of the
Committee and by a written Stock Option Agreement executed by the Company and
the Optionee. The terms of the Option, including the Option's duration, time
or times of exercise, exercise price, and whether the Option is intended to be
an Incentive Stock Option, shall be stated in the Stock Option Agreement. No
Incentive Stock Option may be granted more than ten years after the earlier to
occur of the effective date of the Plan or the date the Plan is approved by the
Company's stockholders. Separate Option Agreements may be used for Incentive
Stock Options and Non-Qualified Stock Options, but any failure to use such
separate agreements shall not invalidate, or otherwise adversely affect the
Optionee's interest in, the Options evidenced thereby.
6.3 Optionee Limitations. The Committee shall not grant an
Incentive Stock Option to any person who, at the time the Incentive Stock
Option is granted:
(a) is not an employee of the Company or its
Subsidiaries; or
(b) owns or is considered to own stock possessing at
least 10% of the total combined voting power of all classes of stock of the
Company or its Subsidiaries; provided, however, that this limitation shall not
apply if at the time an Incentive Stock Option is granted the Exercise Price is
at least 110% of the Fair Market Value of the Stock subject to such Option and
such Option by its terms would not be exercisable after five years from the
date on which the Option is granted. For the purpose of this subsection (b), a
person shall be considered to own (i) the stock owned, directly or indirectly,
by or for his or her brothers and sisters (whether by whole or half blood),
spouse, ancestors and lineal descendants; (ii) the stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust in
proportion to such person's stock interest, partnership interest or beneficial
interest therein; and (iii) the stock which such person may purchase under any
outstanding Options of the Company or of any Subsidiary of the Company.
6.4 $100,000 Limitation. Except as provided below, the Committee
shall not grant an Incentive Stock Option to, or modify the exercise provisions
of outstanding Incentive Stock Options held by, any person who, at the time the
Incentive Stock Option is granted (or modified), would thereby receive or hold
any Incentive Stock Options of the Company and any Subsidiary of the Company
such that the aggregate Fair Market Value (determined as of the respective
dates of grant or modification of each option) of the stock with respect to
which such Incentive Stock Options are exercisable for the first time during
any calendar year is in excess of $100,000 (or such other limit as may be
prescribed by the Code from time to time); provided that the foregoing
restriction on modification of outstanding Incentive Stock Options shall not
preclude the Committee from modifying an outstanding Incentive Stock Option if,
as a result of such modification and with the consent of the Optionee, such
Option no longer constitutes an Incentive Stock Option; and provided that, if
the $100,000 limitation (or such other limitation prescribed by the Code)
described in this Section is exceeded, the Incentive Stock Option the granting
or modification of
5
<PAGE> 9
which resulted in the exceeding of such limit shall be treated as an Incentive
Stock Option up to the limitation and the excess shall be treated as a
Non-Qualified Stock Option.
6.5 Exercise Price. The Exercise Price of the Stock subject to
each Option shall be determined by the Committee. Subject to the provisions of
Section 6.3(b) hereof, the Exercise Price of an Incentive Stock Option shall
not be less than the greater of (a) the Fair Market Value of the Stock as of
the date the Option is granted (or in the case of an Incentive Stock Option
that is subsequently modified, on the date of such modification); and (b) Ten
and 67/100 Dollars ($10.67) per share of Stock, as adjusted pursuant to Section
5.2 hereof. The Exercise Price of a Non- Qualified Stock Option shall not be
less than Ten and 67/100 Dollars ($10.67) per share of Stock as adjusted
pursuant to Section 5.2 hereof.
6.6 Exercise Period. The period for the exercise of each Option
granted hereunder shall be determined by the Committee, but the Stock Option
Agreement with respect to each Option shall provide that such Option shall not
be exercisable after the expiration of ten (10) years from the date of grant
(or modification) of the Option, and no Option shall be exercisable prior to
stockholder approval of the Plan.
6.7 Option Exercise.
(a) Unless otherwise provided in the Stock Option
Agreement or Section 6.6 hereof, an Option may be exercised at any time or from
time to time during the term of the Option as to any or all full shares which
have become Purchasable under the provisions of the Option, but not at any time
as to less than 100 shares unless the remaining shares that have become so
Purchasable are less than 100 shares. The Committee shall have the authority
to prescribe in any Stock Option Agreement that the Option may be exercised
only in accordance with an accrual schedule during the term of the Option.
(b) An Option shall be exercised by (i) delivery to the
Company at its principal office of a written notice of exercise with respect to
a specified number of shares of Stock (the "Notice"), (ii) payment to the
Company at that office of the full amount of the Exercise Price for such number
of shares in accordance with Section 6.7(c) and (iii) execution and delivery to
the Company of a Stock Purchase Agreement and, if required by the Committee, an
escrow agreement and any other documents which the Committee may require as a
condition to the issuance of such shares.
(c) The aggregate amount of the Exercise Price (such
aggregate Exercise Price being the Exercise Price times the number of shares of
the Stock specified in the Notice) is to be paid in full in U.S. Dollars in
cash upon the exercise of the Option and the Company shall not be required to
deliver certificates for the shares purchased until such payment has been made;
provided, however, that in lieu of cash and in the sole discretion of the
Committee, all or any portion of such aggregate Exercise Price may be paid by
tendering to the Company shares of Stock duly endorsed for transfer and owned
by the Optionee to be credited against such aggregate Exercise Price at the
aggregate Fair Market Value of such shares on the date of exercise (however, no
fractional shares may be so transferred, and the Company shall not be obligated
to make any cash payments in consideration of any excess of the aggregate Fair
Market Value of Stock transferred over the aggregate Exercise Price); provided
further, that the Committee may provide in a Stock Option Agreement or may
otherwise determine in its sole discretion at the time of exercise that, in
lieu of cash or Stock, all or a portion of the aggregate Exercise Price may be
paid by delivery to the Company of such other consideration consisting of money
or property actually received by the Company as may be deemed in the sole
opinion of the Committee to have a value equal to the aggregate Exercise Price,
all subject to compliance with applicable state and federal laws, rules and
regulations.
6
<PAGE> 10
(d) In addition to and at the time of payment of the
aggregate Exercise Price, the Optionee shall pay to the Company in U.S. Dollars
in cash the full amount of any federal, state, and local income, employment, or
other withholding taxes applicable to the taxable income of such Optionee
resulting from such exercise; provided, however, that in the discretion of the
Committee, any Stock Option Agreement may provide that all or any portion of
such tax obligations, together with additional taxes not exceeding the actual
additional taxes to be owed by the Optionee as a result of such exercise, may,
upon the irrevocable election of the Optionee, be paid by tendering to the
Company whole shares of Stock duly endorsed for transfer and owned by the
Optionee, or by authorization to the Company to withhold shares of Stock
otherwise issuable upon exercise of the Option, in either case in that number
of shares having an aggregate Fair Market Value on the date of exercise equal
to the amount of such taxes thereby being paid, and subject to such
restrictions as to the approval and timing of any such election as the
Committee may from time to time determine to be necessary or appropriate.
(e) The holder of an Option shall not have any of the
rights of a stockholder with respect to the shares of Stock subject to the
Option until such shares have been issued in the name of and transferred to the
Optionee upon the exercise of the Option.
6.8 Nontransferability of Option. No Incentive Stock Option shall
be transferable by an Optionee other than by will or the laws of descent and
distribution, and no Non-Qualified Stock Option shall be transferable by an
Optionee other than by will or the laws of descent and distribution or pursuant
to a Qualified Domestic Relations Order. During the lifetime of an Optionee,
Options shall be exercisable only to the extent specifically permitted under
the terms of the Stock Option Agreement. An Option may be exercised during the
Optionee's lifetime only by the Optionee (or by such Optionee's guardian or
legal representative, should one be appointed).
6.9 Termination of Employment or Service. The Committee shall
have the power to specify, with respect to the Options granted to a particular
Optionee, the effect upon such Optionee's right to exercise an Option of
termination of such Optionee's employment or service under various
circumstances, which effect may include, without limitation, immediate or
deferred termination of such Optionee's rights under an Option, or acceleration
of the date at which an Option may be exercised in full; or, at the option of
the Company, purchase of the Option by the Company or its Subsidiaries upon
payment to the Optionee (against surrender by the Optionee of the Option) of
the aggregate Fair Market Value of the shares of Stock that would have been
Purchasable by the Optionee at the date of such termination of employment or
service (with such Fair Market Value to be determined as of the effective date
at any such termination of employment or service as near to that date as is
reasonably possible under the circumstances), less the aggregate Exercise Price
of said shares; provided, however, that in no event may an Incentive Stock
Option be exercised after the expiration of ten (10) years from the date of
grant thereof; nor more than three (3) months after termination of employment
for any reason other than Disability; nor more than one (1) year after
termination of employment by reason of Disability.
6.10 Employment Rights. Nothing in the Plan or in any Stock Option
Agreement shall confer on any person any right to continue in the employ or
other service of the Company or its Subsidiaires or shall interfere in any way
with the right of the Company or its Subsidiaries to terminate such person's
employment or service therewith.
6.11 Certain Successor Options. To the extent not inconsistent
with the terms, limitations and conditions of Code section 422 and any
regulations promulgated with respect thereto, an Option issued in respect of an
option held by an employee, director or officer to acquire stock of any entity
acquired, by merger or otherwise, by the Company (or its Subsidiaries) may
contain terms that differ from those stated
7
<PAGE> 11
in this Article VI, but solely to the extent necessary to preserve for any such
employee the rights and benefits contained in such predecessor option, or to
satisfy the requirements of Code section 424(a).
ARTICLE VII
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate
for shares of Stock purchased upon the exercise of any Option granted hereunder
or any portion thereof, prior to fulfillment of all of the following
conditions:
(a) The completion of any registration or other
qualification of such shares which the Committee shall deem necessary or
advisable under any federal or state law or under the rulings or regulations of
the Securities and Exchange Commission of the United States or any other
governmental regulatory body;
(b) The obtaining of any approval or other clearance from
any federal or state governmental agency or body which the Committee shall
determine to be necessary or advisable; and
(c) The lapse of such reasonable period of time following
the exercise of the Option as the Committee from time to time may establish for
reasons of administrative convenience.
Stock certificates issued and delivered to Optionees shall
bear such restrictive legends as the Company shall deem necessary or advisable
pursuant to applicable federal and state securities and corporate laws.
ARTICLE VIII
TERMINATION AND AMENDMENT OF PLAN
The Board may at any time terminate the Plan, and may at any time and
from time to time and in any respect amend the Plan; provided, however, that
the Board (unless its actions are approved or ratified by the stockholders of
the Company) may not amend the Plan to:
(a) Increase the total number of shares of Stock issuable
pursuant to Incentive Stock Options under the Plan or materially increase the
number of shares of Stock subject to the Plan, in each case except as
contemplated in Section 5.2 hereof;
(b) Change the class of employees eligible to receive
Incentive Stock Options or materially change the class of persons that may
participate in the Plan; or
(c) Otherwise materially increase the benefits accruing
to Eligible Participants under the Plan.
Except as provided herein, no termination, or amendment, or
modification of the Plan shall affect adversely an Optionee's rights under a
Stock Option Agreement without the consent of the Optionee or his or her legal
representative.
8
<PAGE> 12
ARTICLE IX
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option,
incentive, or other compensation plans in effect for the Company or its
Subsidiaries; nor shall the adoption of the Plan preclude the Company or its
Subsidiaries from establishing any other form of incentive or other
compensation plan for employees, officers or directors of the Company or
employees and officers of the Company's Subsidiaries.
ARTICLE X
MISCELLANEOUS
10.1 Replacement or Amended Grants. At the discretion of the
Committee, and subject to the terms of the Plan, the Committee may modify
outstanding Options or accept the surrender of outstanding Options and grant
new Options in substitution for them. However, no modification of an Option
shall adversely affect an Optionee's rights under a Stock Option Agreement
without the consent of the Optionee or his or her legal representative.
10.2 Forfeiture for Competition. If an Optionee provides services
to a competitor of the Company, or its Subsidiaries, whether as an employee,
officer, director, independent contractor, consultant, agent, or otherwise,
such services being of a nature that can reasonably be expected to involve the
knowledge, skills, and experience used or developed by the Optionee while an
employee or a director of the Company, then that Optionee's rights under any
Options outstanding hereunder shall be forfeited and terminated, subject to a
determination to the contrary by the Committee.
10.3 Plan Binding on Successors. The Plan shall be binding upon
the successors and assigns of the Company.
10.4 Singular, Plural; Gender. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender.
10.5 Headings, etc. Headings of Articles and Sections hereof are
inserted for convenience and reference; they do not constitute part of the
Plan.
10.6 Contingent on Implementation of Plan of Recapitalization.
This Amended and Restated Masada Security Holdings, Inc. 1996 Stock Option Plan
shall not become effective unless and until the Plan of Recapitalization
adopted by the Board of Directors of the Company in September 1996 is
implemented.
* * * * *
9
<PAGE> 13
Exhibit A to Masada Security
Holdings, Inc. 1996 Stock
Option Plan - Form of Stock
Option Agreement
MASADA SECURITY HOLDINGS, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered into as of
this ______ day of __________________________, 19__, by and between Masada
Security Holdings, Inc., a Delaware corporation (the "Company"), and
_____________________ (the "Optionee").
WHEREAS, on September ____, 1996, the Board of Directors of the
Company adopted a stock option plan known as the "Amended and Restated Masada
Security Holdings, Inc. 1996 Stock Option Plan" (the "Plan"); and
WHEREAS, the Committee (as defined in the Plan) has granted the
Optionee a stock option to purchase the number of shares of the Company's
common stock as set forth below, and in consideration of the granting of that
stock option the Optionee intends to remain in the employ or other service of
the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written
agreement with respect to such option in accordance with the Plan;
NOW, THEREFORE, as a performance incentive and to encourage stock
ownership, and also in consideration of the mutual covenants contained herein,
the parties hereto agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the
provisions of the Plan and the terms and definitions of the Plan are
incorporated herein by reference and made a part hereof. A copy of the Plan
has been delivered to, and receipt is hereby acknowledged by, the Optionee.
2. Grant of Option. Subject to the terms, restrictions,
limitations and conditions stated herein, the Company hereby evidences its
grant to the Optionee, not in lieu of salary or other compensation, of the
right and option (the "Option") to purchase all or any part of the number of
shares of the Company's common stock, par value $.01 per share (the "Stock"),
set forth on Schedule A attached hereto and incorporated herein by reference.
The Option shall be exercisable in the amounts and at the times specified on
Schedule A. The Option shall expire and shall not be exercisable on the date
specified on Schedule A or on such earlier date as determined pursuant to
Section 8, 9 or 10 hereof. Schedule A states whether the Option is intended to
be an Incentive Stock Option.
3. Purchase Price. The price per share to be paid by the
Optionee for the shares subject to this Option (the "Exercise Price") shall be
as specified on Schedule A, which price shall be an amount not less than (a)
the greater of (i) the Fair Market Value of a share of Stock as of the Date of
Grant (as defined in Section 11 below), and (ii) Ten and 67/100 Dollars
($10.67) per share of Stock (as adjusted under the antidilution provision of
Section 5.2 of the Plan if the Option is an Incentive Stock Option; or (b) Ten
and 67/100 Dollars ($10.67) per share of Stock (as adjusted under the
antidilution provisions of Section 5.2 of the Plan) if the Option is a
Non-Qualified Stock Option.
A-1
<PAGE> 14
4. Exercise Terms. The Optionee must exercise the Option for at
least the lesser of 100 shares or the number of shares of Purchasable Stock as
to which the Option remains unexercised. In the event this Option is not
exercised with respect to all or any part of the shares subject to this Option
prior to its expiration, this Option shall be null and void and the shares with
respect to which this Option was not exercised shall no longer be subject to
this Option.
5. Restrictions on Transferability. No Incentive Stock Option
shall be transferable by an Optionee other than by will or the laws of descent
and distribution, and no Non-Qualified Stock Option shall be transferable by an
Optionee other than by will or the laws of descent and distribution or pursuant
to a Qualified Domestic Relations Order.
6. Notice of Exercise of Option. This Option may be exercised by
the Optionee, or by the Optionee's administrators, executors or personal
representatives, by a written notice (in substantially the form of the Notice
of Exercise attached hereto as Schedule B) signed by the Optionee, or by such
administrators, executors or personal representatives, and delivered or mailed
to the Company as specified in Section 14 hereof to the attention of the
President or such other officer as the Company may designate. Any such notice
shall (a) specify the number of shares of Stock which the Optionee or the
Optionee's administrators, executors or personal representatives, as the case
may be, then elects to purchase hereunder, (b) contain such information as may
be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by
(i) a certified or cashier's check payable to the Company in payment of the
total Exercise Price applicable to such shares as provided herein, (ii) a
certified or cashier's check and shares of Stock owned by the Optionee and duly
endorsed or accompanied by stock transfer powers, or authorization to the
Company to withhold a number of shares of Stock otherwise issuable upon the
exercise of the Option, whose Fair Market Value when added to the amount of the
check equals the total Exercise Price applicable to such shares purchased
hereunder, or (iii) such other consideration as may from time to time be
specified by the Committee (subject to the requirements of the Plan and
applicable law) as constituting valid and adequate consideration for
Purchasable Stock and having a fair market value equal to the total Exercise
Price applicable to such shares purchased hereunder. Upon receipt of any such
notice and accompanying payment, and upon execution and delivery by Optionee
and the Company of a Stock Purchase Agreement, as shall be specified by the
Committee, and if required by the Committee, an escrow agreement and any other
documents which the Committee may require as a condition to the issuance of
shares of the Stock to Optionee, and subject to the terms hereof, the Company
agrees to issue to the Optionee or the Optionee's administrators, executors or
personal representatives, as the case may be, stock certificates for the number
of shares specified in such notice registered in the name of the person
exercising this Option.
7. Adjustment in Option. The number of Shares subject to this
Option, the Exercise Price and other matters are subject to adjustment during
the term of this Option in accordance with Section 5.2 of the Plan.
8. Termination of Employment.
(a) Except as otherwise specified in Schedule A hereto,
in the event that the Optionee shall cease to be employed by, or otherwise
associated or affiliated with, the Company in any capacity involving the
rendition of services to the Company either directly, as an employee or member
of the Board of the Company, or indirectly, as an employee of its Subsidiaries,
other than a termination that is either (i) for cause, or (ii) voluntary on the
part of the Optionee and without written consent of the Company or its
Subsidiaries, or (iii) for reasons of disability as contemplated under Section
9 below, the Optionee may
A-2
<PAGE> 15
exercise this Option at any time within ninety (90) days after such termination
to the extent of the number of shares which were Purchasable hereunder at the
date of such termination.
(b) Except as specified in Schedule A attached hereto, in
the event Optionee (i) terminates his employment voluntarily without the
written consent of the Company, or (ii) is terminated for cause, this Option,
to the extent not previously exercised, shall terminate immediately and shall
not thereafter be or become exercisable.
(c) This Option does not confer upon the Optionee any
right with respect to continuance of service as a director of the Company of
employment by the Company, or of employment by its Subsidiaries.
9. Disabled Optionee. In the event of termination of employment
because of the Optionee's becoming a Disabled Optionee, the Optionee (or his or
her personal representative) may exercise this Option at any time within one
year after such termination to the extent of the number of shares which were
Purchasable hereunder at the date of such termination.
10. Death of Optionee. Except as otherwise set forth in Schedule
A with respect to the rights of the Optionee upon termination of employment or
association or affiliation with the Company under Section 8(a) hereof, in the
event of the Optionee's death while employed by or associated or affiliated
with the Company or its Subsidiaries the appropriate persons described in
Section 6 hereof may exercise this Option at any time within a period ending on
the earlier of (a) the last day of the three (3) month period following the
Optionee's death or (b) the expiration date of this Option. If the Optionee
was an employee, officer or director of the Company or its Subsidiaries at the
time of death, this Option may be so exercised to the extent of the number of
shares that were Purchasable hereunder at the date of death. If the Optionee's
employment, association or affiliation terminated prior to his or her death,
this Option may be exercised only to the extent of the number of shares covered
by this Option which were Purchasable hereunder at the date of such
termination.
11. Date of Grant. This Option was granted by the Committee on
the date set forth in Schedule A (the "Date of Grant").
12. Compliance with Regulatory Matters. The Optionee acknowledges
that the issuance of capital stock of the Company is subject to limitations
imposed by federal and state law, and the Optionee hereby agrees that the
Company shall not be obligated to issue any shares of Stock upon exercise of
this Option that would cause the Company to violate law or any rule,
regulation, order or consent decree of any regulatory authority (including
without limitation the Securities and Exchange Commission) having jurisdiction
over the affairs of the Company. The Optionee agrees that he or she will
provide the Company with such information and representation as is reasonably
requested by the Company or its counsel to determine whether the issuance of
Stock complies with the provisions described by this Section, including,
without limitation, a representation that the Optionee shall not sell or
otherwise dispose of the Stock in the absence of registration of such shares
under applicable federal and state securities laws or an opinion of counsel,
satisfactory to the Company, that such registration is not required.
13. Restriction on Disposition of Shares. Unless further
restrictions are placed upon disposition by the provisions of the Stock
Purchase Agreement, the shares of Stock purchased pursuant to the exercise of
an Incentive Stock Option shall not be transferred by the Optionee except
pursuant to the Optionee's will or the laws of descent and distribution until
such date which is the later of two years after the grant of such Incentive
Option or one year after the transfer of the shares to the Optionee pursuant to
the exercise of such
A-3
<PAGE> 16
Incentive Stock Option. The shares of stock purchased pursuant to the exercise
of a Non-Qualified Stock Option shall not be transferred by the Optionee except
pursuant to the Optionee's will or the laws of descent and distribution or
pursuant to a Qualified Domestic Relations Order. The transfer restrictions
imposed by this Section 13 will expire and be of no force and effect upon the
completion by the Company of a public offering of the Stock registered with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended.
14. Miscellaneous.
(a) This Agreement shall be binding upon the parties
hereto and their representatives, successors and assigns.
(b) This Agreement is executed and delivered in, and
shall be governed by the laws of, the State of Alabama.
(c) Any requests or notices to be given hereunder shall
be deemed given, and any elections or exercises to be made or accomplished
shall be deemed made or accomplished, upon actual delivery thereof to the
designated recipient, or three days after deposit thereof in the United States
mail, certified or registered, return receipt requested and postage prepaid,
addressed, if to the Optionee, at the address set forth below and, if to the
Company, to the executive offices of the Company at 950 22nd Street North,
Suite 800, Birmingham, Alabama 35203.
(d) This Agreement may not be modified except in writing
executed by each of the parties hereto.
IN WITNESS WHEREOF, the Compensation Committee of the Board of
Directors of the Company has caused this Stock Option Agreement to be executed
on behalf of the Company and the Company's seal to be affixed hereto and
attested by the Secretary of the Company, and the Optionee has executed this
Stock Option Agreement under seal, all as of the day and year first above
written.
COMPANY:
MASADA SECURITY HOLDINGS, INC.
Attest:
By:
- ------------------------------- --------------------------------------
Secretary Name:
Title: Chairman, Compensation Committee
[SEAL]
OPTIONEE:
-----------------------------------------
Name:
Address:
---------------------------------
---------------------------------
---------------------------------
A-4
<PAGE> 17
SCHEDULE A
TO STOCK OPTION AGREEMENT BETWEEN
MASADA SECURITY HOLDINGS, INC. AND
[NAME]
Dated__________________
<TABLE>
<S> <C>
1. Number of Shares Subject to Option: ______________ Shares.
2. This Option (Check one) [ ] is [ ] is not an Incentive Stock Option.
3. Option Exercise Price: $______ per Share.
4. Date of Grant: ______________________________
5. Option Vesting Schedule: Options are exercisable with respect to the
number of shares indicated below on or after the date indicated next
to the number of shares:
No. of Shares Vesting Date
------------- ------------
6. Option Exercise Period:
Check One: ( ) All options expire and are void unless
exercised on or before _______________________.
( ) Options expire and are void unless exercised on
or before the date indicated next to the number
of shares:
No. of Shares Expiration Date
------------- ---------------
7. Effect of Termination of Employment or Other Association or
Affiliation with the Company of Optionee (if different from that set
forth in Sections 8 and 10 of the Stock Option Agreement):
</TABLE>
<PAGE> 18
SCHEDULE B
TO STOCK OPTION AGREEMENT BETWEEN
MASADA SECURITY HOLDINGS, INC. AND
[NAME]
Dated_________________
NOTICE OF EXERCISE
The undersigned hereby notifies Masada Security Holdings, Inc.
(the "Company") of this election to exercise the undersigned's stock option to
purchase ________________ shares of the Company's common stock, par value $.01
per share (the "Stock"), pursuant to the Stock Option Agreement (the
"Agreement") between the undersigned and the Company dated ________________.
Accompanying this Notice is (1) a certified or a cashier's check in the amount
of $________________ payable to the Company, and/or (2) _______________ shares
of Stock presently owned by the undersigned and duly endorsed or accompanied by
stock transfer powers, or an authorization to the Company to withhold the
number of shares of Stock otherwise issuable pursuant to the exercise of the
Option, in each case having an aggregate Fair Market Value (as defined in the
Amended and Restated Masada Security Holdings, Inc. 1996 Stock Option Plan) as
of the date hereof of $__________________, such amounts being equal, in the
aggregate, to the purchase price per share set forth in Section 3 of the
Agreement multiplied by the number of shares being purchased hereby (in each
instance subject to appropriate adjustment pursuant to Section 7 of the
Agreement).
IN WITNESS WHEREOF, the undersigned has set his hand and seal,
this ________ day of ________________, ______.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
-------------------------------------
Name:
Capacity (if other than Optionee):
<PAGE> 1
STOCK OPTION/PURCHASE
PLAN OF MASADA SECURITY HOLDINGS, INC.
Masada Security Holdings, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Company"), hereby adopts the
following Stock Option/Purchase Plan (the "Plan") for certain present and
future key employees ("Employees") of the Company and Masada Security, Inc., a
close corporation organized and existing under the laws of the State of
Delaware and a wholly-owned subsidiary of the Company ("MSI"), and non-employee
directors ("Directors") of the Company.
Section 1. Certain Definitions.
For purposes of this Plan, except as otherwise expressly provided or
unless the context otherwise requires: (a) the terms defined in this Section
shall have the meanings assigned to them below, such meanings to be applicable
to singular and plural nouns and verbs of any tense; (b) all references in
this Plan to designated Sections and other subdivisions are to the designated
Sections and other subdivisions of this Plan as originally executed and as
amended from time to time; and (c) the words "herein", "hereof", "hereunder"
and other words of similar import refer to this Plan as a whole.
"Award" shall mean any Incentive Stock Option, Stock Option or Stock
Purchase granted to any Participant pursuant to this Plan.
"Board" shall mean the Board of Directors of the Company as duly
elected from time to time by the holders of voting stock of the Company, in
accordance with the prevailing law of the State of Delaware.
"Company" shall mean Masada Security Holdings, Inc., a corporation
organized and existing under the laws of the State of Delaware, and any
corporation that shall succeed to the business and assets of the Company,
either in a transaction (such as a merger, consolidation or reorganization) in
which the stock of the Company is converted into stock of such successor
corporation, or in a transaction (such as an asset sale) in which all or
substantially all of the assets of the Company are sold to such successor
corporation.
"Director" shall mean a duly elected member of the Board who is not an
Employee, whether such Person is a member of the Board at the time this Plan is
adopted or becomes a member of the Board subsequent to the adoption and prior
to the termination of this Plan.
"Director Participant" shall mean any Director who is granted the right
pursuant to this Plan to receive a Stock Option in accordance with Section 7
hereof or who makes a Stock Purchase in accordance with Section 9 hereof.
1
<PAGE> 2
"Employee" shall mean any employee, including any officer, of the
Company or MSI, whether such employee is employed at the time this Plan is
adopted or becomes employed subsequent to the adoption and prior to the
termination of this Plan.
"Employee Participant" shall mean any Employee who is granted the
right pursuant to this Plan to either receive an Incentive Stock Option in
accordance with Section 6 hereof or a Stock Option in accordance with Section
7 hereof, or who makes a Stock Purchase in accordance with Section 9 hereof.
"Incentive Stock Option" shall mean an option to purchase Stock which
is granted to an Employee Participant pursuant to Section 7 of this Plan, and
which is intended to qualify as an "incentive stock option" under the
provisions of Section 422 of the Internal Revenue Code of 1986, as amended.
"MSI" shall mean Masada Security, Inc., a close corporation organized
and existing under the laws of the State of Delaware which is a wholly-owned
subsidiary of the Company, and any corporation that shall succeed to the
business and assets of MSI, either in a transaction (such as a merger,
consolidation or reorganization) in which the stock of MSI is converted into
stock of such successor corporation, or in a transaction (such as an asset
sale) in which all or substantially all of the assets of MSI are sold to such
successor corporation.
"Option" shall mean either an Incentive Stock Option or a Stock
Option.
"Option Period" shall mean the period during which either an Incentive
Stock Option or a Stock Option may be exercised by a Participant.
"Participant" shall mean, generally, either an Employee Participant or
Director Participant.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, limited liability company, trust, bank, trust company or
estate (including any beneficiaries thereof) unincorporated organization or
government, or any agency or political subdivision thereof.
"Plan" shall mean this Stock Option/Purchase Plan of the Company, as
may be amended from time to time by the Board.
"Stock" shall mean both the authorized but unissued shares of the
Class B Common Stock of the Company and the shares of the Class B Common Stock
of the Company held in the Company's treasury.
"Stock Option" shall mean an option to purchase Stock which is granted
to an Employee Participant or Director Participant pursuant to Section 7 of
this Plan, and which is not intended to qualify as an "incentive stock option"
under the provisions of Section 422 of the Internal Revenue Code of 1986, as
amended.
2
<PAGE> 3
"Stock Purchase" shall mean the purchase of shares of Stock by an
Employee Participant or Director Participant pursuant to Section 9 of this
Plan.
Section 2. Purposes.
The purposes of this Plan are as follows:
(a) to facilitate the growth, development and financial success of
the Company by providing additional incentives in the form of Incentive Stock
Options, Stock Options and Stock of the Company or MSI who have been or will be
given Purchases to certain Employees responsibility for the management and
administration of the business affairs of the Company or MSI, and to allow such
Employees to benefit directly from the growth, development and financial
success of the Company during its formative period in a manner so as to
preserve the financial integrity of the Company;
(b) to attract, retain and motivate experienced and knowledgeable
Directors by providing incentives in the form of Stock Options and Stock
Purchases.
Section 3. Administration.
This Plan shall be administered by the Board on a duly constituted
committee thereof, in which case the actions of such committee shall constitute
actions by the Board for purposes hereof. Subject to the express provisions of
this Plan, the Board shall have plenary authority to interpret this Plan, to
prescribe, amend and rescind the rules and regulations relating to this Plan
and to make all other determinations deemed necessary and advisable for the
administration of this Plan. All such determinations by the Board shall be
conclusive and shall be binding on the parties subject thereto.
Section 4. Stock Subject to Plan.
Subject to the adjustment provisions of Section 13 hereof, a total of
one hundred thousand (100,000) shares of Stock shall be subject to Options and
Stock Purchases under this Plan. If, and to the extent that, any Option or
Stock Purchase granted under this Plan shall terminate, expire or be forfeited
or cancelled for any reason whatsoever, including, but not limited to the
expiration of any Option term without an Option being exercised by the
applicable Participant in accordance with the provisions hereof or the
forfeiture of any Stock Purchase, new Options or Stock Purchases, as the case
may be, may be granted in respect of the shares of Stock covered by such
terminated, expired, forfeited or cancelled Option or Stock Purchase, pursuant
to the provisions of this Plan. Stock issued to a Participant upon the exercise
of any Option or upon any Stock Purchase under this Plan may be shares of
authorized and unissued Stock, shares of Stock held in the Company's treasury,
or a combination of the foregoing. There shall be reserved
3
<PAGE> 4
at all times for conveyance under this Plan a number of shares of Stock, of
either authorized and unissued shares of Stock, shares of Stock held in the
Company's treasury, or a combination of the foregoing, equal to the maximum
number of shares of Stock which may be issued in the form of Options and Stock
Purchases under the provisions of this Plan.
Section 5. Participant Selection, Participation Acceptance and Forms
of Awards.
(a) Participant Selection. The identity of each Participant, and
the number of shares of Stock to be granted to each such Participant in the
form of an Incentive Stock Option, Stock Option or Stock Purchase, as the case
may be, shall be determined by the Board in the exercise of its sole
discretion. The Board, upon its selection of a Participant, shall provide
written notice to such Participant (the "Participation Notice"). The
Participation Notice shall set forth the name of the Participant, the number of
shares of Stock to be granted to such Participant pursuant to this Plan,
depending upon the form of Award selected by the Participant, and the price per
share of Stock to be granted to such Participant, depending upon the form of
Award selected by the Participant, and shall have attached thereto a copy of
this Plan.
(b) Participation Acceptance. Each Participant who receives a
Participation Notice and who shall elect to participate in this Plan shall have
the right to select the form of Award to be utilized in the grant of the shares
of Stock identified in the Participation Notice, subject to the requirements of
Section 6, Section 7 and Section 9 hereof. Within thirty (30) days after
delivery to such Participant of a Participation Notice, the Participant shall
evidence his or her election to participate in this Plan by delivering to the
Board written notice of his or her acceptance (the "Participation Acceptance"),
which Participation Acceptance shall set forth the form of Award selected by
the Participant. No Participant shall select more than one (1) form of Award in
response to a Participation Notice.
(c) Improper Participation Acceptance. In the event that the
Participation Acceptance shall set forth more than one (1) form of Award, shall
fail to set forth the form of Award for the shares of Stock identified in the
Participation Notice or shall select an Award for which such Participant is
ineligible pursuant to this Plan, the Board may, in the exercise of its sole
discretion, select the form of Award which will be utilized in the grant of the
shares of Stock identified in the Participation Notice delivered to such
Participant. If upon the selection by the Company of a form of Award pursuant
to this subsection (c) the Participant to which such Award is granted should
fail to fulfill the requirements of Section 6, Section 7, or Section 9 hereof,
as the case may be, such Award shall be automatically cancelled and rescinded
without any further or additional actions on the part of the Board; provided,
however, that the Board may, in the exercise of its sole discretion, elect to
allow such Participant to receive an Award pursuant to this Plan at any future
time during the term hereof.
(d) Failure to Deliver Participation Acceptance. In the event that
any Participant shall fail to deliver a Participation Acceptance to the Board
within thirty (30) days after the Board shall deliver to such Participant a
Participation Notice, the Award identified in the Participation Notice
4
<PAGE> 5
to such Participant shall be automatically cancelled and rescinded without any
further or additional actions on the part of the Board, and such Participant
shall have no right to acquire the Stock identified in the Participation Notice
or otherwise participate in this Plan in any respect; provided, however, that
the Board may, in the exercise of its sole discretion, elect to allow a
Participant who fails to timely deliver a Participation Acceptance to receive
an Award pursuant to this Plan at any future time during the term hereof.
(e) Forms of Awards. The forms of Awards which shall be granted
pursuant to this Plan shall consist of Incentive Stock Options, Stock Options
and Stock Purchases. The eligible Participants for Incentive Stock Options,
Stock Options and Stock Purchases, and the separate terms and conditions
applicable to Incentive Stock Options, Stock Options and Stock Purchases, are
set forth in Section 6, Section 7 and Section 9 hereof, respectively.
Section 6. Incentive Stock Options.
(a) Section 422 of Internal Revenue Code. The Incentive Stock
Options granted to eligible Participants pursuant to this Plan are intended to
qualify as "incentive stock options" under the provisions of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). As such, all Incentive
Stock Options granted to Participants pursuant to this Plan shall be subject
to, in addition to the terms, conditions and requirements contained in this
Plan, the requirements of Section 422 of the Code.
(b) Incentive Stock Option Participants. Only Employees shall be
Participants who are eligible to receive Incentive Stock Options pursuant to
this Plan.
(c) Effective Date of Grant of Incentive Stock Options. The
effective date of the grant of an Incentive Stock Option to an Employee
Participant shall be the date that the Company and the Employee Participant
shall enter into an agreement evidencing the grant of such Incentive Stock
Option, such agreement to be substantially in the form of Exhibit "A" hereto
(an "Incentive Stock Option Agreement").
(d) Incentive Stock Option Exercise Price. The price per share
of Stock deliverable by an Employee Participant upon the exercise of an
Incentive Stock Option shall be one hundred percent (100%) of the "fair market
value" thereof (as determined in accordance with Section 11 hereof), as of the
date of the Participation. Notice which is delivered to the Employee
Participant with regard to such Incentive Stock Option (the "ISO Exercise
Price").
(e) Incentive Stock Option Period. Each Incentive Stock Option
granted pursuant to this Plan, and all rights or obligations thereunder, shall
expire ten (10) years after the effective date of the grant of such Incentive
Stock Option (the "Incentive Stock Option Period"); provided, however,
Incentive Stock Options granted shall be subject to termination, cancellation
or forfeiture, in whole or in part, prior to the conclusion of the Incentive
Stock Option Period, in the manner and upon the occurrence of the events
described in Section 8 hereof.
5
<PAGE> 6
(f) Exercise of Incentive Stock Options. An Incentive Stock Option
shall be deemed exercised when such Incentive Stock Option fully vests in
accordance the provisions of Section 8(a) or partially vests in accordance with
the provisions of Section 8(b) or Section 8(c)(ii) hereof and the Employee
Participant entitled to exercise the Incentive Stock Option:
(i) delivers written notice to the Company of the Employee
Participant's decision to exercise the Inventive Stock Option;
(ii) concurrently tenders to the Company full payment of the ISO
Exercise Price for the Stock associated with such Incentive
Stock Option; and
(iii) provides to the Company (x) such representations and documents
of the Employee Participant or any other Person as the Company deems
necessary or advisable in its reasonably exercised discretion to
effect compliance with all applicable provisions of the Securities Act
of 1933, as amended, and any other applicable federal or state laws or
regulations, (y) a certificate of the Employee Participant certifying
compliance with the terms and conditions of this Plan and (z) the
Incentive Stock Option Agreement.
In no event, and under no circumstances, shall any Incentive Stock Option be
exercised at any time subsequent to the final day of the applicable Incentive
Stock Option Period.
The Company may, in its reasonably exercised discretion, take whatever
additional actions it deems appropriate to comply with this Plan and the
requirements of Section 422 of the Code, including, without limitation, placing
restrictive legends on stock certificates representing ownership of the Stock
issued pursuant to the exercise of Incentive Stock Options. Upon the exercise
of an Incentive Stock Option in accordance with this subsection (f), the
Company shall issue and deliver to the Employee Participant the stock
certificate(s) representing the Stock associated with such Incentive Stock
Option.
(g) Incentive Stock Option Exercise Statement. The Company shall,
on or before January 31 of the calendar year following the calendar year in
which an Incentive Stock Option is exercised pursuant to subsection (f) of this
Section 6, furnish to the Employee Participant exercising such Incentive Stock
Option a statement containing the following information:
(i) The Company's name, address and taxpayer identification
number;
(ii) The name, address and taxpayer identification number of the
Employee Participant;
(iii) The effective date of grant of the Incentive Stock Option;
(iv) The date the shares of Stock conveyed to the Employee
Participant pursuant to the exercise of the Incentive Stock Option
were transferred;
6
<PAGE> 7
(v) The "fair market value" (as determined in accordance with
Section 11 hereof), of the shares of Stock conveyed pursuant
to the exercise of the Incentive Stock Option on date of exercise;
(vi) The number of shares of Stock transferred upon exercise of the
Incentive Stock Option;
(vii) A statement that the Incentive Stock Option was intended to
constitute an "incentive stock option" under Section 422 of the Code;
and
(viii) The total ISO Exercise Price paid by the Employee Participant.
(g) Maximum Amount of Incentive Stock Option Award. The aggregate
"fair market value" (as of the effective date of grant of Incentive Stock
Options) of Stock that is subject to Incentive Stock Options granted to an
Employee Participant by the Board in any calendar year during the term of this
Plan shall not exceed One Hundred Thousand Dollars ($100,000.00).
Section 7. Stock Options.
(a) No Incentive Stock Option. The Stock Options granted to
Participants pursuant to this Plan are not intended to qualify as "incentive
stock options" under the provisions of Section 422 of the Code. All Stock
Options granted to Participants pursuant to this Plan shall be subject to the
terms, conditions and requirements contained in this Plan.
(b) Stock Option Participants. Both Employees and Directors shall be
Participants who are eligible to receive Stock Options pursuant to this Plan.
(c) Effective Date of Grant of Stock Options. The effective date
of the grant of a Stock Option to a Participant shall be the date that the
Company and the Participant shall enter into an agreement evidencing the grant
of such Stock Option, such agreement to be substantially in the form of
Exhibit "B" hereto (the "Stock Option Agreement").
(d) Stock Option Exercise Price. The price per share of Stock
deliverable by a Participant upon the exercise of a Stock Option shall be the
price determined by the Board in the exercise of its sole discretion and which
is set forth in the Participation Notice with regard to such Stock Option which
is delivered to the Participant (the "SO Exercise Price").
(e) Stock Option Period. Each Stock Option granted pursuant to
this Plan, and all rights or obligations thereunder, shall expire ten (10)
years after the effective date of the grant of such Stock Option (the "Stock
Option Period"); provided, however, Stock Options granted shall be subject to
termination, cancellation or forfeiture, in whole or in part, prior to the
conclusion of the Stock Option Period, in the manner and upon the occurrence of
the events described in Section 8 hereof.
7
<PAGE> 8
(f) Exercise of Stock Options. A Stock Option shall be deemed
exercised when such Stock Option fully vests in accordance with the provisions
of Section 8(a) or partially vests in accordance with the provisions of Section
8(b) or Section 8(c)(ii) hereof and the Participant entitled to exercise the
Stock Option:
(i) delivers written notice to the Company of the Participant's
decision to exercise the Stock Option;
(ii) concurrently tenders to the Company full payment of the SO
Exercise Price for the Stock associated with such Stock Option; and
(iii) provides to the Company (x) such representations and documents
of the Participant or any other Person as the Company deems necessary
or advisable in its reasonably exercised discretion to effect
compliance with all applicable provisions of the Securities Act of
1933, as amended, and any other applicable federal or state laws or
regulations, (y) a certificate of the Participant certifying
compliance with the terms and conditions of this Plan and (z) the
Stock Option Agreement.
In no event, and under no circumstances, shall any Stock Option be exercised at
any time subsequent to the final day of the applicable Stock Option Period.
The Company may, in its reasonably exercised discretion, take whatever
additional actions it deems appropriate to comply with this Plan, including,
without limitation, placing restrictive legends on stock certificates
representing ownership of the Stock issued pursuant to the exercise of Stock
Options. Upon the exercise of a Stock Option in accordance with this subsection
(f), the Company shall issue and deliver to the Participant the stock
certificate(s) representing the Stock associated with such Stock Option.
Section 8. Vesting of Options.
(a) Vesting Period. All Options granted pursuant to this Plan
shall vest for each Participant based on such Participant's years of service
beginning on or after February 1, 1993 with the Company, MSI or Masada Security
Limited Partnership as predecessor in interest to MSI, as the case may be,
according to the following schedule:
Years of Service Percent Vested
---------------- --------------
less than 2 0%
" but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
8
<PAGE> 9
Upon the completion of five (5) years of continuous service, beginning
on the later to occur February 1, 1993, or the commencement of services with
the Company, MSI or Masada Security Limited Partnership as predecessor in
interest to MSI, as the case may be, by any Participant (the "Vesting Period"),
such Participant shall be fully vested with regard to an Option granted
pursuant to Section 6 or Section 7 hereof, as the case may be. Upon completion
of the Vesting Period with regard to any Option, the applicable Participant may
thereafter at any time during the remaining portion of the Option Period,
exercise the Option granted to such Participant, in accordance with either
Section 6 or Section 7 hereof, as applicable.
(b) (b) Departure of Director During Vesting Period. If any
Director Participant ceases to serve as a Director of the Company during the
Vesting Period for any reason whatsoever, including but not limited to, death,
disability, voluntary resignation or removal, then the non-vested percentage of
the Stock Option shall be forfeited. The Director Participant may at any time
during the Option Period exercise the vested percentage of the Stock Option in
accordance with Section 7 hereof.
(c) Termination of Employment During Vesting Period.
(i) Resignation or Termination for Cause. If any Participant shall,
prior to the completion of the Vesting Period, either resign from his
or her employment with the Company or MSI, as the case may be, or be
terminated for "cause" (as defined herein) by the Company or MSI, as
the case may be, then such Participant's Option shall be forfeited,
terminated and cancelled in its entirety. Thereafter, such Participant
shall have no right to acquire the shares of Stock which comprised the
Option. Termination for "cause" shall mean termination by reason of
insubordination, violation of Company or MSI written policies or
procedures, participation in conduct during employment consisting of
fraud, commission of a felony, willful misconduct, commission of any
act which causes or may reasonably be expected to cause substantial
damage to the Company or MSI, as the case may be, or for any other
reason constituting "cause" for termination under any applicable
employment agreement.
(ii) Termination Upon Death, Disability, Retirement or Involuntary
Termination. If any Employee Participant's employment with the Company
or MSI, as the case may be, shall, prior to the completion of the
Vesting Period, be terminated as a result of such Employee
Participant's death, disability (as determined by the Board),
retirement (as determined by the Board) or involuntary termination for
any reason other than for "cause" (as determined by the Board), then
the non-vested percentage of the Option shall be forfeited. The
Employee Participant may, only during the three (3) month portion of
the Option Period occuring immediately subsequent to the date of
termination for any such reason, excercise the vested percentage of
the Option in accordance with Section 6 or Section 7 hereof, as
applicable.
9
<PAGE> 10
Section 9. Stock Purchases.
(a) No Option. The Stock Purchases granted to Participants pursuant
to this Plan shall constitute purchases and sales of Stock and shall not
constitute Options. All Stock Purchases granted pursuant to this Plan shall be
subject to the terms, conditions and requirements contained in this Plan.
(b) Stock Purchases Participants. Both Employees and Directors shall
be Participants who are eligible to make Stock Purchases pursuant to this Plan.
(c) Effective Date of Stock Purchases. The effective date of Stock
Purchase by a Participant shall be the date that the Company and the
Participant shall enter into an agreement evidencing the sale of such shares of
Stock identified in the applicable Participation Notice, such agreement to be
substantially in the form of Exhibit "C" hereto (the "Stock Purchase
Agreement").
(d) Stock Purchase Price and Payment. The price per share of Stock
purchased by a Participant pursuant to a Stock Purchase shall be the price
determined by the Board in the exercise of its sole discretion and which is set
forth in the Participation Notice with regard to such Stock Purchase which is
delivered to the Participant (the "Stock Purchase Price"). The Stock Purchase
Price shall be paid by the Participant to the Company in a single payment on
the fifth (5th) anniversary of the date of execution of the Stock Purchase
Agreement. The obligation of payment of the Stock Purchase Price shall be
evidenced by the execution and delivery by the Participant to the Company,
simultaneous with the execution of the Stock Purchase Agreement, of a promissory
note which shall bear interest at the rate of eight percent (8%) from the date
of execution of the Stock Purchase Agreement until the fifth anniversary
thereof and the payment of the Stock Purchase Price in full by the Participant
to the Company, such promissory note to be substantially in the form of
Exhibit "D" hereof (the "Promissory Note"). The obligation of payment by the
Participant of the Stock Purchase Price, as set forth in the Stock Purchase
Agreement and as evidenced by the Promissory Note, shall be absolute,
unconditional and with recourse to the Participant, and shall be secured by a
pledge of the Stock comprising the Stock Purchase.
Upon the tender to the Company of full payment of the Stock Purchase
Price for the Stock purchased pursuant to the Stock Purchase Agreement in
accordance with the terms of the Promissory Note, and upon the provision by the
Participant to the Company of:
(i) such representations and documents of the Participant or any
other Person as the Company deems necessary or advisable in its
reasonably exercised discretion to effect compliance with all
applicable provisions of he Securities Act of 1993, as amended, and
any other applicable federal or state laws or regulations;
(ii) A certificate of the Participant certifying compliance with
the terms and conditions of this Plan; and
10
<PAGE> 11
(iii) the Stock Purchase Agreement,
the Company shall deliver to the Participant the stock certificate(s)
representing the Stock purchased pursuant to the Stock Purchase Agreement and
shall mark the Promissory Note "paid in full" and deliver same to Participant.
The Company may, in its reasonably exercised discretion, take whatever
additional actions it deems appropriate to comply with this Plan, including,
without limitation, placing restrictive legends on the stock certificate(s)
representing ownership of the Stock issued pursuant to the Stock Purchase
Agreement and this Plan.
(e) Forfeiture.
(i) The Stock purchased by a Participant pursuant to a Stock Purchase
Agreement shall be subject to optional forfeiture and repurchase by the
Company, in the exercise of the Board's discretion upon the occurrence of the
events described in subsections (e) (ii) or (iii) of this Section 9, prior to
payment in full of the Promissory Note and the completion of five (5) years of
continuous service by the Participant, beginning on the later to occur of
February 1, 1993, or the commencement of services with the Company, MSI or
Masada Security Limited Partnership as predecessor in interest to MSI, as the
case may be, by any Participant (the "Forfeiture Period"). The Stock purchased
by a Participant pursuant to a Stock Purchase Agreement shall become
incrementally non-forfeitable and not subject to repurchase by the Company,
subject to the further provisions of this subsection (e), based on such
Participant's years of service beginning on or after February 1, 1993 with the
Company, MSI or Masada Security Limited Partnership as predecessor in interest
to MSI, as the case may be, according to the following schedule:
Years of Service Percent Non-Forfeitable
---------------- -----------------------
less than 2 0%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
Upon completion of the Forfeiture Period with regard to any Purchased Stock,
the Purchased Stock shall be non-forfeitable to the Company, subject to the
provisions of this subsection (e).
(ii) Departure of Director During Forfeiture Period. If any
Director Participant ceases to serve as a Director of the Company during the
Forfeiture Period for any reason whatsoever, including but not limited to,
death, disability, voluntary resignation or removal, then the percentage of the
Purchased Stock which remains forfeitable pursuant to the schedule contained in
subsection (e)(i) of this Section 9 as of such date shall, at the option of the
Board exercisable in its sole discretion, be forfeited to and repurchased by
the Company in exchange for the cancellation by the Company of the obligation
of payment of that percentage of the Stock
11
<PAGE> 12
Purchase Price, including interest accrued thereon pursuant to the Promissory
Note, that is equal to the percentage of the Purchased Stock which is being
forfeited to and repurchased by the Company. Upon the forfeiture to and
repurchase by, the Company of a portion of the Stock comprising the Stock
Purchase, the stock certificate(s) representing that portion of the Stock
comprising the Stock Purchase shall be cancelled. In the event the Board shall
elect, in the exercise of its sole discretion, to cause the percentage of the
Purchased Stock remaining forfeitable to be forfeited to and repurchased by the
Company, the payment by the Participant for that percentage of the Purchased
Stock not forfeited to and repurchased by the Company pursuant to this
subsection (e) (ii) shall occur in accordance with subsection (d) of this
Section 9, and the purchase price therefor shall be that percentage of the
Stock Purchase Price, including interest accrued thereon pursuant to the
Promissory Note, which is equal to the percentage of the Stock comprising the
Stock Purchase not forfeited to and repurchased by the Company pursuant to this
subsection (e)(ii). In the event the Board shall not elect, in the exercise of
its sole discretion, to cause the forfeiture to and repurchase by the Company
pursuant to this subsection (e) (ii) of the percentage of the Purchased Stock
remaining forfeitable, the payment by the Participant for the Purchased Stock
shall occur in accordance with subsection (d) of this Section 9, and the
purchase price therefor shall be the Stock Purchase Price.
(iii) Termination of Employment During Forfeiture Period.
(A) Resignation or Termination for Cause. If any Employee
Participant shall, prior to the completion of the Forfeiture Period,
either resign from his or her employment with the Company or MSI, as
the case may be, or be terminated for "cause" (as defined herein) by
the Company or MSI, as the case may be, then the Purchased Stock
shall, at the option of the Board exercisable in its sole discretion,
be forfeited to and repurchased by the Company in exchange for the
cancellation by the Company of the obligation of payment of the Stock
Purchase Price, including all interest accrued thereon pursuant to
the Promissory Note as of the date of resignation or termination for
"cause". Upon the forfeiture to, and repurchase by, the Company of
the Stock comprising the Stock Purchase, the stock certificates
representing the Stock comprising the Stock Purchase shall be
cancelled. In the event the Board shall not elect, in the exercise of
its sole discretion, to cause the forfeiture to and repurchase by the
Company of the Purchased Stock pursuant to this subsection
(e)(iii)(A), the payment by the Participant for the Purchased Stock
shall occur in accordance with subsection (d) of this Section 9, and
the purchase price therefor shall be the Stock Purchase Price.
Termination for "cause' shall mean termination by reason of
insubordination, violation of Company or MSI written policies or
procedures, participation in conduct during employment consisting of
fraud, commission of a felony, willful misconduct, commission of any
act which causes or may reasonably be expected to cause substantial
damage to the Company or MSI, as the case may be, or for any other
reason constituting "cause" for termination under any applicable
employment agreement.
(B) Termination Upon Death, Disability, Retirement or Involuntary
Termination. If any Employee Participant's employment with the
Company or MSI, as the case may be, shall, prior to the completion of
the Forfeiture Period, be terminated as a result of such
12
<PAGE> 13
Employee Participant's death, disability (as determined by the Board),
retirement (as determined by the Board) or involuntary termination for any
reason other than for "cause" (as determined by the Board), then, at the option
of the Board exercisable in its sole discretion, the Purchased Stock shall be
forfeited to and repurchased by the Company in the following manner. The
percentage of the Purchased Stock which remains forfeitable pursuant to the
schedule contained in subsection (e)(i) of this Section 9 as of such date shall
be forfeited to and repurchased by the Company in exchange for the cancellation
by the Company of the obligation of payment of that percentage of the Stock
Purchase Price, including interest accrued thereon pursuant to the Promissory
Note, that is equal to the percentage of the Stock comprising the Stock
Purchase which remains forfeitable pursuant to the schedule contained in
subsection (e)(i) of this Section 9 as of such date. The percentage of the
Purchased Stock which has become non-forfeitable pursuant to the schedule
contained in subsection (e)(i) of this Section 9 as of such date shall be
forfeited to and repurchased by the Company in exchange for: (x) the
cancellation by the Company of the obligation of payment of that percentage of
the Stock Purchase Price, including interest accrued thereon pursuant to the
Promissory Note, that is equal to the percentage of the Stock comprising the
Stock Purchase which has become non-forfeitable pursuant to the schedule
contained in subsection (e)(i) of this Section 9 as of such date (the
"Cancellation Amount"); and (y) the payment by the Company to the Participant
of the difference between the Cancellation Amount and the fair market value (as
determined in accordance with Section 11 hereof) of the percentage of the Stock
comprising the Stock Purchase which has become non-forfeitable pursuant to the
schedule contained in subsection (c)(i) of this Section 9 as of such date (the
"Fair Market Value Difference"). The Cancellation Amount and the Fair Market
Value Difference shall be collectively referred to hereinafter as the "Fair
Market Value Amount". If within one year after payment of the Fair Market Value
Amount any securities comprising twenty percent (20%) or more of the Company's
common equity, assuming full dilution and complete conversion of all shares of
stock convertible into shares of any class of common stock of the Company, are
sold from its authorized and unissued shares or from its treasury or a
Reorganization Event (as defined in Section 14) occurs and the valuation of the
Company's common equity with reference to such transaction is greater than the
valuation of the Company's common equity used to determine the Fair Market
Value Amount, the Company shall forthwith pay to Participant the excess of the
Fair Market Value Amount determined with reference to the valuation applicable
to such transaction over the Fair Market Value Amount previously paid. Upon the
forfeiture to, and repurchase by, the Company of the Stock comprising the Stock
Purchase. the stock certificate(s) representing the Stock comprising the Stock
Purchase shall be cancelled. In the event the Board shall not elect, in the
exercise of its sole discretion, to cause the forfeiture to and purchase by the
Company of the Purchased Stock pursuant to this subsection (e)(iii)(B), the
payment by the Participant for the Purchased Stock shall occur in accordance
with subsection (d) of this Section 9, and the purchase price therefor shall be
the Stock Purchase Price.
13
<PAGE> 14
(iv) Failure to Pay Stock Purchase Price. In the event that any
Participant shall fail to pay the Stock Purchase Price to the Company in full
in accordance with subsection (d) or (e) of this Section 9, as applicable, then
the Company may exercise any and all remedies available in law or equity to
obtain full payment of the Stock Purchase Price pursuant to this subsection
(e)(iv) and in accordance with the Promissory Note.
(F) Issuance of Stock Certificates. Contemporaneous with the execution
by the Participant and the Company of the Stock Purchase Agreement, the
Company shall issue to the Participant the stock certificate(s) representing
the Stock comprising the Stock Purchase. As a result of the requirement that
the Stock comprising the Stock Purchase be pledged to the Company as
collateral security for the payment of the Stock Purchase Price, and because
of the possibility of forfeiture of the Stock comprising the Stock Purchase
pursuant to subsection (e) of this Section 9, simultaneous with the issuance
to the Participant of the stock certificate(s) representing the Stock
comprising the Stock Purchase, such stock certificate(s) shall be held by the
Company until such time as the requirements of Section 9(d) are fulfilled.
Section 10. Restrictions on Ownership of Stork.
In the event that stock certificates representing ownership of Stock shall be
delivered to a Participant pursuant to this Plan, whether pursuant to the
exercise of a Stock Option or on account of a Stock Purchase, the ownership of
the Stock shall at all times be subject to and restricted by the terms and
conditions set forth herein.
(a) The Stock has not been registered with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, or the so-called "blue
sky" securities laws of the several states and the rules and regulations issued
in respect thereto (collectively, the "Securities Laws'), and may not be
transferred or resold unless such transfer or resale does not violate the
Securities Laws. As such, no Stock may be assigned, pledged, conveyed, gifted
or otherwise disposed of, voluntarily or involuntarily, unless, prior to any
such conveyance or disposition, a Participant shall furnish to the Company an
opinion of counsel acceptable to the Company, at such Participant's expense,
that such conveyance or disposition is exempt from the registration
requirements of the Securities Laws, and unless such Participant shall comply
with the requirements of subsection (b) of this Section 10.
(b) In the event Participant shall desire to transfer, encumber, pledge,
assign, sell or otherwise dispose of (collectively, "Transfer") all or any
portion of any of the Stock acquired pursuant to this Plan and prior to such
time the Board, in the exercise of its discretion, shall not have caused the
Company to register the Stock under the Securities Laws, he or she may Transfer
the Stock only after offering the Stock to the Company in the following manner:
(i) Offer by Participant. The Participant shall serve written
notice upon the Board in the manner herein provided indicating that he
or she has received a bona fide offer for the sale of his or her
Stock, such notice stating the number of shares of Stock proposed
14
<PAGE> 15
to be Transferred, the name and address of the prospective purchaser, the sales
price per share of Stock and terms of payment (the "Offer Notice"). The Offer
Notice shall also contain an offer by the Participant to sell his or her Stock
to the Company at the price and upon the same terms and conditions offered by
such bona fide offeror.
(ii) Option of Company to Purchase Stock. For a period of thirty (30)
days after the receipt by the Company of the Offer Notice, the Company shall
have the right, option and priviledge (but not the duty) to redeem the Stock
offered in the Offer Notice, for the price and upon the terms and conditions
contained in the Offer Notice. Subject to provisions of subsection (b)(iii) of
this Section 10 the delivery of written notice by the Company to the Participant
electing to redeem the Stock (the "Acceptance Notice") shall create an
agreement between the Participant and the Company for the sale by the
Participant and the purchase by the Company of the Stock so offered in the
Offer Notice, at the purchase price and upon the terms contained in the Offer
Notice.
(iii) Participant's Duty to Sell. The Participant hereby agrees to sell to the
Company, all, but not less than all, the shares of Stock which are the subject
of this Section 10; provided, however, that the right and option of the Company
to purchase any such Stock and the Participant's obligation to sell any such
Stock are expressly conditioned upon the exercise of the option by the Company
in such manner as to obligate itself to purchase collectively all of such
shares of Stock.
(iv) Closing. The closing of the redemption of Stock by the Company pursuant
to this Section 10(b) shall take place on the thirtieth (30th) day following
the date the Acceptance Notice is delivered by the Company to the Participant.
The closing shall occur at the offices of the Company, and the exact time and
place of the Closing may be altered by the consent of the Participant and the
Company. At Closing:
(A) the Participant shall deliver the stock certificate(s) to the
Company, duly endorsed, representing all the Stock owned by the
Participant which was offered for sale in the Offer Notice, along
with a duly executed certificate representing that he or she has good
title to same, free and clear of any and all liens, claims and
encumbrances except for those described herein; and
(B) the Company shall tender the purchase price for the Stock upon
the terms and conditions contained in the Offer Notice, after offset
of any sums owed to the Company by the Participant, regardless of
whether any such indebtedness has then matured.
(v) Purchase of Stock by Third Party. In the event that the Company
shall not exercise the option so as to obligate itself to redeem all of the
stock offered by the Participant, the option granted to the Company pursuant to
this Section 10(b) shall be deemed not to have been exercised and the
Participant may thereafter Transer the Stock so offered to the person named in
the offer described in the Offer Notice at the price and
15
<PAGE> 16
upon the terms and conditions set forth in such Offer Notice;
provided, however, that the requirements of Section 10(a) are
fulfilled and provided further that such Transfer and disposition must
be made within sixty (60) days following the termination of the
Company's option. If the Transfer of Stock to a third party is not
consummated within such sixty (60) day period, the provisions and
restrictions of this Section 10 shall be automatically reinstated and
shall again apply to any proposed Transfer by the Participant of any
stock acquired pursuant to this Plan.
Section 11. Fair Market Value of Stock.
For purposes of this Plan, the "fair market value" of a share of the
Stock shall mean the fair market value thereof as determined by the Board based
upon such factors as the Board shall deem relevant and appropriate, and after
the consultation with the Company's chief financial officer. The "fair market
value" of a share of Stock determind in accordance with this Section 11 shall
be conclusive for the purposes of this Plan.
Section 12. Non-Transferability/Non-Alienation of Awards
(a) No award or any right arising therefrom or evidenced thereby
shall be transferable by any Participant in any manner other than by will or
the laws of descent and distribution, and, during the lifetime of a
Participant, only such Participant (or his or her court-appointed legal
representative) may exercise an Award.
(b) No right or benefit under this Plan shall be subject to
anticipation, alienation, sale, assignment, hypothecation, pledge, exchange,
transfer, encumbrance or charge, and any attempt to anticipate, alienate, sell,
assign, hypothecate, pledge, exchange, transfer, encumber or charge the same
shall be void. To the extent permitted by applicable law, no right or benefit
arising hereunder shall in any manner be subject to the debts, contracts,
liabilities or torts of the Person entitled to such benefits.
Section 13. Adjustment Upon Changes in Capitalization, Etc.
In the event of any stock split, reverse stock split, stock dividend
or reclassification, prior to the vesting and exercise of any Option or prior
to the payment in full of the Stock Purchase Price for any Stock purchased
pursuant to a Stock Purchase Agreement, such Award shall entitle the
Participant, upon the vesting and execise of the Option or the payment in fill
of the Stock Purchase Price, as the case may be, to receive in substitution of
the number of shares of Stock originally comprising the Option or the Stock
Purchase, as the case may be, such number and kind of shares of Stock as the
Participant would have been entitled to receive if the Participant had actually
owned the Stock originally subject to the Option or the Stock Purchase, as the
case may be, at the time of such occurence of such event.
16
<PAGE> 17
Section 14. Changes in Circumstances.
If prior to the full vesting and exercise of all Options and prior to
the payment in full of the Stock Purchase Price for any Stock purchased pursuant
to a Stock Purchase Agreement, the Company is merged or consolidated with
another entity and the Company shall not be the entity surviving such merger or
consolidation, or in the event that all or substantially all of the assets of
the Company are sold (collectively, a "Reorganization Event"), the following
shall occur. In the event the entity, which upon the occurrence of a
Reorganization Event either survives the Company as a result of a merger or
consolidation or is the purchaser of all or substantially all of the assets of
the Company, shall assume the obligations of the Company under this Plan as a
component of the Reorganization Event, the Company shall, as to any Participant
who is offered comparable employment (as determined in good faith by the Board)
by such successor entity and who accepts such employment, advance to the day
preceding the Reorganization Event, the dates upon which fifty percent (50%) of
the non-vested or forfeitable Stock comprising the applicable Option or Stock
Purchase, as the case may be, becomes vested and exercisable, or
non-forfeitable and eligible to be paid for in full, respectively. Any
Participant not offered comparable employment (as determined in good faith by
the Board) by the successor entity in a Reorganization Event shall have the
dates upon which all such Participant's Option's are vested and exercisable or
upon which the entirety of such Participant's Stock Purchase becomes
non-forfeitable and may be paid for in full, as the case may be, advanced to
the day preceding the Reorganization Event. Norwithstanding anything contained
in the Section 14 to the contrary, the Board, in its absolute discretion, may,
as to all Participants, regardless of whether the successor entity in a
Reorganization Event shall assume the obligations of the Company under this
Plan and regardless of whether such successor entity offers to employ any or
all Participants, advance the dates upon which Options are vested and
exercisable or upon which Stock purchased pursuant to a Stock Purchase
Agreement becomes non-forfeitable and may be paid for in full to the day
preceding the Reorganization Event.
Section 15. Purchase for Investment.
Each Participant shall be required to represent to the Company in
writing that such Participant is acquiring shares of Stock for investment and
not with a view to, or in connection with, a sale or distribution of any part
thereof.
Section 16. Effective Date and Term of Plan.
The effective date of this Plan shall be February 11, 1994, and the
term of this Plan, subject to the provisions of Section 17, shall be for a
period of ten (10) years, ending February 11, 2004. In no event shall any
Option or Stock Purchase be granted after February 11, 2004; provided however,
that any Option or Stock Purchase granted on or before February 11, 2004 shall
be governed by this Plan.
17
<PAGE> 18
Section 17. Termination and Amendment of Plan.
This Plan may be terminated or amended at any time by the Board;
provided however, no termination or modification of the Plan may adversely
affect the rights of any Participant with regard to an Option or Stock Purchase
that has previously been granted pursuant to this Plan.
Section 18. Government and Other Regulations.
The obligations of the Company with respect to Awards granted
pursuant to this Plan shall be subject to all applicable laws, rules and
regulations, including approvals acquired by any governmental agency.
Section 19. Withholding.
The Company's obligation to deliver Stock in respect of any Award
granted under this Plan shall be subject all applicable federal, state and
local tax withholding requirements.
Section 10. Non-Exclusivity of Plan.
The adoption of this Plan by the Board shall be not construed as
creating any limitation on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and awarding of capital stock of the Company other
than pursuant to this Plan.
Section 11. Governing Law.
This Plan shall be governed by, and shall be construed in accordance,
with the internal laws of the state of Delaware, without regard to its
provisions concerning conflicts of laws.
Section 22. Injunctive Relief.
It is understood that the Company will not have an adequate remedy at
law in the event any Participant breaches any of the terms and conditions
contained herein. In any such event, the Company shall have the right, in
addition to any other rights the Company may have, to obtain injunctive relief
to restrain any breach or threatened breach by any Participant or to obtain
specific performance of such terms and conditions.
18
<PAGE> 19
Section 23. Non-Recourse.
Notwithstanding anything contained in this Plan to the contrary, it is
understood that each and every covenant, undertaking, obligation and agreement
made or created herein or resulting here from by the Company or any member of
the Board is not made or intended to be made as a personal or individual
undertaking or agreement on the part of any past, present or future officer or
director of the Company, and no personal or individual liability or
responsibility is assumed by, nor shall any recourse at any time be asserted or
enforced against any such past, present or future officer or director of the
Company, and all such recourse (whether in common law, in equity, by statute or
otherwise), is hereby forever waived and released, the sole recourse being to
the assets and property of the Company.
This Stock Option/Purchase Plan is hereby enacted pursuant to the
authority of the Board of Directors of Masada Security Holdings, Inc. effective
the 11th day of February, 1994.
MASADA SECURITY HOLDINGS, INC.
By: /s/ Terry W. Johnson
---------------------------------
Terry W. Johnson
Its: President
19
<PAGE> 20
EXHIBIT "A"
Incentive Stock 0ption Agreement
This Incentive Stock Option Agreement (this "Agreement") is entered
into on this the ______ day of ______________, 199__, by and between Masada
Security Holdings, Inc., a Delaware corporation (the "Company"), and _________
("Optionee").
Recitals
Optionee was engaged by the Company as an employee effective as of
________________ 199__, as evidenced by that certain employment agreement by
and between the Company and Optionee dated _______________ 199__.
The Company has adopted a Stock Option/Purchase Plan dated February
11, 1994 for the purposes set forth therein (the "Plan").
Pursuant to the Plan, the Company has reserved a portion of its Class
B Common Stock for allocation in the form of incentive stock options to certain
employees of the Company and Masada Security, Inc., a Delaware close
corporation which is a wholly-owned subsidiary of the Company, and has adopted
the Plan to govern such incentive stock options as are granted by the Company.
The incentive stock options which may be granted by the Company are
intended to qualify as "incentive stock options" under the provisions of
Section 422 of the Internal Revenue Code of 1986, as amended.
The Company desires to award Optionee and Optionee desires to accept
from the Company, pursuant to the Plan and upon the terms and conditions set
forth therein, an incentive stock option to acquire Stock of the Company.
NOW THEREFORE, in consideration of the foregoing recitals and premises
and the mutual covenants and agreements hereinafter contained, and intending to
be legally bound, the Company and Optionee agree as follows:
Section 1. Grant of Incentive Stock Qption.
The Company hereby grants to Optionee, and Optionee hereby accepts
from the Company, an incentive stock option to acquire __________ (___) shares
of the Class B Common Stock of the Company (the "Stock") for the aggregate
price of ________________ Dollars (_____________ Dollars per share), pursuant
to the Plan and upon the terms and conditions set forth therein (the "Option").
The Company and Optionee acknowledge and agree that the Option shall be
governed and administered in all respects by the Plan, including, but not
limited to, the participation, vesting, exercise, restriction, termination,
forfeiture and ownership restrictions
1
<PAGE> 21
contained therein, and that the grant of the Option contained in this Agreement
contains the entire agreement between the Company and the Optionee concerning
the grant to Optionee of an incentive stock option to acquire Stock and
supersedes any and all other agreements by and between the Company and Optionee
concerning the grant to Optionee of an option to acquire Stock; provided,
however, the execution and delivery of this Agreement by the parties hereto
shall not terminate, revoke or rescind other agreement(s) between the parties
hereto to the extent that such agreement(s) are not inconsistent with the Plan
and this Agreement, and such other agreements shall remain in all such respects
in full force and effect on the parties hereto in accordance with their terms.
Section 2. Effective Date of Option.
The effective date of the grant of the Option is _____________,
19__.
Section 3. Option Period.
(a) Optionee hereby acknowledges that the Option expires ten
(10) years after the effective date of the grant of the Option, and may not be
exercised subsequent to such date.
(b) The tax treatment available pursuant to Section 422 of the
Internal Revenue Code of 1986, as amended, upon the exercise of an incentive
stock option will not be available to Optionee if the Option is exercised more
than: (i) twelve (12) months after the date of termination of employment as a
result of disability or (ii) three (3) months after the date of termination of
employment as a result of death, retirement or involuntary termination for any
reason other than for "cause".
Section 4. Compliance with Plan.
Optionee hereby acknowledges receipt of a true and complete photocopy
of the Plan, and Optionee agrees that [he/she] shall comply with the Plan at
all times and in all respects with regard to the Option hereby awarded to
Optionee.
Section 5. Capitalized Terms.
Except as specifically defined otherwise in this Agreement
capitalized terms used herein shall have the meanings ascribed to such terms in
the Plan.
Section 6. No Employment Contract.
This Agreement and the Plan shall not together or separately be
construed as constituting an employment agreement between the Company and
Optionee, and unless Optionee's employment is subject to a separate written
employment contract, such employment is terminable at will by the Company.
<PAGE> 22
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized representative and Optionee has hereunto set
his or her hand and seal, on the day and year first above written.
MASADA SECURITY HOLDINGS, INC.
BY:
-------------------------
Its
------------------------
WITNESS:
----------------------------
- ------------------------- OPTIONEE
3
<PAGE> 23
EXHIBIT "B"
Stock Option Agreement
This Stock Option Agreement (this "Agreement") is entered into on
this the_______ day of 199__, by and between Masada Security Holdings, Inc., a
Delaware corporation (the "Company"), and ("Optionee").
Recitals
Optionee was____________________ [engaged by the Company/elected by
the stockholders] as__________________ [an employee/a member of the board of
directors of the Company] effective as of______________, 199_. [as evidenced
by that certain employment agreement by and between the Company and Optionee
dated __________, 199_.]
The Company has adopted a Stock Option/Purchase Plan dated February
11, 1994 for the purposes set forth therein (the "Plan").
Pursuant to the Plan, the Company has reserved a portion of its
Class B Common Stock for allocation in the form of stock options to certain
officers, directors and employees of the Company, and to certain officers and
employees of Masada Security, Inc., a Delaware close corporation which is a
wholly-owned subsidiary of the Company, and has adopted the Plan to govern
such stock options as are granted by the Company.
The stock options which may be granted by the Company are not intended
to qualify as "incentive stock options" under the provisions to Section 422 of
the Internal Revenue Code of 1986, as amended.
The Company desires to award Optionee and Optionee desires to accept
from the Company, pursuant to the Plan and upon the terms and conditions set
forth therein, an option to acquire Stock of the Company.
NOW THEREFORE, in consideration of the foregoing recitals and premises
and the mutual covenants and agreements hereinafter contained, and intending
to be legally bound, the Company and Optionee agree as follows:
Section 1. Grant of Option.
The Company hereby grants to Optionee, and Optionee hereby accepts
from the Company, an option to acquire _____________ (_) shares of the Class B
Common Stock of the Company (the "Stock") for the aggregate price of __________
Dollars (______________ Dollars per share), pursuant to the Plan and upon the
terms and conditions set forth therein (the "Option"). The Company and Optionee
acknowledge and agree that the Option
<PAGE> 24
shall be governed and administered in all respects by the Plan, including, but
not limited to, the participation, vesting, exercise, restriction,
termination, forfeiture and ownership restrictions contained therein, and that
the grant of the Option contained in this Agreement contains the entire
agreement between the Company and the Optionee concerning the grant to Optionee
of an option to acquire Stock and supersedes any and all other agreements by
and between the Company and Optionee concerning the grant to Optionee of an
option to acquire Stock; provided, however, the execution and delivery of this
Agreement by the parties hereto shall not terminate, revoke or rescind other
agreement(s) between the parties hereto to the extent that such agreement(s)
are not inconsistent with the Plan and this Agreement, and such other
agreements shall remain in all such respects in full force and effect on the
parties hereto in accordance with their terms.
Section 2. Effective Date of Option.
The effective date of the grant of the Option is _________, 19__.
Section 3. Option Period. Optionee hereby acknowledges that the Option
expires ten (10) years after the effective date of the grant of the Option, and
may not be exercised subsequent to such date.
Section 4. Compliance with Plan.
Optionee hereby acknowledges receipt of a true and complete photocopy
of the Plan, and Optionee agrees that [he/she] shall comply with the Plan at
all times and in all respects with regard to the Option hereby awarded to
Optionee.
Section 5. Capitalized Terms.
Except as specifically defined otherwise in this Agreement,
capitalized terms used herein shall have the meanings ascribed to such terms in
the Plan.
Section 6. No Employment Contract [FOR EMPLOYEES ONLY].
This Agreement and the Plan shall not together or separately be
construed as constituting an employment agreement between the Company and
Optionee, and unless Optionee's employment is subject to a separate written
employment contract, such employment is terminable at will by the Company.
<PAGE> 25
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized representative and Optionee has hereunto set
his or her hand and seal, on the day and year first above written.
MASADA SECURITY HOLDINGS, INC.
BY:
-----------------------------
Its
-----------------------------
WITNESS:
--------------------------------
- -------------------------- OPTIONEE
3
<PAGE> 26
EXHIBIT "C"
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") entered into on
this the _________ day of______, 199___, by and between Masada Security
Holdings, Inc., a Delaware corporation (the "Company"), and ("Purchaser").
RECITALS
Purchaser was ___________________ [engaged by the Company/elected by
the stockholders] as _____________ [an employee/a member of the board of
directors of the Company] effective as of__________________, 199__. [, as
evidenced by that certain employment agreement by and between the Company and
Purchaser dated ______________________, 19__.]
The Company has adopted a Stock Option/Purchase Plan dated February
11, 1994 for the purposes set forth therein (the "Plan").
Pursuant to the Plan, the Company has reserved a portion of its
Class B Common Stock for allocation in the form of stock purchases by certain
officers, directors and employees of the Company, and by certain officers and
employees of Masada Security, Inc., a Delaware close corporation which is a
wholly-owned subsidiary of the Company, and has adopted the Plan to govern
such stock purchases as are granted by the Company.
The Company desires to sell to Purchaser and Purchaser desires to
purchase from the Company, pursuant to the Plan and upon the terms and
conditions set forth therein, shares of Stock of the Company.
NOW THEREFORE, in consideration of the foregoing recitals and
premises and the mutual covenants and agreements hereinafter contained,
and intending to be legally bound, the Company and Purchaser hereby agree
as follows:
Section 1. Purchase of Stock.
The Company hereby sells, assigns, transfers and conveys to Purchaser,
and Purchaser hereby purchases from the Company,_________________ (________)
shares of the Class B Common Stock of the Company (the "Stock") for the
aggregate price of _____________ Dollars (________ Dollars per share), pursuant
to the Plan and upon the terms and conditions set forth therein. The Company
and Purchaser acknowledge and agree
<PAGE> 27
that the purchase of Stock by Purchaser shall be governed and administered in
all respects by the Plan, including, but not limited to, the participation,
restriction, termination, forfeiture and ownership restrictions contained
therein, and that the Agreement contained herein with regard to the purchase of
the Stock contains the entire agreement between the Company and Purchaser
concerning the purchase by Purchaser of Stock and supersedes any and all other
agreements by and between the Company and Purchaser concerning the purchase of
Stock; provided, however, the execution and delivery of this Agreement by the
parties hereto shall not terminate, revoke or rescind other agreement(s)
between the parties hereto to the extent that such agreement(s) are not
inconsistent with the Plan and this Agreement, and such other agreements shall
remain in all respects in full force and effect on the parties hereto in
accordance with their terms.
Section 2. Effective Date of Purchase.
The effective date of the purchase of the Stock is______________, 19_.
Section 3. Payment of Purchase Price. Purchaser hereby agrees to pay
the purchase price for the Stock in accordance with the terms of the Plan and
that certain promissory note of even date herewith executed by Purchaser to
evidence the obligation of payment of the purchase price.
Section 4. Compliance with Plan.
Purchaser hereby acknowledges receipt of a true and complete photocopy
of the Plan, and Purchaser agrees that [he/she] shall comply with the Plan at
all times and in all respects with regard to the purchase of Stock described
herein.
Section 5. Pledge of Stock.
Purchaser hereby pledges, delivers, transfers, assigns and conveys to
the Company, and grants to the Company a continuing security interest in, all
of Purchaser's rights, title and interest in and to the Stock, and all proceeds
thereof, until payment in full of the purchase price for the Stock and until
such time as the Purchaser shall fully comply with all the terms of the Plan
applicable to the purchase of the Stock.
Section 6. Power of Attorney.
Purchaser does hereby irrevocably constitute and appoint the Company
as his/her lawful attorney to carry out the provisions of Section 9 of the Plan
on his/her behalf and in his/her stead. In so doing, said attorney-in-fact may
assign, endorse, cancel and transfer all or any part of the Stock issued to
Purchaser, and take all necessary acts of assignment, endorsement, cancellation
and transfer, with regard to all or any part of the Stock issued to Purchaser.
Such power of attorney, being coupled with an interest, shall survive the death
or incapacity of Purchaser.
<PAGE> 28
Section 7. Capitalized Terms.
Except as specifically defined otherwise in this Agreement,
capitalized terms used herein shall have the meanings ascribed to such terms in
the Plan.
Section 8. No Employment Contract [FOR EMPLOYEES ONLY].
This Agreement and the Plan shall not together or separately be
construed as constituting an employment agreement between the Company and
Purchaser, and unless Purchaser's employment is subject to a separate written
employment contract, such employment is terminable at will by the Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized representative and Purchaser has hereunto set
his or her hand and seal, on the day and year first above written.
MASADA SECURITY HOLDINGS, INC.
BY:
-----------------------------------
Its
----------------------------------
WITNESS:
--------------------------------------
- --------------------------- PURCHASER
3
<PAGE> 29
EXHIBIT "D"
Promissory Note
$_____________________ ___________________ ___,19__
FOR VALUE RECEIVED, the undersigned __________________ ("Maker") hereby
promises to pay to the order of Masada Security Holdings, Inc., a Delaware
corporation ("Holder") at 950 22nd Street North, Suite 800, Birmingham, Alabama
35203, or such other place as the Holder may from time to time designate, the
principal sum of ______ Dollars ($_______), together with interest on the
outstanding balance hereof accruing as of the date of execution of this
Promissory Note (this "Note"), at the rate and upon the terms specified in
this Note.
Section 1. Maturity Date. All expenses, principal and interest
remaining unpaid under this Note are due and payable on the first to occur of
either (i) the day of which this Note is accelerated as a result of an Event of
Default, as set forth in Section 5 hereof, or (ii)________________, __________.
Section 2. Interest Rate. The interest on the outstanding balance of
this Note shall be compounded annually on the basis of a 365-day year and shall
accrue at the rate of _________ percent(______%).
Section 3. Payment. Payment pursuant to the terms and conditions of
this Note shall be made in one installment on the fifth anniversary of the date
of execution hereof in such amount as is necessary to extinguish the unpaid
principal balance of this Note and all accrued interest thereon.
Section 4. Security. The obligations under this Note are secured by
the pledge of ___ shares of the Class B common stock of Holder issued in the
name of Maker pursuant to the terms of the Stock Option/Purchase Plan of
Holder (the "Plan") and the Stock Purchase Agreement by and between Maker and
Holder of even date herewith (the "Stock Purchase Agreement").
Section 5. Events of Default. If any of the following events shall
occur before the full and complete satisfaction of this Note (each of which is
herein sometimes called an "Event of Default"):
(a) Default in the payment of any principal or interest
due under this Note more than ten (10) days after the day when the same shall
become due and payable; or
1
<PAGE> 30
(b) Any violation or default in the observance or
performance by Maker of any term, agreement, covenant, condition or stipulation
contained or referred to in the Plan or the Stock Purchase Agreement;
then, at the election of Holder, the indebtedness evidence by this Note shall
become immediately due and payable, both as to interest and principal, without
notice or additional periods of grace, all of which are specifically waived,
and Holder may proceed to protect and enforce its rights by action at law, suit
in equity or other appropriate proceeding.
Section 6. Cost of Collection. The undersigned further promises to
pay reasonable attorneys' fees in the event that this Note is referred to an
attorney for collection, together with court costs incurred in maintaining any
action for the collection hereof.
Section 7. Legal Tender. The sum due hereunder is payable in coin or
currency of the United States of American as at the time payment shall be legal
tender for the payment of public and private debts.
Section 8. Modification. The terms of this Note shall not be varied,
altered or modified by course of dealing, conduct or custom, but only by
writing signed by the Holder.
Section 9. Prepayments. The obligations evidenced by this Note may be
prepaid, in whole or in part, without penalty or fee.
Section 10. Obligations Absolute. The obligations of the undersigned
under this Note are absolute and unconditional and shall not be subject to any
counter-claim, recoupment, set-off reduction or defense based on any claim that
the undersigned may have against Holder or any other person.
Section 11. Waiver. The undersigned hereby waives presentment for
payment, protest, notice of protest and notice of nonpayment of this Note, and
consents that the Holder hereof may from time to time extend the time for
payment or excuse compliance with any covenant or agreement herein contained
without waiving any rights hereunder. The undersigned hereby waives all rights
of exemption of property from levy or sale under execution or other process for
the collection of debts under the Constitution or laws of the United States or
of any state thereof.
Section 12. Time of Essence. Time is of the essence with respect to
each and every term of this Note.
- ------------------------------ ---------------------------------
WITNESS MAKER
2
<PAGE> 31
STOCK OPTION/PURCHASE PLAN OF MASADA SECURITY HOLDINGS, INC.
INCENTIVE STOCK OPTION
EXAMPLE
Set forth below is an illustration of the tax consequences applicable
to an Incentive Stock Option ("ISO") granted under the above-captioned Stock
Option/Purchase Plan (the "Plan"). The example set forth below assumes that the
ISO is granted on January 1, 1995, the fair market value of the stock subject
to the ISO is $24 per share on January 11, 1995, the participant continues
employment on an uninterrupted basis for at least 5 years beginning on January
1, 1995, the participant is eligible to receive an ISO under the Plan and that
the ISO fully vests and is exercised pursuant to the Plan. THE EXAMPLE SET
FORTH BELOW IS PROVIDED FOR PURPOSES OF ILLUSTRATION ONLY, AND IS NOT INTENDED
TO CONSTITUTE TAX OR LEGAL ADVICE. ANY RECIPIENT OF AN ISO IS ENCOURAGED TO
SEEK THE ADVICE OF HIS OR HER ACCOUNTANT AND/OR LEGAL COUNSEL WITH REGARD TO
SAME. THE ILLUSTRATIONS PROVIDED ARE SUBJECT TO ANY CHANGES IN THE INTERNAL
REVENUE CODE AND THE REGULATIONS PROMULGATED THEREUNDER SUBSEQUENT TO THE
ADOPTION OF THE PLAN, ARE NOT NECESSARILY INDICATIVE OF ACTUAL TAX RESULTS
WHICH MAY BE OBTAINED BY ANY PARTICIPANT AND ARE NOT BINDING UPON THE INTERNAL
REVENUE SERVICE IN ITS INTERPRETATION AND IMPLEMENTATION OF THE TAX LAWS.
1. date of grant - January 1, 1995
2. number of shares of stock comprising ISO - 1,000
3. f.m.v. of share of stock on January 1, 1995 - $24
4. vesting and exercise date - December 31, 1999
5. f.m.v. of a share of stock on December 31, 1999 - $35
On January 1, 1995, the participant is granted an ISO to acquire 1,000
shares of stock for $24 a share. The participant does not recognize any taxable
income at the time of grant of the ISO. On December 31, 1999, the participant
exercises the ISO by paying the exercise price of $24,000 and otherwise
complying with the exercise procedures in the Plan, and receives the stock. At
this time the participant does not recognize any taxable income. If the
participant disposes of the ISO stock after completion of the 2 year holding
period mandated by the IRS from the date of exercise of the ISO, the
participant will recognize as capital gains income the difference between the
dollar amount received in such disposition over his basis in the ISO stock
($24,000).
Alternatively, if the participant disposes of the ISO stock before the
2 year holding period mandated by the IRS expires, the participant must
recognize as ordinary compensation income the difference between the ISO
stock's f.m.v. at the time of option exercise and the ISO exercise price. The
participant will also recognize, as capital gains income, the difference
between the total dollar amount received in such disposition over the basis in
the ISO stock, which is the sum of the exercise price plus the additional
ordinary compensation amount recognized.
1
<PAGE> 32
Assuming the ISO stock is disposed of by the participant on January 1,
2002, for the price of $40 per share, the participant will recognize as capital
gains income the amount of $16,000, which is the difference between the dollar
amount received in the disposition, $40,000 ($40 per share x 1000 shares), and
the basis in the ISO stock, $24,000 ($24 per share x 1,000 shares).
Assuming the ISO stock is disposed of by the participant on December
15, 2001, for the price of $40 per share, the participant will recognize as
ordinary compensation income the amount of $11,000, which is the difference
between the ISO stock's f.m.v. at the time of option exercise $35,000 ($35 per
share x 1,000 shares) and the ISO exercise price, $24,000 ($24 per share x 1000
shares). The participant will also recognize as capital gains income $5,000,
the difference between the dollar amount received in the disposition, $40,000
($40 per share x 1,000 shares), and the basis in the ISO stock, $35,000, which
is the sum of the exercise price, $24,000, plus the additional ordinary
compensation amount recognized, $11,000.
Total cost to participant $24,000 exercise price
-------------------------------------------
Sale on or after January 1, 2002
Total gain to participant $16.000 taxable as capital
(assuming 2 year holding ======= gain income
period observed)
Sale before January 1, 2002
Gain to participant $11,000 taxable as ordinary
(holding period not observed) income
$ 5,000 taxable as capital gains
------- income
Total $16,000
=======
2
<PAGE> 33
STOCK OPTION/PURCHASE PLAN OF MASADA SECURITY HOLDINGS, INC.
STOCK OPTION
EXAMPLE
Set forth below is an illustration of the tax consequences applicable
to a Stock Option ("SO") granted under the above-captioned Stock
Option/Purchase Plan the ("Plan"). The example set forth below assumes that the
SO is granted on January 1, 1995, the fair market value of the stock subject
to the SO is $24 per share on January 1, 1995, the participant continues
employment on an uninterrupted basis for at least 5 years beginning on January
1, 1995, the participant is eligible to receive a SO under the Plan and that
the SO fully vests and is exercised pursuant to the Plan. THE EXAMPLE SET
FORTH BELOW IS PROVIDED FOR PURPOSES OF ILLUSTRATION ONLY, AND IS NOT INTENDED
TO CONSTITUTE TAX OR LEGAL ADVICE. ANY RECIPIENT OF A SO IS ENCOURAGED TO SEEK
THE ADVICE OF HIS OR HER ACCOUNTANT AND/OR LEGAL COUNSEL WITH REGARD TO SAME.
THE ILLUSTRATIONS PROVIDED ARE SUBJECT TO ANY CHANGES IN THE INTERNAL REVENUE
CODE AND THE REGULATIONS PROMULGATED THEREUNDER SUBSEQUENT TO THE ADOPTION OF
THE PLAN, ARE NOT NECESSARILY INDICATIVE OF ACTUAL TAX RESULTS WHICH MAY BE
OBTAINED BY ANY PARTICIPANT AND ARE NOT BINDING UPON THE INTERNAL REVENUE
SERVICE IN ITS INTERPRETATION AND IMPLEMENTATION OF THE TAX LAWS.
<TABLE>
<S> <C>
1. date of grant - January 1, 1995
2. number of shares of stock comprising SO - 1,000
3. f.m.v. of a share of stock on January 1, 1995 - $24
4. vesting and exercise date - December 31, 1999
5. f.m.v. of a share of stock on December 31, 1999 - $35
</TABLE>
On January 1, 1995, the participant is granted a SO to acquire 1,000
shares of stock for $1 a share. The participant does not recognize any taxable
income at the time of grant of the SO. On December 31, 1999, the participant
exercises the SO by paying the exercise price of $1,000 and otherwise complying
with the exercise procedures in the Plan, and receives the stock. Upon
exercise, the participant will recognize as ordinary compensation income
$34,000, which is the difference between the SO stock's f.m.v. at the time of
option exercise, $35,000 ($35 per share x 1,000 shares) and the SO exercise
price, $1,000 ($1 per share x 1,000 shares).
The holding period to determine long term capital gain treatment
begins on the date of exercise, in this example, December 31, 1999.
Consequently, assuming the SO stock is disposed of by the participant on
December 15, 2001, for the price of $40 per share, the participant will
recognize as captial gains income, $5,000, the difference between the dollar
amount received in the disposition, $40,000 ($40 per share x 1,000 shares), and
the basis in the SO stock, $35,000, which is the sum of the exercise price,
$1,000, plus the additional ordinary compensation amount previously recognized,
$34,000. The participant could wait until he wishes to sell the SO stock to
exercise, in which case all gain would be taxed as ordinary.
1
<PAGE> 34
compensation income.
Total cost to participant $ 1,000 exercise price
- ---------------------------------------------
Gain to participant $34,000 taxable as ordinary income
$ 5,000 taxable as capital gain
------- income
Total Gain $39,000
=======
2
<PAGE> 35
STOCK OPTION/PURCHASE PLAN OF MASADA SECURITY HOLDINGS, INC.
STOCK PURCHASE
EXAMPLE
Set forth below is an illustration of the tax consequences applicable
to a Stock Purchase ("SP") granted under the above-captioned Stock
Option/Purchase Plan (the "Plan"). The example set forth below assumes that the
SP occurs on January 1, 1995 and the stock is purchased for $1 per share,
the fair market value of the stock subject to the SP is $24 per share on
January 1, 1995, the participant continues employment on an uninterrupted
basis for at least 5 years beginning on January 1, 1995, and that the SP
becomes completely non-forfeitable at the end of the five-year period. THE
EXAMPLE SET FORTH BELOW IS PROVIDED FOR PURPOSES OF ILLUSTRATION ONLY, AND IS
NOT INTENDED TO CONSTITUTE TAX OR LEGAL ADVICE. ANY RECIPIENT OF A SP IS
ENCOURAGED TO SEEK THE ADVICE OF HIS OR HER ACCOUNTANT AND/OR LEGAL COUNSEL
WITH REGARD TO SAME. THE ILLUSTRATIONS PROVIDED ARE SUBJECT TO ANY CHANGES IN
THE INTERNAL REVENUE CODE AND THE REGULATIONS PROMULGATED THEREUNDER
SUBSEQUENT TO THE ADOPTION OF THE PLAN, ARE NOT NECESSARILY INDICATIVE OF
ACTUAL TAX RESULTS WHICH MAY BE OBTAINED BY ANY PARTICIPANT AND ARE NOT
BINDING UPON THE INTERNAL REVENUE SERVICE IN ITS INTERPRETATION AND
IMPLEMENTATION OF THE TAX LAWS.
1. date of SP - January 1, 1995
2. number of shares of stock comprising SP - 1,000
3. f.m.v. of a share of stock on January 1, 1995 - $24
4. non-forfeitable date - December 31, 1999
5. f.m.v. of a share of stock on December 31, 1999 - $35
Assuming the stock comprising the SP is purchased by the participant
for $1 a share, and the participant does not file an 83(b) election within 30
days of the grant of the SP, the participant will not recognize any taxable
income until the time the SP becomes non-forfeitable on December 31, 1999. At
this time the participant will recognize as ordinary compensation income the
amount of $34,000, which is the difference between the f.m.v. of the stock
comprising the SP as of December 31, 1999, $35,000 ($35 per share x 1,000
shares) and the SP price paid, $1,000 ($1 per share x 1,000 shares). Upon a
subsequent disposition of the stock comprising the SP on December 15, 2001, for
the price of $40 per share, the participant will recognize as capital gains
income, $5,000, the difference between the total dollar amount received is such
disposition, $40,000 ($40 per share x 1,000 shares) over the basis in the stock
comprising the SP, which is the sum of the purchase price, $1,000, plus the
additional ordinary compensation amount recognized, $34,000.
Assuming the stock comprising the SP is purchased by the participant
for $1 a share, and the participant does file an 83(b) election within 30 days
of the grant of the SP, the participant will recognizes as ordinary
compensation income at the time of the grant of the SP, $23,000, which is the
difference between the f.m.v. of the stock comprising the SP at the time of
grant, $24,000 ($24 per shares x 1,000 shares) and the SP price to be paid,
$1,000 ($1 per share x 1,000 shares). The participant will not recognize any
taxable income at the time the SP becomes
1
<PAGE> 36
non-forfeitable on December 31, 1999. Upon a susequent disposition of the stock
comprising the SP on December 15, 2001, for the price of $40 per share, the
participant will recognize as capital gains income, $16,000, which is the
difference between the total dollar amount received in such disposition,
$40,000 ($40 per share x 1,000 shares) over the basis in the stock comprising
the SP, $24,000, which is the sum of purchase price $1,000 plus the additional
ordinary compensation amount recognized, $23,000.
Total cost to participant $ 1,000 purchase price
- ------------------------------------------------------
Gain to participant $ 34,000 taxable as ordinary
(assuming no 83(b) election) income
$ 5,000 taxable as capital
--------- gains income
Total $ 39,000
=========
Gain to participant $ 23,000 taxable as ordinary
(assuming 83(b) election) income
$ 16,000 taxable as capital
--------- gains income
Total $ 39,000
=========
2
<PAGE> 37
FIRST AMENDMENT TO STOCK OPTION/PURCHASE
PLAN OF MASADA SECURITY HOLDINGS, INC.
The Stock Option/Purchase Plan of Masada Security Holdings, Inc.
adopted in 1994 is hereby amended as follows:
1. The last subsection of Section 6, which is entitled "Maximum
Amount of Incentive Stock Option Award" and which is incorrectly labeled as
subsection (g), is hereby amended and restated as follows:
(h) Maximum Amount of Incentive Stock Option Award. Except
as provided below, the Board shall not grant an Incentive Stock Option
to, or modify the exercise provisions of outstanding Incentive Stock
Options held by, any Employee Participant who, at the time the Incentive
Stock Option is granted (or modified), would thereby receive or hold any
Incentive Stock Options of the Company such that the aggregate "fair
market value" (determined as of the respective dates of grant or
modification of each option) of the Stock with respect to which such
Incentive Stock Options are exercisable for the first time during any
calendar year is in excess of $100,000 (or such other limit as may be
prescribed by the Code from time to time); provided that the foregoing
restriction on modification of outstanding Incentive Stock Options shall
not preclude the Board from modifying an outstanding Incentive Stock
Option if, as a result of such modification and with the consent of the
Employment Participant, such Option no longer constitutes an Incentive
Stock Option; and provided that, if the $100,000 limitation (or such
other limitation prescribed by the Code) described in this Section 6(h)
is exceeded, the Incentive Stock Option, the granting or modification
of which resulted in the exceeding of such limit, shall be treated as
an Incentive Stock Option up to the limitation and the excess shall be
treated as a Stock Option.
2. Section 14 is hereby amended and restated in its entirety as
follows:
Section 14. Change in Circumstances.
If prior to the full vesting and exercise of all Options and
prior to the payment in full of the Stock Purchase Price for any Stock
purchased pursuant to a Stock Purchase Agreement, the Company is acquired
by a third party (the "Acquiror"), whether by means of a merger or
consolidation in which the Company does not survive, the sale of all or
substantially all of the assets of the Company or MSI, or the sale of at
least 80% of the shares of capital stock of the Company (each, a
"Reorganization Event"), the following shall occur: (a) in the event the
Acquiror shall assume the obligations of the Company under this Plan as
a component of the Reorganization Event, the Company shall, as to any
Participant who is offered comparable employment (as determined in good
faith by the Board) by the Acquiror or its affiliates and who accepts
such employment, advance to the day preceding the Reorganization Event
the dates upon which fifty percent (50%) of the non-vested or forfeitable
Stock comprising the applicable Option or Stock Purchase, as the case may
be, becomes vested and exercisable, or non-forfeitable and eligible to be
paid for in full, respectively; (b) any Participant not offered
comparable employment (as determined in good faith by the Board) by the
Acquiror or its affiliates in a Reorganization Event shall have the dates
upon which all such Participant's Option's are vested and exercisable or
upon which the entirety of such Participant's Stock Purchase becomes
non-forfeitable and may be paid for in full, as the case may be, advanced
to the day preceding the Reorganization Event; and (c) notwithstanding
anything contained in this Section 14 to the contrary, the Board, in its
absolute discretion, may, as to all Participants, regardless of whether
the Acquiror in a Reorganization Event shall assume the obligations of
the Company under this Plan and regardless of whether such Acquiror or
its affiliates offers to employ any or all Participants, advance the
dates upon which Options are vested and exercisable or upon which Stock
purchased pursuant to a Stock Purchase Agreement becomes non-forfeitable
and may be paid for in full to the day preceding the Reorganization Event.
This First Amendment was approved by the Masada Security Holdings, Inc. Board
of Directors on April _, 1996.
-----------------------------------------------
Cathy Antee, Secretary
<PAGE> 38
SECOND AMENDMENT TO THE STOCK OPTION/PURCHASE PLAN
OF MASADA SECURITY HOLDINGS, INC.
The Stock Option/Purchase Plan of Masada Security Holdings, Inc.
adopted in 1994, and amended in April 1996 (the "Plan"), is hereby further
amended as follows:
1. The definition of the term "Stock" set forth in Section 1 of the
Plan is hereby amended and restated in its entirety as follows:
"Stock" shall mean both the authorized but unissued shares of
the Common Stock, $.01 par value per share, of the Company and the shares
of the Common Stock, $.01 par value per share, of the Company held in the
Company's treasury.
2. The definition of the term "Employee" set forth in Section 1
of the Plan is hereby amended and restated in its entirety as follows:
"Employee" shall mean any employee, including any officer, of the
Company or any Subsidiary of the Company, whether such employee is
employed at the time this Plan is adopted or becomes employed subsequent
to the adoption and prior to the termination of this Plan. Any and all
language contained in the Plan which is inconsistent with this definition
of Employee shall be and hereby is amended and shall be interpreted so as
to be consistent with this amended and restated definition of Employee.
3. Section 1 of the Plan is hereby amended by adding the following
definition:
"Subsidiary" shall mean any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if, at the
time of the grant of the Award, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
4. Section 4 of the Plan, which is entitled "Stock Subject to
Plan," is hereby amended and restated in its entirety as follows:
Section 4. Stock Subject to Plan.
Subject to the adjustment provisions of Section 13 hereof, a total of
three hundred thousand (300,000) shares of Stock shall be subject to
Options and Stock Purchases under this Plan. If, and to the extent that,
any Option or Stock Purchase granted under this Plan shall terminate,
expire or be forfeited or cancelled for any reason whatsoever, including,
but not limited to the expiration of any Option term without an Option
being exercised by the applicable Participant in accordance with the
provisions hereof or the forfeiture of any Stock Purchase, new Options or
Stock Purchases, as the case may be, may be granted in respect of the
shares of Stock covered by such terminated, expired, forfeited or cancelled
Option or Stock Purchase, pursuant to the provisions of this Plan. Stock
issued to a Participant upon the exercise of any Option or upon any Stock
Purchase under this Plan may be shares
<PAGE> 39
of authorized and unissued Stock, shares of Stock held in the
Company's treasury, or a combination of the foregoing. There shall be
reserved at all times for conveyance under this Plan a number of
shares of Stock, of either authorized and unissued shares of Stock,
shares of Stock held in the Company's treasury, or a combination of
the foregoing, equal to the maximum number of shares of Stock which
may be issued in the form of Options and Stock Purchases under the
provisions of this Plan.
5. Section 1 of the Incentive Stock Option Agreement, which is
Exhibit A to the Plan, is hereby amended and restated in its entirety as
follows:
Section 1. Grant of Incentive Stock Option.
The Company hereby grants to Optionee, and Optionee hereby
accepts from the Company, an incentive stock option to acquire ______
(__) shares of the Common Stock of the Company (the "Stock") for the
aggregate price of ______ Dollars (______ Dollars per share),
pursuant to the Plan and upon the terms and conditions set forth
therein (the "Option"). The Company and Optionee acknowledge and
agree that the Option shall be governed and administered in all
respects by the Plan, including, but not limited to, the
participation, vesting, exercise, restriction, termination,
forfeiture and ownership restrictions contained therein,
and the grant of the Option contained in this Agreement contains the
entire agreement between the Company and the Optionee concerning the
grant to Optionee of an incentive stock option to acquire Stock and
supersedes any and all other agreements by and between the Company and
Optionee concerning the grant to Optionee of an option to acquire
Stock; provided, however, the execution and delivery of this Agreement
by the parties hereto shall not terminate, revoke or rescind other
agreement(s) between the parties hereto to the extent that such
agreement(s) are not inconsistent with the Plan and this Agreement, and
such other agreements shall remain in all such respects in full force
and effect on the parties hereto in accordance with their terms.
6. Section 1 of the Stock Option Agreement, which is Exhibit B to
the Plan, is hereby amended and restated in its entirety as follows:
Section 1. Grant of Option.
The Company hereby grants to Optionee, and Optionee hereby
accepts from the Company, an option to acquire _________________ (_)
shares of the Common Stock of the Company (the "Stock") for the
aggregate price of ______ Dollars (___________ Dollars per share),
pursuant to the Plan and upon the terms and conditions set forth
therein (the "Option"). The Company and Optionee acknowledge and
agree that the Option shall be governed and administered in all
respects by the Plan, including, but not limited to, the
participation, vesting, exercise, restriction, termination,
forfeiture and ownership restrictions contained therein, and the
grant of the Option contained in this Agreement contains the entire
agreement between the Company and the Optionee concerning the grant
to Optionee of an option to acquire Stock and supersedes any and all
other agreements by and between the Company and Optionee concerning
the grant to Optionee of an option to acquire Stock; provided,
however, the execution and delivery
2
<PAGE> 40
of this Agreement by the parties hereto shall not terminate, revoke or
rescind other agreement(s) between the parties hereto to the extent
that such agreement(s) are not inconsistent with the Plan and this
Agreement, and such other agreements shall remain in all such respects
in full force and effect on the parties hereto in accordance with
their terms.
7. Section 1 of the Stock Purchase Agreement, which is Exhibit C
to the Plan, is hereby amended and restated in its entirety as follows:
Section 1. Purchase of Stock.
The Company hereby sells, assigns, transfers and conveys to
Purchaser, and Purchaser hereby purchases from the Company, ________
(__) shares of the Common Stock of the Company (the "Stock") for the
aggregate price of _______ Dollars (________ Dollars per share),
pursuant to the Plan and upon the terms and conditions set forth
therein. The Company and Purchaser acknowledge and agree that the
purchase of Stock by the Purchaser shall be governed and administered
in all respects by the Plan, including, but not limited to, the
participation, restriction, termination, forfeiture and ownership
restrictions contained therein, and that the Agreement contained
herein with regard to the purchase of the Stock contains the entire
agreement between the Company and Purchaser concerning the purchase
by Purchaser of Stock and supersedes any and all other agreements by
and between the Company and Purchaser concerning the purchase of
Stock; provided, however, the execution and delivery of this
Agreement by the parties hereto shall not terminate, revoke or
rescind other agreement(s) between the parties hereto to the extent
that such agreement(s) are not inconsistent with the Plan and
this Agreement, and such other agreements shall remain in all respects
in full force and effect on the parties hereto in accordance with
their terms.
8. Section 4 of the Promissory Note, which is Exhibit D to the
Plan, is hereby amended and restated in its entirely as follows:
Section 4. Security. The obligations under this Note are secured by
the pledge of ______ shares of the Common Stock of Holder issued in
the name of Maker pursuant to the terms of the Stock Option/Purchase
Plan of Holder (the "Plan") and the Stock Purchase Agreement by and
between Maker and Holder of even date herewith (the "Stock Purchase
Agreement").
7. This Second Amendment shall not become effective unless and
until the Plan of Recapitalization adopted by the Board of Directors of Masada
Security Holdings, Inc. in September 1996 is implemented.
This Second Amendment was approved by the Masada Security
Holdings, Inc. Board of Directors and Stockholders on September _, 1996.
------------------------
Cathy Antee, Secretary
3
<PAGE> 1
EXHIBIT _____
SONITROL DEALER FRANCHISE AGREEMENT
THIS AGREEMENT, effective this 23 day of December, 1988, by and among
SONITROL CORPORATION, a Delaware corporation, SONITROL SOUTHEAST, INC., a
Indiana corporation, hereinafter referred to as "DISTRIBUTOR," and MASADA
SECURITY LIMITED PARTNERSHIP, d/b/a SONITROL OF MIAMI, a limited partnership,
formed in the State of Delaware, hereinafter referred to as "DEALER."
RECITALS
WHEREAS, SONITROL CORPORATION is the owner of the registered trademark
"SONITROL," and DISTRIBUTOR has been licensed, with the right to sub-license
others, to use the trademark "SONITROL," registered with the United States
Patent Office under the principal register number 12-681, together with all the
goodwill connected therewith; and
WHEREAS, SONITROL CORPORATION has a unique system for the promotion,
sale and delivery of security products and services, which is identified by the
trademark "SONITROL," and which system may be improved, further developed, or
otherwise modified from time to time by SONITROL CORPORATION, hereinafter
referred to as the "Sonitrol Product System;" and
WHEREAS, SONITROL CORPORATION is engaged in the business of granting
franchises for the operation of security businesses using the "SONITROL"
trademark and the system identified therewith; and
WHEREAS, SONITROL CORPORATION has expended time, effort, and money to
obtain knowledge in the field of merchandising, distributing and promoting the
sale of security systems and related products and services, and has established
successfully a reputation, demand and goodwill for such products and services
under the "SONITROL" trademark, which signifies the source and quality of
products and services sold under the "SONITROL" name and the high quality of
management, supervision, and merchandising associated therewith; and
<PAGE> 2
- 2 -
WHEREAS, the Sonitrol Alarm Product Line, hereinafter referred to as
"Sonitrol Products," consists of products bearing the trademark or trade name
"SONITROL," which products include security system components using Sonitrol
Corporation's premier audio detection technology and components using emerging
technologies for diverse security system requirements, and which in many
applications are monitored by Sonitrol Dealers at central monitoring stations;
and
WHEREAS, Sonitrol Products work effectively as integral components of
security systems as a result of the time, money and effort expended in
developing specifications for Sonitrol Products, and the high standards adhered
to in the testing, quality, production, manufacture, distribution,
installation, and service of Sonitrol Products, all of which is essential to
the goodwill and reputation for quality associated with the "SONITROL"
trademark which Sonitrol Products bear; and
WHEREAS, all of the foregoing having a distinctive and valuable
significance, DEALER acknowledges and understands the importance of
maintaining the goodwill and good reputation of the "SONITROL" trademark, and
DEALER desires to purchase and market equipment and products bearing the
"SONITROL" trademark, and to use and obtain benefits from the Sonitrol Product
System for promoting, leasing, selling and servicing Sonitrol Products, and to
do business using the "SONITROL" trademark and obtain the benefit of the
goodwill inherent therein; and
WHEREAS, DEALER has read this Agreement, and SONITROL CORPORATION's and
DISTRIBUTOR's Franchise Offering Circulars, and understands and accepts the
terms, conditions, and covenants regarding DEALER's operation and acquisition
of supplies set forth herein as being reasonable and necessary to maintain the
high standards of quality and service at all Sonitrol dealerships, and thereby
protect and preserve the goodwill inherent in the "SONITROL" trademark;
NOW, THEREFORE, SONITROL CORPORATION, DISTRIBUTOR and DEALER,
intending to be legally bound in consideration of the mutual agreements,
covenants and promises herein set forth, do hereby agree as follows:
SECTION ONE
LICENSE OF TRADEMARK AND FRANCHISE TERRITORY
1.1 DISTRIBUTOR hereby licenses and grants to DEALER, upon the terms and
conditions set forth herein, the right to, and primary responsibility for,
promoting, leasing, selling, and
<PAGE> 3
- 3 -
servicing Sonitrol Products bearing the trademark "SONITROL," and to
use solely in connection therewith the "SONITROL" trademark and the Sonitrol
Product System identified with said trademark, within the following area: Dade
County in the State of Florida hereinafter referred to as Area of Primary
Responsibility.
DEALER shall use the name "SONITROL" in the name under which it
conducts business, which name shall be approved in advance by SONITROL
CORPORATION, but not in its corporate or other legal name.
1.2 DEALER agrees that it will not establish a Sonitrol central station or a
business premises outside of DEALER's Area of Primary Responsibility. Further,
DEALER shall not represent itself as a local Sonitrol Dealer in territory
outside its Area of Primary Responsibility unless DEALER has been granted
franchise rights to that other territory under a separate Sonitrol Dealer
Franchise Agreement.
1.3 SONITROL CORPORATION and DISTRIBUTOR agree that they will not license
another DEALER with the right to establish a central station or a business
premises within DEALER's Area of Primary Responsibility except as otherwise
provided in this Agreement and so long as DEALER complies with the terms and
conditions of this Agreement.
1.4 The parties understand and agree that this license is of the registered
trademark "SONITROL," and of the related Sonitrol Product System which SONITROL
CORPORATION has developed as this system presently exists or may hereafter be
modified. DEALER agrees to and shall use the "SONITROL" trademark in
connection with, and exclusively for, the promotion and conduct of the business
to be operated by DEALER under this Agreement, hereinafter referred to as
"Franchise Business," in accordance with such instructions, rules and
procedures as may be prescribed by SONITROL CORPORATION from time to time with
respect thereto.
1.5 DEALER understands and agrees that this Agreement confers upon DEALER no
proprietary right, title or interest in the "SONITROL" trademark and trade
name, or in the Sonitrol Product System, but only the right to the use thereof
during the term of this Agreement. DEALER agrees and covenants that it will not
register or attempt to register such trademark in its own name or that of any
other firm, person or corporation, and that it shall not directly or indirectly
contest or aid in contesting the use, ownership and rights of SONITROL
CORPORATION in and to the "SONITROL" trademark. Further,
<PAGE> 4
- 4 -
DEALER agrees that it shall not permit, authorize, license or approve others to
use the "SONITROL" trademark for any purpose. Immediately upon the termination
of this Agreement, DEALER agrees and covenants that it shall cease and forever
abstain from using the "SONITROL" trademark and trade name and shall execute
such documents and take such action as SONITROL CORPORATION may deem reasonably
necessary or desirable to evidence the fact that DEALER has ceased using the
trademark and trade name "SONITROL" and that DEALER has no further interest or
right therein whatsoever.
1.6 DEALER agrees that it shall use the "SONITROL" trademark only in
accordance with the terms and conditions of this Agreement and any and all
standards promulgated from time to time by Sonitrol Corporation relating
thereto. DEALER agrees to report to SONITROL CORPORATION any unauthorized use
of the name or trademark "SONITROL" of which it becomes aware in violation of
this Agreement or standards or procedures prescribed by SONITROL CORPORATION
from time to time with respect thereto.
1.7 DEALER shall promptly notify SONITROL CORPORATION of any suspected
infringement of or challenge to the validity of SONITROL CORPORATION's
ownership and rights to its proprietary marks. DEALER acknowledges that
SONITROL CORPORATION shall, in its sole and absolute discretion, institute
proceedings or defend proceedings as it shall deem fit and that SONITROL
CORPORATION alone has the right to control any administrative proceeding or
litigation involving the proprietary marks. If SONITROL CORPORATION undertakes
the defense or prosecution of any litigation relating to the proprietary
marks, DEALER agrees to execute any and all documents and to do whatever acts
and things as may, in the opinion of counsel for SONITROL CORPORATION, be
necessary or advisable to carry out the defense or prosecution. DEALER shall
not, under any circumstances whatsoever, institute or take any legal
proceedings relating to the proprietary marks.
1.8 DEALER shall only use the trademarks affixed or related to Sonitrol
Products on Sonitrol Products purchased from DISTRIBUTOR. DEALER shall not
affix or relate the "SONITROL" trademark or trade name to any product or
equipment which was not purchased from DISTRIBUTOR, or a product approved by
SONITROL CORPORATION, and respecting which SONITROL CORPORATION has authorized
the affixing of such trademark or trade name.
1.9 DEALER understands and agrees that SONITROL CORPORATION reserves the right
to manufacture, sell, promote, lease and service products other than Sonitrol
Products to and through
<PAGE> 5
- 5 -
other sales organizations within the DEALER's Area of Primary Responsibility
without Compensating DEALER for same. However, such products will not bear the
"SONITROL" name or trademark, unless such products are Sonitrol Products which
DEALER has declined to distribute pursuant to Section Six of this Agreement.
DEALER understands and agrees that SONITROL CORPORATION reserves the right to
manufacture and promote Sonitrol products within DEALER's Area of Primary
Responsibility.
1.10 DEALER further understands and agrees that SONITROL CORPORATION may sell
Sonitrol Products directly to (i) any agency, office or facility of the United
States Government located in DEALER's Area of Primary Responsibility, and (ii)
certain customers located in DEALER's Area of Primary Responsibility when such
sale is part of a package sale to a business with national or regional
locations and such locations are both inside and outside of the Area of Primary
Responsibility. DEALER shall have the option of installing and servicing all
such sales of Sonitrol Products within DEALER's Area of Primary Responsibility
and being compensated for such installation and service. If DEALER chooses not
to be responsible for such installations and service, then SONITROL
CORPORATION, or its designee, shall have the right to provide such installation
and service without compensating DEALER.
SECTION TWO
TERM OF AGREEMENT AND RENEWAL
2.1 The term of this Agreement shall be for a period of ten (10) years from
the date first written above.
2.2 DEALER may, at its option, renew its right to use the "SONITROL"
trademark, purchase and market Sonitrol Products, and use the Sonitrol Product
system for an additional ten (10) year period, provided that at the end of the
initial ten (10) year term:
2.2.1. DEALER has given SONITROL CORPORATION and DISTRIBUTOR written
notice of such election to renew not less than six (6) months nor more
than twelve (12) months prior to the end of the term then in effect;
2.2.2. DEALER is not in default of any provision of this Agreement, any
amendment hereof or successor hereto, or any other agreement between
DEALER, DISTRIBUTOR and SONITROL CORPORATION, its subsidiary or
affiliated corporations, and has substantially complied
<PAGE> 6
- 6 -
with all the terms, conditions and covenants of such agreements during
the terms thereof;
2.2.3. Upon renewal DEALER shall execute SONITROL CORPORATION's then
standard form of Dealer Franchise Agreement currently in use. In the
event DEALER chooses for any reason not to execute the then standard
current form of Dealership contract, DEALER may renew for an additional
ten years under the terms of this Agreement; however, SONITROL
CORPORATION shall have the right to establish dealers and shall have
the right to sell and market products within DEALER's Area of Primary
Responsibility without compensating DEALER for the same and said
products may bear the SONITROL CORPORATION trademark or trade name.
DEALER shall not be required to pay again the initial franchise fee
provided for, or its equivalent, as a condition of renewal;
2.2.4. DEALER, DISTRIBUTOR and SONITROL CORPORATION shall execute a
mutual general release, in the form of Attachment A, for any and all
claims each party shall have against the other, its parent, subsidiary
and affiliated corporations, and their officers, directors, agents and
employees, excepting only such claims as are precluded from waiver by
applicable law.
SECTION THREE
TRAINING AND ASSISTANCE
3.1 DISTRIBUTOR will provide to DEALER and DEALER will be required to send, at
its expense, its general manager or principal operating person, and any other
employees required by DISTRIBUTOR and SONITROL CORPORATION, to an initial
training program relating to aspects of the franchised business, including
startup, financial matters, business operations, marketing and sales
procedures, and installation, operation and monitoring of security systems
utilizing Sonitrol Products. The initial training program will be conducted
for such period of time as is deemed necessary by SONITROL CORPORATION and
DISTRIBUTOR.
3.2 SONITROL CORPORATION and DISTRIBUTOR will provide DEALER with further
sales and operational training courses from time to time as is available to all
Sonitrol dealers, which courses specified employees of DEALER may be required
to attend.
3.3 Training programs will be conducted at locations selected by SONITROL
CORPORATION and DISTRIBUTOR, and DEALER shall pay
<PAGE> 7
- 7 -
the costs of travel, living accommodations and salary for its personnel to
attend and the required training fee.
SECTION FOUR
SONITROL, STANDARDS AND PROCEDURES
4.1 The success of the Sonitrol Product System depends on the national
goodwill resulting from consistency among Sonitrol dealers in the sale,
promotion, leasing, and servicing of Sonitrol Products. This conformity can be
achieved only by the rigid adherence by DEALER and by other licensed dealers to
a consistent plan of operation. Consistent therewith, SONITROL CORPORATION
will publish and supply to DEALER manuals, bulletins, handbooks and/or other
written material containing operational standards which may be modified from
time to time by SONITROL CORPORATION. DEALER covenants and agrees to operate
the Franchise Business in strict conformance with the operational standards set
forth in such publications and agrees to be bound by any changes made thereto.
The franchise standards and procedures manual, bulletins, handbooks and
information provided contain trade secrets and confidential information and
will remain the property of SONITROL CORPORATION and therefore DEALER shall
only reveal the contents of these materials to such of DEALER's personnel who
need to know the information for the effective operation of the Franchise
Business, and who sign a statement in the form prescribed by SONITROL
CORPORATION agreeing to not reveal such materials to any other person or
entity. DEALER shall not otherwise reveal the contents of these materials
without SONITROL CORPORATION's prior written authorization.
SECTION FIVE
PURCHASE AND REPAIR OF SONITROL CORPORATION PRODUCTS
RESTRICTION ON SALE OF OTHER PRODUCTS
5.1 During the term of this Agreement, DEALER agrees to purchase and
DISTRIBUTOR will Sell to DEALER the aforementioned Sonitrol Products at
DISTRIBUTOR's list prices for Sonitrol Products as in effect at the time of
such sales, except that DISTRIBUTOR shall not be obligated to sell Sonitrol
Products to DEALER if DEALER is in default of this Agreement. All purchases
from DISTRIBUTOR by DEALER shall be shipped F.O.B. Orlando, Florida, and DEALER
agrees to pay for Sonitrol Products under the terms and conditions set forth in
the Purchase Order or other documents governing the sale.
<PAGE> 8
- 8 -
5.2 Because repair of Sonitrol Products involves certain trade secrets and
confidential information and procedures, all servicing and repair of Sonitrol
Products shall be performed by SONITROL CORPORATION under the prevailing terms
and conditions. DEALER agrees to pay SONITROL CORPORATION for the cost of such
repair under the terms and conditions in effect at the time of such repair.
DEALER shall ship any Sonitrol Products to be repaired, freight prepaid, to
SONITROL CORPORATION's facility at Orlando, Florida. SONITROL CORPORATION will
return the repaired equipment, F.O.B. Orlando Florida, within a reasonable
period of time. DEALER, or any person authorized by DEALER, may not modify,
repair, or attempt to repair Sonitrol Products. Such modification, repair, or
attempt to repair shall void any and all guarantees and warranties, express or
implied, applicable to Sonitrol Products, and shall constitute a breach of this
Agreement. SONITROL CORPORATION may, in writing, authorize the repair of
certain products in its sole discretion.
5.3 Because the national goodwill inherent in the "SONITROL" trademark and the
Sonitrol Product System depends on the consumer's identification of the
trademark with a high quality product, and because all products sold, promoted,
leased and serviced by DEALER tend to be identified by the consumer as
"SONITROL" trademark products, DEALER shall purchase all products and equipment
which are promoted, leased, sold, installed, or serviced in the operation of
DEALER's business only from DISTRIBUTOR or from manufacturers, suppliers or
distributors designated or approved by SONITROL CORPORATION in writing, which
manufacturers, suppliers, or distributors shall meet in all respects SONITROL
CORPORATION's specifications and standards as to quality, durability,
performance, warranties, finish and appearance for such products and equipment,
and who shall adequately demonstrate the ability, capacity, and facilities to
supply DEALER's needs in the quantities, at the times, and with the reliability
necessary for efficient and high quality operation of DEALER's business.
SECTION SIX
NEW PRODUCT DEVELOPMENT
6.1 SONITROL CORPORATION shall notify DEALER of the development, availability,
and distribution and marketing program of any new subscriber Sonitrol
Product(s), hereinafter "New Products", during the term of this Agreement.
Within ninety (90) days of the receipt of such notice from SONITROL
CORPORATION, DEALER shall, by written notice, agree or decline
<PAGE> 9
- 9 -
to purchase and distribute such New Products in accordance with the prescribed
marketing plan.
6.2 If DEALER agrees to purchase and distribute such New Products in accordance
and consistent with SONITROL CORPORATION's prescribed marketing plan, then said
New Products shall be considered a Sonitrol Product within the provisions of
this Agreement. If DEALER declines to so purchase and distribute such New
Products, then such New Products shall be excluded from the definition of
Sonitrol Product hereunder and SONITROL CORPORATION and/or DISTRIBUTOR shall
have the right to market said New Products within DEALER's Area of Primary
Responsibility without compensating DEALER for the same, and said New Products
may bear the "SONITROL" trademark or name.
SECTION SEVEN
MINIMUM PURCHASE AND INVENTORY REQUIREMENTS
7.1 At all times during the term of this Agreement, DEALER agrees and covenants
to use its best efforts to fully develop the market for Sonitrol Products and
to effect the widest and best possible distribution of Sonitrol Products within
its Area of Primary Responsibility and to promote the Sonitrol Product system
within DEALER's Area of Primary Responsibility.
7.2 Recognizing the obligation of DEALER set forth in Paragraph 7.1 to effect
the widest and best possible distribution of Sonitrol Products within the Area
of Primary Responsibility granted herein, DEALER agrees:
7.2.1 To purchase from DISTRIBUTOR for sale and installation only within
DEALER'S Area of Primary Responsibility granted by this Agreement, at a
minimum, the following number of Sonitrol Product subscriber systems during
the first through the fifth years of operation, beginning with the date
specified in Paragraph 7.2.3:
Cumulative No. of
Year(s) Subscriber Systems
------- ------------------
One 183
One-Two 390
One-Three 644
One-Four 914
One-Five 1219
<PAGE> 10
- 10 -
Beginning the sixth year and for each year thereafter for the duration
of this Agreement, DEALER shall purchase each year a number of Sonitrol
Product subscriber systems for installation within its Area of Primary
Responsibility equal to the number of Sonitrol Product subscriber systems
required for the fifth year of operation.
7.2.2 During the first through the fifth years of operation, DEALER
shall install at new subscriber account locations within its Area of
Primary Responsibility a number of Sonitrol Product subscriber systems
equal to the minimum purchase requirements set forth in section 7.2.1.
Beginning the sixth year of operation, and for each year thereafter for the
duration of this Agreement, DEALER shall install at new subscriber account
locations within its Area of Primary Responsibility a number of Sonitrol
Product subscriber systems equal to the minimum purchase requirements for
the fifth year of operation. DEALER shall provide DISTRIBUTOR with monthly
reports setting forth the number of Sonitrol subscriber accounts within
DEALER's Area of Primary Responsibility for the preceding month.
7.2.3 To commence business with, and maintain during the first year of
operation, an inventory of Sonitrol Product subscriber systems equivalent
to two-twelfths of the minimum purchase requirement for that year, and
during the second through fifth years an inventory of Sonitrol Product
subscriber systems equivalent to two-twelfths of the difference between the
cumulative minimum purchase requirement for the pertinent year and the
previous year. Thereafter, DEALER shall maintain an inventory of Sonitrol
Product subscriber systems equivalent to two-twelfths of DEALER'S Sonitrol
Product subscriber system purchases for DEALER'S preceding fiscal year.
7.2.4 To commence sales and marketing efforts of Sonitrol Product
subscriber systems within DEALER'S Area of Primary Responsibility on or
before the 1st day of March, 1989.
7.2.5 To acquire an adequate facility within DEALER'S Area of Primary
Responsibility, purchase from DISTRIBUTOR and complete installation of
Sonitrol Central Station monitoring equipment, and commence monitoring of
subscriber accounts from DEALER'S facility within the Area of Primary
Responsibility within ______ months following the date of this Agreement.
DEALER agrees to submit a purchase order for Sonitrol Central Station
monitoring equipment in a reasonable time to permit delivery and
installation of same prior to the end of the time period specified in
this Paragraph.
<PAGE> 11
- 11 -
7.3 If DEALER fails to achieve and/or maintain the minimum requirements set
forth in this section, then and in that event, and in addition to those rights
under Sections Twenty-One and Twenty-Two of this Agreement, DISTRIBUTOR and
SONITROL CORPORATION shall have the right, at their option, to establish an
additional dealer or dealers within part or all of DEALER'S Area of Primary
Responsibility.
SECTION EIGHT
FRANCHISE AND ROYALTY FEES
8.1 In consideration of the grant to DEALER of the license to use the
"SONITROL" trademark and the Sonitrol Product System and the services to be
performed by DISTRIBUTOR and SONITROL CORPORATION as set forth in this
Agreement, DEALER agrees to pay to DISTRIBUTOR a non-refundable franchise fee
of $__________, receipt of which is hereby acknowledged.
8.2 DEALER agrees to pay DISTRIBUTOR, on or before the tenth (l0th) day of
each month, a continuing monthly royalty fee calculated at two and one-half
percent (2 1/2%) of DEALER's gross revenue during the preceding calendar month,
except as provided in Subsection 8.4 below. The royalty fee percentage may be
changed by SONITROL CORPORATION upon thirty (30) days written notice to DEALER,
provided that any such change shall not result in more than a one-quarter
percent (.25%) increase over the then-existing rate for any twelve (12) month
period. A service fee of one and one-half percent (1 1/2%) per month will be
assessed on all past due royalty fees.
8.3 The term "Gross Revenue," as used in this section, means the amount of all
revenue received by DEALER from the sale of all products and services, and all
income of every kind or nature, whether direct or indirect, received by DEALER,
related to the DEALER's franchised business which is the subject of this
Agreement; provided, however, that the term "Gross Revenues" shall not include
any sales taxes or other taxes collected by DEALER for transmittal to the
appropriate taxing authority.
8.4 During the first year of operation, beginning with the date set forth in
subsection 7.2.3 above and for one year thereafter, DEALER shall pay
DISTRIBUTOR one-half (1/2) of the monthly royalty fee required by subsection
8.2 above, and the remaining one-half (1/2) of the monthly royalty fee shall be
applied by DEALER to bona fide local advertising in newspapers, magazines,
radio, television, billboard or other promotional and marketing media,
exclusive of a Directory Listing which
<PAGE> 12
- 12 -
shall be placed with separate funds of DEALER. Within ten (l0) days following
the end of the first year of operation, DEALER shall provide DISTRIBUTOR with
receipts, or other documentation satisfactory to DISTRIBUTOR, reflecting
DEALER's expenditures during that year on bona fide local advertising. If
DEALER's expenditures as reflected on such receipts are less than one-half
(1/2) of the sum of the monthly royalty fees for the first year of operation,
DEALER shall pay DISTRIBUTOR an amount equal to such deficiency within five (5)
days of receipt by DEALER of written notification of such deficiency.
Following the first year of operation, the entire monthly royalty fee shall be
paid by DEALER to DISTRIBUTOR in accordance with subsection 8.2 above.
8.5 At the same time a monthly royalty payment is made pursuant to the terms
and conditions of Paragraph 8.2 above, DEALER shall also submit a monthly
statement to DISTRIBUTOR, in the form prescribed by DISTRIBUTOR, setting forth
the gross revenue of DEALER for the immediately preceding calendar month.
SECTION NINE
ADVERTISING FEES
9.1 DEALER agrees, upon establishment of a Dealer Cooperative Advertising
Council (hereinafter "Council"), to pay SONITROL CORPORATION a monthly
advertising and sales promotion contribution to be placed in a Sonitrol
Advertising Fund (hereinafter "Fund"). DEALER shall pay this contribution by
the tenth (10th) day of each month, and the amount of the contribution shall be
established by SONITROL CORPORATION and the Council, but in no event will it
exceed three percent (3%) of DEALER's gross revenues from the business which is
the subject of this Agreement for the preceding month.
9.2 The Council will direct all advertising programs, it shall have
discretion over the maintenance and allocation of the Fund, and the creative
concepts, materials and media used in advertising programs. The Fund is
intended to maximize general public recognition and acceptance of the
"SONITROL" trademark, and the products and services associated therewith.
SONITROL CORPORATION and the Council undertake no obligation in administering
the Fund to make expenditures for DEALER which are equivalent or proportionate
to DEALER's contributions, or to ensure that DEALER benefits directly or
proportionately from the placement of advertising.
9.3 DEALER agrees that the Fund may be used to meet any and all costs of
maintaining, administering, directing and
<PAGE> 13
- 13 -
preparing national, state or regional advertising materials, programs and
public relations activities. The Fund shall be accounted for separately from
other funds of SONITROL CORPORATION by the Council. SONITROL CORPORATION
assumes no direct or indirect liability or obligation to DEALER with respect to
the maintenance, direction or administration of the Fund.
9.4 The term "Gross Revenues," as used in this Agreement means the amount of
all revenue received by DEALER from the sale of all products and services, and
all income of every kind or nature, whether direct or indirect, received by
DEALER, related to the DEALER's franchised business which is the subject of
this Agreement; provided, however, that the term "Gross Revenues" shall not
include any sales taxes or other taxes collected by DEALER for transmittal to
the appropriate taxing authority.
SECTION TEN
DEALER'S BUSINESS PLAN
10.1 DEALER acknowledges that conformity to the Business Plan prepared by
DEALER and submitted to SONITROL CORPORATION and DISTRIBUTOR prior to execution
of this Agreement, which Business Plan is attached hereto and made a part
hereof as Attachment B, is required for the successful performance by DEALER of
all of the duties and obligations required to be performed, fulfilled and
observed by DEALER under this Agreement, and DEALER agrees to conform to the
Business Plan in the conduct of its business. DEALER hereby certifies that the
Business Plan, including DEALER's representations contained therein, is true
and correct, and DEALER acknowledges and understands that SONITROL CORPORATION
and DISTRIBUTOR rely upon DEALER's Business Plan in entering into this
Agreement.
10.2 DEALER hereby certifies that the total capitalization set forth in
DEALER's Business Plan is true and correct, and that said capitalization is
available as of the date first above written, and DEALER acknowledges and
understands that SONITROL CORPORATION and DISTRIBUTOR rely upon this
certification by DEALER in entering into this Agreement.
<PAGE> 14
- 14 -
SECTION ELEVEN
TAXES AND INSURANCE
11.1 DEALER shall be responsible for paying and shall discharge all applicable
tax liabilities.
11.2 DEALER shall maintain at its expense insurance against all types of
liability as SONITROL CORPORATION and DISTRIBUTOR may require, including, but
not limited to, comprehensive general liability insurance (covering premises,
products liability, completed operations, blanket contractual and personal
injury liabilities), errors and omissions insurance, worker's compensation
insurance, and automobile insurance. Coverage limits for each type of
insurance shall be in accord with generally accepted and/or statutorily
mandated limits. In any event, DEALER shall maintain a minimum liability limit
of not less than One Million Dollars ($1,000,000.00) for each type of insurance
for which such limits are available. DEALER shall purchase all such insurance
from a responsible and accredited insurer and each such policy shall include
SONITROL CORPORATION and DISTRIBUTOR, or any of their designated subsidiary or
affiliated corporations, as additional insureds and shall also provide that
such policies may not be cancelled or their coverage materially changed without
thirty (30) days prior written notice to all named insureds. DEALER shall
provide SONITROL CORPORATION and DISTRIBUTOR with certificates of insurance on
all policies and evidence that the premiums therefore have been paid.
SECTION TWELVE
PERSONNEL AND BUSINESS APPEARANCE STANDARDS
12.1 DEALER acknowledges that the successful operation of DEALER's business
under this Agreement requires professional management, and DEALER agrees that
the General Manager or principal operating person (hereinafter "Manager") of
DEALER shall be a person who is capable of performing on behalf of the
Franchise Business all of the duties and obligations required to be performed,
fulfilled, and observed by DEALER under this Agreement. DEALER shall keep
SONITROL CORPORATION and DISTRIBUTOR advised of the identity of the Manager and
shall provide SONITROL CORPORATION and DISTRIBUTOR a complete resume of the
Manager together with a statement by DEALER that it has investigated the
qualifications of the Manager and has determined that such person has the
requisite qualifications and is capable of performing the duties and
obligations required of DEALER under this Agreement.
<PAGE> 15
- 15 -
12.2 DEALER shall keep all records on the installation, servicing and
monitoring of its customers' accounts in the strictest confidence and will
permit only the necessary minimum of trusted employees to have access to such
records. DEALER shall maintain all of its records and files in a secure manner
so as to safeguard its records and files from exposure to criminal elements or
any other unauthorized person(s). SONITROL CORPORATION and DISTRIBUTOR shall
have the right to review DEALER's security procedures and may require
reasonable changes in such procedures to increase DEALER's security.
12.3 DEALER shall adhere to high ethical standards and shall conduct its
business in strict compliance with all applicable laws, regulations, ordinances
and requirements or any federal, state, county, municipal or other government,
and shall obtain all necessary permits, licenses, or other consents for the
operation of DEALER's business.
12.4 DEALER and its employees shall cooperate with all law enforcement agencies
to the fullest extent compatible with its duty to customers. However, no duty
to customers shall require DEALER or its employees to act in violation of the
law.
12.5 Recognizing that a favorable business reputation is difficult to achieve
and thereafter maintain, and that the goodwill inherent in the "SONITROL"
trademark depends upon the identification of the trademark with businesses
operated in accordance with high standards of quality, DEALER agrees:
12.5.1 To keep its business premises, vehicles and furnishings
clean, neat and orderly so as to maintain an attractive appearance;
12.5.2 To keep all equipment used in the conduct of the
business and its inventory stock clean and in a state of good repair;
12.5.3 To maintain reasonable financial stability and credit
standing;
12.5.4 To maintain good customer relations;
12.5.5 To strive to ensure that its employees respond promptly
and courteously to all business and servicing inquiries and
that its employees are neat and well groomed in personal appearance.
12.6 DEALER agrees that DISTRIBUTOR and SONITROL CORPORATION may from time to
time, during the DEALER's course of operation, with or without notice, inspect
the DEALER's business premises
<PAGE> 16
- 16 -
and operation of business to determine if the business is being operated in
accordance with the standards and procedures set forth herein and in the
franchise standards and procedures manual. SONITROL CORPORATION and
DISTRIBUTOR shall report to DEALER in writing any aspects of DEALER's
operations which are not in conformity with the manual or this Agreement, and
DEALER shall take immediate steps to correct such deficiencies. Failure of the
DEALER to correct any deficiencies within 30 days of receipt of notice of such
deficiencies shall constitute a default of this Agreement and the Agreement may
be terminated pursuant to Section Twenty-Two.
SECTION THIRTEEN
ACCOUNTING AND RECORDS REQUIREMENTS
13.1 DEALER shall maintain true and accurate records, reports, accounts, books
and data which shall accurately reflect all particulars relating to the
Franchise Business in compliance with the standard financial management system
prescribed by SONITROL CORPORATION for record keeping, bookkeeping, accounting
and reporting all business and operation of the Franchise Business, and shall
permit SONITROL CORPORATION's and Distributor's representative to examine and
audit said records, reports, accounts, books and data at all reasonable times
and at SONITROL CORPORATION's and DISTRIBUTOR's expense.
13.2 The DEALER shall provide SONITROL CORPORATION and DISTRIBUTOR with
financial statements relating to the Franchise Business subject to this
Agreement, including a profit and loss statement and balance sheets. The first
financial statement shall be due six (6) months after the effective date of
this Agreement, and semi-annually thereafter. Within four (4) months following
the close of each fiscal year, the DEALER, at its expense, shall provide to
SONITROL CORPORATION and DISTRIBUTOR a financial statement prepared by an
independent Public Accountant. The DEALER shall utilize recognized and
customary accounting procedures.
13.3 DEALER shall deliver to SONITROL CORPORATION and DISTRIBUTOR on or before
the date of this Agreement a complete list of its stockholders, (or if DEALER
is a partnership, a complete list of all its general and/or limited partners)
all of whom shall appear to be of good moral and ethical character so as not to
compromise the Sonitrol Product System, procedures, equipment or trade secrets
to either criminal elements or commercial competition and DEALER shall keep said
list of stockholders (or general or limited partners) current. In the event a
change in the list is proposed under
<PAGE> 17
- 17 -
circumstances where SONITROL CORPORATION or DISTRIBUTOR has the right to
approve the proposed change pursuant to Section Eighteen of this Agreement,
sufficient advance notice shall be given to SONITROL CORPORATION and
DISTRIBUTOR. This subsection shall not apply to publicly held corporations
having more than thirty (30) stockholders.
13.4 SONITROL CORPORATION and DISTRIBUTOR hereby covenant not to reveal
or communicate designated confidential and proprietary information of DEALER to
any third party without the prior consent and authorization of DEALER and shall
use its best efforts to prevent inadvertent disclosure of such information to
any third party, except as may be appropriate and professionally necessary to
DEALER's and/or SONITROL CORPORATION's and DISTRIBUTOR's accountants,
attorneys and banking sources, or as required by law.
SECTION FOURTEEN
CHAIN ACCOUNTS AND NATIONAL PROGRAMS
14.1 Within such guidelines as are established and promulgated
from time to time by SONITROL CORPORATION, DEALER shall use its best efforts
to secure chain accounts which have their national or regional headquarters
located in DEALER's Area of Primary Responsibility. DEALER shall provide to
SONITROL CORPORATION reports relating to securing said chain accounts.
14.2 Upon request by SONITROL CORPORATION, DEALER agrees to promote,
lease, sell, install and service chain accounts within DEALER's Area of Primary
Responsibility. If DEALER declines to promote, lease, sell, install and
service chain accounts upon request by SONITROL CORPORATION, DEALER agrees
that SONITROL CORPORATION, or DISTRIBUTOR, shall have the right to promote,
lease, sell, install and service chain accounts within DEALER'S Area of Primary
Responsibility without compensating DEALER for same.
14.3 Unless precluded by law, DEALER agrees to promote programs
promulgated at the national level by SONITROL CORPORATION. Such programs
shall be designed to benefit all Sonitrol dealers by ensuring a high level of
quality for the Sonitrol Product system, Sonitrol Products, and services.
<PAGE> 18
- 18 -
SECTION FIFTEEN
PROTECTION OF TRADE SECRETS
15.1 To further the business relationship among SONITROL CORPORATION,
DISTRIBUTOR and DEALER, it is necessary and desirable that from time to time
SONITROL CORPORATION will disclose to DEALER confidential information
relating to the Sonitrol Product System, hereinafter referred to as
"Sonitrol Information." Sonitrol Information includes, but is not limited
to: current, future, or proposed Sonitrol Products; plans, technologies,
operating and monitoring techniques relating to such products; plans and
information relating to the marketing, merchandising and sale of Sonitrol
Products; and the processes, services, policies, procedures, records and
accounts of SONITROL CORPORATION; excluding only that information which is
generally known throughout the industry or which is within the public domain.
15.2 DEALER recognizes that Sonitrol Information is a valuable trade secret.
DEALER shall only reveal Sonitrol information to such of its personnel who
need to know the information for the effective operation of the Franchise
Business and who sign a statement as provided in Section Four above. DEALER
hereby covenants not to otherwise reveal or communicate Sonitrol Information,
directly or through its employees, agents or representatives, to any third
party, which shall include any parent, subsidiary or affiliated corporation of
DEALER, without the prior written consent and authorization of SONITROL
CORPORATION and shall use its best efforts to prevent inadvertent disclosure of
Sonitrol Information to any third party, except as may be appropriate and
professionally necessary to DEALER's accountants, attorneys and banking
sources, or as required by law.
15.3 DEALER further agrees that the aforesaid duty not to disclose Sonitrol
Information shall continue during the term of this Agreement and any successor
agreements, and for a period of three (3) years following the expiration or
termination of this Agreement and any successor agreements.
SECTION SIXTEEN
RELATIONSHIP OF PARTIES
16.1 DEALER is and shall be considered an independent contractor with entire
control and direction of its business and operations, subject only to the
conditions and obligations established by this Agreement. No agency,
employment or
<PAGE> 19
- 19 -
partnership is created by this Agreement. DEALER's business is separate and
apart from any that may be operated by SONITROL CORPORATION or DISTRIBUTOR.
16.2 No party to this Agreement shall make any representation tending to
create apparent agency, employment, or partnership. No party will have
authority to act for the other in any manner to create obligations or debts
binding on the other, and no party will be responsible for any obligations or
expenses whatsoever of the other. Neither DEALER, its employees, nor any
person performing any duties or engaged in any work at the request of DEALER
shall be deemed an employee or agent of SONITROL CORPORATION or DISTRIBUTOR.
16.3 In all public records and in its relationship with other persons, on
letterheads and business forms, and invoices, in accordance with SONITROL
CORPORATION's prescribed standards and procedures which DEALER agrees to
follow, DEALER shall indicate its independent ownership of said business, and
that it is a franchise of SONITROL CORPORATION by using the following
language: "An Independent Sonitrol Dealer Franchise." Further, DEALER agrees
to exhibit on its premises in a place designated by SONITROL CORPORATION, a
notification that it is an independent Sonitrol dealer franchise.
SECTION SEVENTEEN
INDEMNITY OF SONITROL CORPORATION AND DISTRIBUTOR
17.1 DEALER agrees, during and after the term of this Agreement, to indemnify
and hold SONITROL CORPORATION and DISTRIBUTOR harmless from and against, and
promptly reimburse them for, any and all loss, damage, liability and attorneys'
fees and other costs and expenses incurred by SONITROL CORPORATION or
DISTRIBUTOR as the result of any violation of this Agreement by, or any act of
omission or commission on the part of DEALER or any of its agents, servants, or
employees, and from all claims, demands, losses, costs, damages, suits,
judgments, penalties, expenses, and liabilities of any kind or nature
whatsoever arising directly or indirectly out of or in connection with the
operation of DEALER's business.
SECTION EIGHTEEN
ASSIGNMENT OF AGREEMENT
18.1 DEALER shall not assign, sell, transfer, or encumber this Agreement, or
any interest in DEALER (including merger into any
<PAGE> 20
- 20 -
other entity and the sale, transfer or disposition of any stock or partnership
interest in DEALER) affecting control of DEALER, without the prior written
consent and approval of SONITROL CORPORATION and DISTRIBUTOR, which consent
and approval shall not be unreasonably withheld. Control is defined as any
assignment, sale or transfer which, whether as a single transfer or when
aggregated with other transfers that occurred after the date of this Agreement,
results in a transfer of twenty-five percent (25%) or more of the ownership
interest in DEALER.
18.2 Written consent and approval of SONITROL CORPORATION and
DISTRIBUTOR shall not be required for:
18.2.1 Assignments, sales or transfers of DEALER's stock, or DEALER's
interest under this Agreement, to a corporation or partnership which
owns over seventy-five percent (75%) of each class of voting stock (if
a corporation) of DEALER at the time of the execution of this
Agreement, or is the controlling general partner (if a partnership) of
DEALER at the time of the execution of this Agreement, provided DEALER
gives SONITROL CORPORATION and DISTRIBUTOR written notice of such
assignment, sale or transfer.
18.2.2 Assignment of this Agreement to a bank or other financial
institution as collateral for a loan provided that DEALER and the bank
or financial institution enter into an agreement identical in form and
substance to the one attached hereto as Attachment C, and such
agreement is approved by SONITROL CORPORATION and DISTRIBUTOR.
18.2.3 Assignments, sales or transfers of publicly traded stock of
DEALER previously registered under federal securities laws, provided:
(a) the transferor owns less than twenty-five percent (25%) of each
class of the stock of DEALER prior to the transfer, and (b) after the
transfer the transferee will own less than twenty-five percent (25%)
of each class of the stock of DEALER.
18.3 No such assignment, sale or transfer of interest under this Agreement
shall be approved, by SONITROL CORPORATION and DISTRIBUTOR unless DEALER and
its proposed assignee meet the following requirements:
18.3.1 The assignee must be acceptable to SONITROL CORPORATION and
DISTRIBUTOR by the standards then utilized in considering applicants
for new dealerships;
<PAGE> 21
- 21 -
18.3.2 There shall be no existing default in the performance or
observance of any of DEALER's obligations under this Agreement or any
other agreement with SONITROL CORPORATION, its subsidiary or
affiliated corporations, or DISTRIBUTOR;
18.3.3 DEALER shall have settled all outstanding accounts with
SONITROL CORPORATION, its subsidiary and affiliated corporations,
and DISTRIBUTOR;
18.3.4 DEALER shall execute a mutual general release, in the form of
Attachment A, for any and all claims each party shall have against the
other, its parent, subsidiary and affiliated corporations, and their
officers, directors, agents and employees, excepting only such claims
as are precluded from waiver by applicable law.
18.3.5 DEALER's assignee must execute all agreements that SONITROL
CORPORATION and DISTRIBUTOR then require of new dealers; and
18.3.6 DEALER's assignee shall have paid a transfer fee of Seven
Thousand Five Hundred Dollars ($7,500.00), $2,500 of which sum shall
have been paid to SONITROL CORPORATION and the remainder to
DISTRIBUTOR.
18.4 Since this Agreement limits the transferability of corporate stock
shares, if DEALER is now incorporated or incorporates during the term of this
Agreement, all certificates of shares issued by DEALER shall have endorsed
thereon an appropriate legend to conform with state law, referring to this
Agreement by date and name of parties hereto, and stating, "Transfer of this
certificate is limited," or similar statutorially required language. This
legend shall not be required on certificates representing publicly traded stock
of DEALER previously registered less than twenty-five percent (25%) of each
class of stock of DEALER.
18.5 SONITROL CORPORATION shall have the right to assign this Agreement and
the rights hereunder to any person, firm, association, or corporation, provided
that such transferee shall agree in writing to assume all obligations
undertaken by SONITROL CORPORATION herein.
SECTION NINETEEN
RIGHT OF FIRST REFUSAL
19.1 If at any time during the term of this Agreement, DEALER or any
stockholder, partner or limited partner of DEALER, desires to sell or transfer,
in whole or in part, any of its interest under this Agreement or any interest in
DEALER, whether DEALER is a partnership, corporation, firm or other association
for profit, DEALER, or any selling stockholder, general partner or limited
partner of DEALER, shall first offer such interest to SONITROL CORPORATION and
DISTRIBUTOR by delivering to SONITROL CORPORATION and DISTRIBUTOR a written
offer setting forth the interest to be sold, the purchase price and terms of
payment, together with all other documentation relating or incidental to such
offer to sell.
19.2 During the sixty (60) day period following receipt of such offer to sell,
and related documentation from DEALER, SONITROL CORPORATION and/or DISTRIBUTOR
shall have the right and option to purchase or otherwise acquire such of
DEALER's interest under this Agreement, and all such other property and rights
of DEALER as may be included in such offer to purchase, upon the same terms and
conditions as set forth in such offer to sell. DISTRIBUTOR shall have the
first right and option to purchase, and shall exercise such right and option by
giving written notice to DEALER and SONITROL CORPORATION within thirty (30)
days after receipt of such offer to sell and related documentation from DEALER.
If DISTRIBUTOR does not give written notice as set forth herein or declines to
exercise its purchase option, then SONITROL CORPORATION shall have the sole
right and option to purchase or otherwise acquire DEALER's interest under the
foregoing terms and conditions within the subsequent thirty (30) day period, and
may exercise such right and option by giving written notice to DEALER and
DISTRIBUTOR.
19.3 If SONITROL CORPORATION and DISTRIBUTOR do not accept such offer within
the time period for acceptance set forth in paragraph 19.2 above, subject to
the provisions of Section Eighteen, DEALER shall be free to sell the interest
covered by such written offer to any other person or entity on the condition
that: (i) such interest is sold during the one hundred twenty (120) day period
immediately following the expiration of such sixty (60) day period above; and
(ii) such sale is consummated at a price greater than or equal to that set
forth in such written offer and otherwise on the terms (including payment
terms) set forth in such offer. The interest subject of the right of first
refusal is interest relating only to the subject matter of this Agreement.
19.4 If SONITROL CORPORATION and DISTRIBUTOR do not receive such offer to sell
and related documentation as set forth in paragraph 19.1 above, then SONITROL
CORPORATION and DISTRIBUTOR shall have no obligation to consider or consent to
the prospective transfer of assignment of DEALER's interest(s) under Section
Eighteen of this Agreement.
19.5 SONITROL CORPORATION and DISTRIBUTOR's right of first refusal granted in
subsections 19.1, 19.2, and 19.3 above shall apply only to assignments, sales
or transfers over which SONITROL CORPORATION and DISTRIBUTOR have a right of
consent and approval under Section Eighteen of this Agreement.
<PAGE> 22
- 22 -
SECTION TWENTY
INCAPACITY OF DEALER'S PRINCIPAL PARTY
20.1 If DEALER is a natural person, in the event of death or incapacity of
DEALER the rights and obligations of DEALER will pass to DEALER'S executors,
representatives, administrators, heirs or legatees ("Legatee") capable of
performing all of the duties and obligations under the Sonitrol Dealer
Franchise Agreement. Legatee must within thirty (30) days of such death or
incapacity assume all of DEALER's obligations under this Agreement in writing.
If SONITROL CORPORATION determines in good faith that Legatee is not capable
of performing all the duties and obligations of DEALER under the Sonitrol
Dealer Franchise Agreement, it will notify Legatee in writing and Legatee shall
have sixty (60) days from the date of notification to locate a bona fide
purchaser and notify SONITROL CORPORATION of the identity of the purchaser
and terms of the purchase. If Legatee fails to find a purchaser, or SONITROL
CORPORATION determines in good faith that the proposed purchaser is not capable
of assuming the duties and obligations of DEALER under this Agreement,
SONITROL CORPORATION may purchase the DEALER's business at fair market value.
20.2 Transfers of this Agreement, or any interest in DEALER, due to the death
or incapacity of any natural person with an ownership interest in DEALER shall
be governed by, and subject to the assignment and right of first refusal
provisions of Sections Eighteen and Nineteen of this Agreement.
<PAGE> 23
- 23 -
SECTION TWENTY-ONE
DEFAULT
21.1 Any of the following events shall constitute a default of this Agreement:
21.1.1 An affirmative act of insolvency by DEALER, an assignment for
the benefit of creditors or similar disposition of assets by DEALER,
or the filing by DEALER of a petition under any bankruptcy,
reorganization, insolvency, or moratorium law, or any law for the
relief of, or relating to, debtors;
21.1.2 The filing of any involuntary petition under any bankruptcy
statute against DEALER'S or the appointment of any receiver or trustee
to take possession of property of DEALER, unless such petition or
appointment is set aside or withdrawn or ceases to be in effect within
thirty (30) days of such filing or appointment;
21.1.3 A final judgment, or the unappealed decision of a regulatory
officer or agency, that results in temporary or permanent suspension
of any permit or license, possession of which is a prerequisite to
operation of DEALER's business under applicable law;
21.1.4 A criminal conviction of DEALER, or an officer, director,
partner or principal of DEALER, for a felony offense, or any other
crime or act which would substantially impair the goodwill associated
with the "SONITROL" trademark, trade name, or the Sonitrol Product
System;
21.1.5 DEALER's failure, refusal, or neglect to pay to DISTRIBUTOR or
SONITROL CORPORATION, its subsidiary or affiliated corporations, any
monies owing to DISTRIBUTOR or SONITROL CORPORATION, its subsidiary or
affiliated corporations, under the terms of this Agreement or any
other agreement, on the date such monies are due or within such terms
as may be established by SONITROL CORPORATION or DISTRIBUTOR;
21.1.6 Any material misrepresentation or false statement by DEALER,
or made at DEALER's behest, to SONITROL CORPORATION or DISTRIBUTOR, in
connection with the execution of this Agreement or in any accounting,
report or plan that DEALER submits to SONITROL CORPORATION, its
subsidiary or affiliated corporations, or DISTRIBUTOR pursuant to this
Agreement;
<PAGE> 24
- 24 -
21.1.7 The use in DEALER's business of any products or equipment in
violation of the provisions of Section Five of this Agreement;
21.1.8 Any purported assignment, sale, transfer, or encumbrance by
DEALER of any of its rights, obligations or interests under this
Agreement without having received the prior written consent of
SONITROL CORPORATION and DISTRIBUTOR;
21.1.9 DEALER's failure to comply with, perform or observe any other
lawful obligation imposed upon it under this Agreement; or repeatedly
failing to comply with, perform or observe the lawful provisions of
this Agreement whether or not such noncompliance is corrected after
notice. "Repeatedly" as used in this sub-paragraph shall mean two
(2) or more times within any twelve month period.
21.2 Upon default DEALER agrees to pay all costs and expenses, including
reasonable attorney's fees, incurred by SONITROL CORPORATION and DISTRIBUTOR in
collecting all monies owed by DEALER or in obtaining other relief to enforce the
provisions of this Agreement.
SECTION TWENTY-TWO
TERMINATION
22.1 If conditions exist that constitute a default of this Agreement by one or
more of the sub-paragraphs of Section Twenty-One, in addition to all other
remedies available to SONITROL CORPORATION and DISTRIBUTOR at law or in equity,
all rights granted to DEALER under this Agreement shall terminate effective
upon thirty (30) days written notice to DEALER (or longer if required by
applicable law), provided that DEALER fails to cure all acts of default within
thirty (30) days of such notice. DEALER acknowledges and agrees that
termination due to a default under one or more of the subsections of Section
Twenty-One shall be deemed to be for good cause. The cure provisions under
this Section shall not apply to a default pursuant to Subsection 21.1.9 above
for DEALER repeatedly failing to comply with the provisions of this Agreement.
22.2 Upon any lawful termination or expiration of this Agreement or any
successor agreements hereto, DEALER shall:
22.2.1 Immediately cease to use in any manner whatsoever the
"SONITROL" trademark and trade name and
<PAGE> 25
- 25 -
any forms, slogans, signs, symbols or devices used in connection with
the operation of a Sonitrol franchise or the Sonitrol Product System;
and will:
(a) Upon request by SONITROL CORPORATION and/or
DISTRIBUTOR, mail to all customers a registered letter,
approved by SONITROL CORPORATION, return receipt requested to
DISTRIBUTOR, informing the customer that the Dealer is no
longer authorized or licensed to operate under the trademark
"SONITROL," and requesting that the customer remove all signs,
decals or other materials bearing the trademark SONITROL from
its premises. This mailing will be completed within thirty
days from the date of the termination of this Agreement.
(b) Within six months from the date of the termination of
this Agreement, remove all signs, decals, or other materials
bearing the trademark "SONITROL" from the DEALER's premises,
and replace all Sonitrol contracts so that they are no longer
in force or effect, and will certify by letter to SONITROL
CORPORATION and DISTRIBUTOR that this has been completed.
22.2.2 Promptly pay to SONITROL CORPORATION, its subsidiary or
affiliated corporations, and DISTRIBUTOR all sums owing from DEALER to
SONITROL CORPORATION, its subsidiary or affiliated corporations, and
DISTRIBUTOR, including all damages, costs and expenses, including
reasonable attorneys' fees incurred by SONITROL CORPORATION, its
subsidiary or affiliated corporations, and DISTRIBUTOR by reason of
any default of this Agreement by DEALER, and further including all
costs and expenses, including reasonable attorneys' fees, incurred by
SONITROL CORPORATION, or its subsidiary or affiliated corporations,
and DISTRIBUTOR in obtaining injunctive or other relief to enforce the
provisions of this Agreement;
22.2.3 Continue to comply with and be bound by all applicable
provisions of this Agreement which survive termination, including, but
not limited to, the noncompetition, and protection of trade secrets
provisions.
22.3 Upon any termination or expiration of this Agreement or any successor
agreements, DISTRIBUTOR shall have the right to repurchase from DEALER all
unused, Current Sonitrol Products of DEALER at the cost to DEALER for such
products, and all stocks
<PAGE> 26
- 26 -
of supplies and materials bearing the "SONITROL" trademark, paying the cost to
DEALER for such products, supplies and materials. In connection with any such
repurchase, DISTRIBUTOR shall be entitled, but not required, to offset against
the repurchase price any monies owed by DEALER to DISTRIBUTOR pursuant to the
terms of this Agreement or any other agreement between the parties. For
purposes of this subparagraph 22.3, "Current Sonitrol Products" shall mean
those products being manufactured by SONITROL CORPORATION, or its subsidiaries,
at the time of termination or expiration of this Agreement.
22.4 In the event or as a result of termination by SONITROL CORPORATION or
DISTRIBUTOR pursuant to the terms of this Agreement, SONITROL CORPORATION and
DISTRIBUTOR shall not be liable to DEALER for any damages, including
consequential or incidental, and including but not limited to profits on sales
or anticipated sales, on account of expenditures, investments, or commitments
made in connection therewith, in connection with the establishment,
development, and maintenance of the business or goodwill of DEALER. Such
termination shall not, however, affect the rights or liabilities of said
parties with respect to products previously sold hereunder or with respect to
any indebtedness then owing by either party to the other.
22.5 Dealer agrees to pay all costs, including, but not limited to,
attorneys' fees, incurred by SONITROL CORPORATION or DISTRIBUTOR in enforcing
and/or completing any of the above provisions not completed by DEALER on a
timely basis.
SECTION TWENTY-THREE
RESTRICTION ON EFFECT OF WAIVER
23.1 No delay or omission to exercise a right, power, or remedy accorded to
SONITROL CORPORATION or DISTRIBUTOR on any breach or default of DEALER under
this Agreement shall impair any such right, power, or remedy of SONITROL
CORPORATION or DISTRIBUTOR, and it shall not be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring.
23.2 Any waiver, permit, consent, or approval of any kind or character on
the part of SONITROL CORPORATION or DISTRIBUTOR of any breach or default under
this Agreement, or any waiver on the part of SONITROL CORPORATION or
DISTRIBUTOR of any
<PAGE> 27
- 27 -
provision or condition of this Agreement must be in writing and shall be
effective only to the extent specifically allowed by such writing.
23.3 All remedies afforded to SONITROL CORPORATION or DISTRIBUTOR, either
under this Agreement or by law or otherwise, shall be cumulative and not
alternative.
SECTION TWENTY-FOUR
COVENANT NOT TO COMPETE
24.1 Other than pursuant to this Agreement, DEALER (which shall include all
entities owned in whole or in part by DEALER, all parent corporations of
DEALER, all shareholders of DEALER, and if DEALER is a partnership, all general
and limited partners of DEALER), agrees that it will not directly or
indirectly own, manage, operate, join, control, or participate in the
ownership, management, operation or control of, or be connected in any manner
with, any business or engage in any business involving the manufacture,
promotion, sale, or delivery of security products and services. DEALER will not
disclose or reveal to anyone, directly or indirectly, any confidential
information or trade secrets of the business of Sonitrol, including customer
lists, personnel information, and secret processes or other technical data,
which DEALER has obtained as a Sonitral dealer. These restrictions continue so
long as this Agreement is in effect and for a period of three (3) years after
its termination. This restriction shall apply to competing businesses
operating (a) within DEALER's Area of Primary Responsibility, and (b) within a
geographical area of One Hundred (100) miles from the boundary of DEALER's Area
of Primary Responsibility. The foregoing restrictions (a) and (b) are distinct
and severable.
24.2 DEALER further covenants and agrees that during the term of this
Agreement and any successor agreement, DEALER shall not divert or attempt to
divert any business of or any customers of the franchised business to any other
competing business, by direct or indirect inducement or otherwise.
24.3 DEALER acknowledges that any violation of the covenants set forth in
paragraphs 24.1 and 24.2 above would cause SONITROL CORPORATION and DISTRIBUTOR
to suffer irreparable damage, the exact amount of which may not be reasonably
or accurately ascertained, and that the resulting damage to the confidential
nature of the Sonitrol Product System could not be adequately compensated by
money damages, and therefore, in the
<PAGE> 28
- 28 -
event of such violation occurring, DEALER hereby agrees and consents to the
issuance of an injunction restraining DEALER or anyone acting for or on behalf
of DEALER from violating said covenants or any of them.
24.4 DEALER shall require all of DEALER's directors and officers to agree
in writing, in a form agreeable to SONITROL CORPORATION, to be bound by the
terms and conditions of this Section Twenty-Four.
SECTION TWENTY-FIVE
FORCE MAJEURE
25.1 Neither DEALER, DISTRIBUTOR nor SONITROL CORPORATION shall be held
liable for failure to comply with any of the terms of this Agreement when such
failure has been caused solely by force majeure, fire, labor dispute, strike,
war, insurrection, riot, flood, government restrictions, or act of God beyond
the control and without fault on the part of the party involved, provided such
party uses due diligence to remedy such default.
SECTION TWENTY-SIX
CONSEQUENTIAL DAMAGES
- -
26.1 None of the parties shall be liable to the other for consequential or
incidental damages including but not limited to profits or sales or anticipated
sales or on account of expenditure, investments, or commitments made in
connection therewith, or in connection with the establishment, development and
maintenance of the business or goodwill of the other.
SECTION TWENTY-SEVEN
NOTICES
27.1 Any and all notices required or permitted under this Agreement shall
be in writing and shall be personally delivered or mailed, by certified mail -
return receipt requested, to the respective parties at the addresses listed
below unless and until a different address has been designated by written
notice:
<PAGE> 29
- 29 -
SONITROL CORPORATION: SONITROL CORPORATION
424 North Washington Street
Alexandria, Virginia 22314
DISTRIBUTOR: SONITROL SOUTHEAST, INC
-----------------------------------
520 Howard Court
-----------------------------------
Clearwater, Florida 34616
-----------------------------------
DEALER:
-----------------------------------
d/b/a Sonitrol of Miami, Inc.
-----------------------------------
-----------------------------------
-----------------------------------
SECTION TWENTY-EIGHT
EFFECTIVE DATE
28.1 This Agreement shall be effective and binding as of the date first
written above when it has been accepted and executed by SONITROL CORPORATION at
SONITROL CORPORATION's corporate headquarters in Alexandria, Virginia.
SECTION TWENTY-NINE
GOVERNING LAW
29.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of Virginia, except to the extent that said laws directly
conflict with and are incompatible with the laws, if any, of the jurisdiction
where DEARLER is located which specifically address and control
franchisor-franchisee relationships and which are applicable to this Agreement.
SECTION THIRTY
CONSENT TO JURISDICTION
30.1 DEARLER consents to jurisdiction in Virginia for the purposes of any
legal proceeding relating to this Agreement or the Sonitrol business granted by
this Agreement.
<PAGE> 30
- 30 -
SECTION THIRTY-ONE
EFFECT OF PARTIAL INVALIDITY
31.1 The invalidity of any portion of this Agreement will not and shall not
be deemed to affect the validity of any other provision. In the event that any
provision of this Agreement is invalid, the parties agree that the remaining
provisions shall be deemed to be in full force and effect as if they had been
executed by both parties subsequent to expungement of the invalid provision.
SECTION THIRTY-TWO
DESCRIPTIVE HEADINGS
32.1 The descriptive headings of the various sections of this Agreement are
provided solely for ease of reference and shall not be considered in construing
or interpreting this Agreement.
SECTION THIRTY-THREE
ENTIRE AGREEMENT
33.1 This instrument contains the entire agreement of the parties. No
representations, inducements, promises, negotiations or agreements, oral or
otherwise, not embodied herein shall be of any force or effect and shall not
affect the construction of the rights and obligations of the parties created
hereby. This Agreement may be modified only in writing, signed by the parties
hereto, and stating that said writing is a modification or amendment hereto.
Any other attempts at modification, whether by course of conduct, oral or
informally written agreement or whatever, shall be of no effect or force.
SECTION THIRTY-FOUR
ACKNOWLEDGEMENT BY DEALER
34.1 DEALER acknowledges that it has entered into this Agreement after
making an independent investigation and evaluation of SONITROL CORPORATION's
and DISTRIBUTOR's operations and the business venture contemplated herein, and
not as a result of representations or projections as to the venture's potential
for success, if any have been quoted, used illustratively or implied to DEALER.
Neither SONITROL
<PAGE> 31
- 31 -
CORPORATION nor DISTRIBUTOR makes any representation, guaranty, or warranty,
express or implied, as to the potential success of the business venture
contemplated herein. DEALER acknowledges that it has previously received a
blank copy of this Agreement in time to afford ample opportunity to seek legal
counsel and to review the provisions contained herein. DEALER acknowledges
that successful operation of this franchise will depend upon its best efforts,
capabilities, management, and efficient operation, as well as local marketing
conditions and other factors.
IN WITNESS WHEREOF, each undersigned individual in individual and/or
representative capacity, having read each and every provision herein and
agreeing to the same, and to this contract as a whole, have hereby executed
this Agreement as warranty of the capacity in which they have signed this
Agreement and as evidence of their understanding and ratification hereof, as a
wholly voluntary act.
Dated at Alexandria, Virginia, December 23, 1988.
<PAGE> 32
- 32 -
SONITROL CORPORATION
ATTEST:
By: /s/ Christopher W. Cobb
-----------------------------------------
By: /s/ Jane A. Landis
----------------------------
Secretary
DEALER:
MASADA SECURITY LIMITED PARTNERSHIP
d/b/a SONITROL OF MIAMI
--------------------------
ATTEST:
By: /s/ Edwin C. Pommerening
----------------------------------------
EDWIN C. POMMERENING
Title: President
-------------------------------------
PRESIDENT, Douglas & Bradford Ltd.
By: and partner of Douglas & Bradford
---------------------------- Investments Limited Partnership as
Secretary General Partner
DISTRIBUTOR:
SONITROL SOUTHEAST INC.
--------------------------------------------
ATTEST:
By: /s/ Jeffrey Hyndman
----------------------------------------
Title: Vice President Distribution
-------------------------------------
By: /s/ Dawn R. Johnson
---------------------------
Secretary
<PAGE> 33
AMENDMENT
SONITROL DEALER FRANCHISE AGREEMENT
SONITROL CORPORATION, a Delaware corporation, hereinafter referred to
as "SONITROL", SONITROL SOUTHEAST, INC., a Indiana corporation, hereinafter
referred to as "DISTRIBUTOR", and Masada Security Limited Partnership, a
Delaware, limited partnership, hereinafter referred to as "DEALER", effective
this 23 day of December, 1988, amend and restate in part that certain Sonitrol
Dealer Franchise Agreement dated December 23, 1988, between SONITROL,
DISTRIBUTOR and DEALER, hereinafter referred to as the "Ageement".
NOW, THEREFORE, SONITROL, DISTRIBUTOR and DEALER, intending to be
legally bound in consideration of the mutual agreements, covenants, and
promises herein set forth, and for good and valuable consideration,
acknowledged and received, do hereby amend and restate in part the Agreement as
follows:
1. In Paragraph 2.2.1 of Section Two of the Agreement, the
words, "provided that DISTRIBUTOR had given written notice to
DEALER not less than twelve (12) months prior to the end of
the initial ten (10) year term that such notice is required by
DEALER" shall be added at the end of the fourth line on the
first sentence after the word "effect" and before the
semicolon.
2. In Paragraph 2.2.3 of Section Two of the Agreement, the words,
"together with those amendments in form and substance
previously agreed upon", are added at the end of the first
sentence.
3. In Paragraph 13.1 of Section of Thirteen of the Agreement, the
words, "and DISTRIBUTOR'S" are deleted at the end of the
seventh line of the first sentence.
4. In Paragraph 5.3 of Section Five of the Agreement, the words,
"of selling, servicing, leasing and promoting Sonitrol systems
and equipment", are added in the eight line following the
words, "DEALER's business", and prior to the words, "only
from".
5. In Paragraph 5.2 of Section Five of the Agreement, the
words, "other then normal in-field servicing of subscriber
accounts" are added after the word "Products" in the third
line of the first sentence.
6. Paragraph 7.2.5 of Section Seven of the Agreement is deleted
in its entirety and restated as follows:
"To maintain an adequate facility within DEALER's area of
primary responsibility for monitoring of subscriber accounts."
<PAGE> 34
- 2 -
7. In Paragraph 8.2 of Section Eight of the Agreement, the words,
"and that such increase shall be applicable to all dealers
with similar royalty fee provisions" are added at the end of
the second sentence.
8. In Paragraph 10.1 of Section Ten of the Agreement, the words,
"So long as the minimum performance standards set forth in
Section 7.2.1 are maintained, failure to meet the sales
projections contained in the Business Plan does not create an
independent right to cancel the franchise" are added at the
end of the paragraph.
9. Section Eighteen of the Agreement is amended to add the
following as Paragraph 18.4:
"18.4 Sales or transfers, in whole or in part, of DEALER's
stock to its subsidiary or sister corporations or to its
parent corporation, and an assignment of this Agreement to a
bank or financial institution provided the DEALER and bank or
financial institution enter into an agreement substantially
in the same form and substance to Exhibit A and obtain the
approval of SONITROL CORPORATION and DISTRIBUTOR thereto,
shall not be subject to the provisions of Paragraphs 18.1,
18.2, and 18.3."
10. Section Nineteen of the Agreement is deleted in its entirety
and amended as follows:
"19.1 If at any time during the term of this Agreement,
DEALER desires to sell its assets, including its rights under
this Agreement, or any shareholder, partner or limited partner
of DEALER, desires to sell or transfer, in whole or in part,
any of its interest in DEALER (the assets of DEALER or an
interest in DEALER being collectively referred to herein as
the "Interest"), DEALER, or any selling stockholder, general
partner or limited partner of DEALER ("Seller"), shall first
offer such Interest to SONITROL CORPORATION and DISTRIBUTOR by
delivering to SONITROL CORPORATION and DISTRIBUTOR a written
offer setting forth the Interest to be sold, the purchase
price and terms of payment.
19.2 During the thirty day period following receipt of such
offer to sell from Seller, SONITROL CORPORATION or DISTRIBUTOR
shall either accept such offer or issue to Seller a
counteroffer in writing setting forth the purchase price and
terms of payment. If SONITROL CORPORATION or DISTRIBUTOR
accept the offer of Seller, the closing of the sale shall
take place within thirty
<PAGE> 35
- 3 -
days after notice of acceptance. If SONITROL CORPORATION or
DISTRIBUTOR issues a counteroffer, Seller shall have ninety
days to accept such counteroffer. During such ninety day
period, Seller may offer to sell the Interest to or solicit
offers to buy such Interest from any third party and if a
third party agrees to purchase the Interest within such ninety
day period at a price greater than and at the same or better
terms of payment that contained in the counteroffer of
SONITROL CORPORATION or DISTRIBUTOR, then Seller may
consummate the sale with such third party free of the rights
granted to SONITROL CORPORATION and DISTRIBUTOR contained in
this Section Nineteen.
19.3 As between SONITROL CORPORATION and DISTRIBUTOR,
DISTRIBUTOR shall have the first right and option to accept
the offer to sell or issue the counteroffer.
19.4 If SONITROL CORPORATION and DISTRIBUTOR do not receive
the offer to sell as set forth in Paragraph 19.l above, then
SONITROL CORPORATION and DISTRIBUTOR shall have no obligation
to consider or consent to the prospective transfer
or assignment of DEALER's Interest under Section Eighteen of
this Agreement.
19.5 SONITROL CORPORATION and DISTRIBUTOR's right of first
refusal granted in subsections 19.1, 19.2, and 19.3 above
shall apply only to assignments, sales or transfers over which
SONITROL CORPORATION and DISTRIBUTOR have a right of consent
and approval under Section Eighteen of this Agreement.
19.6 It is clearly understood by DEALER, DISTRIBUTOR and
SONITROL CORPORATION that nothing contained herein affects
DISTRIBUTOR and SONITROL CORPORATION rights under Section
Eighteen of this Agreement."
11. Section Twenty-four of the Agreement is amended by adding the
following subsection:
"24.5 SONITROL CORPORATION and DISTRIBUTOR recognize that
DEALER's shareholders or affiliated companies currently have
an ongoing business in security alarms and sells non-Sonitrol
manufactured or approved security alarms within the Area of
Primary Responsibility granted by this Agreement.
Notwithstanding this recognition, DEALER agrees that in
conducting the Sonitrol business granted by this Agreement it
will use its best efforts to fully develop the market for
Sonitrol Products and shall comply with
<PAGE> 36
- 4 -
all the terms and conditions of this Agreement including all
standards and procedures of SONITROL CORPORATION for the
operation of a Sonitrol franchised business. DEALER warrants
and agrees that the marketing, servicing and monitoring
operations of its non-Sonitrol business shall be independent
from and not associated with the operations of the business
granted by this Agreement, even if located in the same
building, and further insures and agrees that the Sonitrol
business granted hereunder will become and remain fully
competitive in the Area of Primary Responsibility. In the
event of DEALER's failure to comply with this Section, in
addition to SONITROL CORPORATION's and DISTRIBUTOR's rights
under Sections Twenty-one and Twenty-two of this Agreement,
SONITROL CORPORATION and DISTRIBUTOR shall after written
notice and provided that dealer fails to cure within thirty
days have the right, at its option, to establish another
dealer or dealers within a part or all of DEALER's Area of
Primary Responsibility."
Except as specifically amended hereby, all terms and conditions of the
Agreement shall remain in full force and effect, and the Agreement shall read
as a single integrated document, incorporating the amendments hereby effected.
IN WITNESS WHEREOF, each undersigned individual in individual and/or
representative capacity, having read each and every provision herein and
agreeing to the same, have hereby executed this Amendment to the Agreement as
warranty of the capacity in which they have signed this Agreement and as
evidence of their understanding and ratification hereof, as a wholly voluntary
act.
<PAGE> 37
- 5 -
DATED at: Alexandria, Virginia, December 23, 1988
SONITROL CORPORATION
By /s/ Christopher W. Cobb
------------------------------------------
Title V.P.
---------------------------------------
ATTEST:
/s/ Jane A. Landis
- ----------------------------
Secretary
DISTRIBUTOR:
SONITROL SOUTHEAST, INC.
By /s/ Jefferey Hyndman
-----------------------------------------
Title V.P. Distribution
---------------------------------------
ATTEST:
/s/ Dawn R. Johnson
- ----------------------------
Secretary
DEALER:
MASADA SECURITY LIMITED PARTNERSHIP
dba SONITROL OF MIAMI
---------------------------
By /s/ Edwin C. Pommerening
----------------------------------------
EDWIN C. POMMERENING
Title President
-------------------------------------
PRESIDENT, Douglas & Bradford, Ltd.
ATTEST: and partner of Douglas-& Bradford
Investments Limited
- ---------------------------- Partnership as General
Secretary Partner
<PAGE> 1
EXHIBIT __
SONITROL DEALER FRANCHISE AGREEMENT
THIS AGREEMENT, effective this 26th day of February, 1993, by and among
SONITROL CORPORATION, a Delaware corporation, SONITROL SOUTHEAST, INC., a
Indiana corporation, hereinafter referred to as "DISTRIBUTOR," and MASADA
SECURITY LIMITED PARTNERSHIP, d/b/a_______________________________________,
a limited partnership, formed in the State of Delaware, hereinafter referred to
as "DEALER."
RECITALS
WHEREAS, SONITROL CORPORATION is the owner of the registered
trademark "SONITROL," and DISTRIBUTOR has been licensed, with the right to
sub-license others, to use the trademark "SONITROL," registered with the United
States Patent Office under the principal register number 12-681, together with
all the goodwill connected therewith; and
WHEREAS, SONITROL CORPORATION has a unique system for the promotion,
sale and delivery of security products and services, which is identified by the
trademark "SONITROL," and which system may be improved, further developed, or
otherwise modified from time to time by SONITROL CORPORATION, hereinafter
referred to as the "Sonitrol Product System;" and
WHEREAS, SONITROL CORPORATION is engaged in the business of granting
franchises for the operation of security businesses using the "SONITROL"
trademark and the system identified therewith; and
WHEREAS, SONITROL CORPORATION has expended time, effort, and money to
obtain knowledge in the field of merchandising, distributing and promoting the
sale of security systems and related products and services, and has established
successfully a reputation, demand and goodwill for such products and services
under the "SONITROL" trademark, which signifies the source and quality of
products and services sold under the "SONITROL" name and the high quality of
management, supervision, and merchandising associated therewith; and
WHEREAS, the Sonitrol Alarm Product Line, hereinafter referred to as
"Sonitrol Products," consists of products bearing the trademark or trade name
"SONITROL," which products include security system components using Sonitrol
Corporation's
<PAGE> 2
- 2 -
premier audio detection technology and components using emerging technologies
for diverse security system requirements, and which in many applications are
monitored by Sonitrol Dealers at central monitoring stations; and
WHEREAS, Sonitrol Products work effectively as integral components
of security systems as a result of the time, money and effort expended in
developing specifications for Sonitrol Products, and the high standards adhered
to in the testing, quality, production, manufacture, distribution,
installation, and service of Sonitrol Products, all of which is essential to
the goodwill and reputation for quality associated with the "SONITROL"
trademark which Sonitrol Products bear; and
WHEREAS, all of the foregoing having a distinctive and valuable
significance, DEALER acknowledges and understands the importance of maintaining
the goodwill and good reputation of the "SONITROL" trademark, and DEALER
desires to purchase and market equipment and products bearing the "SONITROL"
trademark, and to use and obtain benefits from the Sonitrol Product System for
promoting, leasing, selling and servicing Sonitrol Products, and to do business
using the "SONITROL" trademark and obtain the benefit of the goodwill inherent
therein; and
WHEREAS, DEALER has read this Agreement, and SONITROL CORPORATION's
and DISTRIBUTOR's Franchise Offering Circulars, and understands and accepts the
terms, conditions, and covenants regarding DEALER's operation and acquisition
of supplies set forth herein as being reasonable and necessary to maintain the
high standards of quality and service at all Sonitrol dealerships, and thereby
protect and preserve the goodwill inherent in the "SONITROL" trademark;
NOW, THEREFORE, SONITROL CORPORATION, DISTRIBUTOR and DEALER,
intending to be legally bound in consideration of the mutual agreements,
covenants and promises herein set forth, do hereby agree as follows:
SECTION ONE
LICENSE OF TRADEMARK AND FRANCHISE TERRITORY
1.1 DISTRIBUTOR hereby licenses and grants to DEALER, upon the terms and
conditions set forth herein, the right to, and primary responsibility for,
promoting, leasing, selling, and servicing Sonitrol Products bearing the
trademark "SONITROL," and to use solely in connection therewith the "SONITROL"
trademark and the Sonitrol Product System identified with said trademark,
within the following area:
<PAGE> 3
- 3 -
Broward County in the State of Florida hereinafter referred to as Area of
Primary Responsibility.
DEALER shall use the name "SONITROL" in the name under which it conducts
business, which name shall be approved in advance by SONITROL CORPORATION,
but not in its corporate or other legal name.
1.2 DEALER agrees that it will not establish a Sonitrol central station or a
business premises outside of DEALER's Area of Primary Responsibility.
Further, DEALER shall not represent itself as a local Sonitrol Dealer in
territory outside its Area of Primary Responsibility unless DEALER has been
granted franchise rights to that other territory under a separate Sonitrol
Dealer Franchise Agreement.
1.3 SONITROL CORPORATION and DISTRIBUTOR agree that they will not license
another DEALER with the right to establish a central station or a business
premises within DEALER's Area of Primary Responsibility except as otherwise
provided in this Agreement and so long as DEALER complies with the terms and
conditions of this Agreement.
1.4 The parties understand and agree that this license is of the registered
trademark "SONITROL," and of the related Sonitrol Product System which SONITROL
CORPORATION has developed as this system presently exists or may hereafter be
modified. DEALER agrees to and shall use the "SONITROL" trademark in connection
with, and exclusively for, the promotion and conduct of the business to be
operated by DEALER under this Agreement, hereinafter referred to as "Franchise
Business, in accordance with such instructions, rules and procedures as may be
prescribed by SONITROL CORPORATION from time to time with respect thereto.
1.5 DEALER understands and agrees that this Agreement confers upon DEALER no
proprietary right, title or interest in the "SONITROL" trademark and trade
name, or in the Sonitrol Product System, but only the right to the use
thereof during the term of this Agreement. DEALER agrees and covenants that
it will not register or attempt to register such trademark in its own name or
that of any other firm, person or corporation, and that it shall not directly
or indirectly contest or aid in contesting the use, ownership and rights of
SONITROL CORPORATION in and to the "SONITROL" trademark. Further, DEALER
agrees that it shall not permit, authorize, license or approve others to use
the "SONITROL" trademark for any purpose. Immediately upon the termination of
this Agreement,
<PAGE> 4
- 4 -
DEALER agrees and covenants that it shall cease and forever abstain from using
the "SONITROL" trademark and trade name and shall execute such documents and
take such action as SONITROL CORPORATION may deem reasonably necessary or
desirable to evidence the fact that DEALER has ceased using the trademark and
trade name "SONITROL" and that DEALER has no further interest or right therein
whatsoever.
1.6 DEALER agrees that it shall use the "SONITROL" trademark only in
accordance with the terms and conditions of this Agreement and any and all
standards promulgated from time to time by Sonitrol Corporation relating
thereto. DEALER agrees to report to SONITROL CORPORATION any unauthorized use
of the name or trademark "SONITROL" of which it becomes aware in violation of
this Agreement or standards or procedures prescribed by SONITROL CORPORATION
from time to time with respect thereto.
1.7 DEALER shall promptly notify SONITROL CORPORATION of any suspected
infringement of or challenge to the validity of SONITROL CORPORATION's
ownership and rights to its proprietary marks. DEALER acknowledges that
SONITROL CORPORATION shall, in its sole and absolute discretion, institute
proceedings or defend proceedings as it shall deem fit and that SONITROL
CORPORATION alone has the right to control any administrative proceeding or
litigation involving the proprietary marks. If SONITROL CORPORATION undertakes
the defense or prosecution of any litigation relating to the proprietary marks,
DEALER agrees to execute any and all documents and to do whatever acts and
things as may, in the opinion of counsel for SONITROL CORPORATION, be necessary
or advisable to carry out the defense or prosecution. DEALER shall not, under
any circumstances whatsoever, institute or take any legal proceedings relating
to the proprietary marks.
1.8 DEALER shall only use the trademarks affixed or related to Sonitrol
Products on Sonitrol Products purchased from DISTRIBUTOR. DEALER shall not
affix or relate the "SONITROL" trademark or trade name to any product or
equipment which was not purchased from DISTRIBUTOR, or a product approved by
SONITROL CORPORATION, and respecting which SONITROL CORPORATION has authorized
the affixing of such trademark or trade name.
1.9 DEALER understands and agrees that SONITROL CORPORATION reserves the right
to manufacture, sell, promote, lease and service products other than Sonitrol
Products to and through other sales organizations within the DEALER's Area of
Primary Responsibility without compensating DEALER for same. However, such
products will not bear the "SONITROL" name or trademark, unless such products
are Sonitrol Products which DEALER has
<PAGE> 5
- 5 -
declined to distribute pursuant to Section Six of this Agreement. DEALER
understands and agrees that SONITROL CORPORATION reserves the right to
manufacture and promote Sonitrol products within DEALER's Area of Primary
Responsibility.
1.10 DEALER further understands and agrees that SONITROL CORPORATION may sell
Sonitrol Products directly to (i) any agency, office or facility of the United
States Government located in DEALER's Area of Primary Responsibility, and (ii)
certain customers located in DEALER's Area of Primary Responsibility when such
sale is part of a package sale to a business with national or regional
locations and such locations are both inside and outside of the Area of Primary
Responsibility. DEALER shall have the option of installing and servicing all
such sales of Sonitrol Products within DEALER's Area of Primary Responsibility
and being compensated for such installation and service. If DEALER chooses not
to be responsible for such installations and service, then SONITROL
CORPORATION, or its designee, shall have the right to provide such installation
and service without compensating DEALER.
SECTION TWO
TERM OF AGREEMENT AND RENEWAL
2.1 The term of this Agreement shall be for a period of ten (10) years from the
date first written above.
2.2 DEALER may, at its option, renew its right to use the "SONITROL"
trademark, purchase and market Sonitrol Products, and use the Sonitrol Product
system for an additional ten (10) year period, provided that at the end of the
initial ten (10) year term:
2.2.1. DEALER has given SONITROL CORPORATION and DISTRIBUTOR
written notice of such election to renew not less than six (6)
months nor more than twelve (12) months prior to the end of the
term then in effect;
2.2.2. DEALER is not in default of any provision of this
Agreement, any amendment hereof or successor hereto, or any other
agreement between DEALER, DISTRIBUTOR and SONITROL CORPORATION, its
subsidiary or affiliated corporations, and has substantially
complied with all the terms, conditions and covenants of such
agreements during the terms thereof;
<PAGE> 6
- 6 -
2.2.3. Upon renewal DEALER shall execute SONITROL
CORPORATION's then standard form of Dealer Franchise
Agreement currently in use. In the event DEALER chooses
for any reason not to execute the then standard current
form of Dealership contract, DEALER may renew for an
additional ten years under the terms of this Agreement;
however, SONITROL CORPORATION shall have the right to
establish dealers and shall have the right to sell and
market products within DEALER's Area of Primary
Responsibility without compensating DEALER for the same and
said products may bear the SONITROL CORPORATION trademark
or trade name. DEALER shall not be required to pay again
the initial franchise fee provided for, or its
equivalent, as a condition of renewal;
2.2.4. DEALER, DISTRIBUTOR and SONITROL CORPORATION shall
execute a mutual general release, in the form of Attachment
A, for any and all claims each party shall have against the
other, its parent, subsidiary and affiliated corporations,
and their officers, directors, agents and employees,
excepting only such claims as are precluded from waiver by
applicable law.
SECTION THREE
TRAINING AND ASSISTANCE
3.1 DISTRIBUTOR will provide to DEALER and DEALER will be required to
send, at its expense, its general manager or principal operating person,
and any other employees required by DISTRIBUTOR and SONITROL CORPORATION,
to an initial training program relating to aspects of the franchised
business, including startup, financial matters, business operations,
marketing and sales procedures, and installation, operation and monitoring
of security systems utilizing Sonitrol Products. The initial training
program will be conducted for such period of time as is deemed necessary
by SONITROL CORPORATION and DISTRIBUTOR.
3.2 SONITROL CORPORATION and DISTRIBUTOR will provide DEALER with further
sales and operational training courses from time to time as is available
to all Sonitrol dealers, which courses specified employees of DEALER may
be required to attend.
3.3 Training programs will be conducted at locations selected by SONITROL
CORPORATION and DISTRIBUTOR, and DEALER shall pay the costs of travel,
living accommodations and salary for its personnel to attend and the
required training fee.
<PAGE> 7
- 7 -
SECTION FOUR
SONITROL STANDARDS AND PROCEDURES
4.1 The success of the Sonitrol Product System depends on the national goodwill
resulting from consistency among Sonitrol dealers in the sale, promotion,
leasing, and servicing of Sonitrol Products. This conformity can be achieved
only by the rigid adherence by DEALER and by other licensed dealers to a
consistent plan of operation. Consistent therewith, SONITROL CORPORATION will
publish and supply to DEALER manuals, bulletins, handbooks and/or other written
material containing operational standards which may be modified from time to
time by SONITROL CORPORATION. DEALER covenants and agrees to operate the
Franchise Business in strict conformance with the operational standards set
forth in such publications and agrees to be bound by any changes made thereto.
The franchise standards and procedures manual, bulletins, handbooks and
information provided contain trade secrets and confidential information and
will remain the property of SONITROL CORPORATION and therefore DEALER shall
only reveal the contents of these materials to such of DEALER's personnel who
need to know the information for the effective operation of the Franchise
Business, and who sign a statement in the form prescribed by SONITROL
CORPORATION agreeing to not reveal such materials to any other person or
entity. DEALER shall not otherwise reveal the contents of these materials
without SONITROL CORPORATION's prior written authorization.
SECTION FIVE
PURCHASE AND REPAIR OF SONITROL CORPORATION PRODUCTS
RESTRICTION ON SALE OF OTHER PRODUCTS
5.1 During the term of this Agreement, DEALER agrees to purchase and
DISTRIBUTOR will sell to DEALER the aforementioned Sonitrol Products at
DISTRIBUTOR's list prices for Sonitrol Products as in effect at the time of
such sales, except that DISTRIBUTOR shall not be obligated to sell Sonitrol
Products to DEALER if DEALER is in default of this Agreement. All purchases
from DISTRIBUTOR by DEALER shall be shipped F.O.B. Orlando, Florida, and DEALER
agrees to pay for Sonitrol Products under the terms and conditions set forth in
the Purchase Order or other documents governing the sale.
5.2 Because repair of Sonitrol Products involves certain trade secrets and
confidential information and procedures, all servicing and repair of Sonitrol
Products shall be performed by
<PAGE> 8
SONITROL CORPORATION under the prevailing terms and conditions. DEALER agrees
to pay SONITROL CORPORATION for the cost of such repair under the terms and
conditions in effect at the time of such repair. DEALER shall ship any
Sonitrol Products to be repaired, freight prepaid, to SONITROL CORPORATION's
facility at Orlando, Florida. SONITROL CORPORATION will return the repaired
equipment, F.O.B. Orlando, Florida, within a reasonable period of time. DEALER,
or any person authorized by DEALER, may not modify, repair, or attempt to
repair Sonitrol Products. Such modification, repair, or attempt to repair
shall void any and all guarantees and warranties, express or implied,
applicable to Sonitrol Products, and shall constitute a breach of this
Agreement. SONITROL CORPORATION may, in writing, authorize the repair of
certain products in its sole discretion.
5.3 Because the national goodwill inherent in the "SONITROL" trademark and the
Sonitrol Product System depends on the consumer's identification of the
trademark with a high quality product, and because all products sold, promoted,
leased and serviced by DEALER tend to be identified by the consumer as
"SONITROL" trademark products, DEALER shall purchase all products and equipment
which are promoted, leased, sold, installed, or serviced in the operation of
DEALER's business only from DISTRIBUTOR or from manufacturers, suppliers or
distributors designated or approved by SONITROL CORPORATION in writing, which
manufacturers, suppliers, or distributors shall meet in all respects SONITROL
CORPORATION's specifications and standards as to quality, durability,
performance, warranties, finish and appearance for such products and equipment,
and who shall adequately demonstrate the ability, capacity, and facilities to
supply DEALER's needs in the quantities, at the times, and with the reliability
necessary for efficient and high quality operation of DEALER's business.
SECTION SIX
NEW PRODUCT DEVELOPMENT
6.1 SONITROL CORPORATION shall notify DEALER of the development, availability,
and distribution and marketing program of any new subscriber Sonitrol
Product(s), hereinafter "New Products", during the term of this Agreement.
Within ninety (90) days of the receipt of such notice from SONITROL
CORPORATION, DEALER shall, by written notice, agree or decline to Purchase and
distribute such New Products in accordance with the prescribed marketing plan.
<PAGE> 9
- 9 -
6.2 If DEALER agrees to purchase and distribute such New Products in
accordance and consistent with SONITROL CORPORATION's prescribed marketing
plan, then said New Products shall be considered a Sonitrol Product within
the provisions of this Agreement. If DEALER declines to so purchase and
distribute such New Products, then such New Products shall be excluded from
the definition of Sonitrol Product hereunder and SONITROL CORPORATION and/or
DISTRIBUTOR shall have the right to market said New Products within DEALER's
Area of Primary Responsibility without compensating DEALER for the same, and
said New Products may bear the "SONITROL" trademark or name.
SECTION SEVEN
MINIMUM PURCHASE AND INVENTORY REQUIREMENTS
7.1 At all times during the term of this Agreement, DEALER agrees and
covenants to use its best efforts to fully develop the market for Sonitrol
Products and to effect the widest and best possible distribution of Sonitrol
Products within its Area of Primary Responsibility and to promote the
Sonitrol Product system within DEALER's Area of Primary Responsibility.
7.2 Recognizing the obligation of DEALER set forth in Paragraph 7.1 to
effect the widest and best possible distribution of Sonitrol Products
within the Area of Primary Responsibility granted herein, DEALER agrees:
7.2.1 To purchase from DISTRIBUTOR for sale and installation only
within DEALER'S Area of Primary Responsibility granted by this
Agreement, at a minimum, the following number of Sonitrol Product
subscriber systems during the first through the fifth years of
operation, beginning with the date specified in Paragraph 7.2.4:
Cumulative No. of
Year(s) Subscriber Systems
One 70
One-Two 140
One-Three 210
One-Four 280
One-Five 350
Beginning the sixth year and for each year thereafter for the
duration of this Agreement, DEALER shall purchase each year a
number of Sonitrol Product subscriber systems for installation
within its Area of
<PAGE> 10
- 10 -
Primary Responsibility equal to the number of Sonitrol Product
subscriber systems required for the fifth year of operation.
7.2.2 During the first through the fifth years of operation,
DEALER shall install at new subscriber account locations within
its Area of Primary Responsibility a number of Sonitrol Product
subscriber systems equal to the minimum purchase requirements set
forth in section 7.2.1. Beginning the sixth year of operation,
and for each year thereafter for the duration of this Agreement,
DEALER shall install at new subscriber account locations within
its Area of Primary Responsibility a number of Sonitrol Product
subscriber systems equal to the minimum purchase requirements for
the fifth year of operation. DEALER shall provide DISTRIBUTOR
with monthly reports setting forth the number of Sonitrol
subscriber accounts within DEALER'S Area of Primary
Responsibility for the preceding month.
7.2.3 To commence business with, and maintain during the first
year of operation, an inventory of Sonitrol Product subscriber
systems equivalent to two-twelfths of the minimum purchase
requirement for that year, and during the second through fifth
years an inventory of Sonitrol Product subscriber systems
equivalent to two-twelfths of the difference between the
cumulative minimum purchase requirement for the pertinent year
and the previous year. Thereafter, DEALER shall maintain an
inventory of Sonitrol Product subscriber systems equivalent to
two-twelfths of DEALER'S Sonitrol Product subscriber system
purchases for DEALER'S preceding fiscal year.
7.2.4 To commence sales and marketing efforts of Sonitrol Product
subscriber systems within DEALER'S Area of Primary Responsibility
on or before the lst day March, 1993.
7.2.5 To acquire an adequate facility within DEALER'S Area of
Primary Responsibility, purchase from DISTRIBUTOR and complete
installation of Sonitrol Central Station monitoring equipment,
and commence monitoring of subscriber accounts from DEALER'S
facility within the Area of Primary Responsibility within _____
months following the date of this Agreement. DEALER agrees to
submit a purchase order for Sonitrol Central Station monitoring
equipment in a areasonable time to permit deivery and
installation of same prior to the end of the time period
specified in this Paragraph.
<PAGE> 11
- 11 -
7.3 If DEALER fails to achieve and/or maintain the minimum requirements set
forth in this section, then and in that event, and in addition to those rights
under Sections Twenty-One and Twenty-Two of this Agreement, DISTRIBUTOR and
SONITROL CORPORATION shall have the right, at their option, to establish an
additional dealer or dealers within part or all of DEALER's Area of Primary
Responsibility.
SECTION EIGHT
FRANCHISE AND ROYALTY FEES
8.1 In consideration of the grant to DEALER of the license to use the
"SONITROL" trademark and the Sonitrol Product System and the services to be
performed by DISTRIBUTOR and SONITROL CORPORATION as set forth in this
Agreement, DEALER agrees to pay to DISTRIBUTOR a non-refundable franchise fee
of $20,000, receipt of which is hereby acknowledged.
8.2 DEALER agrees to pay DISTRIBUTOR, on or before the tenth (10th) day of
each month, a continuing monthly royalty fee calculated at two and one-half
percent (2 1/2%) of DEALER's gross revenue during the preceding calendar
month, except as provided in Subsection 8.4 below. The royalty fee
percentage may be changed by SONITROL CORPORATION upon thirty (30) days
written notice to DEALER, provided that any such change shall not result in
more than a one-quarter percent (.25%) increase over the then-existing rate
for any twelve (12) month period. A service fee of one and one-half percent
(1 1/2%) per month will be assessed on all past due royalty fees.
8.3 The term "Gross Revenue," as used in this section, means the amount of
all revenue received by DEALER from the sale of all products and services,
and all income of every kind or nature, whether direct or indirect, received
by DEALER, related to the DEALER's franchised business which is the subject
of this Agreement; provided, however, that the term "Gross Revenues" shall
not include any sales taxes or other taxes collected by DEALER for
transmittal to the appropriate taxing authority.
8.4 At the same time a monthly royalty payment is made pursuant to the terms
and conditions of Paragraph 8.2 above, DEALER shall also submit a monthly
statement to DISTRIBUTOR, in the form prescribed by DISTRIBUTOR, setting forth
the gross revenue of DEALER for the immediately preceding calendar month.
<PAGE> 12
- 12 -
SECTION NINE
ADVERTISING FEES
9.1 DEALER agrees, upon establishment of a Dealer Cooperative Advertising
Council (hereinafter "Council"), to pay SONITROL CORPORATION a monthly
advertising and sales promotion contribution to be placed in a Sonitrol
Advertising Fund (hereinafter "Fund"). DEALER shall pay this contribution by
the tenth (10th) day of each month, and the amount of the contribution shall be
established by SONITROL CORPORATION and the Council, but in no event will it
exceed three percent (3%) of DEALER's Gross Revenues from the business which is
the subject of this Agreement for the preceding month.
9.2 The Council will direct all advertising programs, it shall have discretion
over the maintenance and allocation of the Fund, and the creative concepts,
materials and media used in advertising programs. The Fund is intended to
maximize general public recognition and acceptance of the "SONITROL" trademark,
and the products and services associated therewith. SONITROL CORPORATION and
the Council undertake no obligation in administering the Fund to make
expenditures for DEALER which are equivalent or proportionate to DEALER's
contributions, or to ensure that DEALER benefits directly or proportionately
from the placement of advertising.
9.3 DEALER agrees that the Fund may be used to meet any and all costs of
maintaining, administering, directing and preparing national, state or regional
advertising materials, programs and public relations activities. The Fund
shall be accounted for separately from other funds of SONITROL CORPORATION by
the Council. SONITROL CORPORATION assumes no direct or indirect liability or
obligation to DEALER with respect to the maintenance, direction or
administration of the Fund.
9.4 The term "Gross Revenues," as used in this Section means the amount of all
revenue received by DEALER from the sale of all products and services, and all
income of every kind or nature, whether direct or indirect, received by DEALER,
related to the DEALER's franchised business which is the subject of this
Agreement; provided, however, that the term "Gross Revenues" shall not include
any sales taxes or other taxes collected by DEALER for transmittal to the
appropriate taxing authority.
<PAGE> 13
- 13 -
SECTION TEN
DEALER'S BUSINESS PLAN
10.1 DEALER acknowledges that conformity to the Business Plan prepared by
DEALER and submitted to SONITROL CORPORATION and DISTRIBUTOR prior to
execution of this Agreement, which Business Plan is attached hereto and made
a part hereof as Attachment B, is required for the successful performance by
DEALER of all of the duties and obligations required to be performed,
fulfilled and observed by DEALER under this Agreement, and DEALER agrees to
conform to the Business Plan in the conduct of its business. DEALER hereby
certifies that the Business Plan, including DEALER's representations
contained therein, is true and correct, and DEALER acknowledges and
understands that SONITROL CORPORATION and DISTRIBUTOR rely upon DEALER's
Business Plan in entering into this Agreement.
10.2 DEALER hereby certifies that the total capitalization set forth in
DEALER's Business Plan is true and correct, and that said capitalization is
available as of the date first above written, and DEALER acknowledges and
understands that SONITROL CORPORATION and DISTRIBUTOR rely upon this
certification by DEALER in entering into this Agreement.
SECTION ELEVEN
TAXES AND INSURANCE
11.1 DEALER shall be responsible for paying and shall discharge all
applicable tax liabilities.
11.2 DEALER shall maintain at its expense insurance against all types of
liability as SONITROL CORPORATION and DISTRIBUTOR may require, including, but
not limited to, comprehensive general liability insurance (covering premises,
products liability, completed operations, blanket contractual and personal
injury liabilities), errors and omissions insurance, worker's compensation
insurance, and automobile insurance. Coverage limits for each type of
insurance shall be in accord with generally accepted and/or statutorily
mandated limits. In any event, DEALER shall maintain a minimum liability
limit of not less than One Million Dollars ($1,000,000.00) for each type of
insurance for which such limits are available. DEALER shall purchase all
such insurance from a responsible and accredited insurer and each such
policy shall include SONITROL CORPORATION and DISTRIBUTOR, or any of their
designated subsidiary or affiliated corporations, as additional insurers and
shall also provide that such policies may not be cancelled or their
<PAGE> 14
- 14 -
coverage materially changed without thirty (30) days prior written notice to
all named insurers. DEALER shall provide SONITROL CORPORATION and DISTRIBUTOR
with certificates of insurance on all policies and evidence that the premiums
therefore have been paid.
SECTION TWELVE
PERSONNEL AND BUSINESS APPEARANCE STANDARDS
12.1 DEALER acknowledges that the successful operation of DEALER's business
under this Agreement requires professional management, and DEALER agrees that
the General Manager or principal operating person (hereinafter "Manager") of
DEALER shall be a person who is capable of performing on behalf of the
Franchise Business all of the duties and obligations required to be performed,
fulfilled, and observed by DEALER under this Agreement. DEALER shall keep
SONITROL CORPORATION and DISTRIBUTOR advised of the identity of the Manager and
shall provide SONITROL CORPORATION and DISTRIBUTOR a complete resume of the
Manager together with a statement by DEALER that it has investigated the
qualifications of the Manager and has determined that such person has the
requisite qualifications and is capable of performing the duties and
obligations required of DEALER under this Agreement.
12.2 DEALER shall keep all records on the installation, servicing and
monitoring of its customers' accounts in the strictest confidence and will
permit only the necessary minimum of trusted employees to have access to such
records. DEALER shall maintain all of its records and files in a secure
manner so as to safeguard its records and files from exposure to criminal
elements or any other unauthorized person(s). SONITROL CORPORATION
and-DISTRIBUTOR shall have the right to review DEALER's security procedures
and may require reasonable changes in such procedures to increase DEALER's
security.
12.3 DEALER shall adhere to high ethical standards and shall conduct its
business in strict compliance with all applicable laws, regulations, ordinances
and requirements of any federal, state, county, municipal or other government,
and shall obtain all necessary permits, licenses, or other consents for the
operation of DEALER's business.
12.4 DEALER and its employees shall cooperate with all law enforcement
agencies to the fullest extent compatible with its duty to customers.
However, no duty to customers shall require DEALER or its employees to act in
violation of the law.
<PAGE> 15
- 15 -
12.5 Recognizing that a favorable business reputation is difficult to achieve
and thereafter maintain, and that the goodwill inherent in the "SONITROL"
trademark depends upon the identification of the trademark with businesses
operated in accordance with high standards of quality, DEALER agrees:
12.5.1 To keep its business premises, vehicles and furnishings
clean, neat and orderly so as to maintain an attractive appearance;
12.5.2 To keep all equipment used in the conduct of the business
and its inventory stock clean and in a state of good repair;
12.5.3 To maintain reasonable financial stability and credit standing;
12.5.4 To maintain good customer relations;
12.5.5 To strive to ensure that its employees respond promptly and
courteously to all business and servicing inquiries and that its
employees are neat and well groomed in personal appearance.
12.6 DEALER agrees that DISTRIBUTOR and SONITROL CORPORATION may from time to
time, during the DEALER's course of operation, with or without notice, inspect
the DEALER's business premises and operation of business to determine if the
business is being operated in accordance with the standards and procedures set
forth herein and in the franchise standards and procedures manual. SONITROL
CORPORATION and DISTRIBUTOR shall report to DEALER in writing any aspects of
DEALER's operations which are not in conformity with the manual or this
Agreement, and DEALER shall take immediate steps to correct such deficiencies.
Failure of the DEALER to correct any deficiencies within 30 days of receipt of
notice of such deficiencies shall constitute a default of this Agreement and
the Agreement may be terminated pursuant to Section Twenty-Two.
SECTION THIRTEEN
ACCOUNTING AND RECORDS REQUIREMENTS
13.1 DEALER shall maintain true and accurate records, reports, accounts, books
and data which shall accurately reflect all particulars relating to the
Franchise Business in compliance with the standard financial management system
prescribed by SONITROL CORPORATION for record keeping, bookkeeping, accounting
and reporting all business and operation of the
<PAGE> 16
- 16 -
Franchise Business, and shall permit SONITROL CORPORATION's and Distributor's
representative to examine and audit said records, reports, accounts, books and
data at all reasonable times and at SONITROL CORPORATION's and DISTRIBUTOR's
expense.
13.2 The DEALER shall provide SONITROL CORPORATION and DISTRIBUTOR with
financial statements relating to the Franchise Business subject to this
Agreement, including a profit and loss statement and balance sheets. The first
financial statement shall be due six (6) months after the effective date of
this Agreement, and semi-annually thereafter. Within four (4) months following
the close of each fiscal year, the DEALER, at its expense, shall provide to
SONITROL CORPORATION and DISTRIBUTOR a financial statement prepared by an
independent Public Accountant. The DEALER shall utilize recognized and
customary accounting procedures.
13.3 DEALER shall deliver to SONITROL CORPORATION and DISTRIBUTOR on or before
the date of this Agreement a complete list of its stockholders, (or if DEALER
is a partnership, a complete list of all its general and/or limited partners)
all of whom shall appear to be of good moral and ethical character so as not to
compromise the Sonitrol Product System, procedures, equipment or trade secrets
to either criminal elements or commercial competition and DEALER shall keep
said list of stockholders (or general or limited partners) current. In the
event a change in the list is proposed under circumstances where SONITROL
CORPORATION or DISTRIBUTOR has the right to approve the proposed change
pursuant to Section Eighteen of this Agreement, sufficient advance notice shall
be given to SONITROL CORPORATION and DISTRIBUTOR. This subsection shall not
apply to publicly held corporations having more than thirty (30) stockholders.
13.4 SONITROL CORPORATION and DISTRIBUTOR hereby covenant not to reveal or
communicate designated confidential and proprietary information of DEALER to
any third party without the prior consent and authorization of DEALER and shall
use its best efforts to prevent inadvertent disclosure of such information to
any third party, except as may be appropriate and professionally necessary to
DEALER's and/or SONITROL CORPORATION's and DISTRIBUTOR's accountants, attorneys
and banking sources, or as required by law.
<PAGE> 17
17
SECTION FOURTEEN
CHAIN ACCOUNTS AND NATIONAL PROGRAMS
14.1 Within such guidelines as are established and promulgated from time to
time by SONITROL CORPORATION, DEALER shall use its best efforts to secure chain
accounts which have their national or regional headquarters located in DEALER's
Area of Primary Responsibility. DEALER shall provide to SONITROL CORPORATION
reports relating to securing said chain accounts.
14.2 Upon request by SONITROL CORPORATION, DEALER agrees to promote, lease,
sell, install and service chain accounts within DEALER's Area of Primary
Responsibility. If DEALER declines to promote, lease, sell, install and
service chain accounts upon request by SONITROL CORPORATION, DEALER agrees that
SONITROL CORPORATION, or DISTRIBUTOR, shall have the right to promote, lease,
sell, install and service chain accounts within DEALER's Area of Primary
Responsibility without compensating DEALER for same.
14.3 Unless precluded by law, DEALER agrees to promote programs promulgated at
the national level by SONITROL CORPORATION. Such programs shall be designed to
benefit all Sonitrol dealers by ensuring a high level of quality for the
Sonitrol Product system, Sonitrol Products, and services.
SECTION FIFTEEN
PROTECTION OF TRADE SECRETS
15.1 To further the business relationship among SONITROL CORPORATION,
DISTRIBUTOR and DEALER, it is necessary and desirable that from time to time
SONITROL CORPORATION will disclose to DEALER confidential information relating
to the Sonitrol Product System, hereinafter referred to as "Sonitrol
Information." Sonitrol Information includes, but is not limited to: current,
future, or proposed Sonitrol Products; plans, technologies, operating and
monitoring techniques relating to such products; plans and information relating
to the marketing, merchandising and sale of Sonitrol Products; and the
processes, services, policies, procedures, records and accounts of SONITROL
CORPORATION; excluding only that information which is generally known
throughout the industry or which is within the public domain.
15.2 DEALER recognizes that Sonitrol Information is a valuable trade secret.
DEALER shall only reveal Sonitrol Information to such of its personnel who need
to know the information for the
<PAGE> 18
- 18 -
effective operation of the Franchise Business and who sign a statement as
provided in Section Four above. DEALER hereby covenants not to otherwise reveal
or communicate Sonitrol Information, directly or through its employees, agents
or representatives, to any third party, which shall include any parent,
subsidiary or affiliated corporation of DEALER, without the prior written
consent and authorization of SONITROL CORPORATION and shall use its best
efforts to prevent inadvertent disclosure of Sonitrol Information to any third
party, except as may be appropriate and professionally necessary to DEALER's
accountants, attorneys and banking sources, or as required by law.
15.3 DEALER further agrees that the aforesaid duty not to disclose Sonitrol
Information shall continue during the term of this Agreement and any successor
agreements, and for a period of three (3) years following the expiration or
termination of this Agreement and any successor agreements.
SECTION SIXTEEN
RELATIONSHIP OF PARTIES
16.1 DEALER is and shall be considered an independent, contractor with entire
control and direction of its business and operations, subject only to the
conditions and obligations established by this Agreement. No agency,
employment or partnership is created by this Agreement. DEALER's business is
separate and apart from any that may be operated by SONITROL CORPORATION or
DISTRIBUTOR.
16.2 No party to this Agreement shall make any representation tending to
create apparent agency, employment, or partnership. No party will have
authority to act for the other in any manner to create obligations or debts
binding on the other, and no party will be responsible for any obligations or
expenses whatsoever of the other. Neither DEALER, its employees, nor any
person performing any duties or engaged in any work at the request of DEALER
shall be deemed an employee or agent of SONITROL CORPORATION or DISTRIBUTOR.
16.3 In all public records and in its relationship with other persons, on
letterheads and business forms, and invoices, in accordance with SONITROL
CORPORATION's prescribed standards and procedures which DEALER agrees to
follow, DEALER shall indicate its independent ownership of said business, and
that it is a franchise of SONITROL CORPORATION by using the following language:
"An Independent Sonitrol Dealer Franchise." Further, DEALER agrees to exhibit
on its premises in a place
<PAGE> 19
- 19 -
designated by SONITROL CORPORATION, a notification that it is an independent
Sonitrol dealer franchise.
SECTION SEVENTEEN
INDEMNITY OF SONITROL CORPORATION AND DISTRIBUTOR
17.1 DEALER agrees, during and after the term of this Agreement, to indemnify
and hold SONITROL CORPORATION and DISTRIBUTOR harmless from and against, and
promptly reimburse them for, any and all loss, damage, liability and attorneys'
fees and other costs and expenses incurred by SONITROL CORPORATION or
DISTRIBUTOR as the result of any violation of this Agreement by, or any act of
omission or commission on the part of DEALER, or any of its agents, servants,
or employees, and from all claims, demands, losses, costs, damages, suits,
judgments, penalties, expenses, and liabilities of any kind or nature
whatsoever arising directly or indirectly out of or in connection with the
operation of DEALER's business.
SECTION EIGHTEEN
ASSIGNMENT OF AGREEMENT
18.1 DEALER shall not assign, sell, transfer, or encumber this Agreement, or
any interest in DEALER (including merger into any other entity and the sale,
transfer or disposition of any stock or partnership interest in DEALER)
affecting control of DEALER, without the prior written consent and approval of
SONITROL CORPORATION and DISTRIBUTOR, which consent and approval shall not be
unreasonably withheld. Control is defined as any assignment, sale or transfer
which, whether as a single transfer or when aggregated with other transfers
that occurred after the date of this Agreement, results in a transfer of
twenty-five percent (25%) or more of the ownership interest in DEALER.
18.2 Written consent and approval of SONITROL CORPORATION and DISTRIBUTOR
shall not be required for:
18.2.1 Assignments, sales or transfers of DEALER's stock, or
DEALER's interest under this Agreement, to a corporation or
partnership which owns over seventy-five percent (75%) of each
class of voting stock (if a corporation) of DEALER at the time of
the execution of this Agreement, or is the controlling general
partner (if a partnership) of DEALER at the time of the execution
of this Agreement, provided DEALER gives
<PAGE> 20
- 20 -
SONITROL CORPORATION and DISTRIBUTOR written notice of such assignment,
sale or transfer.
18.2.2 Assignment of this Agreement to a bank or other financial
institution as collateral for a loan provided that DEALER and the bank
or financial institution enter into an agreement identical in form and
substance to the one attached hereto as Attachment C, and such
agreement is approved by SONITROL CORPORATION and DISTRIBUTOR.
18.2.3 Assignments, sales or transfers of publicly traded stock of
DEALER previously registered under federal securities laws, provided:
(a) the transferor owns less than twenty-five percent (25%) of each
class of the stock of DEALER prior to the transfer, and (b) after the
transfer the transferee will own less than twenty-five percent (25%) of
each class of the stock of DEALER.
18.3 No such assignment, sale or transfer of interest under this Agreement
shall be approved, by SONITROL CORPORATION and DISTRIBUTOR unless DEALER and
its proposed assignee meet the following requirements:
18.3.1 The assignee must be acceptable to SONITROL CORPORATION and
DISTRIBUTOR by the standards then utilized in considering applicants
for new dealerships;
18.3.2 There shall be no existing default in the performance or
observance of any of DEALER's obligations under this Agreement or any
other agreement with SONITROL CORPORATION, its subsidiary or affiliated
corporations, or DISTRIBUTOR;
18.3.3 DEALER shall have settled all outstanding accounts with SONITROL
CORPORATION, its subsidiary and affiliated corporations, and
DISTRIBUTOR;
18.3.4 DEALER shall execute a mutual general release, in the form of
Attachment A, for any and all claims each party shall have against the
other, its parent, subsidiary and affiliated corporations, and their
officers, directors, agents and employees, excepting only such claims
as are precluded from waiver by applicable law.
18.3.5 DEALER's assignee must execute all agreements that SONITROL
CORPORATION and DISTRIBUTOR then require of new dealers; and
<PAGE> 21
- 21 -
18.3.6 DEALER's assignee shall have paid a transfer fee of Seven
Thousand Five Hundred Dollars ($7,500.00), $2,500 of which sum shall
have been paid to SONITROL CORPORATION and the remainder to
DISTRIBUTOR.
18.4 Since this Agreement limits the transferability of corporate stock
shares, if DEALER is now incorporated or incorporates during the term of this
Agreement, all certificates of shares issued by DEALER shall have endorsed
thereon an appropriate legend to conform with state law, referring to this
Agreement by date and name of parties hereto, and stating, "Transfer of this
certificate is limited," or similar statutorially required language. This
legend shall not be required on certificates representing publicly traded stock
of DEALER previously registered under the federal securities laws and
representing less than twenty-five percent (25%) of each class of stock of
DEALER.
18.5 SONITROL CORPORATION shall have the right to assign this Agreement and
the rights hereunder to any person, firm, association, or corporation, provided
that such transferee shall agree in writing to assume all obligations
undertaken by SONITROL CORPORATION herein.
SECTION NINETEEN
RIGHT OF FIRST REFUSAL
19.1 If at any time during the term of this Agreement, DEALER or any
stockholder, partner or limited partner of DEALER, desires to sell or transfer,
in whole or in part, any of its interest under this Agreement or any interest in
DEALER, whether DEALER is a partnership, corporation, firm or other association
for profit, DEALER, or any selling stockholder, general partner or limited
partner of DEALER, shall first offer such interest to SONITROL CORPORATION and
DISTRIBUTOR by delivering to SONITROL CORPORATION and DISTRIBUTOR a written
offer setting forth the interest to be sold, the purchase price and terms of
payment, together with all other documentation relating or incidental to such
offer to sell.
19.2 During the sixty (60) day period following receipt of such offer to
sell, and related documentation from DEALER, SONITROL CORPORATION and/or
DISTRIBUTOR shall have the right and option to purchase or otherwise acquire
such of DEALER's interest under this Agreement, and all such other property and
rights of DEALER as may be included in such offer to purchase, upon the same
terms and conditions as set forth in such offer to sell. DISTRIBUTOR shall
have the first right and option to
<PAGE> 22
- 22 -
purchase, and shall exercise such right and option by giving written notice to
DEALER and SONITROL CORPORATION within thirty (30) days after receipt of such
offer to sell and related documentation from DEALER. If DISTRIBUTOR does not
give written notice within the time period set forth herein or declines in
writing before the end of such time period to exercise its purchase option,
then SONITROL CORPORATION shall have the sole right and option to purchase or
otherwise acquire DEALER'S interest under the foregoing terms and conditions
within the subsequent thirty (30) day period, and may exercise such right and
option by giving written notice to DEALER and DISTRIBUTOR.
19.3 If SONITROL CORPORATION and DISTRIBUTOR do not accept such offer within
the time period for acceptance set forth in paragraph 19.2 above, subject to the
provisions of Section Eighteen, DEALER shall be free to sell the interest
covered by such written offer to any other person or entity on the condition
that: (i) such interest is sold during the one hundred twenty (120) day period
immediately following the expiration of such sixty (60) day period above; and
(ii) such sale is consummated at a price greater than or equal to that set forth
in such written offer and otherwise on the terms (including payment terms) set
forth in such offer. The interest subject of the right of first refusal is
interest relating only to the subject matter of this Agreement.
19.4 If SONITROL CORPORATION and DISTRIBUTOR do not receive such offer to
sell and related documentation as set forth in paragraph 19.1 above, then
SONITROL CORPORATION and DISTRIBUTOR shall have no obligation to consider or
consent to the prospective transfer or assignment of DEALER'S interest (s) under
Section Eighteen of this Agreement.
19.5 SONITROL CORPORATION and DISTRIBUTOR's right of first refusal granted
in subsections 19.1, 19.2, and 19.3 above shall apply only to assignments,
sales or transfers over which SONITROL CORPORATION and DISTRIBUTOR have a right
of consent and approval under Section Eighteen of this Agreement.
SECTION TWENTY
INCAPACITY OF DEALER'S PRINCIPAL PARTY
20.1 If DEALER is a natural person, in the event of death or incapacity of
DEALER the rights and obligations of DEALER will pass to DEALER's executors,
representatives, administrators, heirs or legatees ("Legatee") capable of
performing all of the duties and obligations under the Sonitrol Dealer
Franchise
<PAGE> 23
- 23 -
Agreement. Legatee must within thirty (30) days of such death or incapacity
assume all of DEALER's obligations under this Agreement in writing. If
SONITROL CORPORATION or DISTRIBUTOR determines in good faith that Legatee is
not capable of performing all the duties and obligations of DEALER under the
Sonitrol Dealer Franchise Agreement, it will notify Legatee in writing and
Legatee shall have sixty (60) days from the date of notification to locate a
bona fide purchaser and notify SONITROL CORPORATION and DISTRIBUTOR of the
identity of the purchaser and terms of the purchase. If Legatee fails to find
a purchaser, or SONITROL CORPORATION or DISTRIBUTOR determines in good faith
that the proposed purchaser is not capable of assuming the duties and
obligations of DEALER under this Agreement, SONITROL CORPORATION and
DISTRIBUTOR may purchase the DEALER's business at fair market value.
DISTRIBUTOR shall have the first right and option to purchase and shall
exercise such right and option by giving written notice to the Legatee and
SONITROL CORPORATION within thirty (30) days following the sixty (60) day time
period. IF DISTRIBUTOR does not give written notice of its intent to purchase
the dealership at fair market value within such time period, then SONITROL
CORPORATION shall have the sole right to purchase the DEALER's business at fair
market value.
20.2 Transfers of this Agreement, or any interest in DEALER, due to the
death or incapacity of any natural person with an ownership interest in DEALER
shall be governed by, and subject to the assignment and right of first refusal
provisions of Sections Eighteen and Nineteen of this Agreement.
SECTION TWENTY-ONE
DEFAULT
21.1 Any of the following events shall constitute a default of this
Agreement:
21.1.1 An affirmative act of insolvency by DEALER, an assignment for
the benefit of creditors or similar disposition of assets by DEALER, or
the filing by DEALER of a petition under any bankruptcy,
reorganization, insolvency, or moratorium law, or any law for the
relief of, or relating to, debtors;
21.1.2 The filing of any involuntary petition under any bankruptcy
statute against DEALER, or the appointment of any receiver or trustee
to take possession of property of DEALER, unless such petition or
appointment is set
<PAGE> 24
- 24 -
aside or withdrawn or ceases to be in effect within thirty (30) days of
such filing or appointment;
21.1.3 A final judgment, or the unappealed decision of a regulatory
officer or agency, that results in temporary or permanent suspension
of any permit or license, possession of which is a prerequisite to
operation of DEALER's business under applicable law;
21.1.4 A criminal conviction of DEALER, or an officer, director,
partner or principal of DEALER, for a felony offense, or any other
crime or act which would substantially impair the goodwill associated
with the "SONITROL" trademark, trade name, or the Sonitrol Product
System;
21.1.5 DEALER's failure, refusal, or neglect to pay to DISTRIBUTOR or
SONITROL CORPORATION, its subsidiary or affiliated corporations, any
monies owing to DISTRIBUTOR or SONITROL CORPORATION, its subsidiary or
affiliated corporations, under the terms of this Agreement or any other
agreement, on the date such monies are due or within such terms as may
be established by SONITROL CORPORATION or DISTRIBUTOR;
21.1.6 Any material misrepresentation or false statement by DEALER, or
made at DEALER's behest, to SONITROL CORPORATION or DISTRIBUTOR, in
connection with the execution of this Agreement or in any accounting,
report or plan that DEALER submits to SONITROL CORPORATION, its
subsidiary or affiliated corporations, or DISTRIBUTOR pursuant to this
Agreement;
21.1.7 The use in DEALER's business of any products or equipment in
violation of the provisions of Section Five of this Agreement;
21.1.8 Any purported assignment, sale, transfer, or encumbrance by
DEALER of any of its rights, obligations or interests under this
Agreement without having received the prior written consent of SONITROL
CORPORATION and DISTRIBUTOR;
21.1.9 DEALER's failure to comply with, perform or observe any other
lawful obligation imposed upon it under this Agreement; or repeatedly
failing to comply with, perform or observe the lawful provisions of
this Agreement whether or not such noncompliance is corrected after
notice. "Repeatedly" as used in this
<PAGE> 25
- 25 -
sub-paragraph shall mean two (2) or more times within any twelve month
period.
21.2 Upon default DEALER agrees to pay all costs and expenses, including
reasonable attorney's fees, incurred by SONITROL CORPORATION and DISTRIBUTOR in
collecting all monies owed by DEALER or in obtaining other relief to enforce
the provisions of this Agreement.
SECTION TWENTY-TWO
TERMINATION
22.1 If conditions exist that constitute a default of this Agreement by one
or more of the sub-paragraphs of Section Twenty-One, in addition to all other
remedies available to SONITROL CORPORATION and DISTRIBUTOR at law or in equity,
all rights granted to DEALER under this Agreement shall terminate effective
upon thirty (30) days written notice to DEALER (or longer if required by
applicable law), provided that DEALER fails to cure all acts of default within
thirty (30) days of such notice. DEALER acknowledges and agrees that
termination due to a default under one or more of the subsections of Section
Twenty-One shall be deemed to be for good cause. The cure provisions under
this Section shall not apply to a default pursuant to Subsection 21.1.9 above
for DEALER repeatedly failing to comply with the provisions of this Agreement.
22.2 Upon any lawful termination or expiration of this Agreement or any
successor agreements hereto, DEALER shall:
22.2.1 Immediately cease to use in any manner whatsoever the "SONITROL"
trademark and trade name and any forms, slogans, signs, symbols or
devices used in connection with the operation of a Sonitrol franchise
or the Sonitrol Product System; and will:
(a) Upon request by SONITROL CORPORATION and/or DISTRIBUTOR,
mail to all customers a registered letter, approved by SONITROL
CORPORATION, return receipt requested to DISTRIBUTOR, informing
the customer that the Dealer is no longer authorized or licensed
to operate under the trademark "SONITROL," and requesting that
the customer remove all signs, decals or other materials bearing
the trademark "SONITROL" from its premises. This mailing will
be completed within thirty (30) days from the date of the
termination of this Agreement.
<PAGE> 26
- 26 -
(b) within six (6) months from the date of the termination of
this Agreement, remove all signs, decals, or other materials
bearing the trademark "SONITROL" from the DEALER's premises, and
replace all Sonitrol contracts so that they are no longer in
force or effect, and will certify by letter to SONITROL
CORPORATION and DISTRIBUTOR that this has been completed.
22.2.2 Promptly pay to SONITROL CORPORATION, its subsidiary or
affiliated corporations, and DISTRIBUTOR all sums owing from DEALER to
SONITROL CORPORATION, its subsidiary or affiliated corporations, and
DISTRIBUTOR, including all damages, costs and expenses, including
reasonable attorneys' fees incurred by SONITROL CORPORATION, its
subsidiary or affiliated corporations, and DISTRIBUTOR by reason of any
default of this Agreement by DEALER, and further including all costs
and expenses, including reasonable attorneys' fees, incurred by
SONITROL CORPORATION, or its subsidiary or affiliated corporations, and
DISTRIBUTOR in obtaining injunctive or other relief to enforce the
provisions of this Agreement;
22.2.3 Continue to comply with and be bound by all applicable
provisions of this Agreement which survive termination, including, but
not limited to, the noncompetition, and protection of trade secrets
provisions.
22.3 Upon any termination or expiration of this Agreement or any successor
agreements, DISTRIBUTOR shall have the right to repurchase from DEALER all
unused, Current Sonitrol Products of DEALER at the cost to DEALER for such
products, and all stocks of supplies and materials bearing the "SONITROL"
trademark, paying the cost to DEALER for such products, supplies and materials.
In connection with any such repurchase, DISTRIBUTOR shall be entitled, but not
required, to offset against the repurchase price any monies owed by DEALER to
DISTRIBUTOR pursuant to the terms of this Agreement or any other agreement
between the parties. For purposes of this subparagraph 22.3, "Current Sonitrol
Products" shall mean those products being manufactured by SONITROL CORPORATION,
or its subsidiaries, at the time of termination or expiration of this
Agreement.
22.4 In the event or as a result of termination by SONITROL CORPORATION or
DISTRIBUTOR pursuant to the terms of this Agreement, SONITROL CORPORATION and
DISTRIBUTOR shall not be liable to DEALER for any damages, including
consequential or incidental, and including but not limited to profits on sales
or anticipated sales, on account of expenditures, investments,
<PAGE> 27
- 27 -
or commitments made in connection therewith, in connection with the
establishment, development, and maintenance of the business or goodwill of
DEALER. Such termination shall not, however, affect the rights or liabilities
of said parties with respect to products previously sold hereunder or with
respect to any indebtedness then owing by either party to the other.
22.5 Dealer agrees to pay all costs, including, but not limited to,
attorneys' fees, incurred by SONITROL CORPORATION or DISTRIBUTOR in enforcing
and/or completing any of the above provisions not completed by DEALER on a
timely basis.
SECTION TWENTY-THREE
RESTRICTION ON EFFECT OF WAIVER
23.1 No delay or omission to exercise a right, power, or remedy accorded to
SONITROL CORPORATION or DISTRIBUTOR on any breach or default of DEALER under
this Agreement shall impair any such right, power, or remedy of SONITROL
CORPORATION or DISTRIBUTOR, and it shall not be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring.
23.2 Any waiver, permit, consent, or approval of any kind or character on
the part of SONITROL CORPORATION or DISTRIBUTOR of any breach or default under
this Agreement, or any waiver on the part of SONITROL CORPORATION or
DISTRIBUTOR of any provision or condition of this Agreement must be in writing
and shall be effective only to the extent specifically allowed by such writing.
23.3 All remedies afforded to SONITROL CORPORATION or DISTRIBUTOR, either
under this Agreement or by law or otherwise, shall be cumulative and not
alternative.
SECTION TWENTY-FOUR
COVENANT NOT TO COMPETE
24.1 Other than pursuant to this Agreement, DEALER (which shall include all
entities owned in whole or in part by DEALER, all parent corporations of
DEALER, all shareholders of DEALER, and if DEALER is a partnership, all general
and limited partners of DEALER), agrees that it will not directly or indirectly
own,
<PAGE> 28
- 28 -
manage, operate, join, control, or participate in the ownership, management,
operation or control of, or be connected in any manner with, any business or
engage in any business involving the manufacture, promotion, sale, or delivery
of security products and services. DEALER will not disclose or reveal to
anyone, directly or indirectly, any confidential information or trade secrets
of the business of Sonitrol, including customer lists, personnel information,
and secret processes or other technical data, which DEALER has obtained as a
Sonitrol dealer. These restrictions continue so long as this Agreement is in
effect and for a period of three (3) years after its termination. This
restriction shall apply to competing businesses operating (a) within DEALER's
Area of Primary Responsibility, and (b) within a geographical area of One
Hundred (100) miles from the boundary of DEALER's Area of Primary
Responsibility. The foregoing restrictions (a) and (b) are distinct and
severable.
24.2 DEALER further covenants and agrees that during the term of this
Agreement and any successor agreement, DEALER shall not divert or attempt to
divert any business of or any customers of the franchised business to any other
competing business, by direct or indirect inducement or otherwise.
24.3 DEALER acknowledges that any violation of the covenants set forth in
paragraphs 24.1 and 24.2 above would cause SONITROL CORPORATION and DISTRIBUTOR
to suffer irreparable damage, the exact amount of which may not be reasonably
or accurately ascertained, and that the resulting damage to the confidential
nature of the Sonitrol Product System could not be adequately compensated by
money damages, and therefore, in the event of such violation occurring, DEALER
hereby agrees and consents to the issuance of an injunction restraining DEALER
or anyone acting for or on behalf of DEALER from violating said covenants or
any of them.
24.4 DEALER shall require all of DEALER's directors and officers to agree
in writing, in a form agreeable to SONITROL CORPORATION, to be bound by the
terms and conditions of this Section Twenty-Four.
SECTION TWENTY-FIVE
FORCE MAJEURE
25.1 Neither DEALER, DISTRIBUTOR nor SONITROL CORPORATION shall be held
liable for failure to comply with any of the terms of this Agreement when such
failure has been caused solely by force majeure, fire, labor dispute, strike,
war,
<PAGE> 29
- 29 -
insurrection, riot, flood, government restrictions, or act of God beyond the
control and without fault on the part of the party involved, provided such
party uses due diligence to remedy such default.
SECTION TWENTY-SIX
CONSEQUENTIAL DAMAGES
26.1 None of the parties shall be liable to the other for consequential or
incidental damages including but not limited to profits or sales or anticipated
sales or on account of expenditure, investments, or commitments made in
connection therewith, or in connection with the establishment, development and
maintenance of the business or goodwill of the other.
SECTION TWENTY-SEVEN
NOTICES
27.1 Any and all notices required or permitted under this Agreement shall be
in writing and shall be personally delivered or mailed, by certified mail -
return receipt requested, to the respective parties at the addresses listed
below unless and until a different address has been designated by written
notice:
SONITROL CORPORATION: SONITROL CORPORATION
1800 Dagonal Rd. Suite 180
Alexandria, Virginia 22314
DISTRIBUTOR: SONITROL SOUTHEAST, INC.
520 Howard Court
Clearwater, Florida 34616
DEALER: MASADA SECURITY LIMITED PARTNERSHIP
3900 Montclair Road - Suite 380
Birmingham, Alabama 32513
SECTION TWENTY-EIGHT
EFFECTIVE DATE
28.1 This Agreement shall be effective and binding as of the date first
written above when it has been accepted and executed by SONITROL CORPORATION at
SONITROL CORPORATION's corporate headquarters in Alexandria, Virginia.
<PAGE> 30
- 30 -
SECTION TWENTY-NINE
GOVERNING LAW
29.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of Virginia, except to the extent that said laws directly
conflict with and are incompatible with the laws, if any, of the jurisdiction
where DEALER is located which specifically address and control
franchisor-franchisee relationships and which are applicable to this Agreement.
SECTION THIRTY
CONSENT TO JURISDICTION
30.1 DEALER consents to jurisdiction in Virginia for the purposes of any
legal proceeding relating to this Agreement or the Sonitrol business granted by
this Agreement.
SECTION THIRTY-ONE
EFFECT OF PARTIAL INVALIDITY
31.1 The invalidity of any portion of this Agreement will not and shall not
be deemed to affect the validity of any other provision. In the event that any
provision of this Agreement is invalid, the parties agree that the remaining
provisions shall be deemed to be in full force and effect as if they had been
executed by both parties subsequent to expungement of the invalid provision.
SECTION THIRTY-TWO
DESCRIPTIVE HEADINGS
32.1 The descriptive headings of the various sections of this Agreement are
provided solely for ease of reference and shall not be considered in construing
or interpreting this Agreement.
SECTION THIRTY-THREE
ENTIRE AGREEMENT
33.1 This instrument contains the entire agreement of the parties. No
representations, inducements, promises,
<PAGE> 31
- 31 -
negotiations or agreements, oral or otherwise, not embodied herein shall be of
any force or effect and shall not affect the construction of the rights and
obligations of the parties created hereby. This Agreement may be modified only
in writing, signed by the parties hereto, and stating that said writing is a
modification or amendment hereto. Any other attempts at modification, whether
by course of conduct, oral or informally written agreement or whatever, shall
be of no effect or force.
SECTION THIRTY-FOUR
ACKNOWLEDGEMENT BY DEALER
34.1 DEALER acknowledges that it has entered into this Agreement after
making an independent investigation and evaluation of SONITROL CORPORATION's
and DISTRIBUTOR's operations and the business venture contemplated herein, and
not as a result of representations or projections as to the venture's potential
for success, if any have been quoted, used illustratively or implied to DEALER.
Neither SONITROL CORPORATION nor DISTRIBUTOR makes any representation,
guaranty, or warranty, express or implied, as to the potential success of the
business venture contemplated herein. DEALER acknowledges that it has
previously received a blank copy of this Agreement in time to afford ample
opportunity to seek legal counsel and to review the provisions contained
herein. DEALER acknowledges that successful operation of this franchise will
depend upon its best efforts, capabilities, management, and efficient
operation, as well as local marketing conditions and other factors.
IN WITNESS WHEREOF, each undersigned individual in individual and/or
representative capacity, having read each and every provision herein and
agreeing to the same, and to this contract as a whole, have hereby executed
this Agreement as warranty of the capacity in which they have signed this
Agreement and as evidence of their understanding and ratification hereof, as a
wholly voluntary act.
<PAGE> 32
- 32 -
Dated at Alexandria, Virginia, February 26, 1993
----------- --
SONITROL CORPORATION
ATTEST:
By: /s/ Christopher W. Cobb
------------------------------
Christopher W. Cobb
Chief Operating Officer
By: /s/ Keri Fleming
-------------------------
Secretary
DEALER: MASADA SECURITY LIMITED PARTNERSHIP
d/b/a SONITROL OF MIAMI
------------
ATTEST:
By: /s/ Terry W. Johnson
----------------------------
Title: President
---------------------------
Masada Security, Inc.
By: /s/ Daryl E. Harms
----------------------
Secretary
DISTRIBUTOR:
SONITROL SOUTHEAST, INC.
---------------------------------
ATTEST:
By: /s/ John J. Rooney
-------------------------------
Title: Executive Vice President
---------------------------
By: /s/ Dawn R. Johnson
---------------------
Secretary
<PAGE> 33
AMENDMENT
SONITROL DEALER FRANCHISE AGREEMENT
SONITROL CORPORATION, a Delaware corporation, hereinafter referred to
as "SONITROL", SONITROL SOUTHEAST, INC., a Indiana corporation, hereinafter
referred to as "DISTRIBUTOR", and MASADA SECURITY LIMITED PARTNERSHIP, a
Delaware, limited partnership, hereinafter referred to as "DEALER", effective
this 26th day of February, 1993, amend and restate in part that certain
Sonitrol Dealer Franchise Agreement dated February 26th, 1993, between
SONITROL, DISTRIBUTOR and DEALER, hereinafter referred to as the "Agreement".
NOW, THEREFORE, SONITROL, DISTRIBUTOR and DEALER, intending to be
legally bound in consideration of the mutual agreements, covenants, and
promises herein set forth, and for good valuable consideration, acknowledged
and received, do hereby amend and restate in part the Agreement as follows:
1. In Paragraph 2.2.1 of Section Two of the Agreement, the words,
"provided that DISTRIBUTOR had given written notice to DEALER
not less than twelve (12) months prior to the end of the
initial ten (10) year term that such notice is required by
DEALER" shall be added at the end of the fourth line on the
first sentence after the word "effect" and before the
semicolon.
2. In Paragraph 2.2.3 of Section Two of the Agreement, the words,
"together with those amendments in form and substance
previously agreed upon", are added at the end of the first
sentence.
3. In Paragraph 13.1 of Section of Thirteen of the Agreement, the
words, "and DISTRIBUTOR'S" are deleted at the end of the
seventh line of the first sentence.
4. In Paragraph 5.3 of Section Five of the Agreement, the words,
"of selling, servicing, leasing and promoting Sonitrol systems
and equipment", are added in the eight line following the
words, "DEALER'S business", and prior to the words, "only
from".
5. In Paragraph 5.2 of Section Five of the Agreement, the words,
"other than normal in-field servicing of subscriber accounts"
are added after the word "Products" in the third line of the
first sentence.
6. Paragraph 7.2.5 of Section Seven of the Agreement is deleted
in its entirety and restated as follows:
"To maintain an adequate facility within DEALER'S area of
primary responsibility for monitoring of subscriber accounts,
either in Dade or Broward County in the State of Florida, as
long as the Dealer is the Sonitrol Franchisee in both of these
franchise territories."
<PAGE> 34
- 2 -
7. In Paragraph 8.2 of Section Eight of the Agreement, the words,
"and that such increase shall be applicable to all dealers
with similar royalty fee provisions: are added at the end of
the second sentence.
8. In Paragraph 10.1 of Section Ten of the Agreement, the words,
"So long as the minimum performance standards set forth in
Section 7.2.1 are maintained, failure to meet the sales
projections contained in the Business Plan does not create an
independent right to cancel the franchise" are added at the
end of the paragraph.
9. Section Eighteen of the Agreement is amended to add the
following as Paragraph 18.4:
"18.4 Sales or transfers, in whole or in part, of DEALER'S
stock to its subsidiary or sister corporations or to its
parent corporation, and an assignment of this Agreement to a
bank or financial institution provided the DEALER and bank or
financial institution enter into an agreement substantially in
the same form and substance to Exhibit A and obtain the
approval of SONITROL CORPORATION and DISTRIBUTOR thereto,
shall not be subject to the provisions of Paragraphs 18.1,
18.2, and 18.3."
10. Section Nineteen of the Agreement is deleted in its entirety
and amended as follows:
"19.1 If at any time during the term of this Agreement,
DEALER desires to sell its assets, including its rights under
this Agreement, or any shareholder, partner or limited partner
of DEALER, desires to sell or transfer, in whole or in part,
any of its interest in DEALER (the assets of DEALER or an
interest in DEALER being collectively referred to herein as
the "Interest"), DEALER, or any selling stockholder, general
partner or limited partner of DEALER (Seller"), shall first
offer such Interest to SONITROL CORPORATION and DISTRIBUTOR by
delivering to SONITROL CORPORATION and DISTRIBUTOR a written
offer setting forth the Interest to be sold, the purchase
price and terms of payment.
19.2 During the thirty day period following receipt of such
offer to sell from Seller, SONITROL CORPORATION or DISTRIBUTOR
shall either accept such offer or issue to Seller a
counteroffer in writing setting forth the purchase price and
terms of payment. If SONITROL CORPORATION or DISTRIBUTOR
accept the offer of Seller, the closing of the sale shall take
place within thirty days after notice of acceptance. If
SONITROL
<PAGE> 35
- 3 -
CORPORATION or DISTRIBUTOR issues a counteroffer, Seller shall
have ninety days to accept such counteroffer. During such
ninety day period, Seller may offer to sell the Interest to or
solicit offers to buy such Interest from any third party and
if a third party agrees to purchase the Interest within such
ninety day period at a price greater than and at the same or
better terms of payment that contained in the counteroffer of
SONITROL CORPORATION or DISTRIBUTOR, then Seller may
consummate the sale with such third party free of the rights
granted to SONITROL CORPORATION and DISTRIBUTOR contained in
this Section Nineteen.
19.3 As between SONITROL CORPORATION and DISTRIBUTOR,
DISTRIBUTOR shall have the first right and option to accept
the offer to sell or issue the counteroffer.
19.4 If SONITROL CORPORATION and DISTRIBUTOR do not receive
the offer to sell as set forth in Paragraph 19.1 above, then
SONITROL CORPORATION and DISTRIBUTOR shall have no obligation
to consider or consent to the prospective transfer or
assignment of DEALER's Interest under Section Eighteen of this
Agreement.
19.5 SONITROL CORPORATION and DISTRIBUTOR's right of first
refusal granted in subsections 19.1, 19.2, and 19.3 above
shall apply only to assignments, sales or transfers over which
SONITROL CORPORATION and DISTRIBUTOR have a right of consent
and approval under section Eighteen of this Agreement.
19.6 It is clearly understood by DEALER, DISTRIBUTOR and
SONITROL CORPORATION that nothing contained herein affects
DISTRIBUTOR and SONITROL CORPORATION rights under Section
Eighteen of this Agreement."
11. Section Twenty-four of the Agreement is amended by adding the
following subsection:
"24.5 SONITROL CORPORATION and DISTRIBUTOR recognize that
DEALER's shareholders or affiliated companies currently have
an ongoing business in security alarms and sells non-Sonitrol
manufactured or approved security alarms within the Area of
Primary Responsibility granted by this Agreement.
Notwithstanding this recognition, DEALER agrees that in
conducting the Sonitrol business granted by this Agreement it
will use its best efforts to fully develop the market for
Sonitrol Products and shall comply with all the terms and
conditions of this Agreement including all standards and
procedures of SONITROL CORPORATION for the operation of a
Sonitrol franchised business. DEALER warrants and agrees
that the marketing, servicing and monitoring operations of
its non-Sonitrol business shall be independent from and not
associated with the operations of the business granted by this
Agreement, even if located in the same building, and further
insures and agrees that the Sonitrol business granted
hereunder will become and remain fully competitive in the Area
of Primary Responsibility. In the event of DEALER's failure
to comply with this Section, in addition to SONITROL
CORPORATION's and DISTRIBUTOR's rights under Sections
Twenty-one and Twenty-two of this Agreement, SONITROL
CORPORATION and DISTRIBUTOR shall after written notice and
provided that dealer fails to cure within thirty days have the
right, at its option, to establish another dealer or dealers
within a part or all of DEALER's Area of Primary
Responsibility."
<PAGE> 36
- 4 -
Except as specifically amended hereby, all terms and conditions of the
Agreement shall remain in full force and effect, and the Agreement shall read
as a single integrated document, incorporating the amendments hereby effected.
IN WITNESS WHEREOF, each undersigned individual in individual and/or
representative capacity, having read each and every provision herein and
agreeing to the same, have hereby executed this Amendment to the Agreement as
warranty of the capacity in which they have signed this Agreement and as
evidence of their understanding and ratification hereof, as a wholly voluntary
act.
<PAGE> 37
- 5 -
Dated at Alexandria, Virginia, February 26, 1993.
----------- --
SONITROL CORPORATION
By /s/ Christopher W. Cobb
------------------------------
Title Chief Operating Officer
---------------------------
ATTEST:
/s/ Keri Fleming
- -------------------------
DISTRIBUTOR:
SONITROL SOUTHEAST, INC.
By /s/ John J. Rooney
----------------------------
Title Executive Vice President
---------------------------
ATTEST:
/s/ Dawn R. Johnson
- --------------------------
DEALER:
MASADA SECURITY LIMITED PARTNERSHIP
SONITROL OF MIAMI
------------
By /s/ Terry W. Johnson
-------------------------------
Title President
----------------------------
MASADA SECURITY, INC. G.P.
ATTEST:
/s/ Daryl E. Harms
- --------------------------
<PAGE> 1
MASADA
SECURITY
May 16, 1995
Sonitrol Corporation
1800 Diagonal Road, Suite 180
Alexandria, VA 22314
Attn: Chris Cobb
Sonitrol Southeast, Inc.
520 Howard Court
Clearwater, FL 34616
Attn: John Rooney
Re: February 10, 1994 Merger of Masada Limited Partnership
with and into Masada Security, Inc.
Dear Chris and John:
As you know, Masada Security Limited Partnership, a Delaware limited
partnership (the "Partnership"), was a party to two Sonitrol Dealer Franchise
Agreements with Sonitrol Corporation and Sonitrol Southeast, Inc. as of the
beginning of 1994. One Agreement, as amended, is dated effective December 23,
1988 and its Area of Primary Responsibility is Dade County, Florida (the "Dade
Agreement"). The other Agreement, as amended, is dated effective February 26,
1993 and its Area of Primary Responsibility is Broward County, Florida (the
"Broward Agreement"). The Partnership's sole general partner during 1994 was
Masda Security, Inc., a Delaware corporation (the "Parent Corporation").
In February 1994, Masada Security was reorganized from a limited
partnership structure to a corporate structure as a result of several steps.
First, the Parent Corporation changed its name from Masada Security, Inc. to
Masada Security Holdings, Inc. effective February 7, 1994. Second, the Parent
Corporation caused the incorporation in Delaware on February 7, 1994 of a new
corporation by the name of Masada Security, Inc. (the "Operating
Corporation"). Third, the Operating Corporation became a wholly-owned
subsidiary of the Parent corporation on February 7, 1994 immediately after
incorporation. Fourth, the Operating Corporation became qualified in various
states to conduct business as a foreign corporation, including the State of
Florida on February 9, 1994. Fifth, the Partnership was merged with and into
the Operating Corporation effective February 11, 1994 (the "Merger"). A copy
of the Certificate of Merger filed with the Delaware Secretary of State is
enclosed for your review.
As a result of the Merger, the Partnership was merged out of existence
and the Operating Corporation "inherited" the assets and liabilities of the
Partnership as the successor of the
950 22nd Street North - Suite 800 - Birmingham, AL 35203
205-323-7233 - 800-531-3293/FAX
<PAGE> 2
May 16, 1995
Page 2
- ------------------
Partnership. Additionally, the Dade Agreement and the Broward Agreement (the
"Agreements") were effectively transferred to the Operating Corporation
by operation of law as a result of the Merger.
The Merger did not alter the ownership, management or control of the
business of Masada Security. The persons and entities that owned interests in
the Partnership prior to the Merger are the same persons and entities that
owned the Operating Corporation (via their ownership of Parent Corporation
capital stock) immediately following the Merger.
This letter is intended to serve as notice, pursuant to Section 18.2.1
of the Agreements, of the transfer of the Partnership's interests under the
Agreements to the Operating Corporation as a result of the Merger. I regret
that we did not provide this notice to you at an earlier date. Our delay in
providing this notice was simply an oversight.
I would sincerely appreciate both of you signing this letter where
indicated below and returning a signed copy to me at your earliest convenience,
if possible by Monday, May 22. Our telecopier number is (800) 531-3293. If
you have any questions, please do not hesitate to call me.
Very truly yours
/s/ Terry W. Johnson
Terry W. Johnson
President
The undersigned acknowledge each of the following: (i) receipt of this
letter; (ii) the applicability of Section 18.2.1 of the Agreements to the
transfers effected by the Merger; and (iii) compliance by the Partnership, the
Parent Corporation and the Operating Corporation with Section 18 of the
Agreements with respect to the Merger.
Sonitrol Corporation Sonitrol Southeast, Inc.
By: /s/ ??? By: /s/ John Rooney
-------------------------- --------------------------
Its: CEO Its: President
----------------------- -----------------------
Date: 5/19/95 Date: 5/18/95
------------------------ -----------------
<PAGE> 1
EXHIBIT
----
LEASE AGREEMENT
MEDICAL FORUM
BIRMINGHAM-JEFFERSON CIVIC CENTER
BIRMINGHAM, ALABAMA
STATE OF ALABAMA
JEFFERSON COUNTY
THIS LEASE, made this 7th day of June 1994, by and between
Birmingham-Jefferson Civic Center Authority (the "Lessor") and MASADA SECURITY,
INC. (the "Lessee").
WITNESSETH:
1. PREMISES. Lessor hereby demises to Lessee and Lessee leases from
Lessor on the terms, covenants and conditions set forth herein those premises
shown on Exhibit "A" attached hereto, (the "Leased Premises"), located in the
building, the location of which is indicated on said Exhibit "A" (the
"Building") in the City of Birmingham, Alabama. The Leased Premises,
approximately 14,623 square feet is located at
Suite 800 950 22nd Street, Birmingham, Alabama, 35203 USA.
2. TERM. The term of this Lease shall be for 120 months, commencing
on September 1, 1994 and ending August 31, 2004.
3. RENT. (a) Lessee shall pay to Lessor without notice or demand at
Lessor's office or at such other place as Lessor may from time to time
designate in writing as rental for the Premises: a base rental in the sum of
See Paragraph 32 Special Provisions Rent Schedule DOLLARS U.S. per annum,
($____) payable in twelve (12) equal monthly installments of $_____ in advance
on the first day of each calendar month during the Lease term hereof beginning
on the commencement date.
(b) Lessee has deposited with Lessor upon the execution of
the Lease, the sum of $6,348.00 as security for the full performance by Lessee
of all provisions of this Lease. If at any time during the term hereof, or any
extension hereof, Lessee shall be in default in payment of rent or any other
payment obligation of Lessee, all or a part of the security deposit may be made
for such payment. Lessor may also apply all or part of the deposit to repair
damages to the Leased Premises during or upon termination of the tenancy
created by this Lease., In the event Lessee is not in default or any of its
obligations hereunder at the termination of this Lease, Lessor shall return the
deposit to Lessee. Lessor shall not be required to keep this security deposit
separate from its general funds, and Lessee shall not be entitled to interest
on such deposit.
(c) All rental payments hereunder shall be due on the first
day of each month. Lessee acknowledges that late payment by lessee to Lessor of
rent or other sums due hereunder will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of which would be extremely
difficult and impractical to ascertain. Such costs include, but are not
limited to, processing and accounting charges. Therefore, in the event Lessee
shall fail to pay any installments of rent or any sums due hereunder promptly
at the time such amount is due, Lessee shall pay to Lessor as additional rent a
late charge equal to five (5%) of all such sums. Such late charges shall be
due for all payments of rent received on or after the tenth (10th) day of each
month.
(d) The rental provided herein in paragraph 3 "Rent" includes
the construction of tenant improvements on the basis set forth in the Lessee
improvement schedule attached hereto as Exhibit "B". In the event Lessee
requests that Lessor construct additional Lessee improvements other than those
shown in Exhibit "B", such requirements shall not be included as part of this
Lease Agreement, but shall be covered by a separate Agreement.
<PAGE> 2
4. POSSESSION AND ACCEPTANCE. (a) Promptly following the tendering of
possession of premises to Lessee by Lessor following completion of the
improvements reflected on Exhibit "B", Lessee agrees to proceed with all due
diligence on the installation of its fixtures and equipment as soon thereafter
as is reasonably possible. Anything to the contrary herein contained
notwithstanding, Lessee's tenancy hereunder shall commence on the date of
tendering of possession by lessor to Lessee after the improvements reflected
on Exhibit "B" has been made. Upon completion of the Leased Premises and other
improvements in accordance with the plans and specifications, Lessee agrees to
accept delivery of the premises and to execute and deliver to Lessor a letter
of acceptance accepting delivery of the Leased Premises. If Lessee shall not
have commenced to occupy the Premises for the Permitted Uses immediately after
they have been deemed ready for occupancy, a certificate of completion by a
licensed architect shall be conclusive evidence that Lessor has performed all
such obligationsu under this Agreement.
(b) If Lessor, for any reason or cause beyond its reasonable
control, cannot deliver possession of the Leased Premises to Lessee within
thirty (30) days after September 1, 1994, the Lessor shall pay Lessee a
penalty equal to one days rent for each day Lessee cannot take possession to a
maximum or ninety (90) days. At the end of the ninety (90) day period Lessee
may void this Lease. The term of this Lease shall be extended by such delay.
Lessee and Lessor shall execute a Lease modification to alter the effective
date of the Lease. Lessor will permit Lessee access for installing equipment
and furnishings in the premises prior to the Term when it can be done without
material interference with remaining work and provided Lessee cooperates with
Lessor and its contractors.
(c) By execution hereunder and occupancy, should the Leased
Premises be already complete and improved, Lessor acknowledges that it has
examined the Leased Premises and accepts them "as is" and as being in the
condition and improved as called for by this Lease.
5. USE OF PREMISES. The Leased Premises may be used and occupied only
for Corporate Office And Operations Center ("Permitted Uses") and for no other
purpose or purposes without Lessor's prior written consent. Lessee shall
promptly comply with all laws, ordinances, orders, and regulations affecting
the Leased Premises and the cleanliness, safety, occupation, and use of the
Leased Premises. Lessee shall not do or permit anything to be done in or about
the Leased Premises, or bring or keep anything in the Leased Premises that will
in any way increase the fire insurance upon the building. Lessee will not
perform any act or carry on any practices that may injure the Building or be a
nuisance or menace to other Lessees or any nearby premises. Lessor shall not
cause, maintain or permit any outside storage on or about the Leased Premises,
including pallets or other refuse. Lessee shall not conduct any business in,
or on or from the premises that would be considered lewd or immoral in nature
or that would not be in keeping with the professional image and standards of
said Medical Forum.
6. UTILITIES. (a) Lessor shall provide electrical, central heating and
cooling, water/sewer, janitorial and trash pickup service subject to such
limitations set out herein, the cost of said basic services being included in
Lessee's base rent calculated at $3.76 per square feet. These services shall
be subject to annual adjustments based on increased cost incurred by Lessor to
provide said services. Annual adjustments shall be the actual increase
incurred or six percent (6%) of the previous years cost, whichever is lower.
(b) HVAC shall be available 24 hours per day seven days per week in the
operations area. HVAC shall be available in the Corporate area weekdays 7AM -
7PM and Saturdays 7AM - 5PM.
(c) Should Lessee's water/sewer usage be deemed by Lessor in its sole
discretion, to be excessive, Lessee shall pay, as additional rent, a surcharge
to be set by Lessor for the excessive usage.
2
<PAGE> 3
(d) Should Lessee's janitorial requirements, trash volume or frequency be
of such size as to create additional costs for cleaning, pickup, additional
container size, more frequency of pickup or special handling, Lessor at his
option, may impose a janitorial or trash charge on the Lessee or increase said
charge if previously applicable. Said amount may be levied one or more months
depending on the circumstances as determined by Lessor. Should Lessor levy
Lessee for additional electrical, water/sewer or trash services, Lessee shall
remit the amount to the Lessor within 10 days after receipt of invoice or pay
as additional rental installments thereafter, whichever is elected by Lessor.
(e) Should Lessee require tile installation and use of natural
gas, Lessee shall pay as additional rent all costs incurred for both
installation and usage.
7. PARKING. Lessor reserves the right to promulgate rules amid
regulations to the use of the Medical Forum Parking Deck. Subject to such
rules and regulations, and the terms of this paragraph, Lessee shall have the
use of seventy (70) parking spaces per shift in said parking deck at no
additional charge. Additional parking spaces may be reserved at the then
current monthly rate, if such spaces are available.
8. ALTERATIONS. (a) Alterations may not be made to the Leased Premises
without the prior written consent of Lessor and any alterations of the Leased
Premises excepting movable furniture, equipment and trade fixtures shall, at
Lessor's option, become part of the realty and belong to Lessor. This
provision, among other things, applies to all draperies, special wall coverings
or floor coverings as well as additional electrical fixtures or circuits.
(b) Should Lessee desire to alter the Leased Premises and
Lessor approves and consents in writing to such alterations Lessee shall permit
Lessor to make said alterations, if Lessor agrees to make said alterations, and
amortize the total cost of same as additional rental for the balance of the
Lease term or any extension thereof if applicable and mutually agreeable.
Should Lessor elect to not provide said alterations, Lessee shall only contract
with a contractor approved by Lessor and all said alterations shall be subject
to Lessor's approval and written consent relative to design, location,
materials and workmanship.
(c) Notwithstanding anything in paragraph 8(b) above, Lessee
may, upon written consent of Lessor, install trade fixtures, machinery or other
trade equipment in conformance with the ordinances of the applicable city and
county, and the same may be removed upon the conditions of the Lease and if
the Leased Premises are not damaged by such removal. Lessee shall return the
Leased premises on the termination of this Lease in the same condition as when
rented to Lessee, reasonable wear and tear excepted. Lessee shall keep the
Leased Premises, the Building, and property in which the Leased Premises are
situated free from any liens arising out of any work performed for, materials
furnished to, or obligations incurred by Lessee. All such work, provided for
above, shall be done at such times and in such manner as Lessor may from
time to time designate.
(d) All fixtures, improvements, alterations, and additions which may be
installed by either Lessor or Lessee in or about the Leased Premises which are
in any manner attached to the floors, walls or ceilings, except trade mixtures,
shall belong to and be the property of Lessor and shall remain on the Leased
Premises during the term of this lease and at the expiration or termination
hereof, except for such property, if any, which the Lessor may designate that
Lessee either shall or may remove, by notice in writing to Lessee prior to
such expiration or termination. To avoid confusion as to trade versus
permanent fixtures Lessee may request Lessor to identify the status of any
fixtures prior to installation. Lessee agrees to repair all damage to the
Leased Premises caused by any such removal (including removal of trade
fixtures) and to restore the Leased Premises to the condition in which they
were prior to the removal of said articles. Any such property so designated
by Lessor to be removed, which shall be left in or upon the Leased Premises,
shall be deemed to have been abandoned by Lessee and may be retained or
disposed of by Lessor, as Lessor shall desire.
3
<PAGE> 4
9. FIRE INSURANCE HAZARDS. No use shall be made or permitted to be
made of the Leased Premises, nor acts done, which will increase the existing
rate of insurance on the Building or cause the cancellation of any insurance
policy covering the Building, or any part thereof, nor shall Lessee sell, or
permit to be kept, used or sold, in or about the Leased Premises, any article
which may be prohibited by the standard form of fire insurance policies.
Lessee shall, at its sole cost and expense, comply with any and all
requirements, pertaining to the Leased Premises, of any insurance organization
or company, necessary for the maintenance of reasonable fire and public
liability insurance, covering the Leased Premises, Building and appurtenances.
Lessee agrees to pay to Lessor as additional rent, any increase in premiums on
policies which may be carried by Lessor on the Leased Premises covering
damages to the Building and loss of rent caused by fire and the perils normally
included in extended coverage above the rates for the least hazardous type of
occupancy.
10. LIABILITY INSURANCE. Lessee, at its own expense, shall provide
and keep in force with companies acceptable to Lessor, in its sole discretion,
public liability insurance for the benefit of Lessor and Lessee jointly against
liability for bodily injury and property damage in the amount of not less than
One Million Dollars ($1,000,000) in respect to injuries to or death of more
than one person in any one occurrence, and in the amount of not less than
Two hundred Fifty Thousand Dollars ($250,000) per occurrence in respect to
damage to property, such limits to be for any greater amounts as may be
reasonably indicated by circumstances from time to time existing or combined
single limit of One Million Five Hundred Thousand Dollars ($1,500,000),
insuring Lessee, Lessor, and Lessor's Agents, Servants, and employees (as an
additional assured) against any liability that may accrue against them or any
of them on account of any occurrences in or about the demised Premises during
the term or in consequence of Lessee's occupancy thereof and resulting in
personal injury or death or property damages. Lessee shall furnish Lessor with
a certificate of such policy within thirty (30) days after the occupancy date
of this Lease and whenever required shall satisfy Lessor that such policy is in
full force and effect. Such policy shall name Lessor as additional insured.
Such policy shall further provide that it shall not be cancelled or altered
without thirty (30) days prior written notice to Lessor. Lessor shall not be
liable for any injury or damage caused by, or growing out of, any defect in
said Building, or its equipment, drains, plumbing, wiring, electric equipment
or appurtenances, or in said premises, or caused by, or growing out of fire,
rain, wind, leaks, seepage or other causes.
11. INDEMNIFICATION BY LESSEE. Lessee shall indemnify and hold harmless
Lessor against and from any and all claims arising from Lessee's use of the
Leased Premises or the conduct of its business or from any activity, work, or
things done, permitted or suffered by the Lessee in or about the Leased
Premises, and shall further indemnify and hold harmless Lessor against and from
any and all claims arising from any act, neglect, fault or emission of the
Lessee, or of its agents or employees, and from and against all costs,
attorney's fees, expenses and liabilities incurred in or about such claim or
any action or proceeding brought thereof and in case any action or proceeding
be brought against Lessor by reason of any such claim, Lessee upon notice from
Lessor still defend the same at Lessee's expense by counsel reasonably
satisfactory to Lessor. Lessee, as a material part of the consideration to
Lessor, hereby assumes all risk of damage to property or injury to persons in,
or about the Leased Premises from any cause whatsoever except that which is
caused by the failure of Lessor to observe any of the terms and conditions of
this Lease and such failure has persisted for all unreasonable period of time
after written notice of such failure, and Lessee hereby waives all claims in
respect thereof against Lessor unless such claims arise out of the negligence
or intentional misconduct of Lessor or its agents. The obligations of Lessee
under this paragraph arising by reason of any occurrences taking place during
the term of this Lease shall survive any termination of this Lease.
4
<PAGE> 5
12. WASTE AND QUIET CONDUCT. (a) Lessee shall not commit, or suffer
any waste upon the Leased Premises, or any nuisance, or other act or thing
which may disturb the quiet enjoyment of any other Lessee in the Building
containing the premises or any building in the project in which the premises
are located, including the parking, service and landscape areas. If Lessee
complies with all terms and conditions of this Agreement and any rules and
regulations promulgated by Lessor, Lessor warrants that Lessee shall be granted
peaceful and quiet possession and enjoyment of the Leased Premises.
(b) Lessee, its employees and agents, shall maintain order in the
building and shall not make or permit any improper noise in the building or
interfere in any way with other Lessees or those having business with them. No
room shall be occupied or used as sleeping or living quarters at any time.
(c) The Lessee shall not (without the Lessor's consent) put up or
operate any electric hearing device, steam engine, machinery or stove upon the
premises, or carry on any mechanical business thereon, or do any cooking
therein, except the use of a microwave oven, or use or allow to be used upon
the demised premises oil, burning fluids, camphene, gasoline, or kerosene for
heating, warning, or lighting. No article deemed hazardous on account of fire
and no explosives shall be brought into said premises. No offensive gases or
liquids will be permitted. Lessee shall keep the premises equipped with all
safety appliances required by law or ordinance or any other regulations
hereafter made by Lessor of which Lessee has been given notice.
13. SIGNS. Lessor shall approve the placing of signs and the size and
quality of the same. Lessee shall place no signs on the exterior of the Leased
Premises. Any signs not in conformity with this Lease or disapproved by Lessor
in its sole discretion may be immediately removed by Lessor.
14. REPAIRS. (a) Lessor is responsible, at its expense, to keep and
maintain the interior of Leased Premises in a clean, sanitary and good
condition, repair and maintenance including replacement of bulbs and lamps.
The exterior structure including walls, roof, common areas, glass and doors
unless said doors and glass are damaged by burglary or attempt thereof or
malicious vandalism or strike directed at the Lessee's place of business
within the Leased Premises shall be the responsibility of the Lessor.
(b) Lessees shall not injure, overload or deface the Building,
including the interior walls, and including the erection of any signs or
identification. The water closets and other water apparatus shall not be used
for any other purposes than those for which they were constructed and no
sweepings, rubbish, sanitary napkins, or other obstructing substances shall
be thrown therein. Any said repair resulting therefrom shall be the expense
obligation of the Lessee.
(c) Not more than two keys for each unit will be furnished without
charge; the charge for additional keys shall be Five Dollars ($5.00) each. No
additional locks or latches shall be put upon any door without written consent
of Lessor. Lessee, at termination of their Lease of the Premises, shall return
to Lessor all keys to doors in the building. Tenant shall install in areas
desired security locks required for UL approval.
(d) Lessor shall be responsible for the preventive and routine
maintenance (except that covered under any warranty) to the heating,
ventilating and air conditioning system. Maintenance made under this paragraph
shall be made at the Lessor's expense.
15. ABANDONMENT. Lessee shall not vacate nor abandon the Leased
Premises at any time during the term of this lease, nor permit the Leased
Premises to remain unoccupied for a period longer than forty-five (45)
consecutive days during the term of this Lease; and if Lessee shall abandon,
vacate or surrender the Leased Premises, or be dispossessed by process of law,
or otherwise, any personal property belonging to Lessee and
5
<PAGE> 6
left on the Leased Premises shall at the option of the Lessor, be deemed
abandoned, and available to Lessor to use or sell to offset rental amount due
and payable, provided that, in the event Lessee desires to maintain it's
demised space by paying rent but not opening its business to the general
public, Lessee may request such permission from Lessor, which permission may or
may not be granted by Lessor, in its sole discretion. Should the premises be
presumed to be vacated or abandoned, Lessor has the right, without being held
as trespassing, to enter the Leased Premises.
16. ENTRY BY LESSOR. Lessee shall permit Lessor and Lessor's agent
to enter the Leased Premises at all reasonable times for the purposes of
inspecting the same or for the purpose of maintaining the Building, or for the
purpose of making repairs, alterations, or additions to any portion of the
Building, including the erection and maintenance of such scaffolding and props
as may be required, or for the purpose of showing the premises to prospective
Lessees during the last 6 months of this Lease without any liability to Lessee
for any loss of occupation or quiet enjoyment of the Leased Premises thereby
occasioned. Lessor shall at all times save and retain a key with which to
unlock all of the doors in, upon and about the Leased Premises, excluding
Lessee's vaults and safes. Due to the nature of Lessee business, Lessor must
provide advance notice for entry to secured areas of Lessee's space.
17. DESTRUCTION. In the event of a partial destruction of the
Leased Premises or the Building during the Lease term which requires repairs to
either the Leased Premises or the Building being declared unsafe or unfit for
occupancy by any authorized public authorities, this Lease shall not
automatically terminate provided Lessee is able to continue operations in the
area unaffected or Lessor is able to provide Lessee alternate temporary space.
Lessee shall be entitled to a proportionate reduction of rent while such
repairs are being made. The proportionate reduction is to be based upon the
extent to which the making of repairs shall interfere with the business carried
on by Lessee in the Leased Premises. If, in the opinion or Lessor, repairs can
be made within forty-five (45) days, Lessor may, at its option, make the same
within reasonable time, with this Lease continuing in full force and effect and
the rent being proportionately abated, as in this paragraph provided. In the
event that Lessor does not so elect to make repairs, or if in Lessor's opinion,
repairs cannot be made within forty-five (45) days, or repairs cannot be made
under current laws and regulations, this Lease may be terminated at the option
of either party. A total destruction (including any destruction required by any
authorized public authority) of either the Leased Premises or the Building
shall terminate this Lease. Lessor shall not be required to repair any
property installed in the Leased Premises by Lessee under any circumstances.
Lessee waives any right under applicable laws inconsistent with the terms of
this paragraph and in the event of a destruction agrees to accept any offer by
Lessor on the same terms as this Lease to provide Lessee with comparable space
within project in which the Premises are located.
18. ASSIGNMENT AND SUBLETTING. Without Lessor's written consent,
which will not be unreasonably withheld, Lessee shall not assign, mortgage, or
hypothecate this Lease, or any interest in this Lease, or permit the use of the
Leased Premises by any person or person's other than Lessee, or sublet the
Leased Premises, or any part of Leased Premises. Any transfer of this Lease
from Lessee by merger, consolidation, or liquidation, or any sale of a majority
ownership in Lessee, shall constitute an assignment for purposes of this
Lease. Any attempted assignment or subletting without Lessor's consent shall
not release Lessee from its primary liability under the Lease, and Lessor's
consent to one assignment, subletting or occupation or use by other parties
shall not be deemed a consent to other subleases or assignment or occupation
or use by other parties.
Notwithstanding the foregoing, Lessee may collaterally assign the leasehold
interest and all other rights granted to Lessee as evidenced by this Lease to
one or more of its lenders ("Lenders") as additional security for loans made by
such Lenders to Lessee. In any such event, Lessor agrees: (a) to provide
Lenders, if requested in writing by Lenders, copies of all notices of default
under the Lease that Lessor may give to Lessee at the time given to Lessee;
6
<PAGE> 7
(b) to permit Lenders to cure any Lessee defaults under the Lease within ten
(10) days (or such longer period if a longer period applies to Lessee) after
Lenders receive notice of such default, and Lessor shall accept performance by
Lenders the same as if the cure had been made by Lessee; (c) as to Lenders
only, to waive any and all rights, liens and interests Lessor may have or
acquire, of any nature whatsoever, in the personal property of Lessee,
regardless of when such right, liens and interests may be deemed to have
arisen; (d) to permit Lenders to succeed to the right, title and interest of
Lessee in this Lease by foreclosure upon Lessee's interest herein or by
voluntary assignment in lieu of foreclosure; provided, however, that in such
event, Lenders shall pay to Lessor any past due rentals, late charges and
additional rentals due under this Lease for period beginning on the date of
execution of this Lease until the effective date Lenders succeed to the rights
of Lessee, and provided further that Lender performs the obligations of Lessee
as evidenced by this lease at all times thereafter; (e) in event of the
termination of this Lease prior to the expiration of its term, except by cause
of condemnation, to give Lenders written notice that this Lease has been
terminated, together with a statement of any and all sums which would at the
time be due under this Lease but for such termination, and all other defaults,
if any, under this Lease known to Lessor, and shall afford Lender the right to
enter into a new Lease for the Premises that shall be effective as of the date
of termination of this Lease for a term coinciding with term of this Lease
which new lease shall have all terms, covenant, and conditions as are contained
in this Lease; provided, however, that Lenders pay to Lessor any past due
rentals, late charges and additional rents due under this Lease through the
date of such termination (other than accelerated rents); (f) if Lenders acquire
Lessee's interest in this Lease in any manner, including, but not limited to,
execution of a new lease, Lenders shall be released from all liability for the
performance or observance of covenant and conditions in this Lease or the new
lease from and after the date of such assignment; (g) to issue to Lenders, or
their written request, certification as to the status of this Lease at any
particular time referencing those matters addressed in paragraph 30 hereof;
and (h) to enter into a written agreement with Lenders at Lessee's written
request affirming Lessor's agreement to each of the matters addressed in (a) -
(g) above.
19. INSOLVENCY OF LESSEE. Either (a) the appointment of a receiver to
take possession of all or substantially all of the assets of Lessee, or (b) a
general assignment by Lessee for the benefit of creditors, or (c) any action
taken or suffered by Lessee under any insolvency or bankruptcy act shall, if
any such appointments, assignments or action continues for a period of thirty
(30) days, constitute a breach of this Lease by Lessee. In such event, Lessor
may at its election without notice, terminate this Lease and in that event be
entitled to immediate possession of the Leased Premises and damages as provided
herein.
20. BREACH BY LESSEE. (a) In the event of a default, Lessor, besides
other rights or remedies that it may have, shall have the right to either
terminate this Lease or from time to time, without terminating this Lease,
relet the Leased Premises or any part thereof for the account and in the name
of Lessee or otherwise, for any such term or terms and conditions as Lessor in
its sole discretion may deem advisable with the right to make alterations and
repairs to the Leased Premises. Lessee shall pay to Lessor, as soon as
ascertained, the costs and expenses incurred by Lessor in such reletting or in
making such alterations and repairs. Rentals received by Lessor from such
reletting shall be applied: First, to the payment of any indebtedness, other
than rent, due hereunder from Lessee to Lessor; second, to the payment of the
cost of any alterations and repairs to the Leased Premises necessary to return
the Leased Premises at the time to good condition, normal wear and tear
excepted, for uses permitted by this lease and cost of storing any of Lessee's
property left on the Leased Premises at the time of reletting; third, to the
payment of rent due and unpaid hereunder and the residue, if any, shall be
held by Lessor and applied in payment of future rent or damages in the event
of termination as the same may become due and payable hereunder and the
balance, if any, at the end of the term of this Lease shall be paid to Lessee.
7
<PAGE> 8
Should such rentals received from time to time from such reletting during any
month be less than that agreed to be paid during that month by Lessee
hereunder, the Lessee shall pay such deficiency to Lessor. Such deficiency
shall be calculated and paid monthly.
(b) No such relenting of the Leased Premises by Lessor shall be
construed as an election on its part to terminate this Lease unless a notice of
such intention be given to Lessee or unless the termination thereof be decreed
by a court of competent jurisdiction. Notwithstanding any such reletting
without termination, Lessor may at any time thereafter elect to terminate this
Lease for such previous breach provided it has not been cured. Should Lessor
at any time terminate this Lease for any breach, in addition to any other
remedy it may have, it may recover from Lessee all damages it may incur by
reason of such breach, including the cost of recovering the Leased Premises and
including (1) all amounts that would have fallen due as rent between the time
of termination of this Lease and the time of the interest on the balance at the
rate of twelve percent (12%) per year; (2) Lessor may, at its option, declare
the entire amount of the rent which would be due and payable during remainder
of the Lease to be due and payable immediately, in which event, Lessee agrees
to pay the same upon demand, together with all rents theretofore due to Lessor
provided, however, that such payments shall not constitute a penalty or
forfeiture or liquidated damages unless elected as same by Lessor. Upon making
such payment, Lessee shall receive the rent payments from other Lessees on
account of said Premises during the remaining term of this Lease, provided,
however, that the monies to which the Lessee shall become so entitled shall in
no event exceed the entire amount payable by Lessee to Lessor as above.
(c) Should Lessee fail to comply with any term, provision or covenant
of this Lease and shall not cure such failure within twenty (20) days after
written notice (notice by registered mail deemed to be constructive notice)
thereof to Lessee, said event shall be deemed to be events of default by Lessee
under this Lease.
21. SURRENDER OF LEASE NOT MERGER. The voluntary or other surrender of
this Lease by Lessee, or a mutual cancellation thereof, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subleases, and/or subtenancies, or may, at the option of Lessor, operate as an
assignment to it of any or all of such subleases or subtenancies.
22. ATTORNEY'S FEES/COLLECTION CHARGES. In the event of any legal action or
proceeding between the parties hereto, reasonable attorney's fees and expenses
of the prevailing party in any such action or proceeding may be added to the
judgment therein. Should Lessor be named as defendant in any suit in
connection with or arising out of Lessee's occupancy, hereunder, Lessee shall
pay to Lessor its cost and expenses incurred in such suit, including a
reasonable attorney's fee.
23. CONDEMNATION. If any part of the Leased Premises shall be taken or
condemned for public or quasi-public use, and a part thereof remains which is
susceptible of occupation hereunder, this Lease shall as to the part so taken,
terminate as of the date title shall vest in the condemnor, and the rent payable
hereunder shall be adjusted so that the Lessee shall be required to pay for the
remainder of the term only such portion of such rent as the number of square
feet in the entire Leased Premises at the date of condemnation; but in such
event Lessor shall have the option to terminate this Lease as of the date
when title to the part so condemned vests in the condemnor. If all the Leased
Premises, or such part thereof be taken or condemned so that there does not
remain a portion suitable for occupation hereunder, this Lease shall thereupon
terminate.
24. Waiver. The waiver by Lessor of any breach of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of such term,
covenant, or condition or any subsequent breach of the same or any other term,
covenant, or condition herein contained.
8
<PAGE> 9
The subsequent acceptance of rent hereunder by Lessor shall not be deemed to be
a waiver of any preceding breach by Lessee of any term, covenant, or condition
of this Lease, other than the failure of Lessee to pay the particular rental so
accepted, regardless of Lessor's knowledge of such preceding breach at the time
of acceptance of such rent.
25. EFFECT OF HOLDING OVER. If Lessee should remain in possession of
the Leased Premises after the expiration of the Lease term and without
executing a new Lease, then such holding over shall be construed as a tenancy
from month to month, subject to all the conditions, provisions, and obligations
of this Lease insofar as the same are applicable to a month-to-month tenancy.
26. PREVENTION OF PERFORMANCE. In the event that the peformance by
Lessor of any of Lessor's obligations or undertakings hereunder shall be
interrupted or delayed by any occurrence not occasioned by the conduct of
either party hereto, whether such occurrence be an act of God or the common
enemy or the result of war, riot, civil disturbance, sovereign conduct,
governmental act or regulation, judicial decree or order, climactic conditions,
fire, explosion, accident, theft, shortage of materials, energy shortages,
delay or failure of carriers, subcontractor's supplies, strike or other labor
difficulty, lockout or trade dispute or any other event or circumstances beyond
the Lessor's reasonable control then the Lessor shall be excused from such
performance for such period of time as is reasonably necessary after such
occurrence to remedy the effects thereof. Notwithstanding the foregoing, the
provisions of this Paragraph 26 shall not apply to those events or
circumstances which are governed by the provisions of Paragraphs 4(b), 17 or 23
of this Lease.
27. TRADEMARK INDEMNITY. The Lessee shall indemnify and hold harmless
Lessor and Lessor's agents and employees from any and all claims, demands,
losses, liabilities, expenses, liens, damages or costs, including, but not
limited to, reasonable attorney's fees, which they may incur by reason of any
claim, action or suit brought by Lessee or by any third party or parties
arising from Lessee's alleged infringement or use of any trade name, trademark,
service mark, trade secret, label, design, and/or similar intangibles. In the
event of any such claim, action or suit, Lessee shall, at its expense, give
Lessor prompt notice of the same and Lessee shall defend the claim, action, or
suit at Lessee's expense by counsel reasonably satisfactory to Lessor. The
obligation of Lessee under this paragraph arising by reason of any occurrences
taking place during the term of this Lease shall survive any termination of
this Lease.
28. MISCELLANEOUS PROVISIONS. (a) This instrument contains all of the
agreements and conditions made between the parties of this Lease and may not be
modified orally or in any other manner than by agreement in writing signed by
all parties to the Lease.
(b) Except as otherwise expressly stated, each payment required
to be made by Lessee shall be in addition to and not in substitution for other
payments to be made by Lessee.
(c) Subject to Paragraph 18, the terms and provisions of this
Lease shall be binding upon and inure to the benefits of the heirs,
executors, administrators, successors and assigns of Lessor and Lessee.
(d) All covenants and agreements to be performed by Lessee under
any of the terms of this Lease shall be performed by Lessee at Lessee's sole
cost and expense and without any abatement of rent.
(e) Where the consent of the Lessee is required, such consent
will not be unreasonably withheld.
(f) This Lease shall create the relationship of Lessor and
Lessee; no estate shall pass out of Lessor.
9
<PAGE> 10
(g) This agreement, its application, enforcement and jurisdiction
shall be construed under the laws applicable in the State of Alabama including
any Lessee whose principal place of business is outside of the U.S.A.
29. DEPOSIT AGREEMENT. Lessor and Lessee hereby agree that Lessor shall
be entitled to immediately endorse and cash Lessee's good faith rent and
security deposit check(s) accompanying this Lease. It is further agreed and
understood that such action shall not guarantee acceptance of this Lease by
Lessor but in the event Lessor does not accept this Lease the deposit shall be
refunded in full to Lessee. This Lease shall be effective only after Lessor
has fully executed this Lease Agreement and it has been ratified by the Board
of Directors of Lessor.
30. ACKNOWLEDGMENTS. Lessee shall upon request and upon being provided a
written instrument and within twenty (20) days of the request by Lessor,
deliver to Lessor or any other person, firm or corporation specified by Lessor,
a letter duly executed and acknowledged, certifying:
(a) That the Lease is unmodified and is in full force and effect
or if there has been any modification that the same is in full force and effect
as so modified and with modifications identified.
(b) Whether or not within the knowledge of Lessee there are then
existing any setoffs or defenses in favor or Lessee against the enforcement of
any of the terms, covenants and conditions of this Lease by Lessor and, if so,
specifying the same, and also whether or not within the knowledge of Lessee,
Lessor has observed and performed all of the terms, covenants, and conditions
on the part of Lessor or to be observed and performed and, if not, specifying
the same; and
(c) The dates to which annual rental, and all other charges
hereunder have been paid.
31. NOTICES. Wherever in this Lease it shall be required or permitted
that notice or demand be given or served by either party to this Lease to or on
the other, such notice or demand shall not be deemed to have been duly given or
served unless in writing, and either personally delivered or forwarded by
registered mail, postage prepaid, addressed as follows:
TO THE LESSOR AT: Birmingham-Jefferson Civic Center Authority
Suite 200
950 22nd Street North
Birmingham, Alabama 35203
TO THE LESSEE AT: Chief Financial Officer
Masada Security, Inc.
Medical Forum Building
Suite 800
950 22nd Street North
Birmingham, Alabama 35203
10
<PAGE> 11
32. SPECIAL PROVISIONS:
(a) Rent Schedule
<TABLE>
<CAPTION>
Graduated Schedule Non Graduated Difference
Monthly Monthly Monthly
<S> <C> <C> <C>
$1.00 Credit $11,673.07 ($4,106.49)
------------
Year I First Four Months $6,348.00 7,566.58 11,673.07 (662.51)
Last Eight Months $9,791.98 11,010.56
Year 2 - $ 10,264.86 11,673.07 (1,408.21)
Year 3 - 10,667.15 11,673.07 (1,005.92)
Year 4 - 11,069.45 11,673.07 (603.62)
Year 5 - 11,471.74 11,673.07 (201.33)
Year 6 - 11,874.63 11,673.07 200.96
Year 7- 12,276.33 11,673.07 603.26
Year 8- 12,678.33 11,673.07 1,005.55
Year 9- 13,082.36 11,673.07 1,409.29
Year 10- 13,483.57 11,673.07 1,810.50
</TABLE>
*See Addendum Number One - Rent Calculations
(b) Cancellation Right - Lessee shall have the right to cancel the
lease after five years by providing Lessor a 120 day notification. If Lessee
cancels this lease any reductions provided during the front portion of the
graduated rent schedule or any unamortized cost of special items, equipment or
features shall be paid in a lump sum upon cancellation.
(c) Lessor shall use telephone and fiber provider of choice. The said
service to be provided direct to Lessee's space only.
(d) Lessor shall provide Lessee a minimum of 145 AMP load and 30 KVA on
Lessors backup generator.
(e) Lessor to provide Lessee a location on the ground level of the
building for installation of Lessee's backup generator which shall become the
backup to the building backup generator.
(f) Lessor shall make available a "workout" room for the use of Lessee
and other building tenants. Lessee to provide equipment for Lessee's
privileges.
(g) Lessee shall be allowed to connect with existing CCTV system to
monitor the parking deck.
(h) Lessee shall be allowed to install a camera directed to the
entrance door of the operations center.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto affixed their hands and seals,
or when appropriate have caused this instrument to be executed by duly
authorized officers with the appropriate seal of the organization, the day and
year first above written.
As to Lessor, signed,
sealed and delivered in
the presence of:
/s/ Jack Fields By: /s/ J.M. Boggan
- ---------------------------- ---------------------------------------
WITNESS SEAL
BIRMINGHAM-JEFFERSON CIVIC CENTER AUTHORITY
-------------------------------------------
DATE 6-8-94
---------------------------------------
As to Lessee, signed,
sealed and delivered in
the presence of:
/s/ Tina M. Rook BY: MASADA SECURITY, INC.
- ---------------------------- ------------------------------------------
WITNESS SEAL
/s/ David P. Tomick, CFO
------------------------------------------
LESSEE
DATE June 7, 1994
---------------------------------------
12
<PAGE> 13
LEASE ADDENDUM
This ADDENDUM made to the Lease dated June 7th, 1994 between
BIRMINGHAM-JEFFERSON CIVIC CENTER AUTHORITY, LESSOR and MASADA SECURITY, INC.,
LESSEE shall provide for the following changes:
WHEREAS: Paragraph 2. Term of the Lease Agreement shall be changed to
reflect the following.
The term of the Lease shall be for 120 months commencing on October 1,
1994 and ending on September 30, 2004.
LESSEE shall occupy the Leased Premises September 12, 1994 and pay
LESSOR $28.00 per day for providing HVAC services until October 1, 1994.
All other terms and conditions of the Lease shall remain the same.
/s/ J.M. Boggan
- -------------------------- -----------------------------
WITNESS BIRMINGHAM-JEFFERSON
CIVIC CENTER AUTHORITY
DATE
-------------------------
/s/ Teresa Brown /s/ David P. Tomick
- -------------------------- -----------------------------
WITNESS MASADA SECURITY
DATE 9-16-94
-------------------------
<PAGE> 14
LEASE ADDENDUM NUMBER TWO
This ADDENDUM made to the Lease dated June 7th, 1994 between
BIRMINGHAM-JEFFERSON CIVIC CENTER AUTHORITY, LESSOR and MASADA SECURITY, INC.,
LESSEE shall provide for the following changes:
WHEREAS: LESSEE, in consideration of LESSOR providing $32,565.84 of
above standard improvements in LESSEE's space agrees to reimburse LESSOR over
the remaining Lease Term with monthly payments based on a 10% interest rate.
Beginning with the third month of the Lease Term, December 1, 1994 and
extending to the end of the Lease Term (118 total months), the monthly rent
calculated for each time period as shown on ADDENDUM NUMBER ONE shall be
increased by an additional amount of $434.62 per month.
/s/ /s/ J.M. Boggan
- -------------------------- -------------------------
WITNESS LESSOR
/s/ Teresa Brown /s/ David P. Tomick
- -------------------------- -------------------------
WITNESS LESSEE
<PAGE> 15
ADDENDUM NUMBER ONE
RENT CALCULATIONS
MASADA SECURITY
<TABLE>
<S> <C> <C>
Rent Schedule:
Total Square Feet 14,623
Improved Square Feet 10,863
Unimproved Square Feet 3,760
Year One
Improved Space
8.87 S.F. - 1.00 = 7.87 X 10,863 = $ 85,491.81
Unimproved Space
5.85 S.F. - 1.00 = 4.85 X 3,760 = 18,236.00
-----------
Total Annual Rent $103,727.81
Less, First Four Months Rent
@$6,348 per month 25,392.00
-----------
Rent For Last Eight Months $ 78,335.81
Per Month Rent Eight Months $ 9,791.98
</TABLE>
Unimproved rent of $5.85 to remain stable years 2-10
$5.85 S.F. X 3,760 = $21,996.00 annual rent being at the
rate of $1,833.00 per month
<TABLE>
<CAPTION>
IMPROVED SPACE RENT MONTHLY MONTHLY TOTAL
GRADUATED UNIMPROVED
<S> <C> <C> <C> <C>
Year 2 9.3144 S.F. X 10,863 S.F. = $101,182.33/12 = $ 8,431.86 + $1,833.00 $10,264.86
Year 3 9.7588 S.F. X 10,863 S.F. = $106,009.84/12 = $ 8,834.15 + $1,833.00 $10,667.15
Year 4 10.2032 S.F. X 10,863 S.F. = $110,837.37/12 = $ 9,236.45 + $1,833.00 $11,069.45
Year 5 10.6476 S.F. X 10,863 S.F. = $115,664.88/12 = $ 9,638.74 + $1,883.00 $11,471.74
Year 6 11.0920 S.F. X 10,863 S.F. = $120,492.40/12 = $10,041.03 + $1,883.00 $11,874.03
Year 7 11.5364 S.F. X lO,863 S.F. = $125,319.91/12 = $10,443.33 + $1,883.00 $12,276.33
Year 8 11.9808 S.F. X 10,863 S.F. = $130,147.43/12 = $10,845.62 + $1,883.00 $12,678.62
Year 9 12.4268 S.F. X 10,863 S.F. = $134,992.33/12 = $11,249.36 + $1,883.00 $13,082.36
Year 10 12.87 S.F. X 10,863 S.F. = $139,806.81/12 = $11,650.57 + $1,833.00 $13,483.57
</TABLE>
<PAGE> 16
LEASE ADDENDUM NUMBER THREE
This ADDENDUM made to the Lease dated June 7th, 1994 between
BIRMINGHAM-JEFFERSON CIVIC CENTER AUTHORITY, LESSOR and MASADA SECURITY, INC.,
LESSEE shall provide for the following changes:
WHEREAS: LESSEE, in consideration of LESSOR installing LESSEE's gas
fueled auxiliary generator at a cost of $6,684.00 agrees to reimburse LESSOR
over the remaining Lease Term with monthly payments based on a 10% interest
rate.
Beginning with the seventh month of the Lease Term, April 1, 1995 and
extending to the end of the Lease Term (114 total months), the monthly rent
calculated for each time period as shown on ADDENDUM's NUMBER ONE and TWO shall
be increased by an additional amount of $91.05 per month.
/s/ Jack Fields /s/ Bert Brosowsky
- -------------------------- -------------------------
WITNESS LESSOR
/s/ Catherine B. Seale /s/ David P. Tomick
- -------------------------- -------------------------
WITNESS LESSEE
<PAGE> 17
ADDENDUM NUMBER FIVE
This ADDENDUM made to the Lease dated June 7th, 1994, between BIRMINGHAM-
JEFFERSON CIVIC CENTER AUTHORITY, LESSOR and MASADA SECURITY, INC., LESSEE.
WHEREAS: LESSEE desires 1,031 s.f. of unimproved leased space be improved
and the rental rate for said amount of unimproved space be adjusted to the
present rate for improved space. This adjustment to be made upon completion of
improvements during year two of the Lease period.
The following rent schedule is an adjustment to the rent schedule in Addendum
Number One. This schedule becomes effective the month improvements are
complete during year two.
Rent Schedule:
Total Square Feet 14,623
Improved Square Feet 10,863 + 1,031 = 11,893
Unimproved Square Feet 3,760 - 1,031 = 2,729
Unimproved rent of $5.85 to remain stable years 2-10
$5.85 S.F. X 2,729 = $15,964.65 annual rent being at the
rate of $1,330.39 per month.
<TABLE>
<CAPTION>
IMPROVED SPACE RENT MONTHLY MONTHLY TOTAL
GRADUATED UNIMPROVED
<S> <C> <C> <C> <C>
Year 2 9.3144 S.F. X 11,893 S.F. = $110,776.16 / 12 = $ 9,231.35 + $1,330.39 $10,561.74
Year 3 9.7588 S.F. X 11,893 S.F. = $116,061.41 / 12 = $ 9,671.78 + $1,330.39 $11,002.17
Year 4 10.2032 S.F. X 11,893 S.F. = $121,346.66 / 12 = $10,112.22 + $1,330.39 $11,112.61
Year 5 10.4476 S.F. X 11,893 S.F. = $126,631.91 / 12 = $10,552.66 + $1,330.39 $11,883.05
Year 6 11.0920 S.F. X 11,893 S.F. = $131,917.16 / 12 = $10,993.10 + $1,330.39 $12,323.47
Year 7 11.5364 S.F. X 11,893 S.F. = $137,202.41 / 12 = $10,433.53 + $1,330.39 $12,763.92
Year 8 11.9808 S.F. X 11,893 S.F. = $142,487.65 / 12 = $11,873.97 + $1,330.39 $13,204.36
Year 9 12.4268 S.F. X 11,893 S.F. = $147,791.00 / 12 = $12,316.00 + $1,330.39 $13,646.38
Year 10 12.87 S.F. X 11,893 S.F. = $153,062.91 / 12 = $12,755.24 + $1,330.39 $14,085.63
</TABLE>
Total monthly rent for each year shall be the amount shown on the above schedule
plus $434.66 as provided for in Addendum Number Two and $91.05 as provided for
in Addendum Number Three.
/s/ ??? /s/ ??? 10/25/95
- --------------------------- -------------------------------------------
Witness Birmingham-Jefferson Civic Center Authority
LESSOR
/s/ ??? /s/ ???
- --------------------------- -------------------------------------------
Witness Masada Security, Inc.
LESSEE
<PAGE> 1
ASSET PURCHASE AGREEMENT
This Agreement is made and entered into this 27th day of October,
1994, by and between MASADA SECURITY, INC., a Delaware corporation
("Purchaser") and KENMAR ELECTRONICS, INC., a Texas corporation d/b/a Houston
Alarm ("Seller").
RECITALS
Seller is engaged in the business of operating a security alarm system
monitoring business in and around Harris County, Texas (the "Business").
WHEREAS, the Purchaser and the Seller negotiated to enter into this
Agreement whereby Seller desires to sell to Purchaser and Purchaser desires to
buy from Seller certain of the customer account contracts and certain other
assets of Seller pertaining to the Business, and Purchaser and Seller desire to
make certain other arrangements between them relating to the purchase and sale
of such assets, all upon the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, the parties hereto in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which is hereby acknowledged, and intending to be
legally bound, agree as follows:
SECTION 1. AGREEMENT TO PURCHASE AND SELL. In accordance with
the terms and conditions contained herein and in reliance on the respective
representations and warranties of the parties hereto (it being acknowledged and
agreed by the parties hereto that Seller makes no warranties or representations
other than as expressly set forth herein and in the other instruments and
documents delivered by Seller in connection herewith), Seller hereby agrees to
sell, convey, transfer, and assign to Purchaser, and Purchaser hereby agrees to
purchase, accept, and acquire from Seller in the manner provided herein, the
assets described below (the "Purchased Assets"):
(a) Contracts. Subject to the provisions of Section 8, all right,
title and interest of Seller in and to the contracts for the rendering of alarm
related and monitoring services based on recurring charges (including charges
for commercial and residential leased equipment, commercial and residential
alarm monitoring, open and close monitoring, inspections, maintenance, computer
reports, long range radio monitoring, police direct connect monitoring, and
additions, add-ons, or extensions, whether evidenced by contract, service
report, or otherwise), to existing customers of Seller specifically set forth
on Schedule 1 (a) hereto (the "Contracts");
1
<PAGE> 2
(b) Inventory. All right, title and interest of Seller in and to
all alarm equipment and parts inventory pertaining to the Business maintained
by Seller at its offices (whether or not allocated to contracts in progress)
specifically set forth on Schedule 1(b) hereto (the "Inventory"), with the
Inventory, including without limitation, items purchased by Seller for resale;
(c) Fixed Assets. All right, title and interest of Seller in and
to the fixed assets used in connection with the Business as specifically set
forth on Schedule 1(c) hereto (the "Fixed Assets");
(d) Equipment. All right, title and interest of Seller in and to
the equipment used in connection with the Business as specifically set forth on
Schedule 1(d) hereto (the "Equipment");
(e) Vehicles. All right, title and interest of Seller in and to
the vehicles specifically set forth on Schedule 1(e) hereto (the "Vehicles"),
WITH ALL SUCH VEHICLES BEING SOLD "AS IS, WHERE IS" AND WITH SELLER DISCLAIMING
AND ALL WARRANTIES AND REPRESENTATIONS, OTHER THAN THOSE CONCERNING TITLE,
RELATING TO THE VEHICLES, INCLUDING ANY WARRANTY OF MERCHANTABILITY AND FITNESS
FOR ANY PARTICULAR PURPOSE;
(f) Other Contracts. All right, title and interest of Seller in
and to those contracts and benefits of Seller specifically set forth on
Schedule 1(f) hereto (the "Other Contracts"), with the Other Contracts,
including, without limitation, all accepted orders for the sale or installation
by Seller of alarm systems which are not yet installed or not completely
installed as of the Closing Date (as defined in Section 5(a));
(g) Receivables. Subject to the provisions of Section 2(c), the
accounts receivable, trade accounts, notes receivable and other debts owed to
Seller for (i) monthly recurring charges owed under the Contracts, (ii) service
call charges pertaining to the Contracts, and (iii) installations and add-ons
pertaining to the Contracts, (collectively the "Receivables") as specifically
set forth on Schedule 1(g) hereto, with no more than ten (10) separate accounts
receivables being more than sixty (60) days past due from the applicable due
date; and with no individual service call, installation or add-on charge
exceeding two hundred fifty ($250.00) dollars;
(h) Intangible Personal Property. The unexpired trademarks
(whether registered or unregistered), trade names, and logos, including, but
not limited to "Kenmar Electronics, Inc." and "Houston Alarm," copyrights and
licenses owned by or accruing to the benefit of Seller pertaining to the
Business, and all non-competition or non-solicitation agreements accruing to
the benefit of Seller and pertaining to the Business to which it is a party
(the "Intangible Personal Property"), all of which is specifically set forth on
Schedule 1(h) hereto;
(i) Telephone Lines and Numbers. All right, title and interest of
Seller in and to the local and long distance telephone numbers, and digital
dialer telephone lines that transmit signals
2
<PAGE> 3
from customer locations to Seller's central station, specifically set forth on
Schedule 1(i) hereto (the "Telephone Lines and Numbers"); and
(j) Other Assets; Records. All files, records and incidental
documentation of Seller pertaining to the Contracts (the "Contract
Information"), including without limitation, all computer lists, contract
information, accounting history, service records and information, credit
records and information, and purchase and sales records and information.
Purchaser warrants and represents to Seller that said business, the assets of
said business, and the financial records of said business described above or
otherwise in this Agreement have been inspected by Purchaser and its agents,
and that said business and the assets of said business subject to this
Agreement are being purchased by Purchaser as a result of such inspection and
the representations and warranties of Seller that are incorporated in this
Agreement.
SECTION 2. PURCHASE PRICE AND PAYMENT.
(a) Purchase Price - Purchased Assets. The purchase price for the
Purchased Assets, excluding subsection (b) (the Vehicles) and (c) (the
Receivables) shall be the product of thirty-four (34) times the aggregate
Monthly Revenue Equivalent of each Contract less an amount equal to the prepaid
revenue relating to each Contract (as set forth on Schedule 2(a) hereto)
computed on a per diem basis to the Closing Date.
(b) Purchase Price - Vehicles. The purchase price for the
Vehicles purchased by Purchaser from Seller (as set forth in Schedule 1(e)),
shall be as follows:
<TABLE>
<S> <C>
1991 Ford Ranger P/U with Gem Top $ 4,650.00
1991 Ford Ranger P/U with Gem Top $ 4,650.00
1991 Ford Ranger P/U with Gem Top $ 4,650.00
1992 Ford Ranger P/U with Gem Top $ 5,025.00
--------------------------------- ----------
Totalling $18,975.00
</TABLE>
(c) Purchase Price - Receivables. Subject to the further
requirements of this Section 2(c), the purchase price for the Receivable shall
be eighty percent (80%) of the amount due to Seller as of the September 30,
1994 pursuant to each individual Receivable set forth on Schedule 1(g) which is
not more than sixty (60) days past due as of September 30, 1994 from the
applicable due date; plus eighty percent (80%) of the amount due to Seller for
service calls, installations and add-on's conducted from October 1, 1994
through the Closing Date; plus forty percent (40%) of the amount due to Seller
as of September 30, 1994 pursuant to each individual Receivable set forth on
Schedule 1(g) which is more than sixty (60) days past from the applicable due
date; provided, however, that the total purchase price for the Receivables
shall not exceed Twenty Four Thousand Dollars ($24,000.00), and that no
individual Receivable for invoices pertaining to installations, service calls
and add-on's exceeds Two Hundred Fifty Dollars ($250.00).
3
<PAGE> 4
(d) Purchase Price - All Purchased Assets. The aggregate sums
computed pursuant to (a) through and including (c) of this section, subject to
the adjustments set forth in Sections 2(f), (g), (h) and (i), shall hereinafter
be referred to as the "Purchase Price."
(e) Payment of Purchase Price. The Purchase Price for the
Purchased Assets acquired by Purchaser shall be paid to Seller in the manner
set forth below:
(i) Simultaneous with the execution of this Agreement,
Purchaser shall pay to Seller the sum of Twenty Five Thousand Dollars ($25,000)
as an earnest money deposit and a component of the Purchase Price (the "Earnest
Money"). The Earnest Money shall be retained by Seller as a component of the
Purchase Price and be credited to the Purchase Price, or shall be refunded to
Purchaser, all in accordance with Section 5(d) hereof;
(ii) A sum equal to ninety-five (95%) of the Purchase Price
less the Earnest Money (the "Initial Payment") shall be paid by Purchaser to
Seller by wire transfer or by certified or cashier's check on the Closing Date;
and
(iii) The remainder of the Purchase Price (the "Deferred
Payment Amount") shall be paid in accordance with Section 3 hereof.
(f) Adjustment to Purchase Price. The Purchase Price shall be
adjusted for items of expense and income prorated as of the Closing Date in the
manner provided below:
(i) Liabilities or credits for personal property taxes, if
any, in respect of the Purchased Assets shall be prorated on the basis of the
current taxable year, to and including the Closing Date; provided that if the
assessed value of any Purchased Asset or rate of tax with respect thereto shall
not have been determined prior to the Closing Date, the value and rate shall be
determined on the basis of the amount of the previous year in which the same
was determined, and
(ii) Other liabilities or credits, prepaid items and deferred
charges relating to the Purchased Assets existing on the Closing Date shall be
adjusted as of the Closing Date by prorating the aforementioned items for
credit to Seller or Purchaser, as the case may be, in accordance with generally
accepted accounting principles.
(g) Chip Changes. Purchaser shall receive a credit of Thirty-Two
Dollars ($32.00) to be applied in computing the Purchase Price for each
customer location set forth on Schedule 2(g) hereto which will require a site
visit for a "chip change" (i.e. replacement of computer chips and/or software
in alarm panels that will not be transferred when digital receiver lines "swing
over" to Purchaser's central monitoring station).
(h) Per-Diem Adjustment. The Purchase Price shall be increased by
the dollar amount obtained by (i) multiplying the number of days beginning
October 1, 1994 and ending on the Closing Date by the quotient achieved from
dividing the "Monthly Revenue Equivalent" as of
4
<PAGE> 5
October 1, 1994 (as defined in Section 4(a)) by thirty-one (31) and (ii)
subtracting from the dollar amount obtained pursuant to (i) the amount of all
revenues received by Seller beginning October 1, 1994 and ending the Closing
Date in payment for any services on which the "Monthly Revenue Equivalent" is
based.
(i) Services Other than Monitoring. Purchaser shall forward to
Seller, within thirty (30) days after the receipt thereof, all revenue for
installation, service calls and add-ons provided by Seller to customers under
the Contracts, provided in the ordinary course of Seller's business, consistent
with past practices and pricing, during the period beginning October 1, 1994
and ending the Closing Date, for those individual accounts receivable amounts
over Two Hundred Fifty Dollars ($250.00), as detailed in Schedule 2(i).
(j) Allocation of Purchase Price. The Purchase Price shall be
allocated as set forth in Schedule 2(j). Purchaser and Seller agree for income
tax purposes that each shall report the transactions contemplated by this
Agreement in a manner consistent with such allocations.
SECTION 3. DEFERRED PAYMENT AMOUNT.
(a) Escrow Agreement. Seller and purchaser shall execute on the
Closing Date an Escrow Agreement in the form attached hereto as Schedule 3(a)
and Purchaser shall deposit with Texas Commerce Bank - Houston, N.A. as escrow
agent (the "Escrow Agent") the Deferred Payment Amount to be held in an escrow
account (the "Escrow Account") pursuant to the terms of the Escrow Agreement
(the Deferred Payment Amount along with all earnings thereon shall hereinafter
be referred to as the "Escrow Amount").
(b) (i) Payment and Escrow Amount. On the one hundred twentieth
(120th) day after the Closing Date (the "Reconciliation Date"), Purchaser shall
submit to Seller on the form attached hereto as Schedule 3(b), along with all
appropriate supporting documentation, a report reflecting (i) the Deferred
Payment Amount, (ii) the total Monthly Revenue Equivalent Upward Adjustment
credited to Seller pursuant to Section 4(b), (iii) the total Monthly Revenue
Equivalent Downward Adjustment credited to Purchaser pursuant to Section 4(c),
and (iv) the resulting sum (the "Resulting Sum"). If Seller does not notify
Purchaser of a dispute regarding such report with ten (10) business days from
the date such report is deemed received by Seller or Seller notifies Purchaser
of its assent to such report, such report shall be deemed complete and accurate
and Seller and Purchaser shall notify Escrow Agent to pay the sums computed
below to Seller or Purchaser, as the case may be, and that the Escrow Account
shall be closed after the payment by the Escrow Agent of all funds held by it
in the Escrow Account. If the Resulting Sum is greater than the Deferred
Payment Amount, then Seller and Purchaser shall instruct Escrow Agent to pay
Seller the entire Escrow Amount and Purchaser shall immediately pay Seller the
amount by which the Resulting Sum is greater than the Escrow Amount. If the
Resulting Sum is a negative amount, then Seller and Purchaser shall instruct
the Escrow Agent to pay Purchaser the entire Escrow Amount and Seller shall owe
no further amount to Purchaser. If the Resulting Sum is a positive amount but
less than the Deferred Payment Amount, then Seller and Purchaser
5
<PAGE> 6
shall instruct the Escrow Agent to (i) pay Seller the Resulting Sum, (ii) pay
Purchaser the amount by which the Deferred Payment Amount exceeds the Resulting
Sum (the "Deferred payment Excess"), and (iii) pay to Seller and Purchaser the
earnings on the Deferred Payment Amount in accordance with the following
formula:
<TABLE>
<S> <C> <C>
Resulting Sum
-------------
Deferred Payment Amount x total earnings on = Seller's portion of
Deferred Payment Amount earnings on Deferred
Payment Amount
Deferred Payment Excess
-----------------------
Deferred Payment Amount x total earnings on = Purchaser's portion of
Deferred Payment earnings on Deferred
Amount Payment Amount
</TABLE>
(ii) Purchaser shall also, on or before the sixtieth (60th) day after the
Closing Date and at least ten (10) days prior to the one hundred twentieth
(120th) day after the Closing Date, submit to Seller on the form attached
hereto as Schedule 3(b), along with all appropriate supporting documentation, a
report reflecting the current good faith estimate by Purchaser of the
information required by Section 3(b)(i); provided, however, that the only
information controlling between the parties hereto and which will be relevant
for the determination required by Section 3(b)(i) (and disputes, if any,
resulting therefrom) shall be that contained in the report required by Section
3(b)(i).
(c) Dispute. All disputes and difference with respect only to the
computations set for on the report on Schedule 3(b) hereunder shall be
determined by binding arbitration under the rules of the American Arbitration
Association. The arbitration proceedings shall be heard by three (3)
arbitrators selected as follows. From the proposed panel of arbitrators issued
by the American Arbitration Association, Seller, on the one hand, and
Purchaser, on the other hand, shall within five (5) business days following the
issuance of the list of potential arbitrators by the American Arbitration
Association, each select an arbitrator. The two (2) persons selected shall
appoint a third person from the list, and such three (3) arbitrators so
selected shall be the arbitrators for the dispute. Each arbitrator so selected
shall be a person who holds a law degree from an accredited institution.
Notwithstanding anything contained herein to the contrary, in the event that
Purchaser or Seller fails to select an arbitrator pursuant to this Section
3(c), then the arbitrator selected by the other party hereto shall solely
determine such dispute. All arbitration awards shall include an award of
reasonable expenses, including, but not limited to, legal and accounting fees.
The place of arbitration shall be Houston, Harris County, Texas.
SECTION 4. DEFERRED PAYMENT AMOUNT ADJUSTMENT.
(a) Monthly Revenue Equivalent. For purposed of this Agreement,
the term "Monthly Revenue Equivalent" with respect to the Contracts acquired
from Seller by Purchaser shall be the charge from alarm related and monitoring
services based on recurring charges (including charges for commercial and
residential leased equipment, commercial and residential alarm monitoring, open
and close monitoring, inspections, maintenance, computer reports, long range
radio
6
<PAGE> 7
monitoring, police direct connect monitoring, and additions, add-ons, or
extensions, whether evidenced by contract, service report, or otherwise),
exclusive of sales or intangible taxes, if any, and any direct wire telephone
line charges associated with monitoring, payable by the customer for each
applicable billing period expressed in terms of a monthly amount regardless of
whether the billing period is annual, semi-annual, quarterly or monthly.
Notwithstanding the above, Monthly Revenue Equivalent shall not include
recurring charges for guard response and any subscriber telephone line
circuits, other than digital telephone lines for central station
communications.
(b) Monthly Revenue Equivalent Upward Adjustment. A credit shall be
made in the manner set forth on Schedule 3(b) for the benefit of Seller for
each Contract for which it is determined before the Reconciliation Date that
the actual Monthly Revenue Equivalent for such Contracts as of the Closing Date
exceeded the Monthly Revenue Equivalent for such Contracts utilized in
computing the Purchase Price. The amount of such credit shall be determined by
computing the amount by which the actual Monthly Revenue Equivalent of such
Contracts exceeds the Monthly Revenue Equivalent for such Contracts utilized in
computing the Purchase Price and multiplying such sum by thirty-four (34) (the
"Monthly Revenue Equivalent Upward Adjustment").
(c) Monthly Revenue Equivalent Downward Adjustment. A credit
shall be made in the manner set forth on Schedule 3(b) for the benefit of
Purchaser for each Contract for which it is determined before the
Reconciliation Date that the Monthly Revenue Equivalent for such Contracts
utilized in computing the Purchase price exceeded the actual Monthly revenue
Equivalent for such Contracts as of the Closing Date. The amount of such
credit shall be determined by computing the amount by which the Monthly Revenue
Equivalent for such Contracts utilized in computing the Purchase Price exceeds
the actual Monthly Revenue Equivalent for such Contracts as of the Closing Date
and multiplying such sum by thirty-four (34) (the "Monthly Revenue Equivalent
Downward Adjustment").
(d) Adjustment Cutoff Date. The Reconciliation Date is the last
date that any adjustments to be made under this Agreement shall be allowed,
except for Seller's and Purchaser's representations and warranties contained
herein.
SECTION 5. THE CLOSING.
(a) Time and Place. The closing of the purchase and sale is to
take place on November 1, 1994, or at such other time and date as shall be
mutually acceptable to Purchaser and Seller (the "Closing Date") and shall take
place at a location mutually agreeable to Seller and Purchaser in Houston,
Harris County, Texas.
(b) Closing Deliveries. On the Closing Date, Seller shall make
the deliveries specified by Section 11 and Purchaser shall make the deliveries
specified by Section 12.
7
<PAGE> 8
(c) Closing Procedure. All proceedings to be taken and all
documents to be delivered and executed on the Closing Date shall be deemed to
have been taken, delivered and executed simultaneously, and no proceeding shall
be deemed taken or documents deemed executed or delivered until all have been
taken, delivered and executed. Purchaser and Seller shall each designate
appropriate and adequate personnel at or immediately after Closing to jointly
inventory all Purchased Assets, and each party shall maintain a signed original
of such inventory being transferred. Purchaser shall make all arrangements, at
Purchaser's sole cost, to transfer and remove all the Purchased Assets on the
Closing Date. Purchaser will cause to be transferred title of the Vehicles no
later than seven (7) days of the Closing Date.
(d) Termination. In the event that any of the conditions set
forth in Section 11 are not satisfied or waived in writing prior to or on the
Closing Date, and at such time all of the conditions set forth in Section 12
are fulfilled and Purchaser is otherwise willing to close the transaction
contemplated hereby, then Purchaser may terminate this Agreement by written
notice to Seller and Seller shall immediately, by wire transfer or certified
funds, refund the Earnest Money to Purchaser. In the event that any of the
conditions set forth in Section 12 are not fulfilled prior to or on the Closing
Date, and at such time all of the conditions set forth in Section 11 are
fulfilled and Seller is otherwise willing to close the transactions
contemplated hereby, then Seller may terminate this Agreement by written notice
to Purchaser and the Earnest Money shall be forfeited to Seller. In the event
that any of the conditions set forth in Section 11 are not satisfied or waived
in writing prior to or on the Closing Date and any of the conditions set forth
in Section 12 are not satisfied or waived in writing prior to or on the Closing
Date and at such time purchaser and Seller are unable to agree in writing upon
a subsequent Closing Date, this Agreement shall be automatically terminated and
Seller shall immediately, by wire transfer or certified funds, refund the
Earnest Money to Purchaser. In the event that any party hereto exercises such
right of termination, this Agreement thereupon shall become wholly void and be
of no further force or effect, except for the confidentiality provisions
contained in Section 16(c) and there shall be no further liability on the part
of Seller or Purchaser or their respective officers, directors or stockholders
with respect to the transactions contemplated hereby.
SECTION 6. ASSUMPTION OF LIABILITIES. Purchaser shall not
assume any liability, debt or obligation of Seller except the responsibility of
rendering security monitoring services pursuant to the Contracts set forth on
Schedule 1(a) subsequent to the Closing Date and those liabilities and
obligations of Seller arising after the Closing Date that are set forth on
Schedule 6 hereto. Purchaser shall not assume any liability, debt or
obligation of Seller except those set forth on Schedules 1(a) and 6, and Seller
shall continue to be responsible for, and shall indemnify and same harmless
Purchaser from and against, all of Seller's known and unknown liabilities,
debts and obligations, arising prior to or on the Closing Date that are not
specifically assumed by Purchaser. Subject to the other provisions of this
Section 6, Purchaser shall indemnify and save harmless Seller from and against
all claims, liabilities, debts and obligations which arise, in whole or in
part, after the Closing Date and which are the result of the operation by
Purchaser of its business utilizing the Purchased Assets.
8
<PAGE> 9
SECTION 7. MONITORING SERVICES. Whereas Seller is unwilling to
sell the Purchased Assets unless Purchaser enters into a monitoring services
agreement as a part of this Asset Purchase Agreement, and for separate and
adequate consideration in hand paid and received, Purchaser agrees to enter
into an irrevocable monitoring services agreement, with the exceptions listed
within in this paragraph, (the "Monitoring Services Agreement") with Alarm
Processing Corporation, whereby Alarm Processing Corporation shall perform
after the Closing Date all security monitoring services for the customers set
forth on Schedule 1(a), less any customers that may from time to time
disconnect their service with Purchaser, upon the terms and conditions set
forth in the Monitoring Services Contract set forth on Schedule 7. The period
of time during which Alarm Processing Corporation shall perform security
monitoring services for the benefit of purchaser shall be referred to herein as
the "APC Monitoring Period." Purchaser shall be obligated to pay the sums
called for hereunder regardless of circumstances, except that Purchaser shall
be relieved of any such obligation to pay only to the extent that Alarm
Processing Corporation is physically unable to perform the contracted-for
monitoring services, for a time period greater than twenty-four (24)
consecutive hours, and then only for such period of actual inability.
SECTION 8. QUALIFIED CONTRACTS AND NON-CONFORMING CONTRACTS.
(a) A Contract constitutes a "Qualified Contract" if (i) such
Contract is evidenced by a monitoring agreement which is a valid, properly
executed, and to the best of Seller's knowledge, information, and belief, an
enforceable monitoring agreement, (ii) such Contract has not, as of the Closing
Date, been repudiated by the customer, (iii) such Contract has generated cash
receipts representing service charges for at least one (1) full billing cycle
or prepayment for at least one (1) month's service, (iv) the account balance
for such Contract has not been written off or materially compromised other than
in respect of service disruptions or other legitimate customer claims, and (v)
such Contracts have no charges that have been outstanding and unpaid for more
than sixty (60) days from the invoice due date as of Closing Date.
(b) A Contract constitutes a "Non-Conforming Contract" if (i) such
Contract is evidenced by a monitoring agreement which is a valid, properly
executed, and to the best of Seller's knowledge, information, and belief, an
enforceable monitoring agreement, (ii) such Contract has not, as of the Closing
Date, been repudiated by the customer, (iii) the account balance for such
Contract has not been written off or materially compromised other than in
respect of service disruptions or other legitimate customer claims, and (iv)
such Contract otherwise fails to fulfill any of the criteria for Qualified
Contracts set forth in Section 8(a).
(c) For the purpose of this Agreement, a Contract shall be deemed
repudiated if as of the Closing Date (i) if the customer has abandoned the
premises at which the security monitoring system has been installed, (ii) if
the customer has filed bankruptcy proceedings, or (iii) if the customer has
cancelled or issued notice to termination of the Contract notwithstanding the
fact that the Contract may remain enforceable against the customer.
9
<PAGE> 10
(d) Schedule 1(a) identifies each Contract as either a Qualified
Contract or a Non-Conforming Contract. Notwithstanding anything contained in
this Agreement to the contrary, Purchaser shall not be obligated to purchase
any Contract which does not constitute a Qualified Contract; provided, however,
Purchaser shall review all Non-Conforming Contracts on or before the third
(3rd) day prior to the Closing Date, and in the exercise of its sole discretion
and subject to its review of relevant documentation, deem any acceptable
Non-Conforming Contracts as a "Qualified Contract" for and among the following
reasons, (i) the Contract is new and has not generated cash receipts as of the
date of review, or (ii) the Contract has unpaid charges con outstanding for
more than 60 days from Closing Date. Otherwise, those "Non-Conforming
Contracts" that are not deemed by Purchaser to be "Qualified Contracts" will
either be disconnected or terminated by Seller (within the constraints and the
obligations of Seller within the Contract) or purchased by Purchaser at a
discounted amount, subject to negotiations between Seller and Purchaser on an
individual Contract basis on or before the third (3rd) day prior to the Closing
Date. Purchaser agrees to accept no more than ten (10) Contracts as Qualified
Contracts that have charges outstanding more than sixty (60) days from the
invoice due date, as of the Closing Date.
(e) Attached hereto as Schedule 8(e) is a copy of each form of
monitoring agreement which Seller has utilized which comprises a Contract.
(f) In the event any Contract is found after the Closing Date to
be repudiated by the customer prior to the Reconciliation Date, such Contract
will be, upon Purchaser's receipt of the full Monthly Revenue Equivalent
Downward Adjustment, returned to Seller by Purchaser without charge, with
Seller having full right, title and interest in the Contract.
SECTION 9 REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby represents and warrants to Seller that on the date hereof and
on each day thereafter to the Closing Date:
(a) Organization and Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and Purchaser has all requisite corporate power and authority to own,
operate and lease its properties and carry on it business as now being
conducted and to enter into this Agreement and to perform its obligations
hereunder.
(b) Authority Relative to this Agreement. The execution, delivery
and performance by Purchaser of this Agreement has been duly authorized by the
board of directors of the sole stockholder of Purchaser, and no further
corporate action is necessary on the part of Purchaser to make this Agreement
valid and binding upon Purchaser in accordance with its terms.
(c) No Violation. Neither the execution nor the delivery of this
Agreement by Purchaser nor the consummation of the transactions contemplated
herein, nor compliance by Purchaser with any of the provisions hereof, violates
or conflicts with or results in the breach or
10
<PAGE> 11
termination of any term or provision of, nor constitutes a default or
acceleration of the performance required under, the articles of incorporation,
bylaws or resolutions of the Purchaser, or any indenture, mortgage, deed, trust
or other contract or agreement to which Purchaser is a party or by which its
properties are bound, or violates any order, writ, injunction or decree of any
court, administrative agency or governmental body.
(d) Brokerage Fees. Purchaser is not obligated nor has it agreed
to pay any brokerage commissions, finders fees or other similar fee or charge
in connection with the purchase of the assets pursuant to this Agreement, other
than as specifically set forth on Schedule 9(d).
(e) Compliance with the Law. The business of Purchaser has been
and is being conducted in compliance with all applicable laws, regulations and
requirements of each jurisdiction in which Purchaser's business is carried on
and is not in breach of any such laws, regulations or requirements, and
Purchaser warrants to hold Seller harmless from and against any violations of
applicable laws, regulations or requirements arising out of non-compliance
therewith prior to the Closing Date.
SECTION 10. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller
hereby represents and warrants to Purchaser that on the date hereof and on each
day thereafter to the Closing Date:
(a) Organization and Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Texas, and Seller has all requisite corporate power and authority to own,
operate and lease its properties and carry on it business as now being
conducted and to enter into this Agreement and to perform its obligations
hereunder.
(b) Authority Relative to this Agreement. The execution, delivery
and performance by Seller of this Agreement has been duly authorized by the
board of directors of the stockholders of Seller, and no further corporate
action is necessary on the part of Seller to make this Agreement valid and
binding upon Seller in accordance with its terms.
(c) No Violation. Neither the execution nor the delivery of this
Agreement by Seller nor the consummation of the transactions contemplated
herein, nor compliance by Seller with any of the provisions hereof, (i)
violates or conflicts with or results in the breach or termination of any term
or provision of, nor constitutes a default or acceleration of the performance
required under, the articles of incorporation, bylaws or resolutions of the
Purchaser, or any indenture, mortgage, deed, trust or other contract or
agreement to which Purchaser is a party or by which its properties are bound,
(ii) violates any order, writ, injunction or decree of any court,
administrative agency or governmental body, or (iii) requires consent from any
other person, entity or governmental authority.
(d) Brokerage Fees. Seller is not obligated nor has it agreed to
pay any brokerage commissions, finders fees or other similar fee or charge in
connection with the purchase of the assets pursuant to this Agreement.
11
<PAGE> 12
(e) Title to Purchased Assets. Seller warrants that on the
Closing Date it shall have good and marketable title to all of the Purchased
Assets, and the Purchased Assets shall not be subject to any pledge, option,
conditional sale agreement, security interest, consensual lien, judgment lien,
encumbrance or charge of any kind. Seller warrants that to its best knowledge,
information and belief, the Contracts are acquired by Purchaser are valid and
are binding upon and enforceable against the customers of Seller executing same
in accordance with their terms, and the obligations of the customers of Seller
thereunder are not subject to set-off or claims resulting from the conduct of
Seller's business prior to their conveyance to Purchaser.
(f) Compliance with the Law. The business of Seller has been and
is being conducted in compliance with all applicable laws, regulations and
requirements of each jurisdiction in which Purchaser's business is carried on
and is not in breach of any such laws, regulations or requirements, and Seller
warrants to hold Purchaser harmless from and against any violations of
applicable laws, regulations or requirements arising out of non-compliance
therewith prior to the Closing Date.
(g) Actions, etc.
(i) Other than as set forth on Schedule 10(g)(i) hereto,
there are no actions, suits, proceedings or investigations pending against or
relating to the business of Seller or the Purchased Assets and Seller has not
received any notice or written or oral communications reflecting an intention
or threat to institute any such action, proceeding or investigation. Schedule
10(g)(i) contains a summarization of each such action, suit, proceeding or
investigation.
(ii) There are no suits, actions or proceedings pending
before any court or governmental agency in which it is sought to restrain or
prohibit the carrying out of this Agreement or the consummation of the
transactions contemplated herein in connection therewith and here is no such
suit, action or proceeding threatened.
(iii) Seller is not subject to any judgment, order, writ,
court decree, governmental decree or injunction relating to the business of
Seller.
(iv) Other than non-material defects or deficiencies related
to routine service calls generated in the normal course of business and not
requiring substantial repair or expenditure of money, there are no known
defects or deficiencies in the products or services provided by Seller prior to
the date hereof as a result of which any claim or suit may arise.
(h) Tax Returns. Seller has timely filed all tax reports and
returns required to be filed and has timely paid all taxes (including, without
limitation, income, payroll withholding, and sales and use taxes) and all other
charges due or claimed to be due from it by Federal, State or local taxing
authorities in respect of the periods covered by such returns.
(i) Qualified Contracts. Except as specifically denoted as a
Non-Conforming Contract on Schedule 1(a), each of the Contracts identified on
Schedule 1(a) is a Qualified
12
<PAGE> 13
Contract which fulfills all of the criteria for Qualified Contracts set forth
in Section 8 hereof.
(j) Non-Conforming Contracts. Each of the Contracts specifically
denoted as a Non-Conforming Contract on Schedule 1(a) fulfills the criteria for
Non-Conforming Contracts set forth in Section 8 hereof.
(k) Benefit Plans. No employee benefit or other plan maintained
by Seller shall obligate Purchaser to make any contributions thereto or
payments in respect thereof with regard to employees of Seller hired by
Purchaser on or after the Closing Date.
(l) Disclosure. No representation, warranty or statement of
Seller contained in this Agreement and no information contained in any schedule
furnished to Purchaser by or on behalf of Seller pursuant to this Agreement,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading. Each of the separate representations and warranties set forth in
the various subsections of this Section 10 in intended to be, and shall be
interpreted as, an independent representation and warranty as to matters
referred to therein, and the applicability or inapplicability of any particular
subsection of this Section 10 shall not affect the interpretation of any other
such subsection.
(m) Seller's Limitation of Liability. Seller's liability under
Section 10 shall not exceed beyond three (3) years after the Closing Date.
SECTION 11. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
Purchaser's obligation to purchase the Purchased Assets under this Agreement is
subject to the fulfillment, prior to or at the Closing Date, of each of the
following conditions:
(a) Representations True on the Closing Date. The representations
and warranties of Seller contained in this Agreement shall be true on the date
hereof, and at the time of the Closing Date as though made on the Closing Date.
(b) Performance. Seller shall have performed and complied with
all agreements and conditions required by this Agreement to be performed or
complied with by it prior to the Closing Date.
(c) Seller's Closing Certificate. Seller shall have delivered to
Purchaser a Closing Certificate of the president or a vice president of Seller
dated as of the Closing Date in the form attached hereto as Schedule 11(c).
(d) Schedules. Seller shall have updated the Schedules hereto in
accordance with Section 16(g) hereof. Purchaser shall have determined, in good
faith, that taking into account the changes to the information in the updated
Schedules, the transactions contemplated by this Agreement are as beneficial to
purchaser as prior to the updating of the Schedules.
13
<PAGE> 14
(e) Consents to Assignments. Seller shall have taken all action
necessary and appropriate, and obtained all necessary consents, waivers and
approvals required under any leases or other agreements to consummate the sale
of the Purchased Assets pursuant to this Agreement in writing on terms
reasonably acceptable to Purchaser, and Purchaser shall reasonably cooperate
with Seller in its efforts to obtain such consents, waivers and approvals.
(f) Litigation. No litigation or proceeding shall be pending or
threatened to restrain, set aside or invalidate the transactions contemplated
by this Agreement or any portion thereof, including without limitation any
claims by creditors of Seller against the Purchased Assets.
(g) Opinion of Seller's Council. Seller shall have delivered to
Purchaser an opinion of counsel for Seller, dated as of the Closing Date and in
a form satisfactory to Purchaser's counsel, to the effect that:
(i) Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas; the location and
character of the properties owned or leased and the business conducted by
Seller do not make qualification or licensing as a foreign corporation
necessary in any other state or jurisdiction; and Seller has the corporate
power and authority to own its properties and to carry on it business as now
being conducted;
(ii) This Agreement has been duly executed and delivered by
Seller and constitutes a legal and binding obligation of Seller, enforceable in
accordance with its terms except as enforcement of the same may be limited by
bankruptcy, insolvency, reorganization or other laws relating to or affecting
the enforcement of creditors' rights and by general equity principles;
(iii) All instruments of transfer and other documents necessary
to effect the transfer to Purchaser o of the Purchased Assets have been duly
authorized, executed and delivered by Seller and are in proper form to transfer
to Purchaser all right, title and interest of Seller in and to the Purchased
Assets;
(iv) Such counsel does not know of any litigation, proceeding,
governmental investigation or claim pending or threatened against or relating
to the Business, the Purchased Assets or the transactions contemplated by this
Agreement, except for those matters disclosed on Schedule 10(g)(i); and
(v) The execution and delivery of this Agreement and the
consummation by Seller of the transactions contemplated hereby do not and will
not violate any provision of the Articles of Incorporation or bylaws of Seller
and, to the knowledge of such counsel, (i) do not and will not violate, or
result, with the giving of notice or the lapse of time or both, in a violation
of any provision of, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, or result in the creation or imposition of, any lien, lease,
agreement, license, instrument, law, ordinance, regulation, order, arbitration,
award, judgment or decree known to such counsel to which Seller is a party or
by
14
<PAGE> 15
which it is bound, and (ii) do not and will not constitute an event permitting
termination of any lease, agreement, license or instrument known to such
counsel to which Seller is a party.
(vi) The Bill of Sale in the form of Schedule 11(j) is sufficient to
transfer all right, title and interest in the Purchased Assets from Seller to
Purchaser.
(h) Certified Resolutions. Seller shall have delivered to Purchaser
copies, certified by the secretary or an assistant secretary of Seller, of the
resolutions of Seller's board of directors and stockholders authorizing the
execution and delivery of this Agreement.
(i) Certificate of Good Standing. Seller shall have delivered to
Purchaser a certificate of good standing of Seller issued by the Secretary of
State of Texas dated as of a date within five (5) days prior to the Closing
Date.
(j) Instruments of Transfer. Seller shall have delivered to
Purchaser a Bill of Sale, Assignment and Assumption Agreement in the form
attached hereto as Schedule 11(j) and other good and sufficient instruments of
transfer and conveyance, as in the reasonable opinion of Purchaser's counsel,
shall be effective to vest in Purchaser good and marketable title to the
Purchased Assets.
(k) Non-Competition Agreements. Seller shall have delivered to
Purchaser Non-Competition Agreements in the form attached hereto as Schedule
11(k) executed by Forrest W. Jenkins, Russell S. Vail and Robert E. Jenkins, in
their individual capacities, and by Seller.
(l) Escrow Agreement. Seller shall have executed and delivered to
Purchaser a counterpart of the Escrow Agreement attached hereto as Schedule
3(a).
(m) Monitoring Services Contract. Seller shall have delivered to
Purchaser a Monitoring Services Contract in the form attached hereto as
Schedule 7 executed by Alarm Processing Corporation.
(n) Notice to Subscribers. Seller shall have delivered with seven
(7) days after the Closing Date to each customer set forth on Schedule 1(a)
hereto a notice in the form attached hereto as Schedule 11(n). Purchaser and
Seller shall each be responsible for one-half (1/2) of the costs associated
with the creation and delivery of such notices.
(o) Payment of Accrued Vacation Pay, etc. Seller shall pay to
each of Seller's employees who render services to the Business that are to be
discharged on or after the Closing Date all accrued and unpaid vacation pay,
sick pay and all other accrued obligations to which such employees are entitled
as a result of the termination of their employment with Seller.
(p) Billing Conversion Notice. Contemporaneous with the execution of
this Agreement, Seller shall deliver written notice to ABM Data System, Inc. of
the proposed sale of the Purchased Assets from Seller to Purchaser described
herein, which notice shall be in the form attached hereto as Schedule 11(p) and
shall request assistance in the transfer of data concerning customer billing,
central station account management information and other pertinent information
related to the conversion of data concerning the Purchased Assets and the
billing for Contracts.
15
<PAGE> 16
Actual billing conversion shall not occur prior to the Closing Date, and the
costs of such conversion shall be borne solely by Purchaser. Seller will use
its best efforts, including but not limited to, the provision of information,
to facilitate such conversion.
(q) Evidence of Insurance. Seller shall have provided to Purchaser
evidence satisfactory to Purchaser that Seller has maintained an occurrence
basis policy of insurance covering the Purchased Assets which is acceptable to
Purchaser prior to and including the Closing Date and Seller's insurer shall
have provided to Purchaser a certificate dated the Closing Date stating that
such policy of insurance is in full force and effect as of the Closing Date and
that all premiums for the policy of insurance which shall be attached to such
certificate, shall have been paid in full as of the Closing Date.
SECTION 12. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
Seller's obligations to sell and transfer the Purchased Assets to purchaser
under this Agreement are subject to the fulfillment, prior to or on the Closing
Date, of each of the following conditions.
(a) Representations True on the Closing. Purchaser's
representations and warranties contained in this Agreement shall be true at the
date hereof, and at the Closing Date as though made on the Closing Date.
(b) Performance. Purchaser shall have performed and complied with
all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or on the Closing Date.
(c) Escrow Agreement. Purchaser shall have executed and delivered
to Seller a counterpart of the Escrow Agreement attached hereto as Schedule
3(a).
(d) Monitoring Services Contract. Purchaser shall have executed
and delivered to Alarm Processing Corporation a Monitoring Services Contract in
the form attached hereto as Schedule 7.
(e) Assumption Agreement. Purchaser shall have executed and
delivered a Bill of Sale, Assignment and Assumption Agreement in the form
attached hereto as Schedule 11(j).
(f) Certified Resolutions. Purchaser shall have delivered to
Seller a copy, certified by the secretary or an assistant secretary of
Purchaser, of the resolutions of Purchaser's sole stockholder authorizing the
execution and delivery of this Agreement.
(g) Purchaser's Examination. Purchaser warrants and represents to
Seller that the Purchased Assets are being purchased by Purchaser based on (i)
Purchaser's inspection of the Purchased Assets and (ii) the representations and
warranties made by Seller in this Agreement. Seller makes no representation or
warranty as to the fair market value of the Purchased Assets, as of the Closing
Date or otherwise.
16
<PAGE> 17
SECTION 13. INDEMNIFICATION. Seller, on the one hand, and
Purchaser, on the other hand, shall indemnify and hold each other harmless from
and against any and all losses, liabilities, damages and expenses, including
reasonable attorneys' fees, that they may suffer or become liable for as a
result of or in connection with any breach of a misrepresentation, warranty,
covenant or agreement contained in this Agreement. The indemnification
obligations of Purchaser and Seller with respect to the representations,
warranties, covenants and agreements contained in this Agreement, shall, except
as provided otherwise in Section 16(c) and in the Non-Competition Agreements
referred to in Schedule 11(k), survive the closing of the transactions
contemplated herein and for a period of three (3) years subsequent to the
Closing Date. With respect to customer or other third party claims arising
under the Contracts only, except for losses, liabilities, damages and expenses
resulting form wantonness, fraud or other intentional misconduct, the
indemnification obligations of Seller contained in this Agreement shall be
limited to the policy limits of insurance maintained by Seller prior to and
including the Closing Date, which policy limits shall in no event be less than
Two Million Dollars ($2,000,000).
SECTION 14. BULK SALES LAW. Seller represents and warrants to
Purchaser that the transactions contemplated by this Agreement do not
constitute a "bulk transfer" of assets under the laws of the State of Texas.
SECTION 15. ASSIGNMENT. Purchaser may, without the consent of
Seller, assign its rights and delegate its obligations under this Agreement, to
any corporation, partnership, association or proprietorship who acquires all or
a substantial part of its business. Upon any such assignment Purchaser shall
be relieved and discharged from any further obligations under this Agreement.
Furthermore, Purchaser may, without the consent of Seller, collaterally assign
its rights under this Agreement to one or more banks, insurance companies or
other financial institution for purposes of financing. Except as provided
above, neither party may assign its rights or delegate its obligations under
this Agreement without the written consent of the other party.
SECTION 16. AGREEMENTS PRIOR TO CLOSING.
(a) Fulfillment of Conditions. Seller shall use its best efforts
to take or cause to be taken all action reasonably necessary or appropriate to
cause each of the conditions set forth in Section 11 to be fulfilled prior to
or on the Closing Date. Purchaser shall use its best efforts to take or cause
to be taken all action reasonably necessary or appropriate to cause each of the
conditions set forth in Section 12 to be fulfilled prior to or on the Closing
Date.
(b) Access to Information. Between the date of this Agreement and
the Closing, Seller shall allow the employees, representatives, attorneys and
accountants of Purchaser free access at
17
<PAGE> 18
all reasonable times to the records, files, correspondence, audits and
properties of Seller which pertain to the Business.
(c) Confidentiality. Purchaser agrees to hold all information it
obtains pursuant to its review of the records, files, correspondence, audits
and properties of Seller, and all information relating to the Purchase Price,
in confidence and not to disclose such information to any third party, except
for (i) information known by Purchaser and obtained from sources other than
Seller; (ii) disclosure that is authorized by Seller in writing; (iii)
disclosure to Purchaser's professional advisors and to persons who are expected
to be lenders to Purchaser; or (iv) disclosure of information where such
information is required to be filed with any governmental agency or required to
be produced before any court or tribunal or otherwise required by law to be
disclosed. In the event that the parties do not close on this Agreement, all
records, files, correspondence, employee lists, copies and other items
associated with this transaction will be returned to Seller without charge, and
no information obtained by the Purchaser, pursuant to the transaction
contemplated hereby, will be used to directly or indirectly, through any person
or entity, to solicit or provide security service to any of the customers of
Seller, or otherwise take any action which would adversely affect Seller's
interests in the Contracts or in the customers. Except in connection with
Seller's filing of tax returns and as otherwise required by law, Seller shall
not disseminate to any person other than officers, directors and
representatives of Seller any information relating to the Purchase Price or
other consideration contemplated to be paid under this Agreement. The
obligations and prohibitions contained in this subsection shall survive
execution of this Agreement.
(d) Conduct of Business. Between the date of this Agreement and the
Closing Date, Seller shall cause to Business to be conducted in the usual and
ordinary course.
(e) Preservation of Existing Relationships. Between the date of
this Agreement and the Closing Date, Seller shall use its best efforts to
continue existing relationships with customers, suppliers, employees and other
having business relations with respect to Seller.
(f) No Negotiations with Third Parties. So long as this Agreement
is in effect, Seller shall not enter into any negotiations, arrangements,
understandings, commitments, options or other agreements regarding the sale,
transfer or other disposition of any of the shares of stock of Seller or of all
or substantially all of the assets of Seller that relate in any way to the
Business, or regarding any merger or consolidation of Seller with or into any
corporation or business entity.
(g) Updated Schedules. Seller agrees to update the Schedules hereto
as of the Closing Date to reflect changes occurring after the date hereof;
provided, however, that if any of the Schedules attached hereto on the date
hereof are materially inaccurate or incorrect, Seller may correct such
Schedules only with Purchaser's written consent. Any updated Schedules shall
be attached to this Agreement and for all purposes be deemed to be a part of
this Agreement.
18
<PAGE> 19
SECTION 17. NO JOINT VENTURE. The relationship between the
parties hereto is that of purchaser/seller and does not constitute a partnership
or joint venture. Both parties agree not to make any representations or
statements to any other person which contradict the foregoing.
SECTION 18. SELLER'S EMPLOYEES. Purchaser shall be under no
obligation to employ after the Closing Date any of Seller's employees. Prior
to the Closing Date and upon providing notice to Seller, Purchaser may
interview any of Seller's employees regarding possible employment with
Purchaser as of the Closing Date, so long as Purchaser does not materially
interfere with the conduct of Seller's business. If Purchaser and any of
Seller's employees reach agreement as to terms of employment to commence on or
after the Closing Date, no inference shall be created that Purchaser has
assumed any of Seller's obligations to its employees. Seller shall furnish to
Purchaser on request a list of all employees of the Business, setting forth
their compensation, job description, hire date and a summary of all group
insurance benefits provided.
SECTION 19. POST-CLOSING COVENANTS.
(a) Conversion. Seller agrees to use its best efforts to
accommodate the conversion of the customer accounts relating to the contracts
(the "Alarm Accounts") to Purchaser's central station and billing system after
the APC Monitoring Period. Seller shall cooperate with Purchaser to cause an
expeditious conversion of the Alarm Accounts after the APC Monitoring Period.
Those Alarm Accounts that are listed in Schedule 1(a) beginning with account
numbers 31----, are Interactive Technology, Inc. type systems and Seller agrees
to assist Purchaser in the downloading and conversion of those accounts to
Purchaser's central station, upon request, after Closing.
(b) Seller's Access to Information. In the event that a claim shall
be asserted against Seller in a court of competent jurisdiction with regard to
a Contract purchased by Purchaser from Seller, Purchaser shall allow the
employees, representatives, attorneys and accountants of Seller access at
reasonable times to the Contract Information existing prior to the Closing Date
solely for the purpose of allowing Seller the opportunity to defend itself
against such claim.
(c) Change in Corporate Name. On or before the one hundred
eightieth (180th) day after the Closing Date, Seller shall change its corporate
name, by filing an amendment to its articles or charter of incorporation, to a
name that is not similar to "Kenmar Electronics, Inc." or "Houston Alarm," and
shall, beginning on the Closing Date and at all times thereafter, refrain from
using the names "Kenmar Electronics, Inc." or "Houston Alarm" or any name
similar thereto. Purchaser hereby grants to Seller a non-exclusive,
non-assignable license to utilize the name "Kenmar Electronics, Inc." for a
period of one hundred eighty (180) days subsequent to the Closing Date for the
limited purpose of terminating Seller's business in an orderly fashion and for
no other purpose.
19
<PAGE> 20
SECTION 20. RISK OF LOSS. The risk of any loss or damage to the
Purchased Assets resulting from fire, theft, explosion, earthquake, windstorm,
flood, accident, act of God, war, seizure, activities of the armed forces or
other casualty, reasonable wear and tear excepted, shall be borne by Seller at
all times prior to the Closing Date, and Seller shall be entitled to all
insurance proceeds resulting from such loss or damage.
SECTION 21. MISCELLANEOUS.
(a) Pronouns. Whenever used herein and unless otherwise indicated
by the context, the masculine pronoun shall include and also mean the feminine
and the neuter, and the singular shall include and also mean the plural.
(b) Expenses. Each party shall pay all expenses incurred by it in
connection with the preparation, execution and performance of this Agreement.
(c) Entire Agreement. This Agreement, together with the Schedules
hereto, sets forth the entire understanding of the parties, and supersedes all
prior agreements, arrangements and communications, whether oral or written,
with respect to the subject matter hereof. This Agreement shall not be
modified or amended except by written agreement of Purchaser and Seller.
Captions appearing in this Agreement are for convenience only and shall not be
deemed to explain, limit or amplify the provisions hereof. All Schedules to
this Agreement are incorporated into and made a part of this Agreement for all
purposes to the same extent as if fully set forth herein.
(d) Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if the invalid
or unenforceable provision was omitted.
(e) Binding Effect; Assignment. All the terms, provisions,
covenants and conditions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by and against the parties hereto and their
respective successors and assigns.
(f) Notices. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five (5) days after posting, if mailed by U.S.
Mail, certified or registered, return receipt requested, postage prepaid or,
upon receipt by overnight courier maintaining records of receipt by addressee
or if delivered by hand or telecopied with the original notice being mailed the
same day by one of the foregoing methods and addressed as follows:
20
<PAGE> 21
If to Purchaser at:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
With copy to:
Tingle, Murvin, Watson & Bates P.C.
900 Park Place Tower
Birmingham, Alabama 35203
Attention: Christopher R. Murvin, Esq.
TELECOPY: (205) 322-1163
If to Seller at:
Kenmar Electronics, Inc.
5160 Timber Creek, Box 12607
Houston, TX 77217
Attention: Forrest W. Jenkins
With copy to:
James W. Freyer, Attorney at Law
4222B Vista
Pasadena, Texas 77504
TELECOPY: (713) 943-9176
or at such other address as the party may designate by 10 days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
(g) Further Assurances. Purchaser and Seller shall execute such other
instruments, documents and other papers and shall take such further actions as
may be reasonably required or desirable to carry out the provisions hereof and
to consummate the transactions contemplated hereby.
21
<PAGE> 22
(h) Governing Law; Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas. Any legal
proceeding initiated with regard to this Agreement shall be brought in the
District Court of Harris County, Texas or in the United States District Court
for the Southern District of Texas, Houston Division.
(i) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
(j) Survival. The representations, warranties, covenants and
agreements of the parties hereto shall survive the date of this Agreement.
(k) Drafting Presumption. Each of the parties hereto has participated
in the negotiation and drafting of this Agreement and agree that no one party
has prepared this document to the exclusion of the other party and that in
construing this Agreement there should be no presumption based upon which party
drafted this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
"Purchaser"
MASADA SECURITY, INC.
By: /s/ Terry W. Johnson
--------------------------------
Its: President
--------------------------------
"Seller"
KENMAR ELECTRONICS, INC.
By: /s/ Forrest Jenkins
--------------------------------
Forrest Jenkins
Its: President
--------------------------------
Addendum A attached hereto constitutes a part of this Agreement as if fully set
forth herein.
22
<PAGE> 23
ADDENDUM "A"
This addendum constitutes a part of the Asset Purchase Agreement between Kenmar
Electronics, Inc. and Masada Security, Inc. dated October 27, 1994 that same as
if fully set forth herein.
SECTION 21 (I) INTENDED BENEFICIARY. Purchase and Seller hereby acknowledges
that the purchase price for the Purchased Assets will be funded from a loan
provided by State Street Bank and Trust Company to Purchaser; therefor,
Purchaser and Seller further acknowledge that State Street Bank and Trust
Company is an intended beneficiary of this Agreement and shall rely upon the
representations, warranties and agreements of Purchaser and Seller contained
herein.
"Purchaser"
MASADA SECURITY, INC.
By: /s/ David P. Tomick
---------------------------------
Its: Chief Financial Officer
---------------------------------
"Seller"
KENMAR ELECTRONICS, INC.
By: /s/ Forrest Jenkins
----------------------------------
Its: President
---------------------------------
23
<PAGE> 24
LIST OF SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 1(a) - The Contracts
Schedule 1(b) - The Inventory
Schedule 1(c) - The Fixed Assets
Schedule 1(d) - The Equipment
Schedule 1(e) - The Vehicles
Schedule 1(f) - The Other Contracts
Schedule 1(g) - The Receivables
Schedule 1(h) - The Intangible Personal Property
Schedule 1(i) - The Telephone Lines and Numbers
Schedule 2(a) - Prepaid Revenue
Schedule 2(g) - Chip Change Locations
Schedule 2(i) - Certain Accounts Receivable
Schedule 2(j) - Allocation of Purchase Price
Schedule 3(a) - Escrow Agreement
Schedule 3(b) - Report
Schedule 6 - Assumed Liabilities
Schedule 7 - Monitoring Services Contract
Schedule 8(e) - Contract Forms
Schedule 9(d) - Brokerage Fee
Schedule 10(g)(i) - Actions, etc.
Schedule 11(c) - Closing Certificate
Schedule 11(j) - Bill of Sale, Assignment and Assumption Agreement
Schedule 11(k) - Non-Competition Agreement
Schedule 11(n) - Notice to Subscribers
Schedule 11(p) - Billing Conversion Notice
</TABLE>
<PAGE> 1
ESCROW AGREEMENT
This Escrow Agreement is made and entered into this 1st day of
November, 1994, by and among MASADA SECURITY, INC., a Delaware corporation
("Purchaser"), KENMAR ELECTRONICS, INC., a Texas Corporation ("Seller"), and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("Escrow Agent").
W I T N E S S E T H:
Purchaser has purchased certain assets from Seller pursuant to
an Asset Purchase Agreement dated October 27, 1994 (the "Purchase
Agreement");
Pursuant to Section 3(a) of the Purchase Agreement, Seller has
deposited with Escrow Agent the sum of One Hundred Fifty Two Thousand
Thirty Dollars ($152,030.00) to secure, for the period and in the
manner hereinafter provided, certain obligations of Seller to
Purchaser; and
Purchaser and Seller desire to provide for the short term
investment and disbursement of such amount as herein provided;
NOW, THEREFORE, the parties hereto in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which is hereby acknowledged, and intending to be
legally bound, agree as follows:
SECTION 1. The Escrow Agent hereby acknowledges receipt of the sum of
One Hundred Fifty Two Thousand Thirty Dollars ($152,030.00) which represents
the amount required to be placed in escrow by Purchaser pursuant to the
Purchase Agreement. The One Hundred Fifty Two Thousand Thirty Dollar
($152,030.00) deposit and the proceeds of investment thereof are hereinafter
collectively referred to as the "Escrow Amount". Escrow Agent shall hold and
dispose of the Escrow Amount in accordance with the terms of this Escrow
Agreement.
SECTION 2. If at any time Escrow Agent shall receive a notice signed
by both Purchaser and Seller containing instructions to Escrow Agent regarding
the disposition of the Escrow Amount in accordance with this Escrow Agreement
or any matter related thereto, Escrow Agent shall comply with such
instructions. Similarly, if at any time Escrow Agent shall receive a notice
signed by both Purchaser and Seller that this Escrow Agreement has been
terminated, Escrow Agent shall deliver the Escrow Amount in accordance with the
instructions contained in such notice and upon such delivery this
1
<PAGE> 2
Escrow Agreement shall be deemed terminated and Escrow Agent shall be
released and discharged from all further obligations hereunder.
SECTION 3.
(a) Subject to the limitations contained in this Section 3(c),
Purchaser may at any time after March 1, 1995, give notice ("Purchaser's
Notice") to Escrow Agent that it deems itself to be entitled to payment of all
of the Escrow Amount, and simultaneously provide a copy of Purchaser's Notice
to Seller. If the Purchaser's Notice is given and Escrow Agent does not
receive, within ten (10) business days after the Purchaser's Notice was
received, a notice from Seller ("Seller's Notice") stating that a dispute (the
"Dispute") exists relating to the Purchaser's right to the Escrow Amount,
Escrow Agent shall, immediately after such ten (10) business day period,
deliver to Purchaser a check in an amount equal to the Escrow Amount after
which this Escrow Agreement shall be deemed terminated and Escrow Agent shall
be released and discharged from any further obligations hereunder.
(b) If Escrow Agent receives Seller's Notice, in which Seller also
provides a copy of Seller's notice to Purchaser, within such ten (10) business
day period, the Purchaser and Seller shall attempt to resolve the Dispute
within a period of thirty (30) business days after Purchaser's receipt of
Seller's Notice, failing which either Seller or Purchaser may commence
arbitration proceedings to determine which of them is entitled to the Escrow
Amount pursuant to and in accordance with Section 3(c) of the Purchase
Agreement.
(c) Notwithstanding anything contained in Section 2, Section 3(a)
or Section 3(b) to the contrary, in no event shall Escrow Agent release Forty
Thousand Dollars ($40,000) of the Escrow Amount until such time as Purchaser
and Seller shall have each delivered written notice to Escrow Agent that (i)
the state tax liens described in Exhibit "A" attached hereto have been paid in
full (including all interest and penalties accrued thereon, if any) and (ii)
that the judgment described in Exhibit "A" attached hereto has been satisfied
in full (including all interest and penalties accrued thereon, if any) and a
release and satisfaction of judgment applicable thereto has been recorded in
the Judicial District Court of Harris County, Texas; provided, however, if
Seller shall have failed to cause the events described in subsections (i) and
(ii) of this Section 3(c) to occur on or before January 31, 1995, and Purchaser
and Seller shall not have provided notice of the occurrence of such events to
Escrow Agent by such time such $40,000 shall be automatically paid by Escrow
Agent to Purchaser without the requirement of any further actions on the part
of Purchaser or Seller, and Seller shall forfeit any right to receive such
$40,000 as part of the purchase price under the Purchase Agreement, or
otherwise.
SECTION 4. The Escrow Agent shall invest and reinvest the Escrow
Amount from time to time in such of the following and in such amounts and
maturities (not exceeding
2
<PAGE> 3
90 days from the date of purchase in each instance) as shall be set forth in
written instructions of Purchaser:
(i) obligations of, or guaranteed by, the United States Government
or any agency thereof;
(ii) time deposits or certificates of deposit issued by any bank or
trust company organized under the laws of the United States or
any state thereof with capital of $100,000,000 or more;
(iii) U.S. Treasury Hanover Money Market Fund; or
(iv) Any investment to which both Purchaser and Seller consent.
The Escrow Agent shall not be required to notify Purchaser or Seller
of any payment or maturity of any instrument in which the escrow is invested or
to take any action to enforce payment of such instrument. Receipt, investment
and reinvestment of the Escrow Amount shall be confirmed by Escrow Agent as
soon as practicable by account statement, and any discrepancies in any such
account statement shall be noted by Purchaser or Seller to Escrow Agent within
30 calendar days after receipt thereof. Failure to inform Escrow Agent in
writing of any discrepancies in any such account statement within said 30-day
period shall conclusively be deemed confirmation of such account statement in
its entirety.
SECTION 5. The following provisions shall control with respect to the
rights, duties, liabilities, privileges and immunities of the Escrow Agent:
(a) Escrow Agent is not a party to, and is not bound by or (except
as specifically provided herein) charged with notice of any agreement out of
which this escrow may arise.
(b) Escrow Agent in acting hereunder may assume the genuineness of
any written notice, request, waiver, consent, certificate, receipt,
authorization, power of attorney, or other paper or document which Escrow Agent
in good faith believes to be genuine and what it purports to be.
(c) Escrow Agent shall not be liable for anything which it may do
or refrain from doing in connection herewith, except as a result of its own
gross negligence or lack of good faith.
(d) Escrow Agent may consult with legal counsel (including
in-house counsel) in the event of any dispute or question as to the
construction of any of the provisions hereof or its duties hereunder, and it
shall incur no liability if it acts in accordance with the opinion and
instructions of such counsel as to such matters.
3
<PAGE> 4
(e) In the event of any disagreement between any of the parties to
this Escrow Agreement, or between them or any of them and any other person or
entity resulting in adverse claims or demands being made in connection with the
subject matter of the escrow, or in the event that Escrow Agent, in good faith,
is in doubt as to what action it should take hereunder, Escrow Agent may, at
its option, refuse to comply with any claims or demands on it, or refuse to
take any other action hereunder, so long as such disagreement continues or such
doubt exists, and, in any such event, Escrow Agent shall not be or become
liable in any way or to any person or entity for its failure or refusal to act,
and Escrow Agent shall be entitled either to continue so to refrain from acting
until (i) the rights of all parties shall have been determined by a final award
of arbitration or in accordance with the directions of a final order or
judgment of a court of competent jurisdiction, or (ii) all differences shall
have been adjusted and all doubt resolved by agreement among all of the
interested persons or entities, and Escrow Agent shall have been notified
thereof in writing signed by all such persons or entities.
SECTION 6. Purchaser and Seller hereby jointly and severally
indemnify Escrow Agent, its officers, directors, partners, employees and agents
(each herein called an "Indemnified Party") against, and hold each Indemnified
Party harmless from, any and all expenses, including, without limitation,
attorneys' fees and court costs, losses, costs, damages and claims, including,
but not limited to, costs of investigation, litigation and arbitration, tax
liability and loss on investments suffered or incurred by an Indemnified Party
in connection with or arising from or out of this Escrow Agreement, except such
acts or omissions as may result from the willful misconduct or gross negligence
of such Indemnified Party. IT IS THE EXPRESS INTENT OF EACH OF PURCHASER AND
SELLER TO INDEMNIFY AND HOLD HARMLESS THE INDEMNIFIED PARTY FROM ITS OWN
NEGLIGENT ACTS OR OMISSIONS.
SECTION 7. The Escrow Agent shall receive compensation and expense
reimbursements for its services hereunder in accordance with its customary
practice, which fees and expenses shall be borne one-half by Purchaser and
one-half by Seller. Purchaser and Seller shall be jointly and severally liable
to Escrow Agent for the payment of all such fees and expenses. In the event
Purchaser and Seller for any reason fail to pay any such fees and expenses as
and when the same are due, such unpaid fees and expenses shall be charged to
and set-off and paid from the Escrow Amount by Escrow Agent without any further
notice.
SECTION 8. The term of this Escrow Agreement shall commence on the
date first above written, and shall terminate upon the disbursement of the
entire Escrow Amount; provided, however, that in the event all such amounts
required to be paid to Escrow Agent hereunder are not fully and finally paid
prior to termination, the provisions of Section 7 hereof shall survive the
termination and the provisions of Section 6 hereof shall, in any event, survive
the termination hereof.
4
<PAGE> 5
SECTION 9. All notices and other official communications between the
parties shall be in writing and shall be given by hand delivery or by a
recognized overnight courier who maintains verification of delivery (deemed to
be duly received on a date delivered), or by registered mail, postage prepaid,
return receipt requested (deemed to be duly received seven (7) days after such
mailing) or by telecopy (deemed to be received on the date sent providing that
the facsimile was properly addressed and disclosed the number of pages
transmitted on its front sheet and that the transmission report produced
indicates that each of the pages of the facsimile was received at the correct
facsimile number) to each of the respective parties as follows:
To Purchaser: Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
TELECOPY: 1-800-531-3293
With a copy to: Christopher R. Murvin, Esq.
Tingle, Murvin, Watson & Bates, P.C.
900 Park Place Tower
Birmingham, AL 35203
TELECOPY: (205) 322-1163
To Seller: KenMar Electronics, Inc.
5160 Timber Creek
Box 12607
Houston, Texas 77217
Attention: Mr. Forrest W. Jenkins
TELECOPY: (713) 943-3388
With copy to: James William Freyer, Esq.
42228 Vista
Pasadena, Texas 77504
TELECOPY: (713) 943-9176
5
<PAGE> 6
To the Escrow Agent: Texas Commerce Bank
National Association
600 Travis Street, 10th Floor
Houston, Texas 77002
Attn: Rebecca A. Newman
TELECOPY: (713) 216-2495
or to such other address for any of the parties hereto as from time to time
shall be designated by notice given by such party to the other party in the
manner hereinabove provided.
SECTION 10. This Agreement shall be governed and construed in
accordance with the substantive laws of the State of Texas and may not be
amended without the written consent of all of the parties hereto. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto, their respective legal representatives, successors and assigns.
SECTION 11. Escrow Agent may resign hereunder upon ten (10) days'
prior notice to Purchaser and Seller. Upon the effective date of such
resignation, Escrow Agent shall deliver the Escrow Amount to any substitute
escrow agent designated by Purchaser and Seller in writing. If Purchaser and
Seller fail to designate a substitute escrow agent within ten (10) days after
the giving of such notice, Escrow Agent may institute a petition for
interpleader. Escrow Agent's sole responsibility after such 10-day notice
period expires shall be to hold the Escrow Amount (without any obligation to
reinvest the same) and to deliver the same to a designated substitute escrow
agent, if any, or in accordance with the directions of a final order or
judgment of a court of competent jurisdiction, at which time of delivery Escrow
Agent's obligations hereunder shall cease and terminate. This Escrow Agreement
or any provision hereof may be amended, modified, waived or terminated only by
written instrument duly signed by the parties hereto.
IN WITNESS WHEREOF, and in agreement hereto, the parties have executed
this Escrow Agreement as of the date first written above.
PURCHASER:
MASADA SECURITY, INC.
By: /s/ David P. Tomick
------------------------------------
Its: Chief Financial Officer
---------------------------
6
<PAGE> 7
SELLER:
KENMAR ELECTRONICS, INC.
By: /s/ Forrest W. Jenkins
------------------------------------
Its: President
--------------------------
ESCROW AGENT:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ Rebecca A. Newman
--------------------------------------------
Its: Vice President and Trust Officer
---------------------------------
7
<PAGE> 1
NON-COMPETITION AGREEMENT
This Agreement is made and entered into this 1st day of November,
1994, by and among MASADA SECURITY, INC., a Delaware corporation ("Masada") and
KENMAR ELECTRONICS, INC., a Texas corporation d/b/a Houston Alarm ("Seller").
RECITALS
Pursuant to the terms of an Asset Purchase Agreement dated as of the
27th day of October, 1994 (the "Purchase Agreement"), Masada is purchasing
certain of the assets and properties of Seller.
Seller is uniquely experienced in the development and operation of the
security alarm system business, and masada is unwilling to acquire the assets
referenced in the Purchase Agreement without first obtaining the agreement of
Seller not to compete with Masada's business.
As an inducement to the consummation of the transactions evidenced by
the Purchase Agreement, Seller is willing to issue this Non-Completion
Agreement to Masada and acknowledges that valuable direct consideration will be
paid to him as a result of his execution and delivery of this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto in consideration of the mutual covenants,
agreements and specific consideration set forth below, the sufficiency and
adequacy of which is hereby acknowledged, and intending to be legally bound,
agree as follows:
SECTION 1. NON-COMPETE COVENANT. For the five (5) year period
beginning on the date hereof, Seller shall not in any manner, directly or
indirectly, through any corporation, partnership, or any other entity, solicit
any person or entity set forth on Schedule 1(a) to the Purchase Agreement,
which solicitation is for the purpose of providing security monitoring services
to such person or entity, if such solicitation would adversely affect Masada's
interest in the Contracts (as such term is defined in the Purchase Agreement)
purchased from Seller. Furthermore, during said five (5) year period, Seller
shall not in any manner, directly or indirectly, through any corporation,
partnership, or any other entity, use, communicate, inform, or otherwise
divulge to any third party any information pertaining to the persons and
entities set forth on Schedule 1(a) to the Purchase Agreement, which use,
communication, information, or divulgence would adversely affect Masada's
interest in the Contracts. Provided, however, that Seller shall be permitted
to establish or maintain an on-going relationship with Alarm Processing
Corporation, which corporation now provides or may in the future provide
wholesale monitoring services to multiple Alarm Dealers (defined as
professional alarm dealers which now have or may in the future have contracts
with Alarm Processing Corporation for the rendering of wholesale
<PAGE> 2
alarm monitoring services, and which are licensed by the State of Texas or
other appropriate regulatory agency to operate as an Alarm Services Contractor
or Fire Alarm Company, as further defined by state or other regulatory
statutes). Additionally, it shall not be a violation of this covenant for
Seller or any related person, firm, or entity to render performance necessary
to comply with any provision of or schedule attached to the Purchase Agreement.
SECTION 2. CONSIDERATION. Seller acknowledges that sufficient
and adequate consideration has been paid to him for the execution and delivery
to Masada of this Agreement.
SECTION 3. REMEDIES FOR BREACH. Seller recognized that in the
event of a breach of the covenants herein contained, it will be difficult to
determine the damages which would be suffered by Masada, and therefore, Seller
agrees and acknowledges that Masada may obtain injunctive relief to prevent
further breaches of the covenants herein contained, in addition to provable
damages. It is specifically understood that in the event of litigation arising
from a breach of the covenants herein contained, Masada shall be entitled to
recover in addition to damages and injunctive relief, all costs incurred,
including reasonable attorneys' fees.
SECTION 4. PARTIAL INVALIDITY. In the event any provision or
portion of this Agreement is deemed to be invalid or unenforceable in whole or
in part for any reason, the remainder thereof shall not be invalidated or
rendered unenforceable or otherwise adversely affected. Without limiting the
generality of the foregoing, if the provisions of the covenant not to compete
shall be deemed to create a restriction which is unreasonable as to duration or
geographical area or both, the parties agree that the provisions of this
Agreement shall be enforced for such duration and in such geographical area as
any court of any competent jurisdiction may determine to be reasonable.
SECTION 5. SUCCESSORS AND ASSIGNS. Seller acknowledges that the
covenants contained herein are unique and personal, and that Seller may not
assign any of his rights or delegate any of his duties or obligations under
this Agreement. The rights and obligations of Masada under this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
Masada.
SECTION 6. NOTICES. Any notice required or permitted to be
delivered pursuant to the terms of this Agreement shall be considered to have
been sufficiently delivered within five (5) days after posting, if mailed by
U.S. Mail, certified or registered, return receipt requested, postage prepaid
or, upon receipt by overnight courier maintaining records of receipt by
addressee or if delivered by hand or telecopied with the original notice being
mailed the same day by one of the foregoing methods and addressed as follows:
<PAGE> 3
If to Purchaser at:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
With copy to:
Tingle, Murvin, Watson & Bates P.C.
900 Park Place Tower
Birmingham, Alabama 35203
Attention: Christopher R. Murvin, Esq.
TELECOPY: (205) 322-1163
If to Seller at:
Kenmar Electronics, Inc.
5160 Timber Creek, Box 12607
Houston, TX 77217
Attention: Forrest W. Jenkins
With copy to:
James W. Freyer, Attorney at Law
4222B Vista
Pasadena, Texas 77504
TELECOPY: (713) 943-9176
or at such other address as the party may designate by 10 days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
SECTION 7. WAIVER OF BREACH. The waiver by Masada of a breach
of any provision of this Agreement by Seller shall not operate or be construed
as a waiver of any subsequent breach by Seller. No waiver shall be valid
unless in writing and signed by an authorized representative of Masada.
<PAGE> 4
SECTION 8. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties, and supersedes all prior agreements, arrangements
and communications, whether oral or written, with respect to the subject matter
hereof. This Agreement shall not be modified or amended except by written
agreement signed by each of the parties hereto.
SECTION 9. GOVERNING LAW; VENUE. This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas.
Any legal proceeding initiated with regard to this Agreement shall be brought
in the District Court of Harris County, Texas or in the United States District
Court for the Southern District of Texas, Houston Division.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day of year first above written.
MASADA SECURITY, INC.
By: /s/ Terry W. Johnson
-------------------------------
Its: President
-------------------------------
KENMAR ELECTRONICS, INC.
By: /s/ Forrest W. Jenkins
-------------------------------
Its: President
-------------------------------
<PAGE> 1
NON-COMPETITION AGREEMENT
This Agreement is made and entered into this 1st day of November,
1994, by and among MASADA SECURITY, INC., a Delaware corporation ("Masada") and
Forrest W. Jenkins, an individual resident of the State of Texas ("F.
Jenkins").
RECITALS
Pursuant to the terms of an Asset Purchase Agreement dated as of the
27th day of October, 1994 (the "Purchase Agreement"), Masada is purchasing
certain of the assets and properties of Kenmar Electronics, Inc. ("Seller").
F. Jenkins is uniquely experienced in the development and operation of
the security alarm system business, and masada is unwilling to acquire the
assets referenced in the Purchase Agreement without first obtaining the
agreement of F. Jenkins not to compete with Masada's business.
As an inducement to the consummation of the transactions evidenced by
the Purchase Agreement, F. Jenkins is willing to issue this Non-Completion
Agreement to Masada and acknowledges that valuable direct consideration will be
paid to him as a result of his execution and delivery of this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto in consideration of the mutual covenants,
agreements and specific consideration set forth below, the sufficiency and
adequacy of which is hereby acknowledged, and intending to be legally bound,
agree as follows:
SECTION 1. NON-COMPETE COVENANT. For the five (5) year period
beginning on the date hereof, F. Jenkins shall not in any manner, directly or
indirectly, through any corporation, partnership, or any other entity, solicit
any person or entity set forth on Schedule 1(a) to the Purchase Agreement,
which solicitation is for the purpose of providing security monitoring services
to such person or entity, if such solicitation would adversely affect Masada's
interest in the Contracts (as such term is defined in the Purchase Agreement)
purchased from Seller. Furthermore, during said five (5) year period, F.
Jenkins shall not in any manner, directly or indirectly, through any
corporation, partnership, or any other entity, use, communicate, inform, or
otherwise divulge to any third party any information pertaining to the persons
and entities set forth on Schedule 1(a) to the Purchase Agreement, which use,
communication, information, or divulgence would adversely affect Masada's
interest in the Contracts. Provided, however, that F. Jenkins shall be
permitted to establish or maintain an on-going relationship with Alarm
Processing Corporation, which corporation now provides or may in the future
provide wholesale monitoring services to multiple Alarm Dealers (defined as
professional alarm dealers which now have or may in the future have contracts
with Alarm Processing Corporation for the rendering of wholesale alarm
monitoring services, and which are licensed by the State of Texas or other
<PAGE> 2
appropriate regulatory agency to operate as an Alarm Services Contractor or
Fire Alarm Company, as further defined by state or other regulatory statutes).
Additionally, it shall not be a violation of this covenant for F. Jenkins or
any related person, firm, or entity to render performance necessary to comply
with any provision of or schedule attached to the Purchase Agreement.
SECTION 2. CONSIDERATION. F. Jenkins acknowledges that
sufficient and adequate consideration has been paid to him for the execution
and delivery to Masada of this Agreement.
SECTION 3. REMEDIES FOR BREACH. F. Jenkins recognized that in
the event of a breach of the covenants herein contained, it will be difficult
to determine the damages which would be suffered by Masada, and therefore, F.
Jenkins agrees and acknowledges that Masada may obtain injunctive relief to
prevent further breaches of the covenants herein contained, in addition to
provable damages. It is specifically understood that in the event of
litigation arising from a breach of the covenants herein contained, Masada
shall be entitled to recover in addition to damages and injunctive relief, all
costs incurred, including reasonable attorneys' fees.
SECTION 4. PARTIAL INVALIDITY. In the event any provision or
portion of this Agreement is deemed to be invalid or unenforceable in whole or
in part for any reason, the remainder thereof shall not be invalidated or
rendered unenforceable or otherwise adversely affected. Without limiting the
generality of the foregoing, if the provisions of the covenant not to compete
shall be deemed to create a restriction which is unreasonable as to duration or
geographical area or both, the parties agree that the provisions of this
Agreement shall be enforced for such duration and in such geographical area as
any court of any competent jurisdiction may determine to be reasonable.
SECTION 5. SUCCESSORS AND ASSIGNS. F. Jenkins acknowledges that
the covenants contained herein are unique and personal, and that F. Jenkins may
not assign any of his rights or delegate any of his duties or obligations under
this Agreement. The rights and obligations of Masada under this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
Masada.
SECTION 6. NOTICES. Any notice required or permitted to be
delivered pursuant to the terms of this Agreement shall be considered to have
been sufficiently delivered within five (5) days after posting, if mailed by
U.S. Mail, certified or registered, return receipt requested, postage prepaid
or, upon receipt by overnight courier maintaining records of receipt by
addressee or if delivered by hand or telecopied with the original notice being
mailed the same day by one of the foregoing methods and addressed as follows:
<PAGE> 3
If to Purchaser at:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
With copy to:
Tingle, Murvin, Watson & Bates P.C.
900 Park Place Tower
Birmingham, Alabama 35203
Attention: Christopher R. Murvin, Esq.
TELECOPY: (205) 322-1163
If to F. Jenkins at:
Forrest W. Jenkins
P. O. Box 12607
Houston, TX 77217
Attention: Forrest W. Jenkins
With copy to:
James W. Freyer, Attorney at Law
4222B Vista
Pasadena, Texas 77504
TELECOPY: (713) 943-9176
or at such other address as the party may designate by 10 days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
SECTION 7. WAIVER OF BREACH. The waiver by Masada of a breach
of any provision of this Agreement by F. Jenkins shall not operate or be
construed as a waiver of any subsequent breach by F. Jenkins. No waiver shall
be valid unless in writing and signed by an authorized representative of
Masada.
<PAGE> 4
SECTION 8. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties, and supersedes all prior agreements, arrangements
and communications, whether oral or written, with respect to the subject matter
hereof. This Agreement shall not be modified or amended except by written
agreement signed by each of the parties hereto.
SECTION 9. GOVERNING LAW; VENUE. This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas.
Any legal proceeding initiated with regard to this Agreement shall be brought
in the District Court of Harris County, Texas or in the United States District
Court for the Southern District of Texas, Houston Division.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day of year first above written.
MASADA SECURITY, INC.
By: /s/ Terry W. Johnson
---------------------------------
Its: President
---------------------------------
/s/ Forrest W. Jenkins
-------------------------------------
FORREST W. JENKINS
/s/ Forrest W. Jenkins
-------------------------------------
Individually
<PAGE> 1
NON-COMPETITION AGREEMENT
This Agreement is made and entered into this 1st day of November,
1994, by and among MASADA SECURITY, INC., a Delaware corporation ("Masada") and
Robert E. Jenkins, an individual resident of the State of Texas ("R. Jenkins").
RECITALS
Pursuant to the terms of an Asset Purchase Agreement dated as of the
27th day of October, 1994 (the "Purchase Agreement"), Masada is purchasing
certain of the assets and properties of Kenmar Electronics, Inc. ("Seller").
R. Jenkins is uniquely experienced in the development and operation of
the security alarm system business, and masada is unwilling to acquire the
assets referenced in the Purchase Agreement without first obtaining the
agreement of R. Jenkins not to compete with Masada's business.
As an inducement to the consummation of the transactions evidenced by
the Purchase Agreement, R. Jenkins is willing to issue this Non-Completion
Agreement to Masada and acknowledges that valuable direct consideration will be
paid to him as a result of his execution and delivery of this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto in consideration of the mutual covenants,
agreements and specific consideration set forth below, the sufficiency and
adequacy of which is hereby acknowledged, and intending to be legally bound,
agree as follows:
SECTION 1. NON-COMPETE COVENANT. For the five (5) year period
beginning on the date hereof, R. Jenkins shall not in any manner, directly or
indirectly, through any corporation, partnership, or any other entity, solicit
any person or entity set forth on Schedule 1(a) to the Purchase Agreement,
which solicitation is for the purpose of providing security monitoring services
to such person or entity, if such solicitation would adversely affect Masada's
interest in the Contracts (as such term is defined in the Purchase Agreement)
purchased from Seller. Furthermore, during said five (5) year period, R.
Jenkins shall not in any manner, directly or indirectly, through any
corporation, partnership, or any other entity, use, communicate, inform, or
otherwise divulge to any third party any information pertaining to the persons
and entities set forth on Schedule 1(a) to the Purchase Agreement, which use,
communication, information, or divulgence would adversely affect Masada's
interest in the Contracts. Provided, however, that R. Jenkins shall be
permitted to establish or maintain an on-going relationship with Alarm
Processing Corporation, which corporation now provides or may in the future
provide wholesale monitoring services to multiple Alarm Dealers (defined as
professional alarm dealers which now
<PAGE> 2
have or may in the future have contracts with Alarm Processing Corporation for
the rendering of wholesale alarm monitoring services, and which are licensed by
the State of Texas or other appropriate regulatory agency to operate as an
Alarm Services Contractor or Fire Alarm Company, as further defined by state or
other regulatory statutes). Additionally, it shall not be a violation of this
covenant for R. Jenkins or any related person, firm, or entity to render
performance necessary to comply with any provision of or schedule attached to
the Purchase Agreement.
SECTION 2. CONSIDERATION. R. Jenkins acknowledges that
sufficient and adequate consideration has been paid to him for the execution
and delivery to Masada of this Agreement.
SECTION 3. REMEDIES FOR BREACH. R. Jenkins recognized that in
the event of a breach of the covenants herein contained, it will be difficult
to determine the damages which would be suffered by Masada, and therefore, R.
Jenkins agrees and acknowledges that Masada may obtain injunctive relief to
prevent further breaches of the covenants herein contained, in addition to
provable damages. It is specifically understood that in the event of
litigation arising from a breach of the covenants herein contained, Masada
shall be entitled to recover in addition to damages and injunctive relief, all
costs incurred, including reasonable attorneys' fees.
SECTION 4. PARTIAL INVALIDITY. In the event any provision or
portion of this Agreement is deemed to be invalid or unenforceable in whole or
in part for any reason, the remainder thereof shall not be invalidated or
rendered unenforceable or otherwise adversely affected. Without limiting the
generality of the foregoing, if the provisions of the covenant not to compete
shall be deemed to create a restriction which is unreasonable as to duration or
geographical area or both, the parties agree that the provisions of this
Agreement shall be enforced for such duration and in such geographical area as
any court of any competent jurisdiction may determine to be reasonable.
SECTION 5. SUCCESSORS AND ASSIGNS. R. Jenkins acknowledges that
the covenants contained herein are unique and personal, and that R. Jenkins may
not assign any of his rights or delegate any of his duties or obligations under
this Agreement. The rights and obligations of Masada under this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
Masada.
SECTION 6. NOTICES. Any notice required or permitted to be
delivered pursuant to the terms of this Agreement shall be considered to have
been sufficiently delivered within five (5) days after posting, if mailed by
U.S. Mail, certified or registered, return receipt requested, postage prepaid
or, upon receipt by overnight courier maintaining records of receipt by
addressee or if delivered by hand or telecopied with the original notice being
mailed the same day by one of the foregoing methods and addressed as follows:
<PAGE> 3
If to Purchaser at:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
With copy to:
Tingle, Murvin, Watson & Bates P.C.
900 Park Place Tower
Birmingham, Alabama 35203
Attention: Christopher R. Murvin, Esq.
TELECOPY: (205) 322-1163
If to R. Jenkins at:
Robert E. Jenkins
5160 Timber Creek
Houston, TX 77287
Attention: Robert E. Jenkins
With copy to:
James W. Freyer, Attorney at Law
4222B Vista
Pasadena, Texas 77504
TELECOPY: (713) 943-9176
or at such other address as the party may designate by 10 days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
SECTION 7. WAIVER OF BREACH. The waiver by Masada of a breach
of any provision of this Agreement by R. Jenkins shall not operate or be
construed as a waiver of any subsequent breach by R. Jenkins. No waiver shall
be valid unless in writing and signed by an authorized representative of
Masada.
<PAGE> 4
SECTION 8. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties, and supersedes all prior agreements, arrangements
and communications, whether oral or written, with respect to the subject matter
hereof. This Agreement shall not be modified or amended except by written
agreement signed by each of the parties hereto.
SECTION 9. GOVERNING LAW; VENUE. This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas.
Any legal proceeding initiated with regard to this Agreement shall be brought
in the District Court of Harris County, Texas or in the United States District
Court for the Southern District of Texas, Houston Division.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day of year first above written.
MASADA SECURITY, INC.
By: /s/ Terry W. Johnson
--------------------------------
Its: President
--------------------------------
/s/ Robert E. Jenkins
------------------------------------
ROBERT E. JENKINS
<PAGE> 1
NON-COMPETITION AGREEMENT
This Agreement is made and entered into this 1st day of November,
1994, by and among MASADA SECURITY, INC., a Delaware corporation ("Masada") and
Russell S. Vail, an individual resident of the State of Texas ("Vail").
RECITALS
Pursuant to the terms of an Asset Purchase Agreement dated as of the
27th day of October, 1994 (the "Purchase Agreement"), Masada is purchasing
certain of the assets and properties of Kenmar Electronics, Inc. ("Seller").
Vail is uniquely experienced in the development and operation of the
security alarm system business, and masada is unwilling to acquire the assets
referenced in the Purchase Agreement without first obtaining the agreement of
Vail not to compete with Masada's business.
As an inducement to the consummation of the transactions evidenced by
the Purchase Agreement, Vail is willing to issue this Non-Completion Agreement
to Masada and acknowledges that valuable direct consideration will be paid to
him as a result of his execution and delivery of this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto in consideration of the mutual covenants,
agreements and specific consideration set forth below, the sufficiency and
adequacy of which is hereby acknowledged, and intending to be legally bound,
agree as follows:
SECTION 1. NON-COMPETE COVENANT. For the five (5) year period
beginning on the date hereof, Vail shall not in any manner, directly or
indirectly, through any corporation, partnership, or any other entity, solicit
any person or entity set forth on Schedule 1(a) to the Purchase Agreement,
which solicitation is for the purpose of providing security monitoring services
to such person or entity, if such solicitation would adversely affect Masada's
interest in the Contracts (as such term is defined in the Purchase Agreement)
purchased from Seller. Furthermore, during said five (5) year period, Vail
shall not in any manner, directly or indirectly, through any corporation,
partnership, or any other entity, use, communicate, inform, or otherwise
divulge to any third party any information pertaining to the persons and
entities set forth on Schedule 1(a) to the Purchase Agreement, which use,
communication, information, or divulgence would adversely affect Masada's
interest in the Contracts. Provided, however, that Vail shall be permitted to
establish or maintain an on-going relationship with Alarm Processing
Corporation, which corporation now provides or may in the future provide
wholesale monitoring services to
<PAGE> 2
multiple Alarm Dealers (defined as professional alarm dealers which now have or
may in the future have contracts with Alarm Processing Corporation for the
rendering of wholesale alarm monitoring services, and which are licensed by the
State of Texas or other appropriate regulatory agency to operate as an Alarm
Services Contractor or Fire Alarm Company, as further defined by state or other
regulatory statutes). Additionally, it shall not be a violation of this
covenant for Vail or any related person, firm, or entity to render performance
necessary to comply with any provision of or schedule attached to the Purchase
Agreement.
SECTION 2. CONSIDERATION. Vail acknowledges that sufficient and
adequate consideration has been paid to him for the execution and delivery to
Masada of this Agreement.
SECTION 3. REMEDIES FOR BREACH. Vail recognized that in the
event of a breach of the covenants herein contained, it will be difficult to
determine the damages which would be suffered by Masada, and therefore, Vail
agrees and acknowledges that Masada may obtain injunctive relief to prevent
further breaches of the covenants herein contained, in addition to provable
damages. It is specifically understood that in the event of litigation arising
from a breach of the covenants herein contained, Masada shall be entitled to
recover in addition to damages and injunctive relief, all costs incurred,
including reasonable attorneys' fees.
SECTION 4. PARTIAL INVALIDITY. In the event any provision or
portion of this Agreement is deemed to be invalid or unenforceable in whole or
in part for any reason, the remainder thereof shall not be invalidated or
rendered unenforceable or otherwise adversely affected. Without limiting the
generality of the foregoing, if the provisions of the covenant not to compete
shall be deemed to create a restriction which is unreasonable as to duration or
geographical area or both, the parties agree that the provisions of this
Agreement shall be enforced for such duration and in such geographical area as
any court of any competent jurisdiction may determine to be reasonable.
SECTION 5. SUCCESSORS AND ASSIGNS. Vail acknowledges that the
covenants contained herein are unique and personal, and that Vail may not
assign any of his rights or delegate any of his duties or obligations under
this Agreement. The rights and obligations of Masada under this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
Masada.
SECTION 6. NOTICES. Any notice required or permitted to be
delivered pursuant to the terms of this Agreement shall be considered to have
been sufficiently delivered within five (5) days after posting, if mailed by
U.S. Mail, certified or registered, return receipt requested, postage prepaid
or, upon receipt by overnight courier maintaining records of receipt by
addressee or if delivered by hand or telecopied with the original notice being
mailed the same day by one of the foregoing methods and addressed as follows:
<PAGE> 3
If to Purchaser at:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
With copy to:
Tingle, Murvin, Watson & Bates P.C.
900 Park Place Tower
Birmingham, Alabama 35203
Attention: Christopher R. Murvin, Esq.
TELECOPY: (205) 322-1163
If to Vail at:
Russell S. Vail
5160 Timber Creek
Houston, TX 77287
Attention: Russell S. Vail
With copy to:
James W. Freyer, Attorney at Law
4222B Vista
Pasadena, Texas 77504
TELECOPY: (713) 943-9176
or at such other address as the party may designate by 10 days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
SECTION 7. WAIVER OF BREACH. The waiver by Masada of a breach
of any provision of this Agreement by Vail shall not operate or be construed as
a waiver of any subsequent breach by Vail. No waiver shall be valid unless in
writing and signed by an authorized representative of Masada.
<PAGE> 4
SECTION 8. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties, and supersedes all prior agreements, arrangements
and communications, whether oral or written, with respect to the subject matter
hereof. This Agreement shall not be modified or amended except by written
agreement signed by each of the parties hereto.
SECTION 9. GOVERNING LAW; VENUE. This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas.
Any legal proceeding initiated with regard to this Agreement shall be brought
in the District Court of Harris County, Texas or in the United States District
Court for the Southern District of Texas, Houston Division.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day of year first above written.
MASADA SECURITY, INC.
By: /s/ Terry W. Johnsom
-------------------------------
Its: President
-------------------------------
/s/ Russell S. Vail
-----------------------------------
RUSSELL S. VAIL
<PAGE> 1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made and entered into
this 14th day of April, 1995, by and between MASADA SECURITY, INC., a Delaware
corporation ("Purchaser") and GLOBAL SECURITY, INC. formerly known as Global
Security Systems of Virginia, Inc., a Virginia corporation (collectively
referred to as "Seller").
Recitals
Seller is engaged in the business of operating a security alarm system
monitoring business in Richmond, Virginia and the surrounding area (the
"Business").
Seller desires to sell to Purchaser and Purchaser desires to buy from
Seller all of the customer account contracts and certain other assets of Seller
pertaining to the Business, and Purchaser and Seller desire to make certain
other arrangements between them relating to the purchase and sale of such
assets, all upon the terms and conditions hereinafter set forth.
Agreement
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which are hereby acknowledged, and intending to be
legally bound, agree as follows:
Section 1. Agreement to Purchase and Sell. In accordance with
the terms and conditions contained herein and in reliance on the respective
representations and warranties of the parties hereto, Seller hereby agrees to
sell, convey, transfer and assign to Purchaser, and Purchaser hereby agrees to
purchase, accept and acquire from Seller in the manner provided herein, the
following assets (collectively referred to as the "Purchased Assets"):
(a) Alarm Accounts. All right, title and
interest of Seller in and to the contracts for the rendering of security
monitoring services to existing customers of Seller which meet all of the
requirements listed in Section 8(i) and are specifically listed on Schedule
1(a) hereto (the "Alarm Accounts");
(b) Inventory. All right, title and interest of
Seller in and to all inventory pertaining to the Business maintained by Seller
at its branch offices, substantially all of which are listed on Schedule 1(b)
hereto (the "Inventory"), with the Inventory, including, without limitation,
items purchased by Seller for resale and all purchase orders relating to the
foregoing;
<PAGE> 2
(c) Fixed Assets. All right, title and interest
of Seller in and to the fixed assets used in connection with the Business,
substantially all of which are listed on Schedule 1(c) hereto (the "Fixed
Assets");
(d) Equipment. All right, title and interest of
Seller in and to the equipment used in connection with the Business,
substantially all of which are listed on Schedule 1(d) hereto (the
"Equipment");
(e) Vehicles. All right, title and interest of
Seller in and to the vehicles specifically listed on Schedule 1(e) hereto (the
"Vehicles");
(f) Contracts-in-Process. All right, title and
interest of Seller in and to those contracts and benefits of Seller related to
all accepted orders for the sale or installation by Seller of alarm systems
which are not yet installed or not completely installed as of the Closing Date,
substantially all of which are listed on Schedule 1(f) hereto (the
"Contracts-in-Process");
(g) Other Contracts. All right, title and
interest of Seller in and to all executory contracts, agreements and leases,
substantially all of which are listed on Schedule 1(g) hereto (the "Other
Contracts"), the Other Contracts to include, without limitation all
non-competition or non-solicitation agreements accruing to the benefit of the
Seller.
(h) Receivables. The accounts receivable, trade
accounts, notes receivable and other debts owed to Seller for monitoring
services rendered pertaining to the Alarm Accounts and Contracts-in-Process;
provided, however, that all such debts owed to Seller for monitoring services
must be for previously rendered monitoring services and not for future
monitoring services, substantially all of which are listed on Schedule 1(h)
hereto (the "Receivables");
(i) Intangible Personal Property. The unexpired
trademarks (whether registered or unregistered), trade names, logos, copyrights
and licenses owned by or accruing to the benefit of Seller pertaining to the
Business substantially all of which are listed on Schedule 1(i) hereto (the
"Intangible Personal Property");
(j) Telephone Lines and Numbers. All right,
title and interest of Seller in and to the local and long distance telephone
numbers, digital dialer telephone lines that transmit signals from customer
locations to Seller's central station, and "ring-down" lines, substantially
all of which are listed on Schedule 1(j) hereto (the "Telephone Lines and
Numbers"); and
(k) Alarm Account Information. All files,
records and incidental documentation of Seller pertaining to the Alarm Accounts
and Contracts-in-Process (the "Alarm Account Information"), including, without
limitation, all computer lists, contract information,
2
<PAGE> 3
accounting history, service records and information, credit records and
information, and purchase and sales records and information,
Section 2. Purchase Price and Payment.
(a) Purchase Price for the Purchased Assets
excluding Vehicles and Receivables. The purchase price for the Purchased
Assets excluding Vehicles and Receivables (the "Purchase Price Excluding
Vehicles and Receivables") shall be the product of 29 times the aggregate of
the Monthly Recurring Revenue of the Alarm Accounts less an amount equal to the
prepaid revenue relating to the Alarm Accounts (as set forth on Schedule 2(a)
hereto) computed on a per diem basis to the Closing Date. For purposes of this
Agreement, the term "Monthly Recurring Revenue" with respect to the Alarm
Accounts acquired from Seller by Purchaser shall be the charge for monitoring
services, (including, without limitation, maintenance and other alarm related
services), exclusive of sales or intangible taxes, if any, and any direct wire
telephone line charges associated with monitoring, payable by the customer for
each applicable billing period expressed in terms of a monthly amount
regardless of whether the billing period is a annual, semi-annual, quarterly or
monthly.
(b) Purchase Price-Vehicles. The purchase price
for the Vehicles (the "Purchase Price - Vehicles") shall be determined in
accordance with the average wholesale price list in the current version of the
Black Book Official Truck and Van Guide published by National Auto Research
Division Hearst Business Media Corporation as of the Closing Date.
(c) Purchase Price-Receivables. The purchase
price for the Receivables (the "Purchase Price - Receivables") shall be equal
to the sum of the amounts associated with the following aging schedule:
85% of face value of Receivables - 30 days or less from the
date of the last invoice prior to the Closing Date
65% of face value of Receivables - 31 to 60 days from the date
of the last invoice prior to the Closing Date
20% of face value of Receivables - 61 to 90 days from the date
of the last invoice prior to the Closing Date;
provided, however, that the maximum purchase price for the Receivables shall in
no instance shall exceed $19,700.00.
(d) Purchase Price-All Purchased Assets. The sum
of the Purchase Price Excluding Vehicles and Receivables, the Purchase
Price-Vehicles and the Purchase Price-Receivables, subject to the adjustments
set forth in Section 2(f), shall hereinafter be referred to as the "Purchase
Price - All Purchased Assets."
3
<PAGE> 4
(e) Payment of Purchase Price.
(i) The aggregate of: 90% of the Purchase
Price Excluding Vehicles and Receivables; the Purchase Price - Vehicles; the
Purchase Price - Receivables; and the adjustments calculated in accordance with
Section 2(f) (collectively referred to as the "Initial Payment") shall be paid
by Purchaser to Seller by wire transfer or other mutually agreeable means on
the Closing Date.
(ii) The Purchase Price - All Purchased
Assets less the Initial Payment (the "Deferred Payment Amount") shall be paid
in accordance with Section 3 hereof.
(f) Adjustment to Purchase Price. The Purchase
Price - All Purchased Assets shall be adjusted for items of expense and income
prorated as of the Closing Date in the manner provided below:
(i) Liabilities or credits for personal
property taxes, if any, in respect of the Purchased Assets shall be prorated on
the basis of the current taxable year, to and including the Closing Date;
provided that if the assessed value of any Purchased Asset or rate of tax with
respect thereto shall not have been determined prior to the Closing Date, the
value and rate shall be determined on the basis of the amount of the previous
year in which the same was determined; and
(ii) Other liabilities or credits, prepaid
items and deferred charges relating to the Purchased Assets existing on the
Closing Date shall be adjusted as of the Closing Date by prorating the
aforementioned items for credit to Seller or Purchaser, as the case may be, in
accordance with generally accepted accounting principles.
(g) Allocation of Purchase Price. The Purchase
Price - All Purchased Assets, subject to the adjustments set forth in Section
2(f), shall be allocated as set forth in Schedule 2(g). Purchaser and Seller
agree for income tax purposes they shall report the transactions contemplated
by this Agreement in a manner consistent with such allocation.
Section 3. Deferred Payment Amount.
(a) Escrow Agreement. On or prior to the Closing
Date, Seller and Purchaser agree to execute an Escrow Agreement substantially
in the form attached hereto as Schedule 3(a) (the "Escrow Agreement") and
Purchaser agrees to deposit with SouthTrust Bank of Alabama, N.A. (the "Escrow
Agent"), the Deferred Payment Amount to be held in an escrow account (the
"Escrow Account") pursuant to the terms of the Escrow Agreement (the "Deferred
Payment Amount" together with all earnings thereon shall collectively
hereinafter be referred to as the "Escrow Amount").
4
<PAGE> 5
(b) Payment and Escrow Amount. Within 30 days of
the first anniversary of the Closing Date, Purchaser shall submit to Seller
substantially in the form attached hereto as Schedule 3(b) along with all
appropriate supporting documentation, a report reflecting: (i) the Escrow
Amount; (ii) the total Repurchase Amounts, if any, credited to Purchaser
calculated in accordance with Section 6 (the "Total Repurchase Amounts"); (iii)
the Conversion Adjustment, if any, credited to Purchaser calculated in
accordance with Section 17 and (iv) the resulting difference between (i) less
the Purchaser's credits associated with (ii) and (iii) (the "Resulting
Difference"). If Seller does not notify Purchaser of a dispute regarding such
report within ten business days from the date such report is submitted by
Purchaser to Seller or if Seller notifies Purchaser of its acceptance of such
report, such report shall be deemed complete and accurate and Seller and
Purchaser shall notify Escrow Agent to pay the sums computed below to Seller or
Purchaser, as the case may be, and the Escrow Account shall then be closed
after payment by the Escrow Agent of all funds held by it in the Escrow
Account. If the Resulting Difference is a positive amount then Seller and
Purchaser shall instruct the Escrow Agent to first pay the Seller the Resulting
Difference and the remainder of the Escrow Amount shall be paid by Escrow Agent
to Purchaser. If the Resulting Difference is a negative amount, then Seller
and Purchaser shall instruct the Escrow Agent to pay Purchaser the entire
Escrow Amount and Seller shall owe no further amount to Purchaser.
(c) Dispute. All disputes and differences with
respect to the computation of the Resulting Difference and the Escrow Account
shall be determined by binding arbitration under the rules then in effect of
the American Arbitration Association, such arbitration hearing to be held in
Richmond, State of Virginia. The arbitration proceedings shall be heard by
one arbitrator selected from the proposed panel of arbitrators issued by the
American Arbitration Association, Seller, on the one hand, and Purchaser, on
the other hand, shall attempt to select a mutually acceptable arbitrator. If
the parties are unable to select a mutually acceptable arbitrator within five
business days following the issuance of the list of potential arbitrators by
the American Arbitration Association, Seller, on the one hand, and Purchaser,
on the other hand, shall each select one person from the list, and those two
persons selected shall appoint a third person from the list, which person
shall be the arbitrator for the dispute. All arbitration awards shall include
an award of expenses including, but not limited to, legal and accounting fees.
Section 4. The Closing.
(a) Date and Place. The closing of the purchase
and sale of the Purchased Assets shall take place on the later of April 28,
1995 or within five days of completion of the reprogramming of the Alarm
Account to Purchaser's central monitoring station or such other date as shall
be mutually acceptable to Purchaser and Seller (the "Closing Date") and shall
take place at a location mutually acceptable to Purchaser and Seller.
(b) Closing Deliveries. On the Closing Date,
Seller shall make the deliveries specified by Section 9 and Purchaser shall
make the deliveries specified by Section 10.
5
<PAGE> 6
(c) Closing Procedure. All proceedings to be
taken and all documents to be delivered and executed on the Closing Date shall
be deemed to have been taken, delivered and executed simultaneously, and no
proceeding shall be deemed taken nor documents deemed executed or delivered
until all have been taken, delivered and executed. On the Closing Date, Seller
and Purchaser shall execute and deliver the instruments and documents
referenced in Sections 9 and 10 and Purchaser shall make the Initial Payment
and shall deposit the Deferred Payment Amount with the Escrow Agent.
(d) Termination. In the event that any of the
conditions set forth in Section 9 are not satisfied or waived in writing prior
to or on the Closing Date, then Purchaser may terminate this Agreement by
written notice to Seller. In the event that any of the conditions set forth in
Section 10 are not satisfied or waived in writing prior to or on the Closing
Date, then Seller may terminate this Agreement by written notice to Purchaser.
In the event that any party hereto exercises such right of termination, this
Agreement thereupon shall become wholly void and be of no further force or
effect, except for the confidentiality provisions contained in Section 14(c)
and there shall be no further liability on the part of Seller or Purchaser or
their respective officers, directors, stockholders, employees or agents with
respect to the transactions contemplated hereby.
Section 5. Assumption of Liabilities.
(a) Generally. Purchaser shall not assume any
liability, debt or obligation of Seller except the responsibility of rendering
security monitoring services pursuant to the Alarm Accounts and Contracts-in-
Process set forth on Schedules 1(a) and 1(f) and those liabilities and
obligations of Seller arising after the Closing Date that are set forth on
Schedule 5 hereto. Purchaser shall not assume any liability, debt or
obligation of Seller except those set forth on Schedules 1(a), 1(f) and 5, and
Seller shall continue to be responsible for, and shall indemnify and save
harmless Purchaser from and against, all of Seller's known and unknown
liabilities, debts and obligations, arising prior to, in connection with, or
subsequent to the Closing Date that are not specifically assumed by Purchaser
as set forth on Schedules 1(a), 1(f) and 5.
(b) Lease. Unless otherwise mutually agreed to
in writing by both parties Purchaser shall assume Seller's current lease of the
property located at 2712 Enterprise Parkway, Richmond, Virginia as of the
Closing Date.
Section 6. Seller's Warranty of Alarm Accounts. Seller warrants
that beginning on the Closing Date and for the 12 month period immediately
after the Closing Date (the "Guarantee Period") all Alarm Accounts purchased by
Purchaser pursuant to this Agreement and described on Schedule 1(a) shall
continue to meet the requirements specified in Section 8(i) and that all
payments from customers shall be made in a timely manner. Agreement, payments
by customers shall be considered timely if they are received by Purchaser on
or before the 60th day following the applicable payment due date. For purposes
of this
6
<PAGE> 7
Agreement a "Defaulted Contract" shall be defined as: (i) any Alarm Account
that no longer meets the requirements specified in Section 8(i); or (ii) any
Alarm Account in which payments from customers shall not have been made in a
timely manner; provided, however, that a "Defaulted Contract" shall not include
any Alarm Account cancelled due to the following reasons: (i) Purchaser's
negligence; (ii) changes in customer service charges; or (iii) a systemic
failure directly related to Purchaser's central station (except for acts of
God). Purchaser shall give Seller written monthly notice of any and all
Defaulted Contracts as soon as reasonably possible. Seller shall have 30 days
from the receipt of such written notice to return such Defaulted Contracts to
compliance with the requirements of Alarm Accounts as specified in Section 8(i)
and timeliness. If at the end of such 30 day period Purchaser, in its sole
discretion, determines that such Alarm Accounts are still Defaulted Contracts,
then Seller shall repurchase the Defaulted Contract from Purchaser for 29 times
the Monthly Recurring Revenue of the Defaulted Contract as of the Closing Date
(the "Repurchase Amount") or shall replace the Defaulted Contract with another
Alarm Account. If the Seller does not repurchase or replace the Defaulted
Contract within such 30 day period, Seller shall be charged against the Escrow
Account an amount equal to the Repurchase Amount plus the interest accruing
thereon from the Closing Date at the rate then applicable to the Escrow
Account; provided, however, the aggregate Repurchase Amount charged against the
Escrow Account shall only exceed the amount of the Escrow Account in the case
of fraud on behalf of Seller.
Section 7. Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to Seller that on the date hereof and
on each day thereafter to the Closing Date:
(a) Organization and Standing. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and Purchaser has all requisite corporate power
and authority to own, operate and lease its properties and carry on its
business as now being conducted and to enter into this Agreement and to perform
its obligations hereunder.
(b) Authority Relative to this Agreement. The
execution, delivery and performance by Purchaser of this Agreement has been
duly authorized by the board of directors and stockholder of Purchaser, and no
further corporate action is necessary on the part of the Purchaser to make this
agreement valid and binding upon Purchaser in accordance with its terms.
(c) No Violation. Neither the execution nor the
delivery of this Agreement by Purchaser nor the consummation of the
transactions contemplated herein, nor compliance by Purchaser with any of the
provisions hereof:
(i) violates or conflicts with or
results in the breach or termination of any term or provision of, nor
constitutes a default or acceleration of the performance required under, the
articles of incorporation, bylaws or resolutions of the
7
<PAGE> 8
Purchaser, or any indenture, mortgage, deed, trust or other contract or
agreement to which Purchaser is a party or by which its properties are bound;
(ii) violates any order, writ, injunction
or decree of any court, administrative agency or governmental body; or
(iii) requires the consent of any other person, entity or governmental
authority.
(d) Brokerage Fees. Purchaser is not obligated
nor has it agreed to pay any brokerage commissions, finders fees or other
similar fee or charge in connection with the purchase of the assets pursuant to
this Agreement.
Section 8. Representations and Warranties of Seller. Seller
represents and warrants to Purchaser that on the date hereof and on each day
thereafter to the Closing Date:
(a) Organization and Standing. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Virginia. Seller has all requisite corporate power
and authority to own, operate and lease its properties and carry on its
business as it has been and currently is being conducted and to enter into this
Agreement and to perform its obligations hereunder.
(b) Authority Relative to this Agreement. The
execution, delivery and performance by Seller of this Agreement has been duly
authorized by the board of directors and stockholders of Seller, and no further
corporate action is necessary on the part of Seller to make this Agreement
valid and binding upon the Seller in accordance with its terms.
(c) No Violation. Neither the execution nor the
delivery of this Agreement by Seller nor the consummation of the transactions
contemplated herein, nor compliance by Seller with any of the provisions
hereof:
(i) violates or conflicts with or results in
the breach or termination of any term or provision of, nor constitutes a
default or acceleration of the performance required under, the articles of
incorporation, bylaws or resolutions of Seller, or under any indenture,
mortgage, deed, trust or other contract or agreement to which Seller is a party
or by which its properties are bound;
(ii) violates any order, writ, injunction or
decree of any court, administrative agency or governmental body; or
(iii) requires the consent of any other person, entity or governmental
authority.
8
<PAGE> 9
(d) Brokerage Fees. Seller is obligated and has
agreed to pay brokerage commissions in the amount of 10% of the Purchase Price
- - All Purchased Assets up to a maximum of $50,000.00 to Dixon Capital
Associates, Inc. in connection with the purchase of the Purchased Assets
pursuant to this Agreement. Seller agrees that Purchaser shall cause the
brokerage commission to be paid directly to Dixon Capital Associates, Inc., as
a reduction of the Initial Payment due to Seller, via a wire transfer or any
other mutually agreeable means on the Closing Date.
(e) Title to Purchased Assets. Seller warrants
that on the date hereof it has good and marketable title to all of the
Purchased Assets, and the Purchased Assets shall not be subject to any pledge,
option, conditional sale agreement, security interest, consensual lien,
judgment lien, encumbrance or charge of any kind. Seller warrants that the
Alarm Accounts acquired by Purchaser are valid and are binding upon and
enforceable against the customers of Seller executing same in accordance with
their terms, and the obligations of the customers of Seller thereunder are not
subject to set-off or claims resulting from the conduct of Seller's business
prior to their conveyance to Purchaser.
(f) Compliance with the Law. The Business has
been and is being conducted in compliance with all applicable laws, regulations
and requirements of each jurisdiction in which it is carried on and is not in
breach of any such laws, regulations or requirements, and Seller warrants to
hold Purchaser harmless from and against any violations or applicable laws,
regulations or requirements arising out of non-compliance therewith prior to
the Closing Date.
(g) Actions, etc.
(i) There are no actions, suits,
proceedings or investigations pending against or relating to the Business or
the Purchased Assets and Seller has not received any notice or written or oral
communication reflecting an intention or threat to institute any such action,
suite proceeding or investigation.
(ii) There are no actions, suits,
proceedings, or investigations pending before any court or governmental agency
in which it is sought to restrain or prohibit the carrying out of this
Agreement or the consummation of the transactions contemplated herein in
connection therewith and there is no such action, suit, proceeding or
investigation threatened.
(iii) Seller is not subject to any
judgment, order, writ, court decree, governmental decree or injunction relating
to the Business.
(iv) There are no known defects or
deficiencies in the products or services provided by Seller prior to the date
hereof as a result of which any claim or suit may arise.
9
<PAGE> 10
(v) Set forth on Schedule 8(g)(v)
attached hereto is a summary and brief description of all pending litigation to
which Seller is a party.
(h) Tax Returns. Seller has timely filed all tax
reports and returns required to be filed and has timely paid all taxes
(including, without limitation, income, payroll withholding, sales and use
taxes) and all other charges due or claimed to be due from it by federal, state
or local taxing authorities in respect of the periods covered by such returns.
(i) Alarm Account Requirements. Each of the Alarm Accounts must:
(i) be evidenced by a valid, enforceable
and properly executed monitoring agreement;
(ii) not been repudiated by the customer.
An Alarm Account shall be deemed repudiated if: (A) the customer has abandoned
the premises at which the security monitoring system has been installed; (B) if
the customer is insolvent; or (C) if the customer has cancelled or issued
notice of termination of an Alarm Account, notwithstanding the fact that an
Alarm Account may remain enforceable against the customer;
(iii) have generated cash receipts
representing service charges for at least one full billing cycle or prepayment
for at least one month's service; and
(iv) have no charges that have been
outstanding and unpaid for more than 60 days from the invoice due date as of
the Closing Date.
(j) Benefit Plans. No profit-sharing, bonus,
stock option, pension, retirement, stock purchase, hospitalization insurance or
similar plan or agreement, formal or informal, providing benefits to any
current or former employee, or any other employee benefit or employee welfare
plan subject to the provisions of the Employee Retirement Income Security Act
of 1974, as amended, maintained by Seller shall obligate Purchaser to make any
contributions thereto or payments in respect thereof with regard to employees
of Seller who may be hired by Purchaser on or after the Closing Date.
(k) Medical Information. Seller has not entered
into any contract or other agreement with any or all of its customers which
would require Purchaser to provide any medical or health information on its
customers to any third party and Seller is not obligated to keep or obtain
medical or health information on any or all of its customers.
(l) Disclosure. No representation or warranty of
Seller, and no statement contained in this Agreement and no information
contained in any schedule furnished to Purchaser by or on behalf of Seller
pursuant to this Agreement, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading. Each of the separate representations and
warranties set forth in the various subsections of this Section 8 is intended
to be, and shall be interpreted as, an
10
<PAGE> 11
independent representation and warranty as to matters referred to therein, and
the applicability or inapplicability of any particular subsection of this
Section 8 shall not affect the interpretation of any other such subsection.
Section 9. Conditions Precedent to Obligations of Purchaser.
Purchaser's obligation to purchase the Purchased Assets under this Agreement is
subject to the fulfillment, prior to or at the Closing Date of each of the
following conditions:
(a) Representations True on the Closing Date.
The representations and warranties of Seller contained in this Agreement shall
be true on the date hereof, and at the time of the Closing Date as though made
on the Closing Date.
(b) Performance. Seller shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
(c) Seller's Closing Certificate. Seller shall
have delivered to Purchaser a Closing Certificate of the president or any
authorized representative of Seller dated as of the Closing Date substantially
in the form attached hereto as Schedule 9(c).
(d) Schedules. Seller shall have updated the
Schedules hereto in accordance with Section 14(g) hereof. Purchaser shall have
determined, in good faith, that taking into account the changes to the
information in the updated Schedules, the transactions contemplated by this
Agreement are as beneficial to Purchaser as prior to the updating of the
Schedules.
(e) Consents to Assignments. Seller shall have
taken all action necessary and appropriate, and obtained all necessary
consents, waivers and approvals, including but not limited to assignment of the
Security Alliance Command Center, Inc.'s alarm monitoring agreements, required
under any leases or other agreements to consummate the sale of the Purchased
Assets pursuant to this Agreement in writing on terms reasonably acceptable to
Purchaser, and Purchaser shall reasonably cooperate with Seller in its efforts
to obtain such consents, waivers and approvals.
(f) Litigation. No litigation or proceeding
shall be pending or threatened to restrain, set aside or invalidate the
transactions contemplated by this Agreement or any portion thereof, including,
without limitation, any claims by creditors of Seller against the Purchased
Assets.
(g) Opinion of Seller's Counsel. Seller shall
have delivered to Purchaser an opinion of counsel for Seller, dated as of the
Closing Date and in form satisfactory to Purchaser's counsel, to the effect
that:
11
<PAGE> 12
(i) Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia; the location and character of the properties owned or
leased and the business conducted by Seller do not make qualification or
licensing as a foreign corporation necessary in any other state or
jurisdiction; and Seller has the corporate power and authority to own its
properties and to carry on its business as now being conducted;
(ii) This Agreement has been duly executed
and delivered by Seller and constitutes a legal and binding obligation of
Seller, enforceable in accordance with its terms except as enforcement of the
same may be limited by bankruptcy, insolvency, reorganization or other laws
relating to or affecting the enforcement of creditors' rights and by general
equity principles;
(iii) All instruments of transfer and other
documents necessary to effect the transfer to Purchaser of the Purchased Assets
have been duly authorized, executed and delivered by Seller and are in proper
form to transfer to Purchaser all right, title and interest of Seller in and to
the Purchased Assets;
(iv) Except as set forth on Schedule
8(g)(v), such counsel does not know of any litigation, proceeding, governmental
investigation or claim pending or threatened against or relating to the
Business, the Purchased Assets or the transactions contemplated by this
Agreement; and
(v) The execution and delivery of this
Agreement and the consummation by Seller of the transactions contemplated
hereby:
(A) do not and will not violate any
provision of the articles of incorporation or bylaws of Seller;
(B) do not and will not violate, or
result, with the giving of notice or the lapse of time or both, in a violation
of any provision of, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, or result in the creation or imposition of, any lien, lease,
agreement, license, instrument, law, ordinance, regulation, order, arbitration
award, judgment or decree known to such counsel to which Seller is a party or
by which it is bound;
(C) do not and will not constitute an
event permitting termination of any lease, agreement, license or instrument
known to such counsel to which Seller is a party; and
(D) when combined with the execution
of the Bill of Sale are sufficient to, and do transfer all right, title and
interest in the Purchased Assets from Seller to Purchaser.
12
<PAGE> 13
(h) Certified Resolutions. Seller shall have
delivered to Purchaser copies, certified by the secretary or an assistant
secretary of Seller, of the resolutions of Seller's board of directors and
stockholders authorizing the execution and delivery of this Agreement.
(i) Certificates of Good Standing. Seller shall
have delivered to Purchaser a certificate of good standing of Seller issued by
the Corporations Commission of the Commonwealth of Virginia dated as of a date
within 35 days prior to Closing Date.
(j) Instruments of Transfer. Seller shall have
delivered to Purchaser a Bill of Sale, Assignment and Assumption Agreement
substantially in the form attached hereto as Schedule 9(j) (the "Bill of Sale")
and other good and sufficient instruments of transfer and conveyance, as in the
reasonable opinion of Purchaser's counsel, shall be effective to vest in
Purchaser good and marketable title to the Purchased Assets.
(k) Non-Solicitation Agreement. Seller shall
have delivered to Purchaser Non-Solicitation Agreements substantially in the
forms attached hereto as Schedule 8(k) executed by Tim C. Mitchell and Casey
Slawinski, in their individual capacities, and by Seller.
(l) Notice to Subscribers. Seller shall have
mailed on the Closing Date to each customer set forth on Schedules 1(a) and
1(f) hereto a notice in the form attached hereto as Schedule 9(1). Seller
shall be responsible for the costs associated with the creation and mailing of
such notices.
(m) Payment of Accrued Vacation Pay, etc. Seller
shall pay to each of Seller's employees who render services to the Business
that are to be discharged on or after the Closing Date all accrued and unpaid
vacation pay, sick pay and all other accrued obligations to which such
employees are entitled as a result of the termination of their employment with
Seller.
(n) Evidence of Insurance. Seller shall have
provided to Purchaser evidence satisfactory to Purchaser that Seller has
maintained an occurrence based policy of insurance covering the Purchased
Assets which is acceptable to Purchaser prior to and including the Closing
Date and Seller's insurer shall have provided to Purchaser a certificate dated
as of the Closing Date stating that such policy of insurance is in full force
and effect as of the Closing Date and that all premiums for the policy of
insurance which shall be attached to such certificate shall have been paid in
full as of the Closing Date. Further, if any claims shall be outstanding as of
the Closing Date on any insurance policy involving the Purchased Assets then
Seller shall notify Purchaser in writing of such outstanding claims prior to
the Closing Date.
Section 10. Conditions Precedent to Obligations of Seller.
Seller's obligations to sell and transfer the Purchased Assets to Purchaser
under this Agreement are subject to the fulfillment, prior to or on the Closing
Date of each of the following conditions:
13
<PAGE> 14
(a) Representations True on the Closing Date.
Purchaser's representations and warranties contained in this Agreement shall be
true at the date hereof, and at the Closing Date as though made on the Closing
Date.
(b) Performance. Purchaser shall have performed
and complied with all agreements and conditions required by this Agreement to
be performed or complied with by it prior to or on the Closing Date.
(c) Assumption Agreement. Purchaser shall have executed and delivered the
Bill of Sale.
Section 11. Indemnification. Seller, on the one hand, and
Purchaser, on the other hand, shall indemnify and hold each other harmless from
and against any and all losses, liabilities, damages and expenses, including
reasonable attorneys' fees, that they may suffer or become liable for as a
result of or in connection with any breach of a representation, warranty,
covenant or agreement contained in this Agreement.
Section 12. Bulk Sales Law. The sale and purchase described in
this Agreement will be conducted according to, and in full compliance with, the
requirements of the bulk transfer provisions of the Uniform Commercial Code as
adopted in the Commonwealth of Virginia. In addition to its indemnity under
Sections 5 and 11, Seller hereby agrees to indemnify and hold Purchaser
harmless from any and all liability to anyone arising from its failure to
comply with the provisions of Va. Code Ann. section 8.6-101 et seq., relating
to bulk transfers. Such indemnity shall survive Closing.
Section 13. Assignment. Purchaser may, without the consent of
Seller, assign its rights and delegate its obligations under this Agreement, to
any corporation, limited liability company partnership, association,
proprietorship or other business entity who acquires all or a substantial part
of the assets of Purchaser in connection with the sale of all or a substantial
part of its business. Upon any such assignment Purchaser shall be relieved and
discharged from any further obligations under this Agreement. Furthermore,
Purchaser may, without the consent of Seller, collaterally assign its rights
under this Agreement to one or more banks, insurance companies or other
financial institution for purposes of financing. Seller shall not assign its
rights or delegate its obligations under this Agreement without the prior
written consent of Purchaser.
Section 14. Agreements Prior to Closing.
(a) Fulfillment of Conditions. Seller shall use
its best efforts to take or cause to be taken all action reasonably necessary
or appropriate to cause each of the
14
<PAGE> 15
conditions set forth in Section 9 to be fulfilled prior to or on the Closing
Date. Purchaser shall use its best efforts to take or cause to be taken all
action reasonably necessary or appropriate to cause each of the conditions set
forth in Section 10 to be fulfilled prior to or on the Closing Date.
(b) Access to Information. Between the date of
this Agreement and the Closing, Seller shall allow the officers, directors,
employees, representatives, attorneys and accountants of Purchaser free access
at all reasonable times to the records, files, correspondence, audits and
properties of Seller which pertain to the Business.
(c) Confidentiality. Purchaser agrees to hold
all information it obtains pursuant to its review of the records, files,
correspondence, audits and properties of Seller in confidence and not to
disclose such information to any third party, except for:
(i) information known by Purchaser and obtained from sources other than
Seller;
(ii) disclosure that is authorized by Seller in writing;
(iii) disclosure to Purchaser's
professional advisors and to persons who are expected to be lenders to
Purchaser; or
(iv) disclosure of information where such
information is required to be filed with any governmental agency or required to
be produced before any court or tribunal or otherwise required by law to be
disclosed. Except in connection with Seller's filing of tax returns and as
otherwise required by law, Seller shall not disseminate to any person other
than officers, directors, employees, representatives, attorneys and accountants
of Seller any information relating to the Purchase Price or other consideration
contemplated to be paid under this Agreement.
(d) Conduct of Business. Between the date of
this Agreement and the Closing Date, Seller shall cause the Business to be
conducted in its usual and ordinary course.
(e) Preservation of Existing Relationships.
Between the date of this Agreement and the Closing Date, Seller shall use its
best efforts to continue existing relationships with customers, suppliers,
employees and others having business relations with respect to Seller.
15
<PAGE> 16
(f) No Negotiations with Third Parties. So long
as this Agreement is in effect, Seller shall not enter into any negotiations,
arrangements, understandings, commitments, options or other agreements
regarding the sale, transfer or other disposition of any of the shares of stock
of Seller or of all or substantially all of the assets of Seller that relate in
any way to the Business, or regarding any merger or consolidation of Seller
with or into any corporation or other business entity.
(g) Updated Schedules. Seller agrees to update
the Schedules hereto as of the Closing Date to reflect changes occurring after
the date hereof; provided, however, that if any of the Schedules attached
hereto on the date hereof are materially inaccurate or incorrect, Seller may
correct such Schedules only with Purchaser's written consent. Any updated
Schedules shall be attached to this Agreement and for all purposes be deemed to
be a part of this Agreement.
Section 15. No Joint Venture. The relationship between the
parties hereto is that of purchaser/seller and does not constitute a
partnership or joint venture. Both parties agree not to make any
representations or statements to any other person which contradict the
foregoing.
Section 16. Seller's Employees. Purchaser shall be under no
obligation to employ after the Closing Date any of Seller's employees. Prior
to the Closing Date, Purchaser may interview any of Seller's employees
regarding possible employment with Purchaser as of the Closing Date, so long as
Purchaser does not materially interfere with the conduct of Seller's business.
If Purchaser and any of Seller's employees reach agreement as to terms of
employment to commence on or after the Closing Date, no inference shall be
created that Purchaser has assumed any of Seller's obligations to its
employees; provided, however, that if Purchaser hires any of Seller's employees
then Seller shall provide Purchaser a copy of any and all personnel records
relating to such employees. Seller shall furnish to Purchaser on request a
list of all employees of the Business, setting forth their compensation, job
description, hire date and a summary of all benefits provided.
Section 17. Post-Closing Covenants. Seller agrees to use its
best efforts to accommodate the conversion of the Alarm Accounts and
Contracts-in-Process to Purchaser's central station and billing system on or
before the Closing Date or such other date as may be mutually agreed to by
Seller and Purchaser (the "Conversion Date"); provided, however, that during
the period of time between the Closing Date and the Conversion Date the
monitoring and servicing of the Alarm Accounts and the Contracts-in-Process
shall be governed by a Monitoring Agreement entered into between Seller and
Purchaser, substantially in the form attached hereto as Schedule 17. Seller
agrees to transfer to Purchaser all "ring down lines" for fire monitoring of
Alarm Accounts without a change in priority or position. In connection with
the conversion of the Alarm Accounts and the Contracts-in-Process, Seller shall
either (i) at its sole expense, secure new telephone numbers and/or lines for
those Alarm Accounts and Contracts-in-Process,
16
<PAGE> 17
which share telephone numbers and/or lines with third parties; or (ii) credit
the Purchase Price - All Purchased Assets in accordance with Section 2(f)(ii)
or credit the Escrow Account (the "Conversion Adjustment"). Such Conversion
Adjustment shall equal $50 per Alarm Account or Contract-in-Process that
requires a post-Closing computer chip change service call by Purchaser.
Additionally, if requested to do so by Purchaser, Seller will assist in the
orderly transition of the Alarm Account and Contracts-in-Process base by
mailing the next scheduled invoices associated with the Alarm Accounts and
Contracts-in-Process.
Section 18. Risk of Loss. The risk of any loss or damage to the
Purchased Assets resulting from fire, theft, explosion, earthquake, windstorm,
flood, accident, act of God, war, seizure, activities of the armed forces or
other casualty, reasonable wear and tear excepted, shall be borne by Seller at
all times prior to the Closing Date, and Seller shall be entitled to all
insurance proceeds resulting from such loss or damage.
Section 19. Miscellaneous.
(a) Pronouns. Whenever used herein and unless
otherwise indicated by the context, the masculine pronoun shall include and
also mean the feminine and the neuter, and the singular shall include and also
mean the plural.
(b) Expenses. Each party shall pay all expenses
incurred by it in connection with the preparation, execution and performance of
this Agreement.
(c) Entire Agreement. This Agreement, together
with the Schedules hereto, sets forth the entire understanding of the parties,
and supersedes all prior agreements, arrangements and communications, whether
oral or written, with respect to the subject matter hereof. This Agreement
shall not be modified or amended except by written agreement of Purchaser and
Seller. Captions appearing in this Agreement are for convenience only and
shall not be deemed to explain, limit or amplify the provisions hereof. All
Schedules to this Agreement are incorporated into and made a part of this
Agreement for all purposes to the same extent as if fully set forth herein.
(d) Severability. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if the invalid or unenforceable provision was omitted.
(e) Binding Effect; Assignment. All the terms,
provisions, covenants and conditions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by and against the parties
hereto and their respective successors and assigns.
(f) Notices. Any notice required or permitted to
be delivered pursuant to the terms of this Agreement shall be considered to
have been sufficiently delivered within five
17
<PAGE> 18
days after posting, if mailed by U.S. Mail, certified or registered, return
receipt requested, postage prepaid or, upon receipt by overnight courier
maintaining records of receipt by addressee or if delivered by hand or
telecopied with the original notice being mailed the same day by one of
the foregoing methods and addressed as follows:
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
WITH COPY TO:
Burr & Forman
420 North 20th Street
Suite 3100
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLER AT:
Global Security, Inc.
2712 Enterprise Parkway
Richmond, Virginia 23294
Attention: Mr. Tim C. Mitchell
FACSIMILE: (804) 346-0390
18
<PAGE> 19
WITH COPY TO:
Spinella, Owings & Shaia, P.C.
8550 Mayland Drive
Richmond, Virginia 23294
Attention: Herman C. Daniel, III, Esq.
FACSIMILE: (804) 270-7268
or at such other address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
(g) Further Assurances. Purchaser and Seller
shall execute such other instruments, documents and other papers and shall take
such further actions as may be reasonably required or desirable to carry out
the provisions hereof and to consummate the transactions contemplated hereby.
(h) Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Alabama,
excluding its conflict of laws principles.
(i) Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original.
(j) Survival. The representations and warranties
of the parties hereto shall survive the date of this Agreement.
(k) Drafting Presumption. Each of the parties
hereto has participated in the negotiation and drafting of this Agreement and
agree that no one party has prepared this document to the exclusion of the
other party and that in construing this agreement there should be no
presumption based upon which party drafted this Agreement.
(l) Intended Beneficiary. Purchaser and Seller
hereby acknowledge that the Purchase Price for the Purchased Assets will be
funded from a loan provided by State Street Bank and Trust Company to
Purchaser; therefore, Purchaser and Seller further acknowledge that State
Street Bank and Trust Company is an intended beneficiary of this Agreement and
shall rely upon the representations, warranties and agreements of Purchaser and
Seller contained herein.
19
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
PURCHASER
MASADA SECURITY, INC.
By: /s/ Terry W. Johnson
---------------------------------
Its: President
-----------------------------
SELLER
GLOBAL SECURITY, INC.
(f/k/a GLOBAL SECURITY SYSTEMS OF
VIRGINIA, INC.)
By: /s/ Timothy C. Mitchell
---------------------------------
Its: President
-----------------------------
20
<PAGE> 21
LIST OF SCHEDULES
Schedule 1(a) - Alarm Accounts
Schedule 1(b) - Inventory
Schedule 1(c) - Fixed Assets
Schedule 1(d) - Equipment
Schedule 1(e) - Vehicles
Schedule 1(f) - Contracts-in-Process
Schedule 1(g) - Other Contracts
Schedule 1(h) - Receivables
Schedule 1(i) - Intangible Personal Property
Schedule 1(j) - Telephone Lines and Numbers
Schedule 2(a) - Prepaid Revenue
Schedule 2(g) - Allocation of Purchase Price
Schedule 3(a) - Escrow Agreement
Schedule 3(b) - Escrow Account Distribution
Schedule 5 - Assumed Liabilities
Schedule 8(g)(v) - Pending Seller Litigation
Schedule 9(c) - Seller's Closing Certificate
Schedule 9(j) - Bill of Sale, Assignment and Assumption
Agreement
Schedule 9(k) - Non-Solicitation Agreement
Schedule 9(l) - Notice to Subscribers
Schedule 17 - Monitoring Agreement
<PAGE> 1
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made effective as of the 5th
day of May, 1995, by and among Masada Security, Inc., a Delaware Corporation
("Purchaser"); Global Security, Inc., formerly known as Global Security Systems
of Virginia, Inc., a Virginia corporation (collectively referred to as
"Seller"); and SouthTrust Bank of Alabama, N.A. ("Escrow Agent").
RECITALS
WHEREAS, Seller and Purchaser have entered into an Asset Purchase
Agreement dated April 14, 1995 (the "Purchase Agreement"), pursuant to which the
Seller agrees to sell and Purchaser agrees to purchase all of the customer
accounts and certain other assets of Seller related to the monitoring of
security alarm systems in Richmond, Virginia, as more fully described therein;
WHEREAS, the Purchase Agreement requires Escrow Agent to hold
$53,937.10 of the purchase price in escrow for approximately one year pending
certain possible adjustments in accordance with the Purchase Agreement;
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. ESCROW AGENT: Purchaser and Seller hereby designate and
appoint the Escrow Agent as the Escrow Agent for the purposes herein set forth.
The Escrow Agent hereby accepts such appointment on the terms and conditions
herein set forth. Escrow Agent is not a party to and is not bound by any
agreement between Purchaser and Seller except this Agreement.
2. DEPOSIT IN ESCROW:
(a) Escrow Agent hereby acknowledges the receipt from
Purchaser of the sum of Fifty-three-Thousand-nine-hundred-thirty-seven and
10/100 ($53,937.10) Dollars (the "Escrowed Funds"). Escrow Agent agrees to hold
and dispose of said sum, and all interest and gains earned thereon, in
accordance with all the terms, conditions and provisions of this Agreement.
Escrow Agent acts hereunder as a depository. All deposits are warranted by
Purchaser to be valid deposits.
(b) Escrow Agent shall invest the Escrowed Funds as
directed by the joint written instructions of Seller and Purchaser. All
earnings received by Escrow Agent as a result of such investment shall be added
to the Escrowed Funds. In the absence of any joint direction by Seller and
Purchaser to the contrary, Escrow Agent, in its discretion, shall invest all
portions of the Escrowed Funds in certificates of deposit (90 day), and/or money
market funds.
<PAGE> 2
3. DISTRIBUTIONS:
(a) On or after May 5, 1996, Purchaser and Seller shall
jointly give signed written notice ("Payment Notice") to Escrow Agent which
Payment Notice shall list the parties entitled to the Escrowed Funds and a
breakdown of the amounts each party is entitled to. Upon receipt of the Payment
Notice, the Escrow Agent shall pay to the appropriate parties the Escrowed Funds
within ten days after the receipt of such Payment Notice. The Payment Notice
shall set forth a brief description of the basis entitling such parties to be
paid the Escrowed Funds.
(b) If the Escrow Agent receives a Payment Notice which
is (i) signed by Purchaser but not by Seller, or (ii) signed by Seller but not
by Purchaser, the Escrow Agent shall give notice, along with a copy of such
Payment Notice, to the other party (the "Non-Signing Party"). If the
Non-Signing Party gives notice to the Escrow Agent of its agreement with the
Payment Notice, or fails to respond to the notice from the Escrow Agent, within
seven days after the date of such notice, then the Escrow Agent shall pay to
Seller (or its designee) the Escrowed Funds, within ten days after the
expiration of such seven day period. If the Non-Signing Party gives notice to
the Escrow Agent of its disagreement with the Payment Notice, within such seven
day period, then the Escrow Agent shall pay the undisputed portion, if any, of
the Escrowed Funds, but shall not pay any portion of the Escrowed Funds subject
to dispute, which disputed funds shall continue to be held by the Escrow Agent
pending resolution of such dispute and further direction from Purchaser and
Seller, or from an authorized arbitrator.
(c) In the event of any disagreement resulting in adverse
claims or demands being made in connection with the subject matter of this
Agreement, or in the event that the Escrow Agent is in doubt as to what action
it should take hereunder, the Escrow Agent may, at its option, refuse to comply
with any claim or demand on it, or refuse to take any other action hereunder, so
long as such disagreement continues or such doubt exists, and in any such event,
the Escrow Agent shall not be or become liable in any way or to any person for
its failure or refusal to act, and the Escrow Agent shall be entitled to
continue to so refrain from acting until (i) the rights of all parties have been
fully and finally decided by an arbitrator selected in accordance with Section
3(c) of the Purchase Agreement, which is incorporated herein by this reference,
or (ii) all differences shall have been decided and all doubt resolved by
agreement between Purchaser and Seller, and the Escrow Agent shall have been
notified thereof in a writing signed by Purchaser and Seller. In addition to
the foregoing remedies, the Escrow Agent is hereby authorized in the event of
any doubt as to the course of action it should take under this Agreement, to
petition the United States District Court for the Northern District of Alabama
and/or the Circuit Court in and for Jefferson County, Alabama for instructions
or to interplead the funds or assets so held into such court. For purposes of
this Agreement the parties agree to the jurisdiction of either of said courts
over their persons as well as the Escrowed Funds and agree that service of
process by certified mail, return receipt requested, to the address set forth in
Paragraph 9 below shall constitute adequate service. Purchaser and Seller
hereby agree to indemnify and hold the Escrow Agent harmless from any liability
or losses occasioned thereby and to pay any and all of its costs, expenses, and
reasonable attorney's fees incurred in any such
2
<PAGE> 3
action and agree that on such petition or interpleader action that the Escrow
Agent, its servants, agents, attorneys, employees and officers will be relieved
of further liability. Escrow Agent is hereby given a lien upon, security
interest in, and right of setoff against, the Escrowed Funds to secure Escrow
Agent's rights to payment or reimbursement for any and all costs, expenses, and
fees incurred by it hereunder.
(d) If a Non-Signing Party shall be determined by (i) a
court of competent jurisdiction, (ii) an arbitrator's binding award, or (iii) a
written release between the parties, to have acted in a frivolous manner and in
bad faith, the other party shall be entitled to reimbursement of all its
reasonable costs incurred in connection with the Payment Notice (including,
without limitation, reasonable attorney's fees).
4. TERMINATION: This Agreement shall terminate on the date that
no Escrowed Funds continue to be held by the Escrow Agent.
5. LIMITATIONS ON LIABILITY OF ESCROW AGENT: In order to induce
the Escrow Agent to act as the escrow agent under this Agreement, Seller and
Purchaser agree as follows:
(a) The Escrow Agent may rely upon and shall be protected
in acting or refraining from acting upon any written notice, instruction or
request received by the Escrow Agent and believed by the Escrow Agent in good
faith to be genuine and signed by Seller and Purchaser. The Escrow Agent shall
not be responsible for the sufficiency, correctness, genuineness or validity of
any notice or instructions delivered to the Escrow Agent. The Escrow Agent
shall not be liable for any error of judgment, or any act or omission under this
Agreement taken in good faith, except for the Escrow Agent's own gross
negligence or willful misconduct.
(b) Seller and Purchaser shall jointly and severally
indemnify and hold harmless the Escrow Agent from and against any claims, costs,
damages, reasonable attorney's fees, expenses, obligations or charges made
against the Escrow Agent by reason of its action or failure to act in connection
with any of the transactions contemplated by this Agreement, unless caused by
the Escrow Agent's gross negligence or willful misconduct.
(c) In the event the Escrow Agent receives or becomes
aware of conflicting instructions, demands or claims with respect to this
Agreement or the sums deposited hereunder, the Escrow Agent shall have the right
to discontinue any and all further acts until such conflict is resolved to the
Escrow Agent's satisfaction. The Escrow Agent shall have the further right to
commence or defend any action or proceeding for the termination of such
conflict. Seller and Purchaser jointly and severally agree to pay all costs,
damages, judgments and expenses, including reasonable attorneys' fees, suffered
or incurred by the Escrow Agent in connection with such action or proceeding.
In the event the Escrow Agent files a suit in interpleader, the Escrow Agent
shall thereupon be fully released and discharged from all further obligations
imposed by this Agreement with respect to sums deposited with a court of
competent jurisdiction pursuant to such suit in interpleader.
3
<PAGE> 4
6. ESCROW FEES: The Escrow Agent shall not be entitled to
receive a fee for serving as the Escrow Agent; provided, however, that the
Escrowed Funds shall be subject to the Escrow Agent's standard fees and service
charges as provided in the Escrow Agent's Rules and Regulations Governing
Deposit Accounts.
7. RESIGNATION: The Escrow Agent may resign at any time upon
giving the parties hereto 30 days advance written notice to that effect. In
such event, the successor escrow agent shall be mutually selected by Seller and
Purchaser. However, in no instance shall the Escrow Agent's resignation be
effective until a successor escrow agent has agreed to act but, Escrow Agent
shall have the right to discontinue any and all future acts until such successor
escrow agent has agreed to act.
8. INTEREST INFORMATION: Unless otherwise agreed to in writing
by both parties: (i) the Escrow Agent shall list the employer tax identification
number of the Seller for federal, state and local tax purposes and for other
necessary purposes; and (ii) all interest earned shall be the sole and exclusive
property of the Seller; and (iii) any and all of Escrow Agent's fees and charges
as provided for in Paragraph (6) of this Agreement shall first be charged
against interest earned and then charged against principal.
9. NOTICE: Any notice or other communication hereunder shall be
in writing and shall be (i) delivered by hand, (ii) delivered by an overnight
courier service with guaranteed next day delivery, (iii) sent by telecopy, or
(iv) mailed by certified mail, postage prepaid, return receipt requested, and
addressed as follows:
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
4
<PAGE> 5
WITH COPY TO:
Burr & Forman
420 North 20th Street
Suite 3100
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLER AT:
Global Security, Inc.
2712 Enterprise Parkway
Richmond, Virginia 23294
Attention: Tim C. Mitchell
FACSIMILE: (804) 346-0390
WITH COPY TO:
Spinella, Owings & Shaia
8550 Mayland Drive
Richmond, Virginia 23294
Attention: Herman C. Daniel, III, Esq.
FACSIMILE: (804) 270-7268
IF TO ESCROW AGENT:
SouthTrust Bank of Alabama, N.A.
420 North 20th Street
Birmingham, Alabama 35203
Attention: Mr. Robert W. Wilkerson
FACSIMILE: (205) 254-5989
5
<PAGE> 6
or to such other address as may have been furnished to the party giving notice
by the party to whom notice is to be given. Notice shall be deemed given upon
the earlier of (i) three days after deposit in the U.S. Mail by certified mail,
or (ii) actual receipt thereof.
10. MISCELLANEOUS:
(a) SUCCESSORS AND ASSIGNS: This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
(b) COUNTERPARTS: This Agreement may be executed in any
number of counterparts, each of which shall be an original, but which together
shall constitute one and the same instrument.
(c) GOVERNING LAW: This Agreement shall be governed by
and construed and interpreted in accordance with the laws of the State of
Alabama.
(d) AMENDMENT: This Agreement may not be modified,
changed, waived or terminated, in whole or in part, except by a supplemental
agreement signed by all of the parties hereto.
(e) HEADINGS: The headings assigned to Paragraphs of
this Agreement are for convenience only and shall be disregarded in construing
this Agreement.
(f) NO ASSIGNMENT: Neither Seller nor Purchaser shall
pledge, hypothecate or otherwise transfer or attempt to transfer any right,
title or interest hereunder without the prior written consent to the other party
hereto.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Terry W. Johnson
-------------------------
Its: President
---------------------
GLOBAL SECURITY, INC.
(f/k/a GLOBAL SECURITY
SYSTEMS OF VIRGINIA, INC.)
By: /s/ Timothy C. Mitchell
--------------------------
Its: President
----------------------
Tax I.D. No.: 54-1614928
----------------
SOUTHTRUST BANK OF ALABAMA,
N.A
By: /s/ Robert W. Wilkerson
--------------------------
Its: Senior Vice President
----------------------
7
<PAGE> 8
May 5, 1995
SouthTrust Bank of Alabama, N.A.
420 North 20th Street
Birmingham, Alabama 35203
Attention: Robert W. Wilkerson
RE: INVESTMENT OF ESCROWED FUNDS
Dear Mr. Wilkerson:
Pursuant to an Escrow Agreement dated May 5, 1995 by and between Masada
Security, Inc., a Delaware corporation ("Masada"), your bank and us, Global
Security, Inc. ("Global"), a Virginia corporation, SouthTrust Bank of Alabama,
N.A. ("Bank") is holding in escrow certain funds which are being paid by
Masada to Global.
Please be advised that it is the desire of Global that all such funds be
held in a one (1) year certificate of deposit with the one (1) year term.
Sincerely,
Global Security, Inc.
By: /s/ Timothy C. Mitchell
--------------------------
Timothy C. Mitchell
President
<PAGE> 9
MASADA SECURITY, INC.
950 22nd Street North
Suite 800
Birmingham, Alabama 35213
(205) 323-7233/fax (800) 531-3293
May 5, 1995
Mr. Bill Wilkerson
SouthTrust Bank
Birmingham, Alabama
Re: Investment of Global Security, Inc./Masada Security, Inc. Escrow Account
Dear Bill:
I concur with investment instructions provided by Tim Mitchell of Global
Security in the letter dated May 5, 1995. The funds are to be invested in a
one year Certificate of Deposit with a one year term.
Please do not hesitate to call me if you have questions or require additional
information.
Sincerely,
Charles E. Armstrong
Vice President of Corporate Development
<PAGE> 1
NON-SOLICITATION AGREEMENT
This Agreement is made and entered into this 5th day of May, 1995, by and
between MASADA SECURITY, INC., a Delaware corporation ("Masada") and GLOBAL
SECURITY, INC., formerly known as Global Security Systems of Virginia, Inc., a
Virginia corporation (collectively referred to as "Global").
RECITALS
Pursuant to the terms of an Asset Purchase Agreement dated of April
14, 1995 (the "Purchase Agreement"), Masada is purchasing certain of the
assets and properties of Global.
Global is uniquely experienced in the development and operation of
the security alarm system business, and Masada is unwilling to acquire
the assets referenced in the Purchase Agreement without first obtaining the
agreement of Global not to solicit Masada's business.
As an inducement to the consummation of the transactions evidenced by
the Purchase Agreement, Global is willing to issue this Non-Solicitation
Agreement to Masada and acknowledges that valuable direct consideration will
be paid to it as a result of its execution and delivery of this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which are hereby acknowledged, and intending
to be legally bound, agree as follows:
Section 1. Non-Solicitation Covenant. Global shall not in any manner,
directly or indirectly, through any corporation, partnership or any other
entity, solicit or provide security
<PAGE> 2
monitoring services to any person or entity set forth on Schedules
1(a) and 1(f) to the Purchase Agreement, or otherwise take any action which
would adversely affect Masada's interest in the Alarm Accounts and
Contracts-in-Process (as such terms are defined in the Purchase Agreement)
purchased from Seller. Furthermore, Global shall not use, communicate,
inform or otherwise divulge to any third party any information pertaining to
the persons and entities set forth on Schedules 1(a) and 1(f) to the Purchase
Agreement.
SECTION 2. CONSIDERATION. Global acknowledges that sufficient
and adequate consideration has been paid to it for the execution and delivery
to Masada of this Agreement.
SECTION 3. REMEDIES FOR BREACH. Global recognizes that in the event of
a breach of any covenant herein contained, which breach remains uncured
after five (5) days written notice by Masada, it will be difficult to
determine the damages Masada would suffer, and therefore, Global agrees and
acknowledges that Masada may obtain injunctive relief to prevent further
breaches of the covenants herein contained, in addition to provable
damages. It is specifically understood that in the event of litigation
arising from a breach of the covenants herein contained, Masada shall
be entitled to recover, in addition to damages and injunctive relief, all
costs incurred, including attorneys' fees.
SECTION 4. PARTIAL INVALIDITY. In the event any provision or portion
of this Agreement is deemed to be invalid or unenforceable in whole or
in part for any reason, the remainder shall not be invalidated, rendered
unenforceable, or otherwise adversely affected. Without limiting the
generality of the forgoing, if the provisions of the covenant not to
solicit contained herein
2
<PAGE> 3
shall be deemed to create a restriction which is unreasonable as to duration
or geographical area or both, the parties agree that the provisions of this
Agreement shall be enforced for such duration and in such geographical
area as any court of any competent jurisdiction may determine to be
reasonable.
SECTION 5. SUCCESSORS AND ASSIGNS. Global acknowledges that the
covenants contained herein are unique and personal, and that Global may not
assign any of its rights or delegate any of its duties or obligations under
this Agreement. The rights and obligations of Masada under this Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of Masada.
SECTION 6. NOTICES. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have
been sufficiently delivered within five days after posting, if mailed by U.S.
Mail, certified or registered, return receipt requested, postage prepaid
or, upon receipt by overnight courier maintaining records of receipt by
addressee or if delivered by hand or telecopied with the original notice being
mailed the same day by one of the foregoing methods and addressed as follows:
IF TO MASADA AT:
Masada Security, Inc.
950 22nd Street North, Suite 800 Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: (800) 531-3293
3
<PAGE> 4
WITH COPY TO:
Burr & Forman
420 North 20th Street
Suite 3100
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO GLOBAL AT:
Global Security, Inc.
2712 Enterprise Parkway
Richmond, Virginia 23294
Attention: Tim C. Mitchell
FACSIMILE: (804) 346-0390
WITH COPY TO:
Spinella, Owings & Shaia, P.C.
8550 Mayland Drive Richmond, Virginia 32394
Attention: Herman C. Daniel, III, Esq.
FACSIMILE: (804) 270-7268
or at such other address as the party may designate by ten days advance
written notice to the other party. Notice shall be effective when
delivered to a responsible person at the address of the addressee.
4
<PAGE> 5
SECTION 7. WAIVER OF BREACH. The waiver by Masada of a breach of any
provision of this Agreement by Global shall not operate or be construed as
a waiver of any subsequent breach by Global. No waiver shall be valid unless
in writing and signed by an authorized representative of Masada.
SECTION 8. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements,
arrangements and communications, whether oral or written, pertaining to the
subject matter hereof. This Agreement may not be modified or amended except by
an agreement in writing signed by each of the parties hereto.
SECTION 9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Alabama, excluding
its conflict of laws principles.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
MASADA SECURITY, INC.
By: /s/ Terry W. Johnson
--------------------------------
Its: President
----------------------------
GLOBAL SECURITY, INC.
(f/k/a GLOBAL SECURITY SYSTEMS OF
VIRGINIA, INC.)
By: /s/ Timothy C. Mitchell
--------------------------------
Its: President
----------------------------
5
<PAGE> 1
NON-SOLICITATION AGREEMENT
This Agreement is made and entered into this 15 day of May, 1995, by
and between MASADA SECURITY, INC., a Delaware corporation ("Masada") and CASEY
SLAWINSKI, an individual resident of the Commonwealth of Virginia ("Slawinski").
RECITALS
Pursuant to the terms of an Asset Purchase Agreement dated as of April
14, 1995 (the "Purchase Agreement"), Masada is purchasing certain of the assets
and properties of Global Security Systems of Virginia, Inc. ("Seller").
Slawinski is a shareholder and key employee of Global and is uniquely
experienced in the development and operation of the security alarm system
business, and Masada is unwilling to acquire the assets referenced in the
Purchase Agreement without first obtaining the agreement of Slawinski not to
solicit Masada's business.
As an inducement to the consummation of the transactions evidenced by
the Purchase Agreement, Slawinski is willing to issue this Non-Solicitation
Agreement to Masada and acknowledges that valuable direct consideration will be
paid to him from Global as a result of his execution and delivery of this
Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which are hereby acknowledged, and intending to
be legally bound, agree as follows:
<PAGE> 2
SECTION 1. NON-SOLICITATION COVENANT. Slawinski shall not in any
manner, directly or indirectly, through any corporation, partnership or any
other entity, solicit or provide security monitoring services to any person or
entity set forth on Schedules 1(a) and 1(f) to the Purchase Agreement, or
otherwise take any action which would adversely affect Masada's interest in the
Alarm Accounts and Contracts-in-Process (as such terms are defined in the
Purchase Agreement) purchased from Seller. Slawinski shall not use,
communicate, inform or otherwise divulge to any third party any information
pertaining to the persons and entities set forth on Schedules 1(a) and 1(f) to
the Purchase Agreement.
SECTION 2. CONSIDERATION. Slawinski acknowledges that sufficient and
adequate consideration has been paid to him for the execution and delivery to
Masada of this Agreement.
SECTION 3. REMEDIES FOR BREACH. Slawinski recognizes that in the
event of a breach of any covenant herein contained, which breach remains
uncured after five (5) days written notice by Masada, it will be difficult to
determine the damages Masada would suffer, and therefore, Slawinski agrees and
acknowledges that Masada may obtain injunctive relief to prevent further
breaches of the covenants herein contained, in addition to provable damages. It
is specifically understood that in the event of litigation arising from a
breach of the covenants herein contained, Masada shall be entitled to recover,
in addition to damages and injunctive relief, all costs incurred, including
attorneys' fees.
SECTION 4. PARTIAL INVALIDITY. In the event any provision or portion
of this Agreement is deemed to be invalid or unenforceable in while or in part
for any reason, the remainder shall not be invalidated, rendered unenforceable,
or otherwise adversely affected. Without limiting the generality of the
foregoing, if the provisions of the covenant not to solicit contained herein
2
<PAGE> 3
shall be deemed to create a restriction which is unreasonable as to duration of
geographical area or both, the parties agree that the provisions of this
Agreement shall be enforced for such duration and in such geographical area as
any court of any competent jurisdiction may determine to be reasonable.
SECTION 5. SUCCESSORS AND ASSIGNS. Slawinski acknowledges that the
covenants contained herein are unique and personal, and that Slawinski may not
assign any of his rights or delegate any of his duties or obligations under
this Agreement. The rights and obligations of Masada under this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
Masada.
SECTION 6. NOTICES. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
IF TO MASADA AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: (800) 531-3293
<PAGE> 4
WITH COPY TO:
Burr & Forman
420 North 20th Street
Suite 3100
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO CASEY SLAWINSKI AT:
Global Security, Inc.
2712 Enterprise Parkway
Richmond, Virginia 23294
Attention: Casey Slawinski
WITH COPY TO:
Spinella, Owings & Shaia, P.C.
8550 Mayland Drive
Richmond, Virginia 32394
Attention: Herman C. Daniel, III, Esq.
FACSIMILE: (804) 270-7268
or at such other address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
SECTION 7. WAIVER OF BREACH. The waiver by Masada of a breach of any
provision of this Agreement by Slawinski shall not operate or be construed as a
waiver of any subsequent
4
<PAGE> 5
breach by Slawinski. No waiver shall be valid unless in writing and signed
by an authorized representative of Masada.
SECTION 8. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements, arrangements
and communications, whether oral or written, pertaining to the subject matter
hereof. This Agreement may not be modified or amended except by an agreement
in writing signed by each of the parties hereto.
SECTION 9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Alabama, excluding its
conflict of laws principles.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
MASADA SECURITY, INC.
By: /s/ Terry W. Johnson
-----------------------------------
Its: President
------------------------------
/s/ Casey Slawinski
--------------------------------------
Casey Slawinski
5
<PAGE> 1
NON-SOLICITATION AGREEMENT
This Agreement is made and entered into this 5th day of May, 1995, by
and between MASADA SECURITY, INC., a Delaware corporation ("Masada") and TIM C.
MITCHELL, an individual resident of the Commonwealth of Virginia ("Mitchell").
RECITALS
Pursuant to the terms of an Asset Purchase Agreement dated as of April
14, 1995 (the "Purchase Agreement"), Masada is purchasing certain of the assets
and properties of Global Security Systems of Virginia, Inc. ("Seller").
Mitchell is a shareholder and key employee of Global and is uniquely
experienced in the development and operation of the security alarm system
business, and Masada is unwilling to acquire the assets referenced in the
Purchase Agreement without first obtaining the agreement of Mitchell not to
solicit Masada's business.
As an inducement to the consummation of the transactions evidenced by
the Purchase Agreement, Mitchell is willing to issue this Non-Solicitation
Agreement to Masada and acknowledges that valuable direct consideration will be
paid to him from Global as a result of his execution and delivery of this
Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which are hereby acknowledged, and intending
to be legally bound, agree as follows:
<PAGE> 2
SECTION 1. NON-SOLICITATION COVENANT. Mitchell shall not in any
manner, directly or indirectly, through any corporation, partnership or any
other entity, solicit or provide security monitoring services to any person or
entity set forth on Schedules 1(a) and 1(f) to the Purchase Agreement, or
otherwise take any action which would adversely affect Masada's interest in the
Alarm Accounts and Contracts-in-Process (as such terms are defined in the
Purchase Agreement) purchased from Seller. Mitchell shall not use,
communicate, inform or otherwise divulge to any third party any information
pertaining to the persons and entities set forth on Schedules 1(a) and 1(f) to
the Purchase Agreement.
SECTION 2. CONSIDERATION. Mitchell acknowledges that sufficient and
adequate consideration has been paid to him for the execution and delivery to
Masada of this Agreement.
SECTION 3. REMEDIES FOR BREACH. Mitchell recognizes that in the
event of a breach of any covenant herein contained, which breach remains
uncured after five (5) days written notice by Masada, it will be difficult to
determine the damages Masada would suffer, and therefore, Mitchell agrees and
acknowledges that Masada may obtain injunctive relief to prevent further
breaches of the covenants herein contained, in addition to provable damages.
It is specifically understood that in the event of litigation arising from a
breach of the covenants herein contained, Masada shall be entitled to recover,
in addition to damages and injunctive relief, all costs incurred, including
attorneys' fees.
SECTION 4. PARTIAL INVALIDITY. In the event any provision or portion
of this Agreement is deemed to be invalid or unenforceable in while or in part
for any reason, the remainder shall not be invalidated, rendered unenforceable,
or otherwise adversely affected. Without limiting the generality of the
foregoing, if the provisions of the covenant not to solicit contained herein
2
<PAGE> 3
shall be deemed to create a restriction which is unreasonable as to duration of
geographical area or both, the parties agree that the provisions of this
Agreement shall be enforced for such duration and in such geographical area as
any court of any competent jurisdiction may determine to be reasonable.
SECTION 5. SUCCESSORS AND ASSIGNS. Mitchell acknowledges that the
covenants contained herein are unique and personal, and that Mitchell may not
assign any of his rights or delegate any of his duties or obligations under
this Agreement. The rights and obligations of Masada under this Agreement
shall inure to the benefit of and be binding upon the successors and assigns
of Masada.
SECTION 6. NOTICES. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
IF TO MASADA AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: (800) 531-3293
3
<PAGE> 4
WITH COPY TO:
Burr & Forman
420 North 20th Street
Suite 3100
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO TIM C. MITCHELL AT:
Global Security, Inc.
2712 Enterprise Parkway
Richmond, Virginia 23294
Attention: Tim C. Mitchell
WITH COPY TO:
Spinella, Owings & Shaia, P.C.
8550 Mayland Drive
Richmond, Virginia 32394
Attention: Herman C. Daniel, III, Esq.
FACSIMILE: (804) 270-7268
or at such other address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
SECTION 7. WAIVER OF BREACH. The waiver by Masada of a breach of any
provision of this Agreement by Mitchell shall not operate or be construed as a
waiver of any subsequent
4
<PAGE> 5
breach by Mitchell. No waiver shall be valid unless in writing and signed by
an authorized representative of Masada.
SECTION 8. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements, arrangements
and communications, whether oral or written, pertaining to the subject matter
hereof. This Agreement may not be modified or amended except by an agreement
in writing signed by each of the parties hereto.
SECTION 9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Alabama, excluding its
conflict of laws principles.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
MASADA SECURITY, INC.
By: /s/ Terry W. Johnson
-----------------------------------
Its: President
------------------------------
/s/ Tim c. Mitchell
--------------------------------------
Tim C. Mitchell
5
<PAGE> 1
MONITORING AGREEMENT
This Monitoring Agreement ("Agreement") is made and entered into on
this the 14th day of April, 1995, by and between MASADA SECURITY, INC., a
Delaware corporation ("Masada") and GLOBAL SECURITY, INC., formerly
known as Global Security Systems of Virginia, Inc., a Virginia corporation
(collectively referred to as "Global").
RECITALS
WHEREAS, Masada and Global have entered into an Asset Purchase
Agreement dated April 14, 1995 (the "Purchase Agreement"), pursuant to which
Global agrees to sell and Masada agrees to purchase certain customer accounts
("Accounts") located in the City of Richmond and its surrounding areas, State
of Virginia, as more fully described therein; and
WHEREAS, the Purchase Agreement requires that Global shall continue to
monitor the Accounts through its subcontractors, Security Alliance Command
Center, Inc. ("SACC") and Security Watch Central, Inc. ("SWC") until each of
the Accounts is reprogrammed to Masada's central monitoring station;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Duration. This Agreement shall become effective on the 14th
day of April, 1995. Masada shall have the unilateral right to terminate this
Agreement in whole or in part by providing Global with 30 days' advance
written notice of its intent to terminate.
2
<PAGE> 2
2. Monitoring Fees. Masada shall not charge Global or any other
person or entity for its monitoring services related to the Accounts for the
period prior to the Closing (as defined in the Purchase Agreement) during which
period Global shall reprogram the Accounts to Masada's central monitoring
station up to a maximum of 90 days after the effective date of this Agreement.
After such 90 day period, Masada shall charge Global a standard monthly
monitoring fee per Account, a listing of which is attached hereto as Exhibit
"A" and incorporated herein by this reference.
3. Joint Obligations. Global's sole and exclusive obligations
under this Agreement shall be to continue in its normal and customary manner
through SACC and SWC to monitor and respond to signals received from the
security alarm systems ("Systems") associated with the Accounts not yet
programmed to Masada's central monitoring station and to reprogram the Accounts
to Masada's central monitoring station. Upon receipt of a signal from a
System, Masada shall make every reasonable effort to promptly notify, by
telephone or other reasonable means, the agencies and/or persons whose names
and telephone numbers are set forth on the emergency information data for such
Account unless there is reasonable cause to believe that the receipt of such
signal does not warrant such action. Upon the request of Global, Masada shall
provide Global with a written summary of the signals received from all Systems
during the period of this Agreement. Consistent with industry standards,
Global, SACC and SWC may also take such other action as they deem appropriate
in responding to a signal from a System.
4. System Damage. In the event that any System becomes disabled
or substantially damaged so that further monitoring to such System is
impractical, Global shall notify Masada
3
<PAGE> 3
of such disability or damage and Global shall cooperate with Masada in
attempting to reestablish service to such System.
5. Indemnification. Global shall indemnify and hold Masada
harmless from and against any and all losses, liabilities, damages and
expenses, including reasonable attorneys' fees, that Masada may suffer or
become liable for as a result or in connection with any intentional conduct,
fraud or negligence on behalf of Global, its officers, employees, agents,
subcontractors or representatives arising in connection with the monitoring or
reprogramming of the Systems.
6. Account Modifications. Global shall notify Masada immediately
of any modification or termination of any Account. Masada shall take whatever
action is required due to such modification or termination including, but not
limited to, changing the emergency information data of an Account or
disconnecting an Account.
7. Assignment. Global shall not assign this Agreement in whole
or in part. Masada shall have the right to assign this Agreement in whole or
in part to any other corporation, limited liability company, partnership,
association, proprietorship, or other business entity without notice to or
approval by Global. Global shall have the right to subcontract any service
which Global may be required to perform pursuant to this Agreement to SACC and
SWC.
8. Miscellaneous.
(a) Conflict with Purchase Agreement. If this Agreement
is found to be in conflict with the Purchase Agreement, then the provisions of
the Purchase Agreement shall control to the extent there is such a conflict.
4
<PAGE> 4
(b) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns (where permitted).
(c) Governing Law. This Agreement shall be governed
by and construed and interpreted in accordance with the laws of the State of
Alabama.
(d) Amendment. This Agreement may not be modified,
changed, waived, or terminated, in whole or in part, except by a supplemental
agreement signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
MASADA SECURITY, INC.
By: /s/ Terry W. Johnson
----------------------------
Its: President
GLOBAL SECURITY, INC.
(f/k/a GLOBAL SECURITY SYSTEMS OF
VIRGINIA, INC.)
By: /s/ Timothy C. Mitchell
------------------------------
Its: President
<PAGE> 1
[VIRGINIA SYSTEMS]
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ALERT CENTRE, INC.
AND
MASADA SECURITY, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I PURCHASE AND SALE OF ASSETS 1
1.1 Assets to be Acquired 1
1.2 Access to Books and Records 2
1.3 Assumed Liabilities 2
1.4 Excluded Liabilities 2
ARTICLE II PURCHASE PRICE AND CLOSING 2
2.1 Purchase Price 2
2.2 Recurring Monthly Revenue 3
2.3 Escrow 4
2.4 Accounts Receivable 5
2.5 Closing Date and Location 5
2.6 Nonsolicitation Agreement 5
2.7 Delinquent Accounts 5
2.8 Allocation of Purchase Price 6
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER 6
3.1 Organization of Seller 6
3.2 Authority of Seller 6
3.3 WIP; Proposals and Bids 7
3.4 Intentionally omitted. 7
3.5 Real Property 7
3.6 Business Documents 7
3.7 Title to Property 7
3.8 Compliance with Laws; Litigation 7
3.9 Condition of Assets 8
3.10 Adverse Developments 8
3.11 Customer and Systems Information 9
3.12 Broker or Finder 10
3.13 No Employees; Agreements with Subcontractors 10
3.14 Tax Returns and Payments 11
3.15 Appraisal Rights 11
3.16 Burdensome Agreements 11
3.17 Options, Warrants and Rights of First Refusal 11
3.18 Environmental Matters 11
3.19 Disclosure 11
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER 12
4.1 Organization of Buyer 12
4.2 Authority of Buyer 12
4.3 Broker or Finder 12
4.4 Compliance with Law 12
4.5 Financing 12
4.6 Disclosure 13
ARTICLE V ACTIONS PRIOR TO THE CLOSING DATE 13
5.1 Investigation 13
5.2 Preservation of Representations and Warranties 13
5.3 Consents and Approvals 13
5.4 Public Announcements 13
5.5 Exclusive Dealing 14
5.6 Lien Searches 14
5.7 Maintenance of Business 14
5.8 Insurance 14
5.9 Organization and Transition 14
5.10 Consummation of Agreement 15
5.11 Accounts Receivable 15
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS (Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER 15
6.1 Covenants and Warranties 15
6.2 Corporate Action 16
6.3 No Restraint or Litigation 16
6.4 Necessary Consents and Permits 16
6.5 Opinion of Counsel 16
6.6 Adverse Change 16
6.7 Documents and Certificates 16
6.8 Satisfaction of Debts 16
6.9 Accounts Receivable 17
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER 17
7.1 Covenants and Warranties 17
7.2 Corporate Action 17
7.3 Delivery of Purchase Price 17
7.4 No Restraint or Litigation 17
7.5 Documents and Certificates 17
7.6 Minimum Purchase Price 17
ARTICLE VIII INDEMNIFICATION 18
8.1 Indemnification by Seller 18
8.2 Indemnification by Buyer 18
8.3 Notice of Claims 18
8.4 Survival 19
8.5 Waiver of Bulk Sales Compliance 19
8.6 Resolution of Claims 19
ARTICLE IX DAMAGE TO PROPERTY AND RISK OF LOSS 19
ARTICLE X CERTAIN POST CLOSING COVENANTS 20
10.1 Seller's Monitoring Obligations 20
10.2 Buyer's Monitoring Obligations 20
ARTICLE XI TERMINATION OF AGREEMENT 20
ARTICLE XII GENERAL PROVISIONS 21
12.1 Survival of Obligations 21
12.2 Transfer Charges and Taxes 21
12.3 Arbitration 21
12.4 Confidentiality 21
12.5 Governing Law 22
12.6 Notices 22
12.7 Assignment 22
12.8 Entire Agreement; Amendments 22
12.9 Interpretation 23
12.10 Waivers 23
12.11 Expenses 23
12.12 Partial Invalidity 23
12.13 Further Assurances 23
12.14 Counterparts 24
12.15 Intended Beneficiary 24
12.16 Consent to Jurisdiction, Service and Venue 24
</TABLE>
-ii-
<PAGE> 4
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of this 9th day of June, 1995, by and between
Alert Centre, Inc., a Delaware corporation ("Seller"), and Masada Security,
Inc., a Delaware corporation ("Buyer").
BACKGROUND:
WHEREAS, Seller owns and operates certain alarm accounts in Richmond,
Virginia and its environs as more specifically identified in Section 1.1.
hereof (the "Security Business"); and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, certain of
the assets of Seller used or useful in connection with the operation of the
Security Business, all on the following terms and conditions.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, and intending to be
legally bound, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Assets to be Acquired.
Upon the terms and subject to the conditions of this Agreement, Seller
shall, on the Closing Date (as defined in Section 2.5), sell, transfer, assign
and deliver to Buyer all of Seller's right, title, interest and benefit in and
to the following assets (the "Assets to be Acquired"):
(a) All of Seller's rights in, to and under all alarm systems
relating to the Security Business;
(b) All of Seller's rights in, to and under all alarm lease,
maintenance, repair, service and monitoring agreements with customers whose
balances at Closing are outstanding 90 days or less from the invoice date, all
of which are set forth on Schedule A;
(c) Any leases of equipment that are related to and used by
Seller in the Security Business, telephone book listing agreements and all
other agreements (including noncompetition and nonsolicitation agreements, if
any), permits (including permits relating to installations which are pending,
currently in process or completed) and manufacturer's warranties on tangible
property that are related to Seller's conduct of the Security Business, all of
which are set forth in Schedule B. The agreements listed on Schedules A and B
are referred to individually as a "Business Document" and collectively as the
"Business Documents";
(d) All of Seller's rights in, to and under the following assets,
intangibles and rights that are related to, and presently owned by Seller and
used in, the Security Business: (i) system designs and drawings (to the extent
relating to the tangible assets being acquired by Buyer);(ii) Accounts
Receivable as defined in Section 2.4;(iii) customer lists and files; (iv)
telephone lines and numbers (including WATS lines and "ring-down" lines), all
of which are listed on Schedule C; and (v) goodwill.
-1-
<PAGE> 5
1.2 Access to Books and Records.
Seller shall provide Buyer with access, upon reasonable request and during
normal business hours, to any of the books and records relating to the Security
Business which are not transferred to Buyer hereunder, and Seller agrees to
retain such books and records for a period of 3 years from the Closing Date.
1.3 Assumed Liabilities.
Buyer agrees to assume all liability for the performance of all
obligations arising after the Closing Date with respect to the Business
Documents assigned to Buyer by Seller (including the obligation to pay line
charges and sales taxes arising after the Closing Date), to the extent, and
only to the extent, listed on Schedules A and B. Buyer also agrees to assume
all liability for the performance of all obligations under any accounts listed
under Section 2.2(b) arising from and after the six month anniversary of the
Closing Date for those accounts that sign Acceptable Contracts during the first
six months after Closing.
1.4 Excluded Liabilities.
Except for the liabilities that Buyer will assume pursuant to Section 1.4,
Buyer will not assume or be obligated for any other liability, obligation or
commitment of Seller, direct or indirect, known or unknown, absolute or
contingent, including any of the following:
(a) any foreign, federal, state, county or local income or other
tax arising from the operation of the Security Business or the ownership of the
Assets to be Acquired on or prior to the Closing Date;
(b) any liability, obligation or commitment of Seller to its
creditors, whether arising out of contract or tort, or to any party holding a
lien on any of Seller's assets;
(c) any employee obligation, including any obligation for wages,
commissions, vacation and holiday pay, sick pay, bonuses, severance pay,
pensions, or any obligation under any collective bargaining agreement,
employment agreement or employment at-will relationship, or any obligation to
hire any employee of Seller after the Closing Date;
(d) any liability, obligation or commitment incurred by Seller
after the Closing Date;
(e) any liability the existence of which would constitute a
breach of any of the representations, warranties and covenants of Seller
hereunder; or
(f) any other liability, obligation or commitment not expressly
assumed by Buyer hereunder.
ARTICLE II
PURCHASE PRICE AND CLOSING
2.1 Purchase Price.
(a) The purchase price for the Assets to be Acquired (the "Purchase
Price") shall equal (i) a multiple of twenty-eight and one-half (28.5) times
the RMR (as defined in Section 2.2) provided by the Security Business for
accounts other than the Delinquent Accounts or the monthly connect fee for any
Emnet Accounts, as herein defined, plus (ii) a multiple of fourteen and
one-quarter (14.25) times the RMR for any accounts from customers whose
balances at Closing are outstanding more than 60 but less than 91 days
-2-
<PAGE> 6
from the invoice date (the "Delinquent Accounts"), plus (iii) a multiple of
twenty and four-fifths (20.8) times the RMR relating to the monthly connect fee
for any accounts acquired by Seller from Emnet and designated as such on
Schedule A (the "Emnet Accounts"), plus (iv) the value of accounts receivable
as determined in accordance with Section 2.4. In the event that the Purchase
Price as calculated hereunder exceeds $700,000, Buyer shall have the right, at
its option, to elect not to purchase certain of the Assets to be Acquired (to
be selected by Buyer) in order to reduce the Purchase Price to $700,000.
(b) At Closing, the Purchase Price shall be determined by Buyer and
Seller. Eighty seven and one-half percent (87.5%) of the Purchase Price, shall
be paid to Seller on the Closing Date by federal funds wire transfer or other
form of immediately available funds. Twelve and one-half percent (12.5%) of
the Purchase Price, shall be deposited by Buyer in escrow pursuant to an escrow
agreement in the form of Exhibit 1 (the "Escrow Agreement") and distributed in
accordance with Section 2.3 (the "Escrow").
(c) The Purchase Price shall be adjusted to reflect, in
accordance with generally accepted accounting principles, the principle that
all expenses of the Security Business attributable to the period after the
Closing Date are for the account of Buyer and all expenses attributable to the
period on or before the Closing Date are for the account of Seller.
Accordingly, Seller shall receive credit for all obligations prepaid by Seller
under the Business Documents and all other expenses prepaid by Seller relating
to the Security Business. Likewise, Buyer shall receive credit for (i)
customer deposits; (ii) customer prepayments for services to be provided by
Buyer after Closing; (iii) accrued expenses under the Business Documents; and
(iv) all other accrued expenses relating to the Security Business. Seller and
Buyer shall to calculate such adjustments at Closing and shall increase or
decrease the amount paid to Seller pursuant to Section 2.1(a) by the amount of
such adjustments. Any errors in any such adjustments shall be recalculated as
soon as possible after Closing and the parties agree to make such payments as
are required to settle such adjustments within thirty (30) days after Closing.
2.2 Recurring Monthly Revenue.
(a) The term "RMR" means the amount of recurring monthly revenue
(net of any direct wire telephone line charges or other communication, utility
company or third-party pass-through charges, assessments or taxes and net of
any customer discounts) of the Security Business as of the date immediately
preceding the Closing Date and which is derived, except as set forth in
paragraph (b) of this Section 2.2, solely from written, valid, complete and
properly executed monitoring agreements in a form meeting Buyer's underwriting
requirements and otherwise acceptable to Buyer ("Acceptable Contracts") and
which have not been repudiated by the customer. RMR shall not include any
revenue: (i) from customers who have not generated cash receipts representing
service charges for at least one full billing cycle or prepaid at least one
month of RMR; (ii) that is not periodic in nature, but rather relates to
installation, purchase payments or one-time assessments or charges; (iii) from
customers whom Seller has received notice of a pending termination; (iv) from
third-party monitoring agreements; or (v) from customers who were recently
added as a result of extraordinary marketing efforts or an amnesty program; For
purposes of calculating RMR, services or charges billed quarterly or annually
shall be recalculated to a monthly equivalent.
(b) All accounts without Acceptable Contracts at Closing shall not be
treated as RMR at Closing, however, Buyer shall pay to Seller at the end of the
first six (6) months after Closing a sum equal to the Purchase Price that would
have been paid to Seller at Closing for any such accounts
-3-
<PAGE> 7
which, during the first six (6) months after Closing, sign Acceptable
Contracts, and which otherwise meet the definition of RMR at the end of such
six (6) month period. Twelve and one-half percent (12.5%) of any amounts paid
pursuant to clause (ii) of this Section shall be deposited by Buyer in Escrow
and distributed in accordance with Section 2.3. Any accounts which do not sign
Acceptable Contracts during the first six (6) months after Closing shall remain
the property of Seller and shall be treated in accordance with Section 10.2.
2.3 Escrow.
(a) The Escrow shall be for a period of thirteen (13) months (the
"Escrow Period").The purpose of the Escrow shall be to provide a source of
funds for the payment of (i) any Purchase Price Deduct, as herein defined, (ii)
at Buyer's discretion, any indemnification obligation of Seller to Buyer under
Section 8.1 and (iii) any Chip Change Credit due to Buyer from time to time
under Section 5.9. Nothing in this Section 2.3 shall be construed to limit in
any way the amount of the indemnification obligation of Seller to Buyer under
Section 8.1 to be paid from sources other than the Escrow.
(b) At the end of the Escrow Period, a determination shall be
made of the RMR on the date immediately preceding the Closing Date (taking into
consideration any accounts added pursuant to Section 2.2(b)) attributable to
customers who have, during the first twelve (12) months of the Escrow Period,
(i) become more than sixty (60) days past due from the invoice date (and who
remain more than sixty (60) days past due from the invoice date as of the last
day of such twelve (12) month period), (ii) who have canceled or failed to
renew for any reason, or (iii) who are listed on Schedule M or who are
replacement accounts provided pursuant to this Section and in either case have
been canceled or terminated by Buyer for excessive false alarms (the "Lost
RMR"). During the first twelve (12) months of the Escrow Period, Buyer shall
notify Seller by the end of each calendar month of all customers who during the
prior calendar month went into default ("Defaulted Accounts") so that Seller
may have an opportunity to either rectify such accounts or repurchase such
accounts within thirty (30) days after notification. If Seller elects to
repurchase an account, the repurchase price shall be an amount equal to (i)
twenty-eight and one-half (28.5) times the RMR generated by such account at
Closing for accounts other than the Delinquent Accounts and the monthly connect
fee for any Emnet Accounts, (ii) fourteen and one-quarter (14.25) times the RMR
generated by any such Delinquent Account at Closing and (iii) twenty and four
fifths (20.8) times the RMR generated by the monthly connect fee for any Emnet
Account at Closing. An account will be deemed to be in default for purposes of
this Section 2.3 if it is canceled (by Buyer, if listed on Schedule M or if a
replacement account provided pursuant to this Section, for excessive false
alarms or by the customer for any reason), fails to renew or if any charges are
not paid within sixty (60) days from the invoice date. If Seller rectifies a
Defaulted Account, repurchases such account or provides a replacement account
acceptable to Buyer within thirty (30) days after notification by Buyer, such
Defaulted Account shall not be included in Lost RMR. In addition, any account
which becomes a Defaulted Account as a result of a failure to pay any charges
within sixty (60) days from the invoice date shall not be treated as Lost RMR
if, at the end of the twelve (12) month period, such account's balance is
outstanding 60 days or less from the invoice date. The Purchase Price shall be
reduced by a multiple of (i) twenty-eight and one-half (28.5) times the Lost
RMR relating to accounts other than the Delinquent Accounts or the monthly
connect fee for any Emnet Accounts, (ii) fourteen and one-quarter (14.25)
times the Lost RMR relating to the Delinquent Accounts, and (iii) twenty and
four-fifths (20.8)
-4-
<PAGE> 8
times the Lost RMR relating to the monthly connect fee for any Emnet Accounts
(the "Purchase Price Deduct"). As soon as possible after the end of the Escrow
Period and in any event within five (5) business days, the parties shall direct
the escrow agent, in writing, to pay Seller the difference between the amount
of the Escrow and the amount of the Purchase Price Deduct (provided that Seller
shall receive a credit for any amounts due Seller from Buyer pursuant to
Section 2.7). In the event Seller repurchases any accounts under this Section
2.3, Seller shall indemnify and hold Buyer harmless from and against any
Aggregate Net Loss (as defined in Section 8.1) incurred by Buyer in connection
with such account from and after the date of repurchase.
2.4 Accounts Receivable.
Buyer shall acquire all of Seller's accounts receivable, trade accounts,
notes receivable and other debts owed to Seller by customers of the Security
Business (collectively, the "Accounts Receivable") relating to the Security
Business for a purchase price equal to the lesser of $14,000 or the sum of (i)
95% of the face value of any Accounts Receivable for services provided on or
prior to the Closing Date from customers with balances outstanding, for any
reason, 30 days or less from the invoice date, (ii) 75% of the face value of
any Accounts Receivable for services provided on or prior to the Closing Date
from customers with balances outstanding, for any reason, more than 30 days but
60 days or less from the invoice date, and (iii) 25% of the face value of any
Accounts Receivable for services provided on or prior to the Closing Date from
customers with balances outstanding, for any reason, more than 60 days but 90
days or less from the invoice date. Any Accounts Receivable for services to be
provided after the Closing Date shall be transferred to Buyer hereunder but
shall not be taken into account in calculating the Purchase Price pursuant to
the foregoing sentence. It is the intent of this Section that all Accounts
Receivable due from a customer will be treated in accordance with the oldest
outstanding amounts due from such customer. For example, if a customer has an
outstanding balance of $100.00 of which $30.00 is outstanding less than 30
days, $40.00 is outstanding more than 30 days but less than 60 days and the
remainder is outstanding more than 60 days but less than 90 days, the purchase
price for such customer's Accounts Receivable would be $25.00 (25% x $100.00);
provided, however, that de minimis amounts of $5.00 or less and amounts which a
customer is disputing in good faith shall not be taken into account in making
the foregoing determination.
2.5 Closing Date and Location.
The consummation of the transfer and delivery of the Security Business to
Buyer and the receipt of the consideration therefor by Seller shall constitute
the "Closing." Unless otherwise mutually agreed to by the parties, the Closing
shall take place at 9:00 A.M., local time, at the offices of Seller, 5800 S.
Quebec Street, Englewood, Colorado 80111 on June 13, 1995, or upon the
satisfaction by Seller of all of the conditions precedent to Buyer's obligation
to consummate this transaction, whichever shall later occur, which date and
time shall constitute the "Closing Date" but in any event shall not be later
than June 15, 1995 (the "Termination Date"). The effective date of the sale of
the Security Business shall be at 11:59:59 p.m. on the day prior to the Closing
Date and all prorations and allocations provided for in Section 2.1(c) shall be
made as of such date.
2.6 Nonsolicitation Agreement.
In connection with the consummation of these transactions, Seller shall
have executed a nonsolicitation agreement in the form of Exhibit 2 (the
"Nonsolicitation Agreement").
2.7 Delinquent Accounts
Buyer shall pay to Seller (or credit to Seller against the amount of any
Purchase Price Deduct), concurrent with
-5-
<PAGE> 9
the release of funds from Escrow, an amount equal to fourteen and one-quarter
(14.25) times the RMR generated at Closing by each Delinquent Account which, at
the end of the twelve-month period after Closing, has no balance outstanding in
excess of 60 days from the invoice date; provided, however, that de minimis
amounts of $5.00 or less and amounts which a customer is disputing in good
faith shall not be taken into account in making the foregoing determination.
2.8 Allocation of Purchase Price.
Buyer and Seller agree to the allocation of the Purchase Price set forth
on Schedule D hereto, and agree to be bound by such allocation and to file all
federal, state and local tax returns based on such allocation. Any adjustment
in the Purchase Price shall be allocated in accordance with the proportionate
allocation reflected on Schedule D.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate
these transactions, Seller represents, warrants and covenants to Buyer and
agrees that as of this date and through and including the Closing Date:
3.1 Organization of Seller.
(a) Seller is a corporation duly incorporated and organized,
validly existing and in good standing under the laws of the State of Delaware,
and has the requisite corporate power and authority to own or lease all of the
Assets to be Acquired, to own and operate the Security Business, to carry on its
business as now conducted, to enter into this Agreement and to perform the
terms of this Agreement. Seller is qualified as a foreign corporation in all
jurisdictions in which it is required to be so qualified.
(b) Schedule F sets forth all of the names and fictitious names
under which Seller or the predecessors of Seller have conducted the Security
Business.
3.2 Authority of Seller.
Seller has full power and authority to enter into this Agreement, to
consummate these transactions and to comply with the terms, conditions and
provisions hereof. This Agreement has been duly authorized, executed and
delivered by Seller and is, and each other agreement or instrument of Seller
contemplated hereby will be, the legal, valid and binding agreement of Seller,
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement and the other agreements of Seller contemplated
hereby have been duly authorized and approved by the board of directors of
Seller and do not require any further authorization or the consent of any third
party, except as set forth on Schedule F. Neither the execution and delivery
of this Agreement nor the consummation of these transactions will (a) conflict
with or result in any violation of or constitute a default under any term of
(i) the Amended and Restated Certificate of Incorporation or By-laws of Seller,
or (ii) to Seller's knowledge, any agreement, mortgage, debt instrument,
indenture, or other instrument, judgment, decree, order, award, law or
regulation by which Seller is bound, or (b) result in the creation of any lien,
security interest, charge or encumbrance upon any of the Assets to be Acquired,
except as set forth on Schedule F.
-6-
<PAGE> 10
3.3 WIP; Proposals and Bids.
Seller does not now have, and at Closing will not have, any work in
process or proposals and bids relating to the Security Business.
3.4 Intentionally omitted.
3.5 Real Property.
Other than in connection with Seller's central station located in the
State of Colorado, Seller does not own, lease or otherwise use any real
property in connection with the operation of the Security Business.
3.6 Business Documents.
Except for the Business Documents and except for oral agreements set forth
on Schedule H, Seller has no presently existing material contract, agreement,
lease, permit, consent, license or commitment, whether written or oral,
affecting or relating to the Security Business. All of the Business Documents
are validly existing, legally enforceable obligations of Seller and, to
Seller's knowledge, of the other parties thereto, and are in full force and
effect in accordance with their terms. Seller has delivered copies of all of
the Business Documents set forth on Schedule B to Buyer as of the date hereof.
Without limiting the foregoing, Seller represents that, to the best of its
knowledge, the Security Business and all equipment used in connection therewith
are now being, and at all times have been, utilized, operated and maintained,
in all material respects, in conformity with the Business Documents, with all
other applicable laws and regulations (including zoning regulations), and with
the orders, rules and regulations of any government or governmental agency or
authority having jurisdiction with respect thereto. Seller has not defaulted
in its obligations pursuant to any of the Business Documents, which default
could result in the cancellation of any Business Document or adversely affect
the rights of Seller thereunder. Seller is not a party to any franchise,
license, distributor or other similar type of agreement. Seller has provided
to Buyer prior to the date hereof copies of or access to all noncompetition and
nonsolicitation agreements entered into by Seller or Seller's predecessors
(whether still in existence or having expired in accordance with their terms).
3.7 Title to Property.
Except as described on Schedule E (which shall have been satisfied or
released at or prior to Closing), Seller has good and marketable title to all
of the Assets to be Acquired, free and clear of all liens, claims, charges,
encumbrances, leases, pledges, security interests, mortgages, defects in title,
equities, covenants and other restrictions of any nature whatsoever. Seller
owns each of the Assets to be Acquired in fee title and not under lease.
3.8 Compliance with Laws; Litigation.
(a) Seller has complied with all laws, regulations, rules, writs,
injunctions, ordinances, franchises, decrees or orders of any federal or state
court or of any municipal or governmental department, commission, board,
bureau, agency or instrumentality which are applicable to the Assets to be
Acquired or the Security Business, except where the failure to so comply would
not have a material adverse effect on the Assets to be Acquired or the Security
Business.
(b) All material reports, schedules and/or returns of any
administrative agency of the federal or any state or local government required
to be filed by Seller have been filed.
(c) Except as set forth on Schedule F, there are no lawsuits,
claims, suits, proceedings or investigations pending or, to the best
-7-
<PAGE> 11
knowledge of Seller, threatened, against or affecting Seller, nor are there any
lawsuits, claims, suits or proceedings pending in which Seller is the plaintiff
or claimant, that relate to the Assets to be Acquired or the Security Business
and which involve the possibility of any judgment, order, award or other
decision that might impair the ability of Seller to perform this Agreement, or
might impair the quality of title of the Assets to be Acquired, or might
adversely affect the normal operation of the Security Business, or might result
in liability for damages or might otherwise adversely affect Seller's right,
title or interest in the Assets to be Acquired or the Security Business,
except, in each case, where it would not have a material adverse effect on the
Assets to be Acquired or the Security Business.
(d) There is no action, suit or proceeding pending or, to the best
knowledge of Seller, threatened, which questions the legality or propriety of
the transactions contemplated by this Agreement.
3.9 Condition of Assets.
(a) The tangible assets included in the Assets to be Acquired (the
"Tangible Assets") are in good operating condition, ordinary wear and tear
excepted. The Tangible Assets are available for immediate use in the Security
Business except for those items being serviced in the ordinary course of
business. To Seller's knowledge, all of the Tangible Assets and the state of
maintenance thereof are in compliance in all material respects with the rules
and regulations of all applicable statutes, ordinances, rules and regulations.
The Assets to be Acquired include all assets and properties which Seller
currently uses to conduct the Security Business.
(b) Seller does not own any inventory, spare parts or equipment
for use in connection with the Security Business.
(c) Schedule G sets forth a true and complete list of all insurance
policies insuring any of the Assets to be Acquired or relating to the Security
Business. All such policies have been in full force and effect during the past
five (5) years with claims payable on an "occurrence basis," which means, for
example, that if a claim arose after the Closing Date for an event which
occurred prior to the Closing Date, Seller's applicable insurance policy in
existence on the date such event occurred would cover such claim. All such
policies are in full force and effect and Seller has not received any notice of
cancellation with respect thereto. During the past five (5) years, no
application by Seller for insurance with respect to the Assets to be Acquired
has been denied for any reason. During the past five (5) years, Seller has not
had any claim made against it by any customer of the Security Business that
would materially adversely affect Seller's insurance rating. Attached as
Exhibit 8 is a copy of Seller's insurance claims history relating to the
Security Business for the past two (2) years.
(d) To the best of Seller's knowledge, all of the information
that Seller has delivered to Buyer in connection with this transaction is true,
correct and complete in all material respects.
3.10 Adverse Developments.
Since December 1, 1994, no event or condition has occurred which
materially adversely affected the Security Business or Assets to be Acquired,
including: (a) any material adverse change in the financial condition, assets
or liabilities of the Security Business, other than changes in the ordinary
course of business; or (b) any damage, destruction, loss or other casualty to
the Security Business, however arising and whether or not covered by insurance.
-8-
<PAGE> 12
3.11 Customer and Systems Information.
(a) Except as set forth on Schedule H, Seller has entered into
written agreements with all of the customers of the Security Business. All of
Seller's agreements with its customers are valid and enforceable. The forms of
all of Seller's monitoring agreements used in connection with the Security
Business have been made available to Buyer. Seller will deliver originals (or
copies, to the extent Seller does not have the originals in its possession) of
all of its contracts with the customers of the Security Business and all files
and documents relating thereto to Buyer at Closing. Schedule A sets forth a
true and accurate list of the amounts which Seller charges its customers for
monitoring, service, maintenance, repairs, open/close, refundable deposits,
reconnect fees and any other services provided by Seller. Seller has no
obligations or liabilities to customers or to other users of Seller's
electronic security services which are material to the Security Business,
except (i) with respect to deposits made by such customers or such other users,
if any; and (ii) the obligation to supply services to customers in the ordinary
course of business. Except as set forth on Schedule M, none of the customers
of the Security Business has a history of excessive false alarms. To the best
knowledge of Seller, there are no complaints by customers or other users of
Seller's electronic security services that, individually or in the aggregate,
could have a material adverse effect upon the Assets to be Acquired or the
financial condition or operation of the Security Business. Seller has no free
or discounted service liability to customers existing with respect to the
Security Business, other than as set forth in Schedule A, and nothing would
prohibit Buyer from discontinuing any such free service after Closing. Seller
has no obligation or liability for the refund of monies to its customers other
than obligations to refund deposits made by customers in the ordinary course of
business. Since December 1, 1994, neither Seller, nor any of Seller's
officers, directors, shareholders, employees or agents have paid directly or
indirectly any accounts receivable of customers (excluding credit adjustments
in the ordinary course consistent with past practice).
(b) To Seller's knowledge, all of the alarm systems are in good
working order and condition, failure of a customer to report to Seller any
problem with an alarm system known to the customer and customer non-use
excepted; and to Seller's knowledge have been installed and maintained in
accordance with good and workmanlike practices prevailing in the electronic
security industry, in accordance with any applicable specifications and
standards of Underwriters Laboratories, etc. and all local authorities,
including local telephone operating companies. To Seller's knowledge, all such
alarm systems conform in all material respects to the contracts pursuant to
which they were installed. In no case has an installation of such alarm systems
been made which at the time of installation was in violation of any applicable
law, code or regulation. To Seller's knowledge, all manufacturer's warranties
applicable to any such alarm systems are freely assignable to Buyer. Schedule
I contains a list of all acquisitions pursuant to which Seller acquired any
accounts of the Security Business, all of which acquisitions occurred prior to
the filing of Seller's bankruptcy petition.
(c) The Security Business has at least 735 accounts and $19,800 of
RMR. No one account of the Security Business represents more than two percent
(2%) of Seller's RMR. There has been no general, overall increase in Seller's
rates in the last six (6) months other than immaterial increases instituted in
the ordinary course, and Seller agrees that there shall be no such increase in
such rates prior to Closing. Seller is not aware of any legal impediments
which would prevent Buyer from instituting any rate
<PAGE> 13
increases after the Closing Date, other than any specific contractual
provisions set forth in the customer contracts made available to Buyer by
Seller.
(d) Seller owns all of the telephone lines applicable to its
accounts and, except as set forth on Schedule J, can convert all such lines to
communicate with Buyer's central station by means of a line switch. Except as
set forth on Schedule J, none of the alarm systems of Seller require an on-site
visit in order to reprogram such system to communicate with Buyer's central
station.
(e) There is no law, rule, regulation or ordinance that limits
Seller's ability to provide monitoring services to customers from a central
station located outside of the State of Virginia.
(f) None of the accounts of the Security Business are monitored by
a third party except as set forth in Schedule A.
(g) To the best of Seller's knowledge, no communities in which the
Security Business is operated currently have or are contemplating passing false
alarm ordinances.
(h) All of the licenses and permits which Seller is required to
hold in connection with the operation of the Security Business are listed on
Schedule K. Seller has paid all necessary permit and/or license fees in
connection with such licenses and permits. To Seller's knowledge, no other
licenses or permits are required.
(i) To Seller's knowledge, no customer of the Security Business has
elected to receive "additional coverage at additional cost" under Seller's
customer agreements.
(j) To Seller's knowledge without inquiry, there are no pending
plans by utilities to change the dialing procedures or exchange numbers within
the areas servicing the Security Business such that Seller would need to
reprogram its customers' digital dialers.
(k) All of the accounts utilize standard digital communicators and
are currently monitored by Seller's Englewood, Colorado UL listed central
station except as set forth on Schedule A. To Seller's knowledge, equipment
installed in the field consists primarily of DSC panels.
3.12 Broker or Finder.
(a) Neither Seller nor any party acting on its behalf has paid or
become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of these transactions.
3.13 No Employees; Agreements with Subcontractors.
(a) Seller does not now employ any employees in connection with the
operation of the Security Business and Seller is not a party to any employment
agreement, written or oral, in connection with the Security Business.
(b) Seller uses subcontractors to conduct the operations of the
Security Business. All such subcontractors are independent contractors.
(c) Except as set forth on Schedule L, Seller has entered into a
nonsolicitation/nondisclosure agreement with each subcontractor
-10-
<PAGE> 14
of the Security Business. In addition, except as set forth on Schedule L,
Seller has written agreements with each subcontractor which establish service
charges and which may be cancelled upon 30 days' notice.
3.14 Tax Returns and Payments.
All unemployment, social security, franchise, real property, personal
property and all other taxes levied, assessed or imposed upon Seller in
connection with Seller's operation of the Security Business by the United
States, or any state, or governmental subdivision of either, to the extent due
and payable, have been duly paid to date or are being contested through
appropriate administrative or judicial procedures, and no liability for
deficiencies with respect thereto exists. To Seller's best knowledge, no tax
deficiencies have been determined nor proposed tax assessments charged against
Seller in connection with Seller's operation of the Security Business (nor is
there any basis therefor). Seller has filed all federal, state, local, sales,
franchise, withholding, real and personal property tax returns required to be
filed in connection with Seller's operation of the Security Business. No
penalties or other charges are, or will become, due with respect to the late
filing of any such return by Seller.
3.15 Appraisal Rights.
Neither the sale and transfer of the Assets to be Acquired pursuant to
this Agreement, nor Buyer's possession and use thereof from and after Closing
because of such sale and transfer, will result in or be subject to the
imposition of any liability upon Buyer for appraisal rights or other liability
owing to any shareholder of Seller.
3.16 Burdensome Agreements.
Seller is not a party to any agreement or instrument nor subject to any
restriction which now has or, as far as Seller can foresee, may have a material
adverse effect, financial or otherwise, upon the Security Business or the
Assets to be Acquired.
3.17 Options, Warrants and Rights of First Refusal.
Seller represents that no person or entity has any option, warrant or
right of first refusal to purchase the Assets to be Acquired or the Security
Business.
3.18 Environmental Matters.
Neither Seller nor any of Seller's predecessors owns, operates or leases
or has owned, operated or leased any property in connection with the Security
Business that has used, generated, stored or disposed of any Hazardous
Materials, nor to the best of Seller's knowledge after due inquiry has there
been any Hazardous Materials disposed of by any third party on any property
owned, operated or leased by Seller and used in connection with the Security
Business. The term "Hazardous Materials" includes hazardous waste, hazardous
substances, toxic substances and all related materials, including all materials
and substances regulated by The Comprehensive Environmental Response,
Compensation and Liability Act of 1989, The Resource Conservation and Recovery
Act of 1976, The Superfund Amendments and Reauthorization Act of 1986, The
Clean Water Act, The Clean Air Act, The Toxic Substance Control Act, all as
amended from time to time, and/or any other applicable federal, state or local
environmental law, statute, rule, regulation or ordinance.
3.19 Disclosure.
No representation or warranty by Seller in this Agreement or any Schedule
or Exhibit, or any statement, list or certificate furnished or to be furnished
by Seller pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading.
-11-
<PAGE> 15
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer hereby represents, warrants and
covenants to Seller and agrees that as of this date and through and including
the Closing Date:
4.1 Organization of Buyer.
Buyer is a corporation duly incorporated and organized, validly existing
and in good standing under the laws of the State of Delaware, and has the
requisite corporate power and authority to own or lease all of the Assets to be
Acquired, to own and operate the Security Business, to carry on its business as
now conducted, to enter into this Agreement and to perform the terms of this
Agreement. Buyer is qualified as a foreign corporation in the State of
Virginia.
4.2 Authority of Buyer.
Buyer has full power and authority to enter into this Agreement, to
consummate these transactions and to comply with the terms, conditions and
provisions hereof. This Agreement has been duly authorized, executed and
delivered by Buyer and is, and each other agreement or instrument of Buyer
contemplated hereby will be, the legal, valid and binding agreement of Buyer,
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement and the other agreements of Buyer contemplated
hereby have been duly authorized and approved by the board of directors of
Buyer and do not require any further authorization or the consent of any third
party. Neither the execution and delivery of this Agreement nor the
consummation of these transactions by Buyer will conflict with or result in any
violation of or constitute a default under any term of (i) the Certificate of
Incorporation or By-laws of Buyer, or (ii) to Buyer's knowledge, any agreement,
mortgage, debt instrument, indenture, or other instrument, judgment, decree,
order, award, law or regulation by which Buyer is bound.
4.3 Broker or Finder.
Neither Buyer nor any party acting on its behalf has paid or become
obligated to pay any fee or commission to any broker, finder or intermediary
for or on account of the transactions contemplated by this Agreement.
4.4 Compliance with Law.
Buyer has complied with all laws, regulations, rules, writs, injunctions,
ordinances, franchises, decrees or orders of any Federal or state court or of
any municipal or governmental department, commission, board, bureau, agency or
instrumentality which are applicable to Buyer's operation of the Security
Business after Closing, except where the failure to so comply would not have a
material adverse effect on the operation of the Security Business after
Closing.
4.5 Financing.
Buyer has the availability of financing through State Street Bank & Trust
Company ("State Street") to complete the transactions contemplated by this
Agreement, subject to State Street's final right of approval of the general
form and substance of this Agreement.
-12-
<PAGE> 16
4.6 Disclosure.
No representation or warranty by Buyer in this Agreement or any Schedule
or Exhibit, or any statement, list or certificate furnished or to be furnished
by Buyer pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading.
ARTICLE V
ACTIONS PRIOR TO THE CLOSING DATE
The parties covenant and agree to take the following actions between the
date hereof and the Closing Date:
5.1 Investigation.
Seller shall afford Buyer and its representatives, so as not to interfere
with the conduct of Seller's business, reasonable access during normal business
hours to the properties, facilities and equipment, and books and records of the
Security Business necessary to conduct due diligence. Seller acknowledges that
Buyer also desires to contact a random sample of Seller's customers in order to
explore customer satisfaction with various aspects of Seller's service (e.g.,
alarm monitoring dispatch, technical service and billing). Seller acknowledges
that Buyer will conduct such survey as if on behalf of Seller and in accordance
with the script agreed to between Buyer and Seller and Seller agrees to
cooperate with Buyer in making such contact. Buyer agrees to make the results
of any such survey available to Seller. It is the parties' intent that Buyer
shall have full opportunity to investigate the business affairs of the Security
Business.
5.2 Preservation of Representations and Warranties.
(a) Buyer and Seller shall refrain from knowingly taking any
action which would render untrue any representation, warranty or covenant
contained in this Agreement, and shall not knowingly omit to take any action,
the omission of which would render untrue any such representation, warranty or
covenant. Promptly upon the occurrence of, or promptly upon Seller becoming
aware of the impending or threatened occurrence of, any material event which
would cause any of the representations or warranties of Seller contained
herein, or in any Schedule or Exhibit, to be materially inaccurate, Seller
shall give detailed written notice thereof to Buyer and Seller shall use its
best efforts to prevent or promptly remedy the same.
(b) Buyer and Seller shall promptly notify the other party of any
action, suit or proceeding that shall be instituted or threatened against such
party to restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement. Seller shall promptly notify Buyer
of any lawsuit, claim, proceeding or investigation that may be threatened,
brought, asserted or commenced against Seller, and of any damage, destruction
or other casualty, whether or not insured, to the Assets to be Acquired.
5.3 Consents and Approvals.
Promptly after the execution of this Agreement and in any event prior to
Closing, Seller shall obtain all necessary third-party consents and approvals.
5.4 Public Announcements.
Neither Buyer nor Seller shall, without the approval of the other party
(which may not be unreasonably withheld), make any press release or other
public announcement concerning the transactions contemplated by this Agreement,
except as and to the extent that
-13-
<PAGE> 17
such party shall be so obligated by law, in which case the other party shall be
advised and Buyer and Seller shall use their best efforts to cause a mutually
agreeable release or announcement to be issued.
5.5 Exclusive Dealing.
Seller and its affiliates shall deal exclusively with Buyer with respect
to the transactions contemplated hereby and shall not solicit, encourage or
entertain offers of inquiry (nor shall Seller or any of its affiliates
authorize or permit any director, officer, employee, attorney, accountant or
other representative or agent to solicit, encourage or entertain offers or
inquiries) from other companies, persons or entities, provide information to or
participate in any discussions or negotiations with any companies, persons or
entities with a view to an acquisition of any of the Assets to be Acquired or
all or substantially all of the Security Business or any interest therein.
5.6 Lien Searches.
Seller shall have delivered to Buyer, at Seller's expense, at least one
(1) week prior to the Closing Date, lien searches performed by Seller against
Seller and any fictitious names used by Seller in connection with the Security
Business showing all UCC-1 financing statements, federal, state or local tax
liens, unsatisfied judgments and pending litigation filed against the Security
Business recorded with the Virginia Secretary of State's Office.
5.7 Maintenance of Business.
Seller shall continue to operate the Security Business, shall maintain the
Assets to be Acquired and shall keep all of its business books, records and
files in connection with the Security Business all in the ordinary course of
business in accordance with past practices consistently applied. Seller shall
not sell, transfer, assign or permit the creation of any lien, charge or
encumbrance on any of the Assets to be Acquired. Seller shall not permit the
amendment or cancellation of any of the Business Documents without the prior
written consent of Buyer except in the ordinary course of business consistent
with past practice. Seller shall not enter into any contract or commitment nor
incur any indebtedness or other liability or obligation of any kind relating to
the Security Business that is not in the ordinary course of business without
the prior written consent of Buyer. Seller shall not acquire any accounts or
any assets from any third party. Seller shall not itself, nor shall Seller
permit any of its officers, directors, shareholders, agents or employees to pay
any of Seller's accounts receivable from customers (excluding credit
adjustments in the ordinary course of business consistent with past practice).
Seller shall not decrease its customer rates or conduct any marketing programs,
including any amnesty programs, involving credits for free service or reduced
rates for service. Seller shall pay off and obtain title to any of the Assets
to be Acquired that are currently leased from third parties,if applicable
(other than any leases for the offices or other facilities of the Security
Business).
5.8 Insurance.
Seller shall maintain in full force and effect all existing insurance
policies to cover and protect the Assets to be Acquired against damage or
destruction.
5.9 Organization and Transition.
(a) Seller shall use all reasonable efforts consistent with sound
business judgment to preserve intact the present business or organization of
the Security Business, to retain the services of its present subcontractors, to
preserve its relationships with customers, suppliers and others having business
relationships with it and to maintain the goodwill enjoyed within the areas
served by the Security Business. Seller and Buyer shall provide each of the
customers of the Security Business with written
-14-
<PAGE> 18
notice of the transactions contemplated by this Agreement pursuant to a letter
in the form of Exhibit 6. Buyer and Seller shall share equally the cost of
such notice. Seller shall cooperate with Buyer to cause an expeditious
conversion of the accounts. Seller agrees to deliver to Buyer all information
reasonably requested by Buyer's central station, including the standard
emergency information for each customer. Seller will deliver originals of the
customers' contracts and all files and documents relating thereto to Buyer at
Closing. If requested to do so by Buyer, Seller will assist in the orderly
transition of the customer base after Closing by maintaining the billing
information for the accounts and mailing the customers' invoice for the month
of July, 1995 (with Buyer's return payment envelope included in such invoice)
and in consideration thereof, Buyer will pay to Seller the sum of $1.00 per
invoice. Seller shall thereafter transfer the billing information to Buyer and
provide Buyer with such reasonable assistance as may be necessary in order to
permit Buyer to mail invoices for the month of August, 1995.
(b) Seller shall, at its expense, either (i) secure new telephone
numbers and/or lines for those customers which share telephone numbers and/or
lines with third parties, or (ii) Seller shall provide Buyer a credit against
the Purchase Price equal to $35.00 for each customer that requires a
post-closing "chip change" service call by Buyer (the "Chip Change Credit").
Accounts which may require a chip change are listed on Schedule J. Buyer
shall be entitled to payment of the Chip Change Credit from Escrow (on a
regular basis but no more often than monthly) from time to time as Buyer
incurs costs relating thereto, and Seller agrees to provide written notice to
the escrow agent in order to permit such amounts to be released to Buyer.
5.10 Consummation of Agreement.
Buyer and Seller shall use their best efforts to perform and fulfill all
obligations and conditions on their part to be performed and fulfilled under
this Agreement, to the end that the transactions contemplated by this Agreement
shall be fully carried out.
5.11 Accounts Receivable.
At least three (3) days prior to the Closing Date, Seller shall deliver to
Buyer an accurate and complete listing of all of the Accounts Receivable which
existed as of a date which is not more than seven (7) days prior to the Closing
Date. Seller acknowledges that all of the Accounts Receivable existing on the
Closing Date are part of the Assets to be Acquired and shall be transferred to
Buyer on the Closing Date in accordance with the terms of Section 2.4.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
On or prior to the Closing Date, Seller shall have satisfied each of the
following conditions, unless waived in writing by Buyer:
6.1 Covenants and Warranties.
There shall have been no breach by Seller in the performance of any of its
covenants and agreements herein; each of the representations and warranties of
Seller contained or referred to herein shall be true and correct in all
material respects on the Closing Date as though made on the Closing Date, and
except for changes therein specifically permitted by this Agreement or
resulting from any transaction expressly consented to in writing by Buyer or
any transaction contemplated by this Agreement; and there shall have been
delivered to Buyer a certificate to that effect, dated the Closing Date, from
the President or a Vice President of Seller.
-15-
<PAGE> 19
6.2 Corporate Action.
Seller shall have taken all corporate action necessary to approve these
transactions, and Seller shall have furnished Buyer with a certification
relating thereto, in form and substance reasonably satisfactory to counsel for
Buyer.
6.3 No Restraint or Litigation.
No action, suit or proceeding shall be pending or threatened by any third
party or governmental or regulatory agency to restrain, prohibit or otherwise
challenge the legality or validity of these transactions or of any of the
Assets to be Acquired.
6.4 Necessary Consents and Permits.
The parties shall have received all of the consents listed on Schedule N
(or, in the case of subcontractors, Buyer shall have entered into separate
agreements with such subcontractors in a form acceptable to Buyer or shall have
received an assignment of a nonsolicitation agreement with each subcontractor
in a form acceptable to Buyer), including the consent or release of any lender
to Seller, and such consents shall be valid and enforceable on the Closing
Date.
6.5 Opinion of Counsel.
Seller shall have delivered to Buyer the legal opinion of local Virginia
counsel for Seller, duly executed and in the form of Exhibit 3 and the legal
opinion of Charles A. Frank, Seller's general counsel, duly executed and in the
form of Exhibit 4.
6.6 Adverse Change.
There shall not have occurred any material adverse change in the Security
Business or in the condition of the Assets to be Acquired.
6.7 Documents and Certificates.
Seller shall have delivered or caused to be delivered to Buyer:
(a) an Assignment and Bill of Sale in the form of Exhibit 5, duly
executed;
(b) the Nonsolicitation Agreement described in Section 2.6, duly
executed;
(c) a recent Certificate of Good Standing issued by the
Secretaries of State of Delaware and Virginia evidencing Seller's corporate
good standing in such states, together with telephone confirmation on the date
of Closing;
(d) a certificate issued by the Department of Taxation and
Revenue of the State of Virginia certifying that there are no tax liens of
record against Seller;
(e) the certificate required pursuant to Section 6.1;
(f) the certificate of insurance required pursuant to Section
8.1; and
(g) all other documents and instruments reasonably requested by
Buyer in connection with the consummation of the transactions contemplated by
this Agreement.
6.8 Satisfaction of Debts.
Seller shall have made appropriate arrangements for the termination of any
liens and encumbrances on file against any of the Assets to be Acquired.
-16-
<PAGE> 20
6.9 Accounts Receivable.
Seller shall have delivered to Buyer the list of Accounts Receivable
described in Section 5.11.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
On or prior to the Closing Date, Buyer shall have satisfied each of the
conditions set forth in Sections 7.1 through 7.5 and the condition set forth in
Section 7.6 shall have been satisfied, unless waived in writing by Seller:
7.1 Covenants and Warranties.
There shall have been no breach by Buyer in the performance of any of its
covenants and agreements herein; each of the representations and warranties of
Buyer contained or referred to herein shall be true and correct in all material
respects on the Closing Date as though made on the Closing Date, except for
changes therein specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Seller or any transaction
contemplated by this Agreement; and there shall have been delivered to Seller a
certificate to such effect, dated the Closing Date, and signed on behalf of
Buyer by the President or a Vice President.
7.2 Corporate Action.
Buyer shall have taken all corporate action necessary to approve these
transactions, and Buyer shall have provided Seller with certified copies of the
resolutions adopted by its Board of Directors in form and substance reasonably
satisfactory to counsel for Seller, in connection with such transactions.
7.3 Delivery of Purchase Price.
Buyer shall have delivered the Purchase Price to Seller, less the amount
of the Escrow and any adjustment made pursuant to Section 2.1(c).
7.4 No Restraint or Litigation.
No action, suit or proceeding shall be pending or threatened by any third
party or governmental or regulatory agency to restrain, prohibit or otherwise
challenge the legality or validity of these transactions.
7.5 Documents and Certificates.
Buyer shall have delivered or caused to be delivered to Seller:
(a) the certificate required pursuant to Section 7.1;
(b) an assumption agreement in a form reasonably satisfactory to
Seller; and
(c) all other documents and instruments reasonably requested by
Seller in connection with the consummation of the transactions contemplated by
this Agreement.
7.6 Minimum Purchase Price.
Seller's obligation to complete the transactions contemplated hereby is
conditioned upon a minimum Purchase Price, calculated at Closing in accordance
with Article 2, of at least $400,000. Seller shall not have the option under
this provision to rescind this transaction should the Closing occur, and Seller
acknowledges that post-closing adjustments could result in the Purchase Price
falling below this level.
-17-
<PAGE> 21
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Seller.
Seller shall indemnify, hold harmless, defend and bear all costs of
defending Buyer, together with its successors and assigns, from, against and
with respect to any and all damage, loss, deficiency, expense (including any
reasonable attorney and accountant fees, legal costs or expenses), action,
suit, proceedings, demand, assessment or judgment to or against Buyer
(collectively referred to as the "Aggregate Net Loss") arising out of or in
connection with:
(a) any debt, obligation, commitment or liability of Seller which
is not expressly assumed by Buyer herein or which is expressly assumed by
Seller herein, whether arising prior to, on or after the Closing Date and
whether or not disclosed to Buyer herein;
(b) any breach or violation of, or nonperformance by, Seller of
any of its representations, warranties, covenants or agreements contained in
this Agreement or in any document, certificate or schedule required to be
furnished pursuant to this Agreement;
(c) any liability incurred by Buyer as a result of the waiver of
compliance with the bulk transfer laws contained in Section 8.5.
Notwithstanding the foregoing, Seller shall have no liability to indemnify
Buyer (a) for any Aggregate Net Loss (other than in connection with a purchase
price adjustment as herein provided or as a result of fraud or willful
misconduct) until the total Aggregate Net Losses incurred by Buyer exceed
$6,000, and then only to the extent of such excess, and (b) for the amount of
any Aggregate Net Losses (other than as a result of fraud or willful
misconduct) exceeding the Purchase Price.
8.2 Indemnification by Buyer.
Buyer shall indemnify, hold harmless, defend and bear all costs of
defending Seller, together with its successors and assigns, from, against and
with respect to any and all damage, loss, deficiency, expense (including any
reasonable attorney and accountant fees, legal costs or expenses), action,
suit, proceeding, demand, assessment or judgment to or against Seller arising
out of or in connection with:
(a) any breach or violation of, or nonperformance by, Buyer of
any of its representations, warranties, covenants or agreements contained in
this Agreement or in any document, certificate or schedule required to be
furnished pursuant to this Agreement;
(b) any failure by Buyer to satisfy any of the liabilities assumed
pursuant to Section 1.3 in accordance with their terms.
8.3 Notice of Claims.
If any claim is made by or against a party which, if sustained, would give
rise to a liability of the other party hereunder, that party (the "Claiming
Party") shall promptly cause notice of the claim to be delivered to the other
party (the "Indemnifying Party") and shall afford the Indemnifying Party and
its counsel, at the Indemnifying Party's sole expense, the opportunity to
defend or settle the claim (and, with respect to claims made by third parties,
the Claiming Party shall have the right to participate at its sole expense).
Any notice of a claim shall state, with reasonable specification, the alleged
basis for the claim and the amount of liability asserted by or against the
other party by reason of the claim.
-18-
<PAGE> 22
Alternatively, if notice is given and the Indemnifying Party fails to assume
the defense of the claim within ten (10) days thereof, the claim may be
defended, compromised or settled by the Claiming Party without the consent of
the Indemnifying Party and the Indemnifying Party shall remain liable under
this Article VIII.
8.4 Survival.
The rights of Buyer and Seller to assert indemnification claims for
breaches of representations and warranties shall survive the Closing Date and
shall expire: (a) with respect to claims for breaches of the representations
and warranties of Seller in Sections 3.1, 3.2, 3.6, 3.7, 3.8(a), 3.8(b),
3.8(c), 3.9(d), 3.12, 3.15, 3.16, 3.17, 3.18 and 3.19, on the third (3rd)
anniversary of the Closing Date; (b) with respect to claims for breaches of
the representations and warranties in Sections 3.3, 3.4, 3.5, 3.8(d), 3.9(a),
3.9(b), 3.9(c), 3.10, 3.11 and 3.13, at the end of the eighteenth (18th) month
after Closing; (c) with respect to claims for breaches of the representations
and warranties of Buyer, on the third (3rd) anniversary of the Closing Date.
The indemnification obligations of Seller and Buyer with respect to third-party
claims and claims relating to the nonpayment of taxes under any federal, state,
county, or other local taxing statutes, upon the expiration of ninety (90) days
following the date on which the running of the statute of limitations with
respect to any such tax or claim shall bar the assessment and collection of
such tax or claim. All other covenants and obligations of the parties
hereunder shall survive the Closing Date without limitation.
8.5 Waiver of Bulk Sales Compliance.
In reliance upon the indemnity of Seller in Section 8.1(c), Buyer hereby
waives compliance by Seller with any bulk sales or transfer law applicable to
Seller and/or this transaction.
8.6 Resolution of Claims.
Should Buyer and Seller be unable to agree as to the amount of any losses
under this Article VIII, , either Buyer or Seller may apply to the American
Arbitration Association under its Commercial Arbitration Rules for the
appointment of an Arbitrator for an arbitration to take place in either
Birmingham, Alabama or Denver, Colorado. Buyer and Seller agree that such
locations are the most convenient forum for both parties. Such arbitrator
shall proceed in accordance with the Commercial Arbitration Rules of the
American Arbitration Association to determine the Aggregate Net Loss and to
certify such loss to Buyer and Seller. Such arbitration and determination
shall be final and binding on Buyer and Seller, judgment may be entered upon
such determination and award in any court having jurisdiction thereof, and
Buyer and Seller agree that no appeals shall be taken therefrom. Buyer may
offset against amounts due under the Escrow Agreement any indemnification or
other obligations due to Buyer from Seller under or in connection with this
Agreement. Seller agrees to name Buyer as an additional insured or certificate
holder under its general liability insurance policy and to deliver a
certificate of insurance to Buyer evidencing such coverage at Closing.
ARTICLE IX
DAMAGE TO PROPERTY AND RISK OF LOSS
The risk of any loss or damage to the Assets to be Acquired and the
Security Business resulting from fire, theft or any other casualty (except
reasonable wear and tear) shall be borne by Seller at all times prior to
Closing and shall shift to Buyer upon transfer of title to the Assets to be
Acquired at Closing. In the event that any such loss or damage shall be
sufficiently substantial so as to preclude and prevent resumption of normal
-19-
<PAGE> 23
operations of any material portion of the Security Business within five (5)
days from the occurrence of the event resulting in such loss or damage, Seller
shall immediately notify Buyer in writing of Seller's inability to resume
normal operations or to replace or restore the lost or damaged property, and
Buyer, at any time within thirty (30) days after receipt of such notice, may
elect either (a) to waive such defect and proceed toward consummation of the
transaction in accordance with terms of this Agreement, or (b) to terminate
this Agreement. If Buyer elects to consummate this transaction despite such
loss or damage and does so, there shall be no diminution of the Purchase Price
on account of such loss or damage and all insurance proceeds payable as a
result of the occurrence of the event resulting in loss or damage to the
property, plus the amount of any deductible upon such insurance coverage, shall
be delivered to Buyer, or the rights thereto shall be assigned to Buyer if not
yet paid over to Seller.
ARTICLE X
CERTAIN POST CLOSING COVENANTS
10.1 Seller's Monitoring Obligations.
After Closing, Seller shall monitor the accounts listed on Schedule J
which are designated on such Schedule and agreed to by Buyer and Seller as
clearly requiring a chip change at the contract monitoring fees set forth on
such Schedule in accordance with a Third Party Monitoring Agreement in the form
of Exhibit 7A until changeover to Buyer's monitoring facilities has been
completed. In addition, Seller agrees that for a period of up to eighteen (18)
months from Closing, Seller will monitor at no charge to Buyer and otherwise in
accordance with the terms of the Third Party Monitoring Agreement any other
accounts sold to Buyer hereunder which are not transferred to Buyer's central
station as a result of the line swing at Closing, including any accounts on
Schedule J which are not designated as clearly requiring a chip change. Buyer
and Seller shall coordinate periodically to verify the transfer of the accounts
to Buyer's central station. Buyer agrees to name Seller as an additional
insured or certificate holder under Buyer's general liability insurance policy
with respect to accounts being monitored by Seller pursuant to this Section
10.1.
10.2 Buyer's Monitoring Obligations.
In the event that any accounts not acquired by Buyer hereunder are
transferred to Buyer's central station, Buyer shall monitor such accounts
pursuant to a Third Party Monitoring Agreement in the form of Exhibit 7B,
provided that Seller has provided Buyer with all necessary information in order
to conduct such monitoring, at Buyer's standard monitoring rates for up to
twelve (12) months after Closing; provided that Seller shall have the
obligation to transfer such accounts out of Buyer's central station as soon as
reasonably practical and in any event prior to the termination of such twelve
(12) month period.
ARTICLE XI
TERMINATION OF AGREEMENT
In the event Buyer fails to consummate the purchase of the Assets to be
Acquired on or before the Termination Date 5 and Seller has complied with all
of the material terms and conditions on its part contained herein, then this
Agreement shall be automatically terminated and Seller shall have the right to
seek monetary damages arising as a result of Buyer's breach. In the event
Seller fails to consummate the sale of the Assets to be Acquired on or before
the Termination Date and Buyer has complied with all of the material
-20-
<PAGE> 24
terms and conditions on its part contained herein, then this Agreement shall be
automatically terminated and Buyer shall have the right, in its discretion, to
seek either specific performance of Seller's obligations hereunder (without the
posting of a bond or other security) or monetary damages arising as a result of
Seller's breach.
ARTICLE XII
GENERAL PROVISIONS
12.1 Survival of Obligations.
Seller and Buyer acknowledge that the representations, warranties,
covenants and agreements of Seller and Buyer contained herein form an integral
part of the consideration given to Buyer in exchange for the Purchase Price and
to Seller in exchange for the Assets to be Acquired, without which Buyer would
be unwilling to purchase, and Seller would be unwilling to sell, the Assets to
be Acquired. Notwithstanding any investigation and review made by Buyer
pursuant to this Agreement, Seller and Buyer agree that all of the
representations, warranties, covenants and agreements of Seller and Buyer
contained in this Agreement or in any exhibit, schedule, statement, report,
certificate or other document or instrument required to be delivered pursuant
to this Agreement shall survive the making of this Agreement, any investigation
or review made by or on behalf of the parties hereto and the Closing and, with
respect to the representations and warranties referenced in Section 8.4, shall
survive in accordance with the terms of Section 8.4.
12.2 Transfer Charges and Taxes.
Seller shall pay all stamp, sales, transfer, use, excise, license income,
or other taxes or fees, federal, state or local imposed by law in respect of
any and all transfers pursuant to this Agreement.
12.3 Arbitration.
Except with respect to Buyer electing to bring an action for specific
performance of this Agreement (which action shall be commenced and settled in a
court of competent jurisdiction), any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in Birmingham, Alabama or Denver, Colorado, in accordance with the
Rules of the American Arbitration Association for Commercial Arbitration. IN
THE EVENT OF ANY COURT PROCEEDING HEREUNDER, THE PARTIES WAIVE THEIR RIGHT TO
TRIAL BY JURY.
12.4 Confidentiality.
Buyer and Seller agree that they will treat in confidence all documents,
materials and other information which they have obtained regarding the other
party during the course of the negotiations leading to the consummation of
these transactions, the investigation provided for herein and the preparation
of this Agreement and other related documents. In the event these transactions
are not consummated, all copies of nonpublic documents and material which have
been furnished in connection therewith shall be promptly returned to the party
furnishing such documents and material, shall continue to be treated as
confidential information and shall not be used for the benefit of the party who
returned such confidential information. Neither Buyer nor Seller shall,
without the approval of the other party (which may not be unreasonably
withheld), make any press release or other public announcement concerning the
transactions contemplated by this Agreement, except as and to the extent that
such party shall be so obligated by law (including any legal obligation imposed
on Seller in connection with its status as a publicly-held corporation), in
which case the other party shall be advised and Buyer and Seller shall use
their reasonable efforts to cause a mutually agreeable release or announcement
to be issued. Notwithstanding the
-21-
<PAGE> 25
foregoing, in the event these transactions are consummated, Buyer shall have
the right without Seller's consent to announce the completion of such
transactions in the form of a "tombstone" announcement.
12.5 Governing Law.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Alabama, without regard to its
conflicts of law provisions.
12.6 Notices.
All notices or other communications required or permitted hereunder shall
be in writing and shall be deemed given or delivered when delivered personally,
by registered or certified mail, by legible facsimile transmission or by
overnight courier (fare prepaid) addressed as follows:
<TABLE>
<S> <C>
If to Buyer, to: with a copy to:
Masada Security, Inc. Buchanan Ingersoll Professional
Attention: Charles F. Armstrong Corporation
Vice President Attention: Thomas G. Buchanan, Esq.
950 22nd Street North, Ste. 800 58th Floor, 600 Grant Street
Birmingham, AL 35203 Pittsburgh, PA 15219
Telecopy: 800-531-3293 Telecopy: 412-562-9316
If to Seller, to: with a copy to:
Barbara L. Hutchison Charles A. Frank
Vice President General Counsel
Alert Centre, Inc. Alert Centre, Inc.
5800 S. Quebec St. 5800 S. Quebec St.
Englewood, Colorado 80111 Englewood, Colorado 80111
Telecopy: 303-488-7887 Telecopy: 303-488-7712
</TABLE>
or to such address as such party may indicate by a notice delivered to the
other parties hereto. Notice shall be deemed received the same day (when
delivered personally), five (5) days after mailing (when sent by registered or
certified mail), the same business day (when sent by facsimile) and the next
business day (when delivered by overnight courier). Any party to this
Agreement may change its address to which all communications and notices may be
sent by addressing notices of such change in the manner provided.
12.7 Assignment.
This Agreement may not be assigned by Seller without the prior written
consent of Buyer. Buyer shall have the right to assign this Agreement, the
Schedules and Exhibits and the rights and obligations hereunder without the
prior written consent of Seller to (i) its subsidiaries or affiliates,
successors and assigns, and (ii) to State Street Bank and Trust Company
collaterally as partial security for providing the financing for this
transaction. To the extent this Agreement is assigned by Buyer, which is a
corporation, to a subsidiary or affiliate of Buyer that is a partnership, all
direct and indirect references herein to Buyer's corporate standing shall be
deemed to refer to partnership standing. If Buyer is a partnership, this
Agreement is nonrecourse to the partners of Buyer.
12.8 Entire Agreement; Amendments.
This Agreement contains the entire agreement between the parties, wholly
cancels, terminates and supersedes any and all previous and/or contemporaneous
oral agreements, negotiations, commitments and writings between the parties
hereto with respect to such subject matter, including the Confidentiality
Agreement between Buyer and Seller dated December 7, 1994. No change,
modification, extension,
-22-
<PAGE> 26
termination, notice of termination, discharge, abandonment or waiver of this
Agreement or any of the provisions hereof, nor any representation, promise or
condition relating to this Agreement, shall be binding upon any party hereto
unless made in writing and signed by such party.
12.9 Interpretation.
Article titles and headings to Sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of any of the provisions of this Agreement. All references to
Sections and subsections contained in this Agreement refer to the Sections and
subsections of this Agreement. All references to Schedules or Exhibits
contained in this Agreement are references to the Schedules or Exhibits
described on the list immediately following the signature page hereto. All
references to the word "including" shall have the same meaning as the phrase
"including without limitation." Any and all Schedules, Exhibits, statements,
reports, certificates or other documents or instruments referred to herein or
attached hereto, including the "Background" portion of this Agreement, are
incorporated herein by reference as though fully set forth at the point
referred to in this Agreement. There shall be no presumption against any party
on the ground that such party was responsible for preparing this Agreement or
any part hereof.
12.10 Waivers.
Any term or provision of this Agreement may be waived, or the time for its
performance may be extended, by the party or parties entitled to the benefit
thereof, but any such waiver must be in writing and must comply with the notice
provisions contained in Section 12.6. The failure of any party to enforce at
any time any provision of this Agreement shall not be construed to be a waiver
of such provision, nor in any way to affect the validity of this Agreement or
any part hereof or the right of any party thereafter to enforce each and every
such provision. No waiver of any breach of this Agreement shall be held to
constitute a waiver of any other or subsequent breach.
12.11 Expenses.
Buyer and Seller will each pay all costs and expenses incident to its
negotiation and preparation of this Agreement and to its performance and
compliance with all agreements and conditions herein on its part to be
performed or complied with, including the fees, expenses and disbursements of
its counsel and accountants; provided, however, that in any action to enforce
the terms of this Agreement, the substantially prevailing party in such action
shall be entitled to recover its reasonable attorneys' fees and costs incurred
in connection with such action.
12.12 Partial Invalidity.
Wherever possible, each provision hereof shall be interpreted in such
manner as to be effective and valid under applicable law, but in case any one
or more of these provisions shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein, unless the deletion of
such provision or provisions would result in such a material change as to cause
the completion of these transactions to be unreasonable.
12.13 Further Assurances.
From time to time following the Closing Date, Seller shall (a) on a weekly
basis deliver to Buyer any cash or other property that it may receive in
respect of receivables relating to the business and operations of the Security
Business (whether attributable to periods before or after the Closing Date),
and (b) at the request of Buyer and without further consideration, execute and
deliver to Buyer such other instruments of conveyance and transfer as Buyer may
reasonably request or as
-23-
<PAGE> 27
may be otherwise necessary to more effectively convey and transfer to, and vest
in, Buyer and put Buyer in possession of, any part of the Assets to be
Acquired. In the case of any agreement, contract, lease, easement or other
commitment which is included in the Assets to be Acquired but which cannot be
transferred or assigned effectively without the consent of a third party, whose
consent has not been obtained prior to Closing, Seller shall cooperate with
Buyer at Buyer's request in trying to promptly obtain such consent.
12.14 Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be considered an original instrument and all of which together shall be
considered one and the same agreement, and shall become effective when
counterparts, which together contain the signatures of each party hereto, shall
have been delivered to Buyer and Seller. Delivery of executed signature pages
hereof by facsimile transmission shall constitute effective and binding
execution and delivery hereof.
12.15 Intended Beneficiary.
Buyer and Seller acknowledge that the Purchase Price will be funded from a
loan provided by State Street Bank and Trust Company to Buyer; therefore, Buyer
and Seller further acknowledge that State Street Bank and Trust Company is an
intended beneficiary of this Agreement and shall rely upon the representations,
warranties and agreements of Buyer and Seller contained herein.
12.16 Consent to Jurisdiction, Service and Venue.
For the purpose of any suit, action or proceeding arising out of or
relating to this Agreement, Seller hereby irrevocably consents and submits to
the jurisdiction and venue of any of the courts of the State of Alabama or of
any federal court located in the Southern District of Alabama and Buyer hereby
irrevocably consents and submits to the jurisdiction and venue of any of the
courts of the State of Colorado or of any Federal court located in the District
of Colorado. Seller and Buyer each waive any objections which they may now or
hereafter have to the venue of any such suit, action or proceeding brought in
such courts and any claim that such suit, action or proceeding brought in such
courts has been brought in an inconvenient forum. The provisions of this
Section shall not limit or otherwise affect the right of Buyer or Seller to
institute and conduct an action in any other appropriate manner, jurisdiction
or court.
-24-
<PAGE> 28
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
SELLER: ALERT CENTRE, INC.
/s/ Raymond A. Gross
--------------------------------
By: President & CEO
-----------------------------
BUYER: MASADA SECURITY, INC.
/s/ Terry W. Johnson
--------------------------------
By: Terry W. Johnson, President
and CEO
-----------------------------
<PAGE> 29
List of Schedules
Schedule Description
A Customer Accounts, List of Services and Rates,
Free or Discounted Service, Third Party Monitoring
B Other Business Documents
C Telephone Lines and Numbers
D Allocation of Purchase Price
E Liens and Encumbrances
F Litigation and Claims
G Insurance
H Customers without Written Contracts
I Prior Acquisitions
J Chip Change Accounts
K Licenses and Permits
L Subcontractors without Nonsolicitation Agreements
or Written Agreements
M Accounts with Excessive False Alarms History
N Consents and Notices
List of Exhibits
Exhibit Description
1 Escrow Agreement
2 Nonsolicitation Agreement
3 Opinion of Seller's Virginia Counsel
4 Opinion of Seller's General Counsel
5 Assignment and Bill of Sale
6 Customer Notice
7A Third Party Monitoring Agreement - Seller
7B Third Party Monitoring Agreement - Buyer
8 Insurance Summary
<PAGE> 1
NON-SOLICITATION AGREEMENT
This Agreement made as of this 13th day of June, 1995, by and between
Masada Security, Inc., a Delaware corporation ("Buyer"), and Alert Centre,
Inc., a Delaware corporation ("Seller").
STATEMENT OF FACTS
1. Buyer is simultaneously purchasing from Seller pursuant to an Asset
Purchase Agreement dated as of June 9, 1995 (the "Agreement of Purchase"), all
of the Assets to be Acquired including certain alarm accounts in the State of
Louisiana.
2. Any and all capitalized terms used herein and not otherwise defined
shall have the meanings given to them in the Purchase Agreement.
3. Buyer intends to continue the operation of the Security Business, and
Seller is willing to enter into this Agreement in consideration of Buyer's
purchase of the Security Business.
NOW, THEREFORE, in consideration of the premises and for good and valuable
consideration, receipt of which is hereby acknowledged, the parties, intending
to be legally bound, covenant and agree as follows:
1. Agreement Not to Solicit. Seller agrees never to solicit or accept,
at any time in the future, any of the customers or accounts sold to Buyer under
the Agreement of Purchase for the purpose of providing electronic security,
central vacuum, intercom systems, home sound or related services.
2. Non-Disclosure.
(a) Seller acknowledges that it possesses certain confidential,
proprietary and trade secret information, materials and business concepts with
respect to the operation of the Security Business, including information
regarding sales and marketing, vendors, customer lists and files (including
former customers), accounting data and methods, operating procedures, pricing
policy, strategic plans, intellectual property, contracts and manufacturer's
warranties (collectively, the "Proprietary Information").
(b) At all times hereafter, Seller agrees (i) not to publish, copy,
disclose, allow to be disclosed, or use for its own benefit or for the benefit
of any other person, firm, corporation or entity, the Proprietary Information
without the prior written consent of Buyer, and (ii) to maintain strictly the
confidentiality of the Proprietary Information at all times. Seller agrees to
take all necessary precautions to protect the Proprietary Information from
unauthorized disclosure or use.
3. Employees. For a period of two (2) years from the date hereof,
neither Seller nor any entity controlling, controlled by or under common
control with Seller shall knowingly solicit for employment any of the present
or future employees of the Security Business located in New Orleans, Louisiana.
Notwithstanding anything to the contrary stated in this Agreement, this Section
3 shall not be binding upon Seller's successors or assigns in the event of a
change of control of Seller or the sale by Seller of all or substantially all
of its assets.
4. Acknowledgment. Seller acknowledges and recognizes that:
(a) this Agreement is necessary for the protection of the legitimate
business interests of Buyer in purchasing the Security Business;
<PAGE> 2
(b) the execution and delivery of this Agreement is a mandatory condition
precedent to the closing of the transactions contemplated by the Agreement of
Purchase, without which such transactions will not close;
(c) the scope of this Agreement regarding duration and the level of
activities restricted is reasonable;
(d) the breach of this Agreement will be such that Buyer will not have an
adequate remedy at law because of the unique nature of the assets being
conveyed and the confusion to customers and the public that a breach would
create; and
(e) the laws of the State of Alabama have been selected by the parties to
govern this Agreement as an inducement to Buyer to purchase the Security
Business and Seller specifically waives any provision under Louisiana law,
including under La.R.S. 23:921, which would limit or in any way restrict the
scope of the agreement not to solicit contained in Section 1 hereof.
5. Remedy. Seller acknowledges and agrees that the rights of Buyer
under this Agreement are of a specialized and unique character and that
immediate and irreparable damage will result to Buyer and the Security Business
if Seller fails to or refuses to perform its obligations under this Agreement
and, notwithstanding any election by Buyer to claim damages from Seller as a
result of any such failure or refusal, Buyer may, in addition to any other
remedies and damages available, seek an injunction (without the need to post a
bond or other security) in a court of competent jurisdiction to restrain any
such failure or refusal.
6. Severability. If any provisions of this Agreement as applied to any
party or to any circumstances shall be adjudged by a court to be invalid or
unenforceable, the same shall in no way affect any other provision of this
Agreement, the application of such provision in any other circumstances or the
validity or enforceability of this Agreement. Buyer and Seller intend this
Agreement to be enforced as written. If any provision or any part thereof is
held to be invalid or unenforceable because of the duration thereof or the
geographic areas covered thereby, the parties agree that the court making such
determination shall have the power to reduce the duration and/or geographic
areas of such provision, and/or to delete specific words or phrases and in its
modified form such provision shall then be enforceable.
7. Consent to Jurisdiction, Service and Venue. For the purpose of any
suit, action or proceeding arising out of or relating to this Agreement, Seller
hereby irrevocably consents and submits to the jurisdiction and venue of any of
the courts of the State of Alabama or of any federal court located in the
Southern District of Alabama and Buyer hereby irrevocably consents and submits
to the jurisdiction and venue of any of the courts of the State of Colorado or
of any Federal court located in the District of Colorado. Seller and Buyer
each waive any objections which they may now or hereafter have to the venue of
any such suit, action or proceeding brought in such courts and any claim that
such suit, action or proceeding brought in such courts has been brought in an
inconvenient forum. The provisions of this Section shall not limit or
otherwise affect the right of Buyer or Seller to institute and conduct an
action in any other appropriate manner, jurisdiction or court.
8. Waiver of Jury Trial. BUYER AND SELLER HEREBY WAIVE ALL RIGHT TO A
TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT.
9. Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given or delivered when
delivered (i) personally, (ii) by registered or certified mail, (iii) by
legible facsimile transmission or (iv) by overnight courier (fare prepaid), in
all cases addressed as follows:
-2-
<PAGE> 3
<TABLE>
<S> <C>
If to Buyer, to: with a copy to:
Masada Security, Inc. Buchanan Ingersoll Professional Corporation
Attn: Charles F. Armstrong, Vice President Attn: Thomas G. Buchanan, Esquire
950 22nd Street North, Suite 800 58th Floor, 600 Grant Street
Birmingham, AL 35203 Pittsburgh, PA 15219
Telecopy: 800-531-3293 Telecopy: 412-562-9316
If to Seller, to: with a copy to:
Barbara L. Hutchison Charles A. Frank
Vice President General Counsel
Alert Centre, Inc. Alert Centre, Inc.
5800 S. Quebec St. 5800 S. Quebec St.
Englewood, Colorado 80111 Englewood, Colorado 80111
Telecopy: 303-488-7887 Telecopy: 303-488-7712
</TABLE>
or to such address as such party may indicate by a notice delivered to the
other party hereto. Notice shall be deemed received the same day (when
delivered personally), five (5) days after mailing (when sent by registered or
certified mail), or the next business day (when sent by facsimile transmission
or when delivered by overnight courier). Any party to this Agreement may
change its address to which all communications and notices may be sent
hereunder by addressing notices of such change in the manner provided.
10. Entire Agreement. This Agreement is an integrated document,
contains the entire agreement between the parties, and wholly cancels,
terminates and supersedes any and all previous and/or contemporaneous oral
agreements, negotiations, commitments and writings between the parties with
respect to such subject matter, except for the Agreement of Purchase. No
change, modification, extension, termination, discharge, abandonment or waiver
of this Agreement or any of the provisions hereof, nor any representation,
promise or condition relating to this Agreement, shall be binding upon the
parties unless made in writing and signed by the parties.
11. Interpretation. The descriptive headings of the Sections are for
ease of reference only and shall in no way affect or be used to construe or
interpret this Agreement. All references to Sections and subsections contained
in this Agreement are references to the Sections and subsections of this
Agreement. The terms and conditions of this Agreement shall not be construed
against its drafter. The word "including" means "including without
limitation."
12. Remedies Cumulative. It is agreed that the rights and remedies
herein provided in case of any default or breach by Seller of this Agreement
are cumulative and shall not affect in any manner any other remedies that Buyer
may have by reason of such default or breach by Seller. The exercise of any
right or remedy herein provided shall be without prejudice to the right to
exercise any other right or remedy provided herein, by law or by equity.
13. Waiver. No waiver of any right or remedy allowed hereunder shall
be implied by the failure to enforce any such right or remedy. No express
waiver shall affect any such right or remedy other than that to which the
waiver is applicable and only for that occurrence.
14. Parties in Interest. Except as stated in Section 3 hereof, this
Agreement shall be binding upon and shall inure to the benefit of Buyer and its
successors and assigns and the permitted successors and assigns of Seller.
15. Assignment. Buyer shall have the right to assign this Agreement to
any third party without the consent of Seller. Seller shall have no right to
assign its rights or obligations under this Agreement except that
- 3 -
<PAGE> 4
Seller may assign any rights that it has under this Agreement to an entity
acquiring all or substantially all of the assets of Seller.
16. Governing Law. This Agreement and the rights and the obligations
of the parties hereto shall be governed by and construed and enforced in
accordance with the laws of the State of Alabama without regard to its
conflicts of law provisions.
17. Incorporation by Reference. Any and all Schedules, Exhibits,
recitals, statements (including the Statement of Facts), reports, certificates
or other documents or instruments referred to herein or attached hereto are
incorporated herein by reference as though fully set forth at the point
referred to in this Agreement.
18. Expenses. Buyer and Seller each agree to pay all of their
respective costs and expenses incident to the negotiation and preparation of
this Agreement including the fees and costs of their counsel and accountants.
The prevailing party in any dispute regarding performance or compliance with
this Agreement will be entitled to its reasonable fees and costs of counsel.
19. Counterparts; Telecopy. This Agreement may be executed in one or
more counterparts, each of which when taken together shall comprise one
instrument. Delivery of executed signature pages hereof by facsimile
transmission shall constitute effective and binding execution and delivery
hereof.
20. Consultation. Seller acknowledges that it has carefully read and
fully understood all of the provisions of this Agreement and that it has
consulted with its attorneys prior to executing this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
--------------------------
ALERT CENTRE, INC.
By: /s/ Brain E. Johnson
---------------------
-4-
<PAGE> 1
ESCROW AGREEMENT
This Escrow Agreement made this 15th day of June, 1995, by
and among Alert Centre, Inc., a Delaware corporation ("Seller"), Masada
Security, Inc., a Delaware corporation ("Buyer"), and Buchanan Ingersoll
Professional Corporation (the "Escrow Agent").
STATEMENT OF FACTS
1. Buyer and Seller are parties to that certain Asset Purchase
Agreement dated as of June 9, 1995 (the "Purchase Agreement"). All capitalized
terms used herein, but not otherwise defined herein, shall have the meanings
given them in the Purchase Agreement.
2. Pursuant to the Purchase Agreement, Buyer agreed to purchase
all of the Assets to be Acquired.
3. Pursuant to the Purchase Agreement, Buyer and Seller agreed
that Buyer would deposit a portion of the Purchase Price with the Escrow Agent
to provide a source to fund any Chip Change Credit, any Purchase Price Deduct
and any indemnification obligation of Seller pursuant to Section 8.1 of the
Purchase Agreement.
NOW, THEREFORE, in consideration of the Statement of Facts
and the mutual covenants and agreements contained herein, the parties,
intending to be legally bound, covenant and agree as follows:
1. Establishment of Escrow Fund.
1.1 Simultaneously with the execution and delivery of this
Escrow Agreement, Buyer shall deposit the sum of Fifty-Seven Thousand
fifty-four and 98/100 Dollars ($57,054.98) (which deposit, together with
interest accrued thereon, shall be referred to as the "Escrow Fund") with the
Escrow Agent.
2. Appointment of Escrow Agent.
2.1 Buyer and Seller hereby appoint the Escrow Agent to serve as
escrow agent under the terms of this Escrow Agreement, and the Escrow Agent
hereby accepts such appointment.
2.2 The Escrow Agent agrees to place the Escrow Fund in an
account with PNC Bank, such account to bear interest at the highest rate
offered on accounts available for immediate withdrawal.
2.3 The Escrow Agent further agrees to carry out the provisions
of this Escrow Agreement on its part to be performed.
3. Purpose of the Escrow Fund.
3.1 The purpose of the Escrow Fund is to deposit a designated
portion of the Purchase Price to provide a source to fund any Chip Change
Credit, any Purchase Price Deduct and any indemnification obligation of Seller
pursuant to Section 8.1 of the Purchase Agreement.
<PAGE> 2
4. Distribution of the Escrow Fund.
4.1 The Escrow Agent shall disburse the Escrow Fund, in whole or
in part, only upon receipt of joint written instructions executed on behalf of
Buyer and Seller or at the direction of the arbitrators to be selected pursuant
to Section 12.3 of the Purchase Agreement or at the direction of a court of
competent jurisdiction.
4.2 The Escrow Agent may, at any time, deposit the Escrow Fund
with such arbitrators or court, and upon such deposit, the Escrow Agent shall
be relieved of any further liability or responsibility with respect thereto.
5. Escrow Agent.
5.1 The Escrow Agent shall not in any way be bound or affected
by a notice of modification or cancellation of this Escrow Agreement unless
notice thereof is given to the Escrow Agent by both Seller and Buyer, nor shall
the Escrow Agent be bound by any modification of its obligations hereunder
unless the same shall be consented to by the Escrow Agent in writing. The
Escrow Agent shall be entitled to rely upon any judgment, certification, demand
or other writing delivered to it hereunder without being required to determine
the authenticity or the correctness of any facts stated therein, the propriety
or validity of the service thereof, or the jurisdiction issuing any judgment.
5.2 The Escrow Agent shall not be under any duty to give the
property held by it hereunder any greater care than it gives its own similar
property.
5.3 The Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine, and it may assume that any person
purporting to give any notice or make any statement in connection with the
provisions hereof has been duly authorized to do so.
5.4 The Escrow Agent may act in reliance upon advice of counsel
in reference to any matter connected herewith, and shall not be liable for any
mistake of fact or error of judgment, or for any act or omission of any kind
except to the extent that such act or omission constitutes willful misconduct,
gross negligence or fraud.
5.5 The Escrow Agent shall not have any responsibility for the
payment of taxes except with funds furnished to the Escrow Agent for that
purpose.
5.6 This Escrow Agreement sets forth exclusively the duties of
the Escrow Agent with respect to any and all matters pertinent hereto. Except
as otherwise expressly provided herein, the Escrow Agent shall not refer to,
and shall not be bound by, the provisions of any other agreement.
5.7 Except with respect to claims based upon the Escrow Agent's
willful misconduct, gross negligence or fraud, Buyer shall indemnify and hold
harmless the Escrow Agent from any claims made against the Escrow Agent by
Seller arising out of or relating to this Escrow Agreement, and Seller shall
indemnify and hold the Escrow Agent harmless from any claims made against the
Escrow Agent by Buyer arising out of or relating to this Escrow Agreement.
Buyer and Seller jointly and severally shall indemnify and hold the Escrow
Agent harmless from any claim made by any third party arising out of or
relating to this Escrow Agreement, such indemnification to include all costs
and expenses incurred by the Escrow Agent, including reasonable attorneys'
fees.
-2-
<PAGE> 3
5.8 The Escrow Agent shall not be required to institute or
defend any action involving any matters referred to herein or which affect it
or its duties or liability hereunder, unless or until requested to do so by any
party to this Escrow Agreement and then only upon receiving full indemnity, in
character satisfactory to the Escrow Agent, against any and all claims,
liabilities and expenses, including reasonable attorneys' fees, in relation
thereto.
5.9 Upon termination of this Escrow Agreement, the Escrow Agent
may request from Buyer and Seller such additional assurances, certificates,
satisfactions, releases and/or other documents as it may deem appropriate to
evidence the termination of this Escrow Agreement.
5.10 The Escrow Agent shall not be entitled to receive a fee for
serving as the Escrow Agent hereunder.
5.11 Buyer and Seller acknowledge that it may be necessary, for
federal income tax or other purposes, for the Escrow Agent to know the employer
identification numbers ("EIN") of Buyer and Seller. Buyer represents that its
EIN is 63-1110400. Seller represents that its EIN is 84-1010258.
5.12 Seller acknowledges that the Escrow Agent is merely acting
as a depository hereunder and that the Escrow Agent has served as counsel for
Buyer with respect to the transactions contemplated herein. Seller agrees that
the Escrow Agent shall be entitled to serve as legal counsel and to represent
Buyer in any dispute involving Buyer and Seller, and Seller hereby waives any
right to assert any conflict of interest or to object to the Escrow Agent
representing Buyer based on its services as the Escrow Agent. The Escrow Agent
shall not be treated as being in a conflict situation with respect to its
representation of Buyer by virtue of the Escrow Agent's agreeing to serve
hereunder.
6. Notices.
6.1 All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given or delivered when
delivered (i) personally, (ii) by registered or certified mail, (iii) by
legible facsimile transmission or (iv) by overnight courier (fare prepaid), in
all cases addressed as follows:
<TABLE>
<CAPTION>
If to Buyer, to: with a copy to:
<S> <C>
Masada Security, Inc. Buchanan Ingersoll Professional Corporation
Attention: Charles F. Armstrong Attention: Thomas G. Buchanan, Esq.
Vice President 58th Floor, 600 Grant Street
950 22nd Street North, Ste. 800 Pittsburgh, PA 15219
Birmingham, AL 35203 Telecopy: 412-562-9316
Telecopy: 800-531-3293
If to Seller, to: with a copy to:
Barbara L. Hutchison Charles A. Frank
Vice President General Counsel
Alert Centre, Inc. Alert Centre, Inc.
5800 S. Quebec St. 5800 S. Quebec St.
Englewood, Colorado 80111 Englewood, Colorado 80111
Telecopy: 303-488-7887 Telecopy: 303-488-7712
</TABLE>
-3-
<PAGE> 4
If to the Escrow Agent, to:
Hugh G. Van der Veer, Esquire
Buchanan Ingersoll, P.C.
600 Grant Street, 58th Floor
Pittsburgh, PA 15219
Telecopy: (412) 562-1041
or to such address as such party may indicate by a notice delivered to the
other parties. Notice shall be deemed received the same day (when delivered
personally), five (5) days after mailing (when sent by registered or certified
mail), or the next business day (when sent by facsimile transmission or when
delivered by overnight courier). Any party to this Escrow Agreement may change
its address to which all communications and notices may be sent hereunder by
addressing notices of such change in the manner provided.
7. Miscellaneous.
7.1 This Escrow Agreement and the rights and the obligations of
the parties shall be governed by and construed and enforced in accordance with
the laws of the State of Alabama without regard to its conflicts of law
provisions.
7.2 The parties: (i) agree that any legal action concerning any
and all claims, disputes, or controversies arising out of or relating to this
Escrow Agreement shall only be commenced in Birmingham, Alabama or Denver,
Colorado; (ii) consent to the jurisdiction of the arbitrators elected pursuant
to the Purchase Agreement; and (iii) agree to accept service of any pleadings
(and such service shall be valid), if made by certified or registered mail,
return receipt requested, to the respective parties at the addresses set forth
in Section 6 of this Escrow Agreement. IN THE EVENT OF ANY COURT PROCEEDING
HEREUNDER, THE PARTIES WAIVE THEIR RIGHT TO A TRIAL BY JURY.
7.3 The parties agree to execute and deliver any and all documents
and to take such further action as shall be reasonably required to effectuate
the provisions of this Escrow Agreement.
7.4 This Escrow Agreement contains the entire understandings of
the parties with respect to the subject matter herein contained and shall not
be modified except by a writing signed by all the parties.
7.5 This Escrow Agreement shall inure to the benefit of and be
binding upon the parties and their respective successors and assigns. Seller
and the Escrow Agent cannot assign this Escrow Agreement, but Buyer shall be
permitted to assign this Escrow Agreement and its rights and obligations
hereunder to its affiliates, successors and assigns.
7.6 There shall be no presumption against any party on the ground
that such party was responsible for preparing this Escrow Agreement or any part
hereof. The word "including" means "including without limitation."
7.7 This Escrow Agreement may be executed in one or more
counterparts, each of which when taken together shall comprise one instrument.
Delivery of executed signature pages by facsimile transmission shall constitute
effective and binding execution and delivery.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Escrow
Agreement to be executed and delivered as of the day and year first above
written.
ALERT CENTRE, INC.
By: /s/ Brian E. Johnson
--------------------------------------
EXEC. V.P. AND C.F.O.
--------------------------------------
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
--------------------------------------
VICE PRESIDENT, CORPORATE DEVELOPMENT
--------------------------------------
BUCHANAN INGERSOLL PROFESSIONAL
CORPORATION
By: /s/ Thomas G. Buchanan
--------------------------------------
--------------------------------------
-5-
<PAGE> 1
EXHIBIT _____
SUBCONTRACTOR AGREEMENT
THIS SUBCONTRACTOR AND INSTALLATION AGREEMENT (the "Agreement") is made
this 15th day of June, 1995 by and between Masada Security, Inc., a
Delaware corporation, located at 950 22nd Street North, Suite 800, Birmingham,
Alabama 35203 ("Masada") and Alert Centre, Inc., a Delaware corporation,
located at 5800 South Quebec Street, Englewood, Colorado 80111
("Subcontractor") . For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by Subcontractor and Masada, the
parties agree as follows:
1. Maintenance and Installation Services. Subcontractor agrees to take
all steps necessary to provide maintenance and installation services (the
"Services") for the protective equipment and systems (the "Protective
Equipment") related to the alarm accounts referred to Subcontractor by Masada
(the "Alarm Accounts") in a good, safe, sound, and serviceable condition
consistent with the standards in the industry for services and maintenance of
such Protective Equipment and in conformity with all applicable federal, state
and local laws.
Subcontractor shall submit invoices to Masada for services rendered to
the Alarm Accounts which shall reflect the amounts due to Subcontractor's
subcontractors for services performed during the term of this Agreement,
without any additional charge or fee added by Subcontractor.
2. Licenses/Permits. At all times during the term of this Agreement,
Subcontractor shall possess all necessary federal, state and local licenses,
permits, cerificates and other authorizations required for Subcontractor's
performance of the Services.
3. No Agency. Subcontractor shall have no right to incur any
liabilities, debts or obligations of any kind, in the name of, on behalf of, or
as agent for Masada. It is specifically agreed that the relationship of the
parties hereto shall be that of principal and independent contractor, and not
of employer and employee. Subcontractor may subcontract with third parties to
provide the Services.
4. Term. Subcontractor agrees to provide the Services beginning the
date set forth above through June 30, 1995, and thereafter, this Agreement may
be renewed upon the written consent of the parties.
5. Guaranty. Subcontractor further guarantees that if Masada incurs any
expenses associated with any Services performed on behalf of any Alarm Account
as a result of Subcontractor's failure, or the failure of the responsible
person or entity designated or selected by Subcontractor, to provide
satisfactory Services on any Alarm Account pursuant to this Agreement,
Subcontractor shall pay such expenses to Masada upon demand. Failure to do so
will entitle Masada to offset such expenses from any funds which Masada may owe
to Subcontractor, or to Subcontractor's subcontractors, pursuant to this
Agreement, or pursuant to that certain Asset Purchase Agreement between the
parties, dated June 9, 1995. Masada hereby agrees to notify Subcontractor of
such offsets. Subcontractor
<PAGE> 2
f
shall have fifteen (15) days from the date notice is received to dispute said
charges.
6. Amendment and Waiver. This Agreement may be amended, or any provision
of this Agreement may be waived, provided that any such amendment or waiver
shall be binding upon the parties hereto only if such amendment or waiver is
set forth in writing executed by both parties hereto.
7. Notices. All written notices given or delivered under or by reason of
the provisions of this Agreement shall be deemed to have been given to the
respective parties hereto when personally delivered or mailed by certified
mail, return receipt requested, to the address noted below such party's
signature to this Agreement, unless another address is specified in writing.
8. Assignment. This Agreement, and all of the provisions hereof, shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Except for assignments by
Subcontractor or Masada to an affiliated entity of Subcontractor or Masada,
respectively, Masada or a successor in interest to any of Masada's Alarm
Accounts that are serviced by Subcontractor, neither this Agreement, nor any of
the rights, interests or obligations hereunder, may be assigned by either party
without the prior written consent of the other party.
9. Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party. All such counterparts taken together shall constitute one and the same
instrument.
10. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of Colorado.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
MASADA SECURITY, INC. ALERT CENTRE, INC.
By: /s/ Charles F. Armstrong By: /s/ Brian E. Johnson
----------------------- -----------------------
Name: Charles F. Armstrong Name: Brian E. Johnson
--------------------- -----------------------
Title: Vice President, Corporate Development Title: Exec. V.P. & C.F.O.
------------------------------------- -----------------------
Address: 950 22nd Street North Address: 5800 S. Quebec St.
Suite 800 Englewood, CO 80111
Birmingham, Alabama 35203
<PAGE> 1
CONTRACT DEALER AGREEMENT
EXHIBIT ___
[ALERT CENTRE, INC. LOGO]
AGREEMENT made this 15th day of June 1995, by and between Masada Security, Inc.,
a Delaware corporation (hereinafter referred to as "AC") with prinicpal
executive offices located at 950 22nd St. North, Suite 800, Birmingham, AL
35203 and Alert Centre, Inc. a (check one) / / Sole Proprietship, / /
Partnership, /x/ Corporation, duly existing under the laws of the State of
Delaware with its principal offices located at 5800 South Quebec Street,
Englewood, CO 80111 ("Installer")
In consideration of the mutual promises and covenants herein specified, and for
other good and valuable consideration, the parties hereto do, for themselves
their successors, and assigns mutually agree as follows:
1. AC, recognizing that Installer will be entering into agreements with its
customers (herein called "Subscribers") for the monitoring of protective
systems of Subscriber's premises, agrees to provide the monitoring and
notification services set forth in this Agreement for such Subscribers as
Installer may direct.
2. The fees to be paid by Installer to AC for such services shall be on a
per-Subscriber basis as specified by AC's Price List in effect at the time such
services are rendered. Installer acknowledges having received the entered Price
List and specifically agrees that same, and/or any amendments thereof, shall be
incorporated by reference as part of this Agreement as is set out in full
herein. Such loans shall be paid to AC by the Installor in advance. A monthly
service charge for each of Installer's systems monitored will be assessed
commencing upon completion of connection, for as long a period as the
Subscriber is connected. The first monthly service charge for each of
Installer's systems shall be prorated in that month to reflect the number of
days AC monitored the system. This agreement shall continue unless either
party notifies the other of its intention to terminate this Agreement by giving
not less than (30) days written notice.
If Installer fails to pay any amount herein provided within sixty (60) days
after the same is due and payable, or if installer fails to perform any other
provisions hereof within sixty (60) days after AC shall have requested in
writing performance thereof, or if installer makes any assignment for the
benefit of creditors, AC shall have the right, but shall not be obligated to
exercise any one or more of the following remedies:
(a) Recover the existing amounts due from Installer and contine to provide
monitoring service, or
(b) Discontinue monitoring service upon five (5) days written notice to
Subscribers and Installers; or
(c) If Installer fails to pay any amount herein provided within sixty (60)
days after the same is due and payable, AC may upon written notification to the
Installer, terminate this Agreement with Installer.
Each right and remedy provided for in this Agreement shall be cumulative, and
shall be in addition to every other right or remedy provided in this Agreement,
now or hereafter existing, at law or in equity or by statute.
3. The obligation of AC to render service to any particular Subscriber shall
become effective only after AC has received an acceptable test signal from the
Installer from the location for which services are to be rendered.
4. AC and the Installer agree that AC's sole obligation is under this
Agreement, and/or under any agreements between Subscribers and this Installer,
shall be to monitor signals received by means of the protective systems of
Subscriber, and upon receipt of signals from a Subscriber's premises, to make
every reasonable effort to transmit notification of the alarm promptly to the
police, fire or other authorities and/or person or persons whose names and
telephone numbers are set forth in instructions received by AC from time to
time from such Subscribers, unless there is reason to believe that an emergency
condition does not exist.
5. It is understood that AC owns none of the electro-protective employment
in the Subscribers' premises and has no responsibility for the condition and/or
the functioning thereof, and that maintenance, repair, service, replacement or
insurance of the electro-protective equipment is not the obligation or
responsibility of AC.
6. AC shall not be liable for any loss or damage caused by defects or
deficiencies in the electro-protective equipment of any Subscriber, nor shall
AC incur any liability for any delay in response time or lack of response by
police, fire or other authorities, institutions or individuals notified by AC.
7. AC shall not be obligated to perform any monitoring service hereunder
during any time when any Subscriber's telephone or telephone equipment shall be
inoperative inasmuch as signals to AC are received solely by means of telephone
communication.
8. This Agreement may be terminated with respect to any Subscriber at any time
by Installer upon written notice to AC.
9. AC shall not be responsible for any fees, charges, or assessments imposed
by any government authority or other person in connection with false alarms
from any equipment located at any Subscriber's premises.
10. This Agreement may be suspended as to any particular Subscriber should the
equipment at the premises of such Subscriber become so disabled or so
subtantially damaged that further service to such Subscriber is impracticable.
AC will not be required to render service to a Subscriber if the failure to
render such service is due to strikes, riots, floods, fires, malfunctions of
telephone lines or telephone equipment, acts of God, or any other cause beyond
the control of AC.
11. In addition, to the fees stated herein, Installer agrees to pay, when
requested by AC, any and all sales and use taxes or other impositions or levies
by municipal, state, or federal authorities in connection with the service to
be performed by AC. The Installer agrees to hold AC harmless from, and to
indemnify it against any claims for the foregoing, including legal or
accounting fees, should such fees be incurred.
12. It is understood and agreed by the parties that AC is not an insurer and
that insurance, if any, covering personal injury and property loss or damage on
any Subscriber's premises shall be obtained by the Subscriber, that AC is being
paid to monitor systems designed to reduce certain risks or loss and that the
amounts being charged by AC are not sufficient to guarantee that no loss will
occur; and that AC is not assuming responsibility for any losses which may
occur even if due to AC's negligent performances or failure to perform any
obligation under this Agreement. AC hereby disclaims all representations and
warranties, expressed or implied, including those of merchantability or fitness
or that service supplied by AC may not be compromised, or that the services
will in all cases provide the protection for wich they may be intended.
Since it is impractical and extremely difficult to fix the actual damages
which may arise due to the failure of services provided, the parties agree
that, should there arise any liability to Installer on the part of AC arising
out of AC's performance or non-performance (negligent or otherwise) of its
obligations under this Agreement with respect to a particular Subscriber, such
liability shall be limited to the sum of $250.00. This sum shall be the
complete limit of AC's liability to Installer for AC's performance or
non-performance of its obligations under this Agreement and shall not be deemed
a penalty. In the event that Installer wishes AC to assume a higher limitation
of liability, the Installer may obtain from AC a higher limit by paying an
additional amount proportioned to such increase, but such additional obligation
shall in no way be interpreted to hold AC as an Insurer. Installer agrees to
indemnify and save harmless AC, its employees and agents, from and against all
liability (including Attorney's fee) for Subscriber or third party claims,
lawsuits, and losses alleged to be caused by AC's performance or
non-performance (negligent or otherwise) of its obligations under this
Agreement.
13. The parties specifically agree that any notices required to be given
under this Agreement shall be made in writing and sent to the address of the
other party indicated herein, or such other address as from time to time may
be provided by each party to the other in writing; that this Agreement contains
the entire understanding between the parties and may be altered or modified
only by a writing signed by the parties; that this Agreement, as to any
particular Subscriber, shall not be assignable by the installer except upon the
express written consent of AC; and that this Agreement, in all respects shall
be governed and construed solely under the laws of the State of Alabama.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written and specifically represent that the person executing
same on behalf of each party is fully authorized to do so.
MASADA SECURITY, INC. ALERT CENTRE, INC.
By: /s/
---------------------------- --------------------------------------
Authorized Representative Dealer Name (Please Print)
Dealer Phone No. 1-205-323-7233 /s/ Brian E. Johnson, Exec. V.P. & CFO
------------------- --------------------------------------
Dealer Signature
Dealer No. Assigned: 944557
---------------- Current Basis Monthly Monitoring
Rate Per Account Per Month $ 5.00
in accordance with Section 10.2 of
Account No. Assigned: the Asset Purchase Agreement, to
--------------- which the Agreement is attached.
Receiver No.:
-----------------------
Receiver Telephone No.:
-------------
<PAGE> 1
[ALERT CENTRE, INC. LOGO] CONTRACT DEALER AGREEMENT
AGREEMENT made this 15th day of June 1995, by and between Alert Centre, Inc.,
d/b/a The Alert Centre Protective Services, a Delaware corporation
(hereinafter referred to as "AC") with principal executive offices located
5800 S. Quebec, Englewood, Colorado, and Masada Security, Inc. a (check one)
/ / Sole Proprietorship, / / Partnership, /X/ Corporation, duly existing under
the laws of the State of DE with its principal offices located at 950 22nd
Street North, Suite 800 Birmingham, AL 35203 ("Installer")
In consideration of this mutual promises and covenants herein specified, and
for other good and valuable consideration, the parties hereto do, for
themselves, their successors, and assigns mutually agree as follows:
1. AC, recognizing that Installer will be entering into agreements with its
customers (herein called "Subscribers") for the monitoring of protective
systems of Subscriber's premises, agrees to provide the monitoring and
notification services set forth in this Agreement for such Subscribers as
Installer may direct.
2. The fees to be paid by Installer to AC for such services shall be on a
par-Subscriber basis as specified by AC's Price List in effect at the time such
services are rendered. Installer acknowledges having received the current
Price List and specifically agrees that same, and/or any amendments thereof,
shall be incorported by reference as part of this Agreement as is set out in
full herein. Such fees shall be paid to AC by the Installer in advance. A
monthly service charge for each of installer's systems monitored will be
assessed commencing upon completion of connection, for as long a period as the
Subscriber is connected. The first monthly service charge for each of
Installer's systems shall be prorated to that month to reflect the number of
days AC monitored the system. This agreement shall continue unless either party
notifies the other of its intention to terminate this Agreement by giving not
less than (30) days written notice.
If Installer fails to pay any amount herein provided within sixty (60)
days after the same is due and payable, or if Installer fails to perform any
other provisions hereof within sixty (60) days after AC shall have requested in
writing performance thereof, or if Installer makes any assignment for the
benefit of creditors, AC shall have the right, but shall not be obligated to
exercise any one or more of the following remedies:
(a) Recover the existing amounts due from Installer and continue to
provide monitoring service, or
(b) Discontinue monitoring service upon five (5) days written notice
to Subscribers and Installer; or
(c) If Installer fails to pay any amount herein provided within sixty
(60) days after the same is due and payable, AC may upon written notification
to the Installer, terminate this Agreement with Installer.
Each right and remedy provided for in this Agreement shall be cumulative, and
shall be in addition to every other right or remedy provided in this
Agreement, now or hereafter existing, of law or in equity or by statute.
3. The obligation of AC to render service to any particular Subscriber shall
become effective only after AC has received an acceptable test signal from the
Installer from the location for which services are to be rendered.
4. AC and the Installer agree that AC's sole obligation under this Agreement,
and/or under any agreements between Subscribers and the Installer, shall be to
monitor signals received by means of the protective systems of Subscribers, and
upon receipt of signals from a Subscriber's premises, to make every reasonable
effort to transmit notification of the alarm promptly to the police, fire, or
other authorities and/or person or persons whose names and telephone numbers are
set forth in instructions received by AC from time to time from such
Subscribers, unless there is reason to believe that an emergency condition does
not exist.
5. It is understood that AC owns none of the electro protective equipment in
the Subscribers' premises and has no responsibility for the condition and/or
the functioning thereof, and that maintenance, repair, service, replacement or
insurance of the electro-protective equipment is not the obligation or
responsibility of AC.
6. AC shall not be liable for any loss or damage caused by defects or
deficiencies in the electro-protective equipment of any Subscriber, nor shall
AC incur any liability for any delay in response time or lack of response by
police, fire or other authorities, institutions or individuals notified by AC.
7. AC shall not be obligated to perform any monitoring service hereunder
during any time when any Subscriber's telephone or telephone equipment shall be
inoperative insasmuch as signals to AC are received solely by means of
telephonic communication.
8. This Agreement may be terminated with respect to any Subscriber at any time
by Installer upon written notice to AC.
9. AC shall not be responsible for any fees, charges, or assessments imposed by
any government authority or other person in connection with false alarms from
any equipment located at any Subscriber's premises.
10. This Agreement may be suspended as to any particular Subscriber should the
equipment of the premises of such Subscriber become so disabled or so
substantially damaged that further service to such Subscriber is impracticable.
AC will not be required to render service to a Subscriber if the failure to
render such service is due to strikes, riots, floods, fires, malfunctions of
telephone lines or telephone equipment, act of God, or any other cause beyond
the control of AC.
11. In addition to the fees stated herein, Installer agrees to pay, when
requested by AC, any and all sales and use taxes or other impositions or levies
by municipal, state or federal authorities in connection with the service to
be performed by AC. The installer agrees to hold AC harmless from, and to
indemnify it against any claims for the foregoing, including legal or
accounting fees, should such fees be incurred.
12. It is understood and agreed by the parties that AC is not an Insurer and
that Insurance, if any, covering personal injury and property loss or damage on
any Subscriber's premises shall be obtained by the Subscriber, that AC is being
paid to monitor systems designed to reduce certain risks or loss and that the
amounts being charged by AC are not sufficent to guarantee that no loss will
occur; and that AC is not assuming responsibility for any losses which may
occur even if due in AC's negligent performance or failure to perform any
obligation under this Agreement. AC hereby disclaims all representations and
warranties, express or implied, including those of merchantability or fitness
or that service supplied by AC may not be compromised, or that the services
will in all cases provide the protection for which they may be intended.
Since it is impractical and extremely difficult to fix the actual damages
which may arise due to the failure of services provided, the parties agree that,
should there arise any liability to Installer on the part of AC arising out of
AC's performance or non-performance (negligent or otherwise) of its obligations
under this Agreement with respect to a particular Subscriber, such liability
shall be limited to the sum of $250.00. This sum shall be the complete limit
of AC's liability to Installer for AC's performance or non-performance of its
obligations under this Agreement and shall not be deemed a penalty. In the
event that Installer wishes AC to assume a higher limitation of liability, the
Installer may obtain from AC a higher limit by paying an additional amount
proportioned to such increase, but such additional obligation shall in no way
be interpreted to hold AC as an insurer. Installer agrees to indemnify and
save harmless AC, its employees and agents, from and against all liability
(including Attorney's fee) for subscriber or third party claims, lawsuits,
and losses alleged to be caused by AC's performance or non-performance
(negligent or otherwise) of its obligations under this Agreement.
13. The parties specifically agree that any notices required to be given under
this Agreement shall be made in writing and sent to the address of the other
party indicated herein, or such other address as from time to time may be
provided by each party to the other in writing; that this Agreement contains
the entire understanding between the parties and may be altered or modified
only by a writing signed by the parties; that this Agreement, as to any
particular Subscriber, shall not be assignable by the Installer except upon the
express written consent of AC; and that this Agreement, in all respects shall
be goverened and construed solely under the laws of the State of Colorado.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written and specifically represent that the person executing
same on behalf of each party is fully authorized to do so.
ALERT CENTRE, INC., d/b/a MASADA SECURITY, INC.
THE ALERT CENTRE PROTECTIVE SERVICES
By:/s/ Brian E. Johnson, Exec. V.P. & CFO /s/
-------------------------------------- --------------------------------
Authorized Alert Representative Dealer Name (Please Print)
Dealer Phone No. 1-205-323-7233
------------------------ --------------------------------
Dealer Signature
Dealer No. Assigned: 944557 Current Basis Monthly Monitoring
--------------------- Rate Per Account Per Month
Account No. Assigned $5.00 for accounts that require
------------------- chip change as set forth in
Receiver No. Schedule J to the Asset
--------------------------- Purchase Agreement between the
Receiver Telephone No. parties, to which this
----------------- Agreement is attached, and for
the remaining accounts, as set
forth in Section 10.1 of such
Asset Purchase Agreement.
<PAGE> 1
ASSET PURCHASE AGREEMENT
This Agreement is made and entered into this 29th day of June 1995, by
and between MASADA SECURITY, INC., a Delaware corporation ("Purchaser") and GRB
SECURITY SYSTEMS, a sole proprietorship ("Seller").
RECITALS
Seller is engaged in the business of operating a security alarm system
monitoring business in the Oklahoma City, Oklahoma metropolitan area (the
"Business").
Seller desires to sell to Purchaser and Purchaser desires to buy from
Seller certain of the customer account contracts and certain other assets of
Seller pertaining to the Business, and Purchaser and Seller desire to make
certain other arrangements between them relating to the purchase and sale of
such assets, all upon the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, the parties hereto in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which is hereby acknowledged, and intending to be
legally bound, agree as follows:
Section 1. Agreement to Purchase and Sell. In accordance with the terms
and conditions contained herein and in reliance on the respective
representations and warranties of the parties hereto, Seller hereby agrees to
sell, convey, transfer and assign to Purchaser, and Purchaser hereby agrees to
purchase, accept and acquire from Seller in the manner provided herein, the
assets described below (collectively referred to as the "Purchased Assets"):
(a) Alarm Accounts. All right, title and interest of Seller in and to the
written contracts for the rendering of security monitoring services to existing
customers of Seller which meet all of the requirements listed in Section 8(h)
and as specifically set forth on Schedule 1(a) hereto (the "Alarm Accounts");
(b) Fixed Assets. All right, title and interest of Seller to selected
fixed assets including any alarm panel programmers that are required to service
the Alarm Accounts and as specifically set forth on Schedule 1(b) hereto (the
"Fixed Assets");
(c) Other Contracts. All right, title and interest of Seller in and to
those contracts and benefits of Seller all of which are listed on Schedule 1(c)
hereto (the "Other Contracts"), with the Other Contracts, including, without
limitation, all executory contracts,
<PAGE> 2
agreements, leases and all accepted orders for the sale or installation by
Seller of alarm systems which are not yet installed or in the process of being
installed as of the Closing Date (as defined in Section 5(a));
(d) Intangible Personal Property. The unexpired copyrights and licenses
owned by or accruing to the benefit of Seller pertaining to the Business,
including all non-competition or non-solicitation agreements accruing to the
benefit of Seller and pertaining to the Business to which it is a party (the
"Intangible Personal Property"), all of which are listed on Schedule 1(d)
hereto;
(e) Telephone Lines and Numbers. All right, title and interest of Seller
in and to the local and long distance telephone numbers, telephone lines that
transmit signals from customer locations to Seller's central station, and
"ring-down" lines (the "Telephone Lines and Numbers") all of which are listed
on Schedule 1(e) hereto;
(f) Vehicle. All right, title and interest of Seller in and to the
vehicle specifically listed on Schedule 1(f) hereto including camper top and
related accessories (the "Vehicle");
(g) Inventory. All right, title and interest of Seller in and to the
goods listed on Schedule 1(g) hereto (the "Inventory"); and
(h) Other Assets. All files, records and incidental documentation of
Seller pertaining to the Alarm Accounts, including, without limitation, all
computer lists, contract information, credit records and information, purchase
and sales records, catalogs, circulars, advertising materials and other
information (the "Other Assets").
Section 2. Purchase Price and Payment.
(a) Purchase Price for the Purchased Assets excluding Vehicle and
Inventory. The purchase price for the Purchased Assets excluding Vehicle and
Inventory (the "Purchase Price Excluding Vehicle and Inventory") shall be the
product of 28 times the aggregate Monthly Revenue Equivalent (as defined in
Section 4) of each Alarm Account less an amount equal to the prepaid revenue
relating to each Alarm Account (as set forth on Schedule 2(a) hereto) computed
on a per diem basis to the Closing Date.
(b) Purchase Price-Vehicle. The purchase price for the Vehicle (the
"Purchase Price-Vehicle") shall be $7,300.00.
(c) Purchase Price-Inventory. The purchase price for the Inventory (the
"Purchase Price-Inventory") shall be $747.90.
2
<PAGE> 3
(d) Purchase Price-All Purchased Assets. The sum of: the Purchase Price
Excluding Vehicle and Inventory; the Purchase Price-Vehicle; and, the Purchase
Price-Inventory shall hereinafter collectively be referred to as the "Purchase
Price-All Purchased Assets".
(e) Adjustment to Purchase Price Excluding Vehicle and Inventory. The
Purchase Price Excluding Vehicle and Inventory shall be adjusted for items of
expense and income prorated as of the Closing Date in the manner provided
below:
(i) Liabilities or credits for personal property taxes, if any, in respect
of the Purchased Assets shall be prorated on the basis of the current taxable
year, to and including the Closing Date; provided that if the assessed value of
any Purchased Asset or rate of tax with respect thereto shall not have been
determined prior to the Closing Date, the value and rate shall be determined on
the basis of the amount of the previous year in which the same was determined;
and
(ii) Other liabilities or credits, prepaid items and deferred charges
relating to the Purchased Assets existing on the Closing Date shall be adjusted
as of the Closing Date by prorating the aforementioned items for credit to
Seller or Purchaser, as the case may be, in accordance with generally accepted
accounting principles.
(f) Payment of Purchase Price-All Purchased Assets.
(i) The sum of: (i) 80% of the Purchase Price Excluding Vehicle and
Inventory subject to the adjustments as set forth in Section 2(e) and less the
Chip Change Credit Amount as determined in accordance with Section 17; (ii) the
Purchase Price-Vehicle; and (iii) the Purchase Price-Inventory (in the
aggregate referred to as the "Initial Payment") shall be paid by Purchaser to
Seller by wire transfer or other mutually agreeable means on the Closing Date;
(ii) The remaining 20% of the Purchase Price Excluding Vehicle and
Inventory (the "Deferred Payment Amount") shall be paid in accordance with
Section 3 hereof.
(iii) The portion of the Chip Change Credit Amount, if any, due to Seller
after the Conversion Date (as defined in Section 17) shall be paid by Purchaser
to Seller by certified check or other mutually agreeable means in accordance
with Section 17 hereof.
(g) Allocation of Purchase Price. The Purchase Price-All Purchased
Assets, subject to the adjustments set forth in Section 2(e) above, shall be
allocated as set forth in Schedule 2(g). Purchaser and Seller agree for income
tax purposes they shall report the transactions contemplated by this Agreement
in a manner consistent with such allocation.
(h) Guarantee Period. Seller warrants that beginning on the Closing Date
and for the 12 month period immediately after the Closing Date (the "Guarantee
Period") all Alarm Accounts purchased by Purchaser pursuant to this Agreement
and described on Schedule 1(a) shall continue to meet the requirements
specified in Section 8(h) and that payments from
3
<PAGE> 4
customers shall be made in a timely manner. For purposes of this Agreement,
payments by customers shall be considered timely if they are received by
Purchaser on or before the 60th day following the applicable payment due date.
For purposes of this Agreement, a "Defaulted Contract" shall be defined as any
Alarm Account that no longer meets the requirements specified in Section 8(h)
or any Alarm Account the payments from which shall not have been made in a
timely manner. Seller within 30 days of receipt of written notice from
Purchaser that one or more of the Alarm Accounts is a Defaulted Contract, shall
repurchase that Defaulted Contract from Purchaser for 28 times the Monthly
Revenue Equivalent of such Alarm Account as of the Closing Date (the
"Repurchase Amount") or shall replace the Defaulted Contract with another Alarm
Account that meets all of the requirements specified in Section 8(h) and has a
Monthly Revenue Equivalent equal to or greater than the Defaulted Contract. If
the Seller does not repurchase or replace the Defaulted Contract within such 30
day period, Seller shall be charged against the Escrow Account as provided for
in Section 3, an amount equal to the Repurchase Amount plus the interest
accruing thereon from the Closing Date at the rate then applicable to the
Escrow Account.
Section 3. Escrow Agreement.
(a) Escrow Agreement. On or prior to the Closing Date, Seller and
Purchaser agree to execute an Escrow Agreement in the form attached hereto as
Schedule 3(a) (the "Escrow Agreement") and Purchaser agrees to deposit with
SouthTrust Bank of Alabama, N.A. (the "Escrow Agent"), the Deferred Payment
Amount to be held in an escrow account (the "Escrow Account") pursuant to the
terms of the Escrow Agreement (the "Deferred Payment Amount" together with all
earnings thereon shall collectively hereinafter be referred to as the "Escrow
Amount").
(b) Payment and Escrow Amount. Within 30 days from the expiration of the
Guarantee Period, Purchaser shall submit to Seller substantially in the form
attached hereto as Schedule 3(b) along with all appropriate supporting
documentation, a report reflecting: (i) the Escrow Amount; (ii) the total
Repurchase Amounts, if any, credited to Purchaser calculated in accordance with
Section 2(h) (the "Total Repurchase Amounts"); and (iii) the resulting
difference between Section 3(b)(i) less the Purchaser's credits associated with
Section 3(b)(ii) (the "Resulting Difference"). If Seller does not notify
Purchaser of a dispute regarding such report within ten business days from the
date such report is submitted by Purchaser to Seller or if Seller notifies
Purchaser of its acceptance of such report, such report shall be deemed
complete and accurate and Seller and Purchaser shall notify Escrow Agent to pay
the sums computed below to Seller or Purchaser, as the case may be, and the
Escrow Account shall then be closed after payment by the Escrow Agent of all
funds held by it in the Escrow Account. If the Resulting Difference is a
positive amount then Seller and Purchaser shall instruct the Escrow Agent to
first pay the Seller the Resulting Difference and the remainder of the Escrow
Amount shall be paid by Escrow Agent to Purchaser. If the Resulting
Difference is a negative amount, then Seller and Purchaser shall instruct the
Escrow Agent to pay Purchaser the entire Escrow Amount.
4
<PAGE> 5
(c) Dispute. All disputes and differences with respect to the computation
of the Resulting Difference and the Escrow Account shall be determined by
binding arbitration under the rules then in effect of the American Arbitration
Association, such arbitration hearing to be held in Jefferson County, State of
Alabama. The arbitration proceedings shall be heard by one arbitrator selected
from the proposed panel of arbitrators issued by the American Arbitration
Association, Seller, on the one hand, and Purchaser, on the other hand, shall
attempt to select a mutually acceptable arbitrator. If the parties are unable
to select a mutually acceptable arbitrator within five business days following
the issuance of the list of potential arbitrators by the American Arbitration
Association, Seller, on the one hand, and Purchaser, on the other hand, shall
each select one person from the list, and those two persons selected shall
appoint a third person from the list, which person shall be the arbitrator for
the dispute. All arbitration awards shall include an award of expenses
including, but not limited to, legal and accounting fees.
Section 4. Monthly Revenue Equivalent. For purposes of this Agreement,
the term "Monthly Revenue Equivalent" with respect to the Alarm Accounts
acquired from Seller by Purchaser shall be the charge for monitoring services,
(including, without limitation, maintenance and other alarm related services),
exclusive of any direct wire telephone line charges associated with monitoring,
payable by the customer for each applicable billing period expressed in terms
of a monthly amount regardless of whether the billing period is annual,
semi-annual, quarterly or monthly.
Section 5. The Closing.
(a) Place. The closing of the purchase and sale of the Purchased Assets
(the "Closing") shall take place on June 23, 1995, or such other date as shall
be mutually agreeable to Seller and Purchaser (the "Closing Date"), and shall
take place at a location mutually agreeable to Seller and Purchaser.
(b) Closing Deliveries. On the Closing Date, Seller shall make the
deliveries specified by Section 9 and Purchaser shall make the deliveries
specified by Section 10.
(C) Closing Procedure. All proceedings to be taken and all documents to be
delivered and executed on the Closing Date shall be deemed to have been taken,
delivered and executed simultaneously, and no proceeding shall be deemed taken
nor documents deemed executed or delivered until all have been taken, delivered
and executed. At the Closing Seller and Purchaser shall execute and deliver
the instruments and documents referenced in Sections 9 and 10 and Purchaser
shall pay the Purchase Price-All Purchased Assets in accordance with Section 2
hereof.
Section 6. Assumption of Liabilities. Purchaser shall not assume any
liability, debt or obligation of Seller except the responsibility of rendering
security monitoring services pursuant to the Alarm Accounts and Other Contracts
set forth on Schedules 1(a) and 1(c) and those liabilities and obligations of
Seller arising after the Closing Date that are set forth on Schedule
5
<PAGE> 6
6 hereto. Purchaser shall not assume any liability, debt or obligation
of Seller except those set forth on Schedules 1(a), 1(c) and 6, and Seller
shall continue to be responsible for, and shall indemnify and save harmless
Purchaser from and against, all of Seller's known and unknown liabilities,
debts and obligations, including without limitation liabilities for violations
of any laws, regulations or other requirements, arising prior to, in connection
with, or subsequent to the Closing Date that are not specifically assumed by
Purchaser as set forth in Schedules 1(a), 1(c) and 6.
Section 7. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller that on the date hereof:
(a) Organization and Standing. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and Purchaser has all requisite corporate power and authority to own, operate
and lease its properties and carry on its business as now being conducted and
to enter into this Agreement and to perform its obligations hereunder.
(b) Authority Relative to this Agreement. The execution, delivery and
performance by Purchaser of this Agreement has been duly authorized by the
stockholder of Purchaser, and no further corporate action is necessary on the
part of Purchaser to make this Agreement valid and binding upon Purchaser in
accordance with its terms.
(c) No Violation. Neither the execution nor the delivery of this
Agreement by Purchaser nor the consummation of the transactions contemplated
herein, nor compliance by Purchaser with any of the provisions hereof,
violates or conflicts with or results in the breach or termination of any term
or provision of, nor constitutes a default or acceleration of the performance
required under, the articles of incorporation, bylaws or resolutions of the
Purchaser; any indenture, mortgage, deed, trust or other contract or agreement
to which Purchaser is a party or by which its properties are bound, or
violates any law, ordinance, regulation, order, writ, injunction or decree of
any court, administrative agency or governmental body.
(d) Brokerage Fees. Purchaser is not obligated nor has it agreed to pay
any brokerage commissions, finders fees or other similar fee or charge in
connection with the purchase of the Purchased Assets pursuant to this
Agreement.
(e) Disclosure. No representation or warranty of Purchaser, and no
statement contained in this Agreement and no information contained in any
schedule furnished to Seller by or on behalf of Purchaser pursuant to this
Agreement, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading. Each of the separate representations and warranties set forth in
the various subsections of this Section 7 is intended to be, and shall be
interpreted as, an independent representation and warranty as to matters
referred to therein, and the applicability
6
<PAGE> 7
or inapplicability of any particular subsection of this Section 7 shall not
affect the interpretation of any other subsection.
Section 8. Representations and Warranties of Seller. Seller represents
and warrants to Purchaser that on the date hereof:
(a) Organization and Standing. Seller is a sole proprietorship,
100% owned by Gary R. Bates and Seller has all requisite power and authority
to own, operate and lease its properties and carry on its business as it has
been and currently is being conducted and to enter into this Agreement and to
perform its obligations hereunder.
(b) Authority Relative to this Agreement. The execution, delivery
and performance by Seller of this Agreement has been duly authorized by the
Seller, and no further action is necessary on the part of Seller to make this
Agreement valid and binding upon the Seller in accordance with its terms.
(c) No Violation. Neither the execution nor the delivery of this
Agreement by Seller nor the consummation of the transactions contemplated
herein, nor compliance by Seller with any of the provisions hereof:
(i) violates or conflicts with or results in the breach or
termination of any term or provision of, nor constitutes a default or
acceleration of the performance required under any indenture, mortgage, deed,
trust, lease or other contract or agreement to which Seller is a party or by
which its properties are bound;
(ii) violates any law, ordinance, regulation, order, writ,
injunction, arbitration, award, judgment or decree to which Seller is a party
or by which it is bound; or
(iii) requires the consent of any other person, entity or
governmental authority.
(d) Brokerage Fees. Seller is not obligated nor has it agreed to
pay any brokerage commissions, finders fees or other similar fee or charge in
connection with the purchase of the Purchased Assets pursuant to this
Agreement.
(e) Title to Purchased Assets. Except as specifically listed on
Schedule 8(e), Seller warrants that on the date hereof it has good and
marketable title to all of the Purchased Assets, and the Purchased Assets
shall not be subject to any pledge, option, conditional sale agreement,
security interest, consensual lien, judgment lien, encumbrance or charge of
any kind. Seller warrants that the Alarm Accounts acquired by Purchaser are
valid and are binding upon and enforceable against the customers of Seller
executing same in accordance with their terms, and the obligations of the
customers of Seller thereunder are not subject to set-off or claims resulting
from the conduct of Seller's business prior to their conveyance to Purchaser.
The Bill
7
<PAGE> 8
of Sale (as defined herein) is sufficient to, and does, transfer all right,
title and interest in the Purchased Assets from Seller to Purchaser.
(f) Actions, etc.
(i) There are no actions, suits, proceedings or investigations
pending against or relating to the Business or the Purchased Assets and Seller
has not received any notice or written or oral communication reflecting an
intention or threat to institute any such action suit, proceeding or
investigation.
(ii) There are no actions, suits, proceedings or
investigations pending before any court or governmental agency in which it is
sought to restrain or prohibit the carrying out of this Agreement or the
consummation of the transactions contemplated herein in connection therewith
and there is no such action suit proceeding or investigation threatened.
(iii) Seller is not subject to any judgment, order, writ,
court decree, governmental decree or injunction relating to the Business.
(iv) There are no known defects or deficiencies in the
products or services provided by Seller prior to the date hereof as a result of
which any claim or suit may arise.
(g) Tax Returns. Seller has timely filed all tax reports and
returns required to be filed and has timely paid all taxes (including, without
limitation, income, payroll withholding, sales and use taxes) and all other
charges due or claimed to be due from it by Federal, State or local taxing
authorities in respect to the periods covered by such returns.
(h) Alarm Account Requirements. Each of the Alarm Accounts:
(i) is evidenced by a valid, enforceable and properly
executed monitoring agreement in a form meeting Purchaser's criteria;
(ii) has not repudiated monitoring services. An Alarm
Account shall be deemed to have repudiated monitoring services if: (A) the
customer has abandoned the premises at which the security monitoring system
has been installed; (B) the customer is insolvent; or (C) the customer has
cancelled or issued notice of termination of the Alarm Account,
notwithstanding the fact that the Alarm Account may remain enforceable
against the customer;
(iii) has generated cash receipts representing service
charges for at least one full billing cycle or has been prepaid for at least
one month's service;
(iv) has no charges that have been outstanding and unpaid
for more than 60 days from the invoice due date as of the Closing Date; and
8
<PAGE> 9
(v) is monitored using digital data signals transmitted from the
customer's premises to a central monitoring station.
(i) Insurance. Seller currently has no insurance which covers the
Purchased Assets. Prior to May 5, 1995, Seller had "occurrence basis" general
liability coverage which covered the Purchased Assets in an amount equal to or
greater than $100,000.00 per single occurrence and workers compensation
insurance coverage equal to or greater than that required by law. For purposes
of this Agreement "occurrence basis" means that if a claim arose after the
Closing Date for an event which occurred prior to May 5, 1995, Seller's
applicable insurance policy in existence on the date such event occurred would
cover such claim. Except as specifically listed on Schedule 8(i), there is no
litigation, proceeding, or claim pending or threatened or any possible
litigation, proceeding or claim against or relating to the Purchased Assets.
(j) Disclosure. No representation or warranty of Seller, and no statement
contained in this Agreement and no information contained in any schedule
furnished to Purchaser by or on behalf of Seller pursuant to this Agreement,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading. Each of the separate representations and warranties set forth in
the various subsections of this Section 8 is intended to be, and shall be
interpreted as, an independent representation and warranty as to matters
referred to therein, and the applicability or inapplicability of any particular
subsection of this Section 8 shall not affect the interpretation of any other
subsection.
Section 9. Conditions Precedent to Obligations of Purchaser. Purchaser's
obligation to purchase the Purchased Assets under this Agreement is subject to
the fulfillment, prior to or at the Closing Date, of each of the following
conditions:
(a) Representations True on the Closing Date. The representations
and warranties of Seller contained in this Agreement shall be true on the date
hereof, and at the time of the Closing Date as though made on the Closing Date.
(b) Performance. Seller shall have performed and complied with
all agreements and conditions required by this Agreement to be performed or
complied with by it prior to the Closing Date.
(c) Seller's Closing Certificate. Seller shall have delivered to
Purchaser a closing certificate of the owner of Seller dated as of the Closing
Date substantially in the form attached hereto as Schedule 9(c).
(d) Schedules. Seller shall have updated the Schedules hereto in
accordance with Section 14(f) hereof. Purchaser shall have determined, in
good faith, that taking into account the changes to the information in the
updated Schedules, the transactions contemplated by this Agreement are as
beneficial to Purchaser as prior to the updating of Schedules.
9
<PAGE> 10
(e) Consents to Assignments. Seller shall have taken all action
necessary and appropriate, and obtained all necessary consents, waivers and
approvals required under any leases or other agreements to consummate the sale
of the Purchased Assets pursuant to this Agreement in writing on terms
reasonably acceptable to Purchaser, and Purchaser shall reasonably cooperate
with Seller in its efforts to obtain such consents, waivers and approvals.
(f) Litigation. No action, suit, proceeding or investigation
shall be pending or threatened to restrain, set aside or invalidate the
transactions contemplated by this Agreement or any portion thereof, including
without limitation any claims by creditors of Seller against the Purchased
Assets. However, if Seller becomes aware of any pending or threatened action,
suit, proceeding or investigation which involves the Purchased Assets between
the date of this Agreement and the Closing Date then Seller shall promptly
notify Purchaser in writing of any such action, suit, proceeding or
investigation.
(g) Instruments of Transfer. Seller shall have delivered to
Purchaser a Bill of Sale, Assignment and Assumption Agreement substantially in
the form attached hereto as Schedule 9(g) (the "Bill of Sale") and other good
and sufficient instruments of transfer and conveyance, as in the reasonable
opinion of Purchaser's counsel, shall be effective to vest in Purchaser good and
marketable title to the Purchased Assets.
(h) Non-Solicitation Agreement. Seller shall have delivered to
Purchaser a non-solicitation agreement substantially in the form attached
hereto as Schedule 9(h) executed by Seller.
(i) Employment Agreement. Seller shall have delivered to
Purchaser an employment agreement, substantially in the form attached hereto
as Schedule 9(i), executed by Gary R. Bates in his individual capacity.
(j) Notice to Subscribers. Seller shall have delivered within
seven days after the Closing Date to each customer set forth on Schedules 1(a)
and 1(c) hereto a notice in the form attached hereto as Schedule 9(j). Seller
shall be responsible for the costs associated with the creation and delivery
of such notices.
(k) Monitoring Agreement. Purchaser shall have entered into a
monitoring agreement with Security Services for the monitoring of the Alarm
Accounts on terms acceptable to Purchaser, in its sole discretion.
Section 10. Conditions Precedent to Obligations of Seller. Seller's
obligations to sell and transfer the Purchased Assets to Purchaser under this
Agreement are subject to the fulfillment, prior to or on the Closing Date, of
each of the following conditions.
(a) Representations True on the Closing. Purchaser's
representations and warranties contained in this Agreement shall be true at
the date hereof, and at the Closing Date as though made on the Closing Date.
10
<PAGE> 11
(b) Performance. Purchaser shall have performed and complied with
all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or on the Closing Date.
(c) Bill of Sale. Purchaser shall have executed and delivered the
Bill of Sale.
Section 11. Indemnification. Except for liabilities assumed by Purchaser
pursuant to Section 6, Seller, on the one hand, and Purchaser, on the other
hand (the "Indemnitor"), shall indemnify and hold harmless the other party (the
"Indemnitee") from and against any and all losses, liabilities, damages and
expenses, including reasonable attorneys' fees, that the Indemnitee may suffer
or become liable for as a result of or in connection with any breach of a
representation, warranty or covenant by Indemnitor contained in this Agreement.
This indemnification in no way limits any cause of action that the parties to
this Agreement have against each other.
Section 12. Bulk Sales Law. The sale and purchase described in this
Agreement may constitute a "bulk transfer" of assets and if so, Seller
represents and warrants that the sale and purchase described in this Agreement
will be conducted according to, and in full compliance with, the requirements
of the bulk transfer provisions of the Uniform Commercial Code as adopted in
the State of Oklahoma. In addition to its indemnity under Sections 6 and 11,
Seller hereby agrees to indemnify and hold Purchaser harmless from any and all
liability to anyone arising from its failure to comply with the provisions of
Title 12A of the Oklahoma Statute, relating to bulk transfers. Such indemnity
shall survive Closing.
Section 13. Assignment. Purchaser may, without the consent of Seller,
assign its rights and delegate its obligations under this Agreement, to any
corporation, limited liability company, partnership, association,
proprietorship or any other business entity who acquires all or a substantial
part of the assets of Purchaser in connection with the sale of all or a
substantial part of its business. Upon any such assignment and with the
written consent of Seller Purchaser shall be relieved and discharged from any
further obligations under this Agreement. Furthermore, Purchaser may, without
the consent of Seller, collaterally assign its rights under this Agreement to
one or more banks, insurance companies or other financial institution for
purposes of financing. Except as provided above, neither party may assign its
rights or delegate its obligations under the Agreement without the written
consent of the other party.
Section 14. Agreements Prior to Closing.
(a) Fulfillment of Conditions. Seller shall use its best efforts
to take or cause to be taken all action reasonably necessary or appropriate to
cause each of the conditions set forth in Section 9 to be fulfilled prior to
or on the Closing Date. Purchaser shall use its best efforts to take or cause
to be taken all action reasonably necessary or appropriate to cause each of the
conditions set forth in Section 10 to be fulfilled prior to or on the Closing
Date.
11
<PAGE> 12
(b) Access to Information. Between the date of this Agreement and the
Closing Date, Seller shall allow the employees, representatives, attorneys and
accountants of Purchaser free access at all reasonable times to the records,
files, correspondence, audits and properties of Seller which pertain to the
Business.
(c) Conduct of Business. Between the date of this Agreement and the Closi
Date, Seller shall cause the Business to be conducted in its usual and ordinary
course and shall not increase the costs of any product or service provided to
the Alarm Accounts or Other Contracts.
(d) Preservation of Existing Relationships. Between the date of this
Agreement and the Closing Date, Seller shall use its best efforts to continue
existing relationships with customers, suppliers, employees and others having
business relations with respect to Seller.
(e) No Negotiations with Third Parties. So long as this Agreement is in
effect, Seller shall not enter into any negotiations, arrangements,
understandings, commitments, options or other agreements regarding the sale,
transfer or other disposition of all or substantially all of the assets of
Seller that relate in any way to the Business.
(f) Updated Schedules. Seller agrees to update the Schedules hereto as of
the Closing Date to reflect changes occurring after the date hereof; provided,
however, that if any of the Schedules attached hereto on the date hereof are
materially inaccurate or incorrect, Seller may correct such Schedules only with
Purchaser's written consent. Any updated Schedules shall be attached to this
Agreement and for all purposes be deemed to be a part of this Agreement.
Section 15. No Joint Venture. The relationship between the parties
hereto is that of purchaser/seller and does not constitute a partnership or
joint venture. Both parties agree not to make any representations or
statements to any other person which contradict the foregoing.
Section 16. Seller's Employees. Except for Gary R. Bates, Purchaser
shall be under no obligation to employ after the Closing Date any of Seller's
employees.
Section 17. Post-Closing Covenants. Seller shall cooperate with
Purchaser to cause an expeditious conversion of the Purchased Assets. Seller
agrees to use its best efforts to accommodate the conversion of the customer
accounts relating to the Purchased Assets to Purchaser's central station and
billing system within 60 days of the Closing Date (the "Conversion Date").
Seller agrees to use its best efforts to transfer to Purchaser any "ring down
lines" for fire monitoring of the Purchased Assets without a change in priority
or position. Seller shall provide Purchaser a credit against the Purchase
Price-All Purchased Assets equal to $40.00 for each customer that requires a
post-closing "chip change" service call by Purchaser ("Chip Change Credit
Amount"). An estimated list the customers which will require a "chip change"
is attached hereto as Schedule 17. On the Conversion Date, Purchaser shall
receive a credit against the Chip Change Credit Amount for: (i) each Alarm
Account that has not been
12
<PAGE> 13
reprogrammed to Purchaser's central monitoring station; and (ii) each Alarm
Account that was reprogrammed during normal business hours (8:00 a.m. to 5:00
p.m. CST). The balance, if any, of the Chip Change Credit Amount shall be paid
to Seller within 30 days of the Conversion Date. Seller shall have each
service ticket associated with a reprogramming service call signed and dated
(including time of service call) by the customer.
Section 18. Risk of Loss. The risk of any loss or damage to the
Purchased Assets resulting from fire, theft, explosion, earthquake, windstorm,
flood, accident, act of God, war, seizure, activities of the armed forces or
other casualty, reasonable wear and tear excepted, shall be borne by Seller at
all times prior to the Closing Date, and Seller shall be entitled to all
insurance proceeds resulting from such loss or damage. Risk of any loss or
damage to the Purchased Assets will pass to Purchaser at Closing.
Section 19. Miscellaneous.
(a) Pronouns. Whenever used herein and unless otherwise indicated by the
context, the masculine pronoun shall include and also mean the feminine and the
neuter, and the singular shall include and also mean the plural.
(b) Expenses. Each party shall pay all expenses incurred by it in
connection with the preparation, execution and performance of this
Agreement.
(c) Entire Agreement. This Agreement, together with the Schedules hereto,
sets forth the entire understanding of the parties, and supersedes all prior
agreements, arrangements and communications, whether oral or written, with
respect to the subject matter hereof. This Agreement shall not be modified or
amended except by written agreement of Purchaser and Seller. Captions
appearing in this Agreement are for convenience only and shall not be deemed to
explain, limit or amplify the provisions hereof. All Schedules to this
Agreement are incorporated into and made a part of this Agreement for all
purposes to the same extent as if fully set forth herein.
(d) Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision was omitted.
(e) Binding Effect; Assignment. All the terms, provisions, covenants and
conditions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by and against the parties hereto and their respective
successors and assigns.
(f) Notices. Any notice required or permitted to be delivered pursuant to
the terms of this Agreement shall be considered to have been sufficiently
delivered within five days after posting, if mailed by U.S. Mail, certified or
registered, return receipt requested, postage prepaid or, upon receipt by
overnight courier maintaining records of receipt by addressee or if
13
<PAGE> 14
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Terry W. Johnson
TELECOPY: 1-800-531-3293
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
(205) 251-3000
Attention: W. Lee Thuston, Esq.
TELECOPY: (205) 458-5100
IF TO SELLER AT:
GRB Security Systems
1305 Valley Road
Yukon, Oklahoma 73099
Attention: Gary R. Bates
TELECOPY:
14
<PAGE> 15
WITH COPY TO:
Miller, Dollarhide, Dawson & Shaw
Second Floor, 100 Park Avenue
Oklahoma City, Oklahoma 73102
(405) 236-8541
Attention: Mark P. Smith, Esq.
TELECOPY: (405) 235-8130
or at such other address as the party may designate by 10 days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
(g) Further Assurances. Purchaser and Seller shall execute such other
instruments, documents and other papers and shall take such further actions as
may be reasonably required or desirable to carry out the provisions hereof and
to consummate the transactions contemplated hereby.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Alabama without regard to
its rules containing conflicts of laws.
(i) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
(j) Survival. The representations, warranties, covenants and agreements of
the parties hereto shall survive the date of this Agreement.
(k) Drafting Presumption. Each of the parties hereto has participated in
the negotiation and drafting of this Agreement and agree that no one party has
prepared this document to the exclusion of the other party and that in
construing this Agreement there should be no presumption based upon which party
drafted this Agreement.
(l) Intended Beneficiary. Purchaser and Seller hereby acknowledge that the
Purchase Price for the Purchased Assets will be funded from a loan provided by
State Street Bank and Trust Company to Purchaser; therefore, Purchaser and
Seller further acknowledge that State Street Bank and Trust Company is an
intended beneficiary of this Agreement and shall rely upon the representations,
warranties and agreements of Purchaser and Seller contained herein.
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.
"Purchaser"
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
------------------------------
Its: VP Corporate Development
--------------------------
"Seller"
GRB SECURITY SYSTEMS
By: /s/ Gary R. Bates
------------------------------
Its: Owner
--------------------------
16
<PAGE> 1
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made effective as of the 29 day
of June, 1995, by and among MASADA SECURITY, INC., a Delaware Corporation
("Purchaser"); GRB SECURITY SYSTEMS, a sole proprietorship located in Oklahoma
City, Oklahoma ("Seller"); and SouthTrust Bank of Alabama, N.A. ("Escrow
Agent").
RECITALS
WHEREAS, Seller and Purchaser have entered into an Asset Purchase
Agreement dated June 29 (the "Purchase Agreement"), pursuant to which the
Seller agrees to sell and Purchaser agrees to purchase all of the customer
accounts and certain other assets of Seller related to the monitoring of
security alarm systems in the Oklahoma City, Oklahoma metropolitan area, as
more fully described therein;
WHEREAS, the Purchase Agreement requires Escrow Agent to hold
$15,612.52 of the purchase price in escrow for approximately 12 months pending
certain possible adjustments in accordance with the Purchase Agreement;
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. ESCROW AGENT: Purchaser and Seller hereby designate and
appoint the Escrow Agent as the Escrow Agent for the purposes herein set forth.
The Escrow Agent hereby accepts such appointment on the terms and conditions
herein set forth. Escrow Agent is not a party to and is not bound by any
agreement between Purchaser and Seller except this Agreement.
2. DEPOSIT IN ESCROW:
(a) Escrow Agent hereby acknowledges the receipt from
Purchaser of the sum of ________________________ ($15,612.52) Dollars (the
"Escrowed Funds"). Escrow Agent agrees to hold and dispose of said sum, and
all interest and gains earned thereon, in accordance with all the terms,
conditions and provisions of this Agreement. Escrow Agent acts hereunder as a
depository. All deposits are warranted by Purchaser to be valid deposits.
(b) Escrow Agent shall invest the Escrowed Funds as
directed by the joint written instructions of Seller and Purchaser. All
earnings received by Escrow Agent as a result of such investment shall be added
to the Escrowed Funds. In the absence of any joint direction by Seller and
Purchaser to the contrary, Escrow Agent, in its discretion, shall invest all
portions of the Escrowed Funds in certificates of deposit (90 day), and/or
money market funds.
<PAGE> 2
3. DISTRIBUTIONS:
(a) On or after June 29, 1996, Purchaser and Seller shall
jointly give signed written notice ("Payment Notice") to Escrow Agent which
Payment Notice shall list the parties entitled to the Escrowed Funds and a
breakdown of the amounts each party is entitled to. Upon receipt of the
Payment Notice, the Escrow Agent shall pay to the appropriate parties the
Escrowed Funds within ten days after the receipt of such Payment Notice. The
Payment Notice shall set forth a brief description of the basis entitling such
parties to be paid the Escrowed Funds.
(b) If the Escrow Agent receives a Payment Notice which
is (i) signed by Purchaser but not by Seller, or (ii) signed by Seller but not
by Purchaser, the Escrow Agent shall give notice, along with a copy of such
Payment Notice, to the other party (the "Non-Signing Party"). If the
Non-Signing Party gives notice to the Escrow Agent of its agreement with the
Payment Notice, or fails to respond to the notice from the Escrow Agent, within
seven days after the date of such notice, then the Escrow Agent shall pay to
Seller (or its designee) the Escrowed Funds, within ten days after the
expiration of such seven day period. If the Non-Signing Party gives notice to
the Escrow Agent of its disagreement with the Payment Notice, within such seven
day period, then the Escrow Agent shall pay the undisputed portion, if any, of
the Escrowed Funds, but shall not pay any portion of the Escrowed Funds subject
to dispute, which disputed funds shall continue to be held by the Escrow Agent
pending resolution of such dispute and further direction from Purchaser and
Seller, or from an authorized arbitrator.
(c) In the event of any disagreement resulting in adverse
claims or demands being made in connection with the subject matter of this
Agreement, or in the event that the Escrow Agent is in doubt as to what action
it should take hereunder, the Escrow Agent may, at its option, refuse to comply
with any claim or demand on it, or refuse to take any other action hereunder,
so long as such disagreement continues or such doubt exists, and in any such
event, the Escrow Agent shall not be or become liable in any way or to any
person for its failure or refusal to act, and the Escrow Agent shall be
entitled to continue to so refrain from acting until (i) the rights of all
parties have been fully and finally decided by an arbitrator selected in
accordance with Section 3(c) of the Purchase Agreement, which is incorporated
herein by this reference, or (ii) all differences shall have been decided and
all doubt resolved by agreement between Purchaser and Seller, and the Escrow
Agent shall have been notified thereof in a writing signed by Purchaser and
Seller. In addition to the foregoing remedies, the Escrow Agent is hereby
authorized in the event of any doubt as to the course of action it should take
under this Agreement, to petition the United States District Court for the
Northern District of Alabama and/or the Circuit Court in and for Jefferson
County, Alabama for instructions or to interplead the funds or assets so held
into such court. For purposes of this Agreement the parties agree to the
jurisdiction of either of said courts over their persons as well as the
Escrowed Funds and agree that service of process by certified mail, return
receipt requested, to the address set forth in Paragraph 9 below shall
constitute adequate service. Purchaser and Seller hereby agree to indemnify
and hold the Escrow Agent harmless from any liability or losses occasioned
thereby and to pay any and all of its costs, expenses, and reasonable
attorney's fees incurred in any such
2
<PAGE> 3
action and agree that on such petition or interpleader action that the Escrow
Agent, its servants, agents, attorneys, employees and officers will be relieved
of further liability. Escrow Agent is hereby given a lien upon, security
interest in, and right of setoff against, the Escrowed Funds to secure Escrow
Agent's rights to payment or reimbursement for any and all costs, expenses, and
fees incurred by it hereunder.
(d) If a Non-Signing Party shall be determined by (i) a
court of competent jurisdiction, (ii) an arbitrator's binding award, or (iii) a
written release between the parties, to have acted in a frivolous manner and in
bad faith, the other party shall be entitled to reimbursement of all its
reasonable costs incurred in connection with the Payment Notice (including,
without limitation, reasonable attorney's fees).
4. TERMINATION: This Agreement shall terminate on the date that
no Escrowed Funds continue to be held by the Escrow Agent.
5. LIMITATIONS ON LIABILITY OF ESCROW AGENT: In order to induce
the Escrow Agent to act as the escrow agent under this Agreement, Seller and
Purchaser agree as follows:
(a) The Escrow Agent may rely upon and shall be protected
in acting or refraining from acting upon any written notice, instruction or
request received by the Escrow Agent and believed by the Escrow Agent in good
faith to be genuine and signed by Seller and Purchaser. The Escrow Agent shall
not be responsible for the sufficiency, correctness, genuineness or validity of
any notice or instructions delivered to the Escrow Agent. The Escrow Agent
shall not be liable for any error of judgment, or any act or omission under
this Agreement taken in good faith, except for the Escrow Agent's own gross
negligence or willful misconduct.
(b) Seller and Purchaser shall jointly and severally
indemnify and hold harmless the Escrow Agent from and against any claims,
costs, damages, reasonable attorney's fees, expenses, obligations or charges
made against the Escrow Agent by reason of its action or failure to act in
connection with any of the transactions contemplated by this Agreement, unless
caused by the Escrow Agent's gross negligence or willful misconduct.
(c) In the event the Escrow Agent receives or becomes
aware of conflicting instructions, demands or claims with respect to this
Agreement or the sums deposited hereunder, the Escrow Agent shall have the
right to discontinue any and all further acts until such conflict is resolved
to the Escrow Agent's satisfaction. The Escrow Agent shall have the further
right to commence or defend any action or proceeding for the termination of
such conflict. Seller and Purchaser jointly and severally agree to pay all
costs, damages, judgments and expenses, including reasonable attorneys' fees,
suffered or incurred by the Escrow Agent in connection with such action or
proceeding. In the event the Escrow Agent files a suit in interpleader, the
Escrow Agent shall thereupon be fully released and discharged from all further
obligations imposed by this Agreement with respect to sums deposited with a
court of competent jurisdiction pursuant to such suit in interpleader.
3
<PAGE> 4
6. ESCROW FEES: The Escrow Agent shall not be entitled to
receive a fee for serving as the Escrow Agent; provided, however, that the
Escrowed Funds shall be subject to the Escrow Agent's standard fees and service
charges as provided in the Escrow Agent's Rules and Regulations Governing
Deposit Accounts.
7. RESIGNATION: The Escrow Agent may resign at any time upon
giving the parties hereto 30 days advance written notice to that effect. In
such event, the successor escrow agent shall be mutually selected by Seller and
Purchaser. However, in no instance shall the Escrow Agent's resignation be
effective until a successor escrow agent has agreed to act but, Escrow Agent
shall have the right to discontinue any and all future acts until such
successor escrow agent has agreed to act.
8. INTEREST INFORMATION: Unless otherwise agreed to in writing
by both parties: (i) the Escrow Agent shall list the employer tax
identification number of the Seller for federal, state and local tax purposes
and for other necessary purposes; and (ii) all interest earned shall be the
sole and exclusive property of the Seller; and (iii) any and all of Escrow
Agent's fees and charges as provided for in Paragraph (6) of this Agreement
shall first be charged against interest earned and then charged against
principal.
9. NOTICE: Any notice or other communication hereunder shall be
in writing and shall be (i) delivered by hand, (ii) delivered by an overnight
courier service with guaranteed next day delivery, (iii) sent by telecopy, or
(iv) mailed by certified mail, postage prepaid, return receipt requested, and
addressed as follows:
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
4
<PAGE> 5
WITH COPY TO:
Burr & Forman
420 North 20th Street
Suite 3100
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLER AT:
GRB Security Systems
1305 Valley Road
Yukon, Oklahoma 73099
Attention: Gary R. Bates
FACSIMILE: _______________
WITH COPY TO:
Miller, Dollarhide, Dawson & Shaw
Second Floor, 100 Park Avenue
Oklahoma City, Oklahoma 73102
(405) 236-8541
Attention: Mark P. Smith, Esq.
FACSIMILE: (405) 235-8130
IF TO ESCROW AGENT:
SouthTrust Bank of Alabama, N.A.
420 North 20th Street
Birmingham, Alabama 35203
Attention: Mr. Robert W. Wilkerson
FACSIMILE: (205) 254-5989
5
<PAGE> 6
or to such other address as may have been furnished to the party giving notice
by the party to whom notice is to be given. Notice shall be deemed given upon
the earlier of (i) three days after deposit in the U.S. Mail by certified mail,
or (ii) actual receipt thereof.
10. MISCELLANEOUS:
(a) SUCCESSORS AND ASSIGNS: This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
(b) COUNTERPARTS: This Agreement may be executed in any
number of counterparts, each of which shall be an original, but which together
shall constitute one and the same instrument.
(c) GOVERNING LAW: This Agreement shall be governed by
and construed and interpreted in accordance with the laws of the State of
Alabama.
(d) AMENDMENT: This Agreement may not be modified,
changed, waived or terminated, in whole or in part, except by a supplemental
agreement signed by all of the parties hereto.
(e) HEADINGS: The headings assigned to Paragraphs of
this Agreement are for convenience only and shall be disregarded in construing
this Agreement.
(f) NO ASSIGNMENT: Neither Seller nor Purchaser shall
pledge, hypothecate or otherwise transfer or attempt to transfer any right,
title or interest hereunder without the prior written consent to the other
party hereto.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
------------------------------------
Its: VP Corporate Development
--------------------------------
GRB SECURITY SYSTEMS
By: /s/ Gary R. Bates
------------------------------------
Its: Owner
Tax I.D. No.: ###-##-####
-------------------------
SOUTHTRUST BANK OF ALABAMA, N.A
By: /s/ Robert W. Wilkerson
------------------------------------
Its: Sr. Vice Pres.
--------------------------------
7
<PAGE> 1
NON-SOLICITATION AGREEMENT
This Agreement is made and entered into this 29 day of June, 1995, by
and among MASADA SECURITY, INC., a Delaware corporation ("Masada") and GRB
SECURITY SYSTEMS, a sole proprietorship ("Seller").
RECITALS
Pursuant to the terms of an Asset Purchase Agreement dated as of
June 29, 1995 (the "Purchase Agreement"), Masada is purchasing certain of the
assets and properties of Seller.
Seller is uniquely experienced in the development and operation of the
security alarm system business, and Masada is unwilling to acquire the assets
referenced in the Purchase Agreement without first obtaining the agreement of
Seller not to solicit Masada's business.
As an inducement to the consummation of the transactions evidenced by
the Purchase Agreement, Seller is willing to issue this Non-Solicitation
Agreement to Masada and acknowledges that valuable direct consideration will be
paid to it as a result of its execution and delivery of this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which is hereby acknowledged, and intending to be
legally bound, agree as follows:
Section 1. Non-Solicitation Covenant. Seller shall not in any
manner, directly or indirectly, through any corporation, partnership or any
other entity (i) solicit or provide security monitoring services to any person
or entity set forth on Schedules 1(a) and 1(c) to the Purchase Agreement, (ii)
use, communicate, inform or otherwise divulge to any third party any
information pertaining to the persons and entities set forth on Schedules 1(a)
and 1(c) to the Purchase Agreement, or (iii) otherwise take any action which
would adversely affect Masada's interest in the Alarm Accounts and Other
Contracts (as such terms are defined in the Purchase Agreement) purchased from
Seller.
Section 2. Consideration. Seller acknowledges that the consideration
paid to it pursuant to the Purchase Agreement constitutes sufficient and
adequate consideration for the execution and delivery to Masada of this
Agreement.
Section 3. Remedies for Breach. Seller recognizes that in the event
of a breach of the covenants herein contained, it will be difficult to
determine the damages which would be suffered by Masada, and therefore, Seller
agrees and acknowledges that Masada may obtain injunctive relief to prevent
further breaches of the covenants herein contained, in addition to provable
damages. It is specifically understood that in the event of litigation arising
from a
<PAGE> 2
breach of the covenants herein contained and if Masada is the prevailing party
in such litigation, then Masada shall be entitled to recover in addition to
damages and injunctive relief, all costs incurred, including reasonable
attorneys' fees. It is also understood that in the event of litigation arising
from a breach of the covenants herein contained, and if Seller is the
prevailing party in such litigation, then Seller shall be entitled to all costs
incurred, including reasonable attorneys' fees.
Section 4. Partial Invalidity. In the event any provision or portion
of this Agreement is deemed to be invalid or unenforceable in whole or in part
for any reason, the remainder thereof shall not be invalidated or rendered
unenforceable or otherwise adversely affected. Without limiting the generality
of the foregoing, if the provisions of non-solicitation covenant shall be
deemed to create a restriction which is unreasonable as to duration or
geographical area or both, the parties agree that the provisions of this
Agreement shall be enforced for such duration and in such geographical area as
any court of any competent jurisdiction may determine to be reasonable.
Section 5. Successors and Assigns. Seller acknowledges that the
covenants contained herein are unique and personal, and that Seller may not
assign any of its rights or delegate any of its duties or obligations under
this Agreement. The rights and obligations of Masada under this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
Masada.
Section 6. Notices. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
IF TO MASADA AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, AL 35203
Attention: Terry W. Johnson
TELECOPY: 1-800-531-3293
2
<PAGE> 3
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
TELECOPY: (205) 458-5100
IF TO SELLER AT:
GRB Security Systems
1305 Valley Road
Yukon, Oklahoma 73099
Attention: Gary R. Bates
TELECOPY:
------------------------
WITH COPY TO:
Miller, Dollarhide, Dawson & Shaw
Second Floor, 100 Park Avenue
Oklahoma City, Oklahoma 73102
(405) 236-8541
Attention: Mark P. Smith, Esq.
TELECOPY: (405) 235-8130
or at such other address as the party may designate by 10 days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
Section 7. Waiver of Breach. The waiver by Masada of a breach of any
provision of this Agreement by Seller shall not operate or be construed as a
waiver of any subsequent breach by Seller. No waiver shall be valid unless in
writing and signed by an authorized representative of Masada.
3
<PAGE> 4
Section 8. Entire Agreement. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements, arrangements
and communications, whether oral or written, pertaining to the subject matter
hereof. This Agreement may not be modified or amended except by an agreement
in writing signed by each of the parties hereto.
Section 9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma, excluding its
conflict of laws principles.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-------------------------------
Its: VP Corporate Development
--------------------------
GRB SECURITY SYSTEMS
By: /s/ Gary R. Bates
-------------------------------
Its: Owner
4
<PAGE> 1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made and entered into
this 30th day of June, 1995, by and between MASADA SECURITY, INC., a Delaware
corporation ("Purchaser") and DELTRON, INC. D/B/A SAN ANTONIO ALARM, a Texas
corporation (collectively referred to as "Seller").
Recitals
Seller is engaged in the business of operating a security alarm system
monitoring business in San Antonio, Texas and the surrounding area (the
"Business").
Seller desires to sell to Purchaser and Purchaser desires to buy from
Seller all of the customer account contracts and certain other assets of Seller
pertaining to the Business, and Purchaser and Seller desire to make certain
other arrangements between them relating to the purchase and sale of such
assets, all upon the terms and conditions hereinafter set forth.
Agreement
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which are hereby acknowledged, and intending to be
legally bound, agree as follows:
Section 1. Agreement to Purchase and Sell. In accordance with
the terms and conditions contained herein and in reliance on the respective
representations and warranties of the parties hereto, Seller hereby agrees to
sell, convey, transfer and assign to Purchaser, and Purchaser hereby agrees to
purchase, accept and acquire from Seller in the manner provided herein, the
following assets (collectively referred to as the "Purchased Assets"):
(a) Alarm Accounts. All right, title and
interest of Seller in and to the contracts for the rendering of security
monitoring services to existing customers of Seller which meet all of the
requirements listed in Section 8(i) and are specifically listed on Schedule
1(a) hereto (the "Alarm Accounts");
(b) Inventory. All right, title and interest of
Seller in and to inventory pertaining to the Business maintained by Seller at
its branch offices, all of which are
<PAGE> 2
listed on Schedule 1(b) hereto (the "Inventory"), with the Inventory,
including, without limitation, items purchased by Seller for resale and all
purchase orders relating to the foregoing;
(c) Fixed Assets. All right, title and interest
of Seller in and to selected fixed assets used in connection with the Business,
all of which are listed on Schedule 1(c) hereto (the "Fixed Assets");
(d) Contracts-in-Process. All right, title and
interest of Seller in and to those contracts and benefits of Seller related to
all accepted orders for the sale or installation by Seller of alarm systems
which are not yet installed or not completely installed as of the Closing Date
(as defined herein), substantially all of which are listed on Schedule 1(d)
hereto (the "Contracts-in-Process");
(e) Other Contracts. All right, title and
interest of Seller in and to all executory contracts, agreements and leases,
substantially all of which are listed on Schedule 1(e) hereto (the "Other
Contracts"), the Other Contracts to include, without limitation all
non-competition or non-solicitation agreements accruing to the benefit of the
Seller.
(f) Receivables. The accounts receivable
(excluding the accounts receivable related to one time installations and
add-ons accruing before Closing and listed on Schedule 2(j)), trade accounts,
notes receivable and other debts owed to Seller for monitoring services
rendered pertaining to the Alarm Accounts and Contracts-in-Process; provided,
however, that all such debts owed to Seller for monitoring services must be for
previously rendered monitoring services and not for future monitoring services,
substantially all of which are listed on Schedule 1(f) hereto (the
"Receivables");
(g) Intangible Personal Property. The unexpired
trademarks (whether registered or unregistered), trade names, logos and
copyrights owned by or accruing to the benefit of Seller pertaining to the
Business substantially all of which are listed on Schedule 1(g) hereto (the
"Intangible Personal Property");
(h) Telephone Lines and Numbers. All right,
title and interest of Seller in and to: (i) the local and long distance
telephone numbers (the "Voice Lines"); (ii) digital dialer telephone lines that
transmit signals from customer locations to Seller's central station, and
"ring-down" lines (the "Alarm Account Communication Lines"); and (iii)
facsimile and other data lines (the "Data Lines"), all of which are listed as
being either Voice Lines, Alarm Account Communication Lines or Data Lines on
Schedule 1(h) hereto (collectively referred to as the "Telephone Lines and
Numbers");
(i) Vehicles. All right, title and interest of
Seller in and to the vehicles specifically listed on Schedule 1(i) hereto (the
"Vehicles"); and
(j) Alarm Account Information. All files,
records and incidental documentation of Seller pertaining to the Alarm Accounts
and Contracts-in-Process (the "Alarm
2
<PAGE> 3
Account Information"), including, without limitation, all computer lists,
contract information, accounting history, service records and information,
credit records and information, and purchase and sales records and information,
Section 2. Purchase Price and Payment.
(a) Purchase Price for the Purchased Assets
Excluding Vehicles. The purchase price for the Purchased Assets excluding
Inventory, Fixed Assets, Receivables and Vehicles (the "Purchase Price
Excluding Vehicles") shall be the product of 28 times the aggregate of the
Monthly Recurring Revenue of the Alarm Accounts less an amount equal to the
prepaid revenue relating to the Alarm Accounts (as set forth on Schedule 2(a)
hereto) computed on a per diem basis to the Closing Date. For purposes of this
Agreement, the term "Monthly Recurring Revenue" with respect to the Alarm
Accounts acquired from Seller by Purchaser shall be the charge for gross alarm
monitoring services, (including, without limitation, maintenance and other
alarm related services), exclusive of sales or intangible taxes, if any, and
any direct wire telephone line charges associated with monitoring, payable by
the customer for each applicable billing period expressed in terms of a monthly
amount regardless of whether the billing period is annual, semi-annual,
quarterly or monthly.
(b) Purchase Price-Inventory. The purchase price
for the Inventory shall be $5,215.00.
(c) Purchase Price-Fixed Assets. The purchase
price for the Fixed Assets shall be $10,109.00.
(d) Purchase Price-Receivables. The purchase
price for the Receivables shall be $7,866.00.
(e) Purchase Price-Vehicles. The purchase price
for the Vehicles (the "Purchase Price- Vehicles") shall be $4,750.00 per
Vehicle.
(f) Purchase Price-All Purchased Assets. The sum
of (i) the Purchase Price Excluding Vehicles, (ii) the Purchase Price-Fixed
Assets, (iii) the Purchase Price-Receivables, and (iv) the Purchase Price-
Vehicles shall hereafter be referred to as the "Purchase Price-All Purchased
Assets".
(g) Payment of Purchase Price-All Purchased
Assets.
(i) The aggregate of: (A) 95% of the
Purchase Price-Excluding Vehicles; (B) the Purchase Price-Inventory; (C) the
Purchase Price-Fixed Assets; (D) the Purchase Price-Receivables; (E) the
Purchase Price-Vehicles; and (F) the adjustments calculated in accordance with
Section 2(e) (collectively referred to as the "Initial Payment") shall be paid
by Purchaser to Seller by wire transfer or other mutually agreeable means on
the Closing Date.
3
<PAGE> 4
(ii) The Purchase Price-All Purchased Assets
less the Initial Payment (the "Deferred Payment Amount") shall be paid in
accordance with Section 3 hereof.
(h) Adjustment to Purchase Price. The Purchase
Price-All Purchased Assets shall be adjusted as of the Closing Date in the
manner provided below:
(i) A credit for the benefit of
Purchaser based upon $110.00 per monitored Alarm Account and $60.00 per
non-monitored Alarm Account as listed on Schedule 2(h)(i) that requires a site
visit by Purchaser to correct any fire code violations, related to the Official
Order of the State of Texas Fire Marshall dated March 16, 1994, remaining as of
the Closing Date (the "Fire Code Violation Credit"); and
(ii) Liabilities or credits for personal
property taxes, if any, in respect of the Purchased Assets shall be prorated on
the basis of the current taxable year, to and including the Closing Date;
provided that if the assessed value of any Purchased Asset or rate of tax with
respect thereto shall not have been determined prior to the Closing Date, the
value and rate shall be determined on the basis of the amount of the previous
year in which the same was determined.
(i) Allocation of Purchase Price-All Purchased
Assets. The Purchase Price-All Purchased Assets, subject to the adjustments
set forth in Section 2(h), shall be allocated as set forth on Schedule 2(i).
Purchaser and Seller agree for income tax purposes they shall report the
transactions contemplated by this Agreement in a manner consistent with such
allocation.
(j) Services Other Than Monitoring. Purchaser
shall forward to Seller, within 30 days after the receipt thereof, all revenue
for installations and add-ons provided by Seller to the Alarm Account customers
or the Contracts-in-Process customers, provided in the ordinary course of
Seller's business, consistent with past practices and pricing during the period
prior to the Closing Date for those individual accounts receivable listed on
Schedule 2(j).
Section 3. Deferred Payment Amount.
(a) Escrow Agreement. On or prior to the Closing
Date, Seller and Purchaser agree to execute an Escrow Agreement substantially
in the form attached hereto as Schedule 3(a) (the "Escrow Agreement") and
Purchaser agrees to deposit with SouthTrust Bank of Alabama, N.A. (the "Escrow
Agent"), the Deferred Payment Amount to be held in an escrow account (the
"Escrow Account") pursuant to the terms of the Escrow Agreement (the "Deferred
Payment Amount" together with all earnings thereon shall collectively
hereinafter be referred to as the "Escrow Amount").
(b) Payment and Escrow Amount. Within 30 days of
six months after the Closing Date, Purchaser shall submit to Seller
substantially in the form attached hereto as
4
<PAGE> 5
Schedule 3(b) along with all appropriate supporting documentation, a report
reflecting: (i) the Escrow Amount; (ii) the total Repurchase Amounts, if any,
credited to Purchaser calculated in accordance with Section 6(a) (the "Total
Repurchase Amounts"); (iii) the RMR Downward Adjustment, if any, credited to
Purchaser calculated in accordance with Section 6(b); (iv) the Conversion
Adjustment, if any, credited to Purchaser calculated in accordance with Section
16, and (v) the resulting difference between Section 3(b)(i) less the
Purchaser's credits associated with Section 3(b)(ii), (iii) and (iv) (the
"Resulting Difference"). If Seller does not notify Purchaser of a dispute
regarding such report within ten business days from the date such report is
submitted by Purchaser to Seller or if Seller notifies Purchaser of its
acceptance of such report, such report shall be deemed complete and accurate
and Seller and Purchaser shall notify Escrow Agent to pay the sums computed
below to Seller or Purchaser, as the case may be, and the Escrow Account shall
then be closed after payment by the Escrow Agent of all funds held by it in the
Escrow Account. If the Resulting Difference is a positive amount then Seller
and Purchaser shall instruct the Escrow Agent to first pay the Seller the
Resulting Difference and the remainder of the Escrow Amount shall be paid by
Escrow Agent to Purchaser. If the Resulting Difference is a negative amount,
then Seller and Purchaser shall instruct the Escrow Agent to pay Purchaser the
entire Escrow Amount and Seller shall owe no further amount to Purchaser.
(c) Dispute. All disputes and differences with
respect to the computation of the Resulting Difference and the Escrow Account
shall be determined by binding arbitration under the rules then in effect of
the American Arbitration Association, such arbitration hearing to be held in
San Antonio, Texas. The arbitration proceedings shall be heard by one
arbitrator selected from the proposed panel of arbitrators issued by the
American Arbitration Association, Seller, on the one hand, and Purchaser, on
the other hand, shall attempt to select a mutually acceptable arbitrator. If
the parties are unable to select a mutually acceptable arbitrator within five
business days following the issuance of the list of potential arbitrators by
the American Arbitration Association, Seller, on the one hand, and Purchaser,
on the other hand, shall each select one person from the list, and those two
persons selected shall appoint a third person from the list, which person shall
be the arbitrator for the dispute. All arbitration awards shall include an
award of expenses including, but not limited to, legal and accounting fees.
Section 4. The Closing.
(a) Date and Place. The closing of the purchase
and sale of the Purchased Assets shall take place on June 30, 1995 or such
other date as shall be mutually acceptable to Purchaser and Seller (the
"Closing Date") and shall take place at a location mutually acceptable to
Purchaser and Seller.
(b) Closing Deliveries. On the Closing Date,
Seller shall make the deliveries specified by Section 9 and Purchaser shall
make the deliveries specified by Section 10.
5
<PAGE> 6
(c) Closing Procedure. All proceedings to be
taken and all documents to be delivered and executed on the Closing Date shall
be deemed to have been taken, delivered and executed simultaneously, and no
proceeding shall be deemed taken nor documents deemed executed or delivered
until all have been taken, delivered and executed. On the Closing Date, Seller
and Purchaser shall execute and deliver the instruments and documents
referenced in Sections 9 and 10 and Purchaser shall make the Initial Payment
and shall deposit the Deferred Payment Amount with the Escrow Agent.
(d) Termination. In the event that any of the
conditions set forth in Section 9 are not satisfied or waived in writing prior
to or on the Closing Date, then Purchaser may terminate this Agreement by
written notice to Seller. In the event that Purchaser exercises such right of
termination, this Agreement thereupon shall become wholly void and be of no
further force or effect, except for the confidentiality provisions contained in
Section 14(c) and there shall be no further liability on the part of Seller or
its respective officers, directors, stockholders, employees or agents with
respect to the transactions contemplated hereby.
(e) Specific Performance. In the event that
Purchaser complies with all of the requirements set forth in Section 10, then
Purchaser shall have the right of specific performance against the Seller as to
the Purchased Assets. In the event that Seller complies with all of the
requirements of Section 9, then Seller shall have the right of specific
performance against Purchaser.
Section 5. Assumption of Liabilities. Purchaser shall not
assume any liability, debt or obligation of Seller except for: (i) the
responsibility of rendering security monitoring services pursuant to the Alarm
Accounts and Contracts-in-Process set forth on Schedules 1(a) and 1(d); (ii)
any liabilities and obligations related to the Alarm Accounts and
Contracts-in-Process set forth on Schedules 1(a) and 1(d) arising in the
ordinary course of business which become performable or payable on, or
subsequent to, the Closing Date; and (iii) those liabilities and obligations of
Seller arising after the Closing Date that are set forth on Schedule 5 hereto.
Seller shall continue to be responsible for, and shall indemnify and save
harmless Purchaser from and against, all of Seller's known and unknown
liabilities, debts and obligations: (i) that arise prior to the Closing Date;
or (ii) in connection with, or subsequent to the Closing Date that are not in
the ordinary course of business and not related to the Alarm Accounts and
Contracts-in-Process; or (iii) that are not specifically assumed by Purchaser
as set forth on Schedules 1(a), 1(d) and 5. Except as provided in other
sections hereof, Purchaser covenants and agrees to indemnify, defend, and hold
harmless Seller from and against any and all claims, debts, suits, losses,
judgments, damages, and liabilities, including any legal and other expenses
incurred in connection with and arising out of the operation of the Purchased
Assets arising after the Closing Date.
Section 6. Warranty of Alarm Accounts and Recurring Monthly Revenue.
6
<PAGE> 7
(a) Alarm Accounts. Seller warrants that beginning
on the Closing Date and for the 6 month period immediately after the Closing
Date (the "Guarantee Period") all Alarm Accounts purchased by Purchaser
pursuant to this Agreement and described on Schedule 1(a) shall continue to
meet the requirements specified in Section 8(i). For purposes of this
Agreement a "Defaulted Contract" shall be defined as any Alarm Account from
which Purchaser has not received a payment related to services provided after
the Closing Date. Purchaser shall give Seller written monthly notice of any
and all Defaulted Contracts as soon as reasonably possible. Seller shall have
30 days from the receipt of such written notice to return such Defaulted
Contracts to compliance with the requirements of Alarm Accounts as specified in
Section 8(i) and timeliness; provided, however, that Seller shall not, either
directly or indirectly, make payments to or provide other assistance to or on
the behalf of the customers who have Defaulted Contracts. If at the end of
such 30 day period Purchaser, in its sole discretion, determines that any or
all such Alarm Accounts are still Defaulted Contracts, then Seller shall
repurchase the Defaulted Contracts from Purchaser for 28 times the Monthly
Recurring Revenue of the Defaulted Contracts as of the Closing Date (the
"Repurchase Amount") or shall replace the Defaulted Contracts with other
contracts that meet all of the requirements listed in Section 8(i) and have
Monthly Recurring Revenue greater than or equal to that of such Defaulted
Contracts. If the Seller does not repurchase or replace the Defaulted
Contracts within such 30 day period, Seller shall be charged against the Escrow
Account an amount equal to the Repurchase Amount; provided, however, the
aggregate Repurchase Amount charged against the Escrow Account shall only
exceed the amount of the Escrow Account in the case of fraud on behalf of
Seller.
(b) Recurring Monthly Revenue Downward
Adjustment. Seller warrants that the Recurring Monthly Revenue used in
computing the Purchase Price Excluding Vehicles shall equal or exceed the
actual Recurring Monthly Revenue of the Alarm Accounts as of the Closing Date.
A charge shall be made against the Escrow Account for the benefit of Purchaser
for each Alarm Account that it is determined the Recurring Monthly Revenue used
in computing the Purchase Price Excluding Vehicles exceeded the actual
Recurring Monthly Revenue for such Alarm Accounts as of the Closing Date. The
amount of such charge shall be determined by computing the amount by which the
Recurring Monthly Revenue of the Alarm Accounts used in computing the Purchase
Price Excluding Vehicles exceeds the actual Recurring Monthly Revenue of such
Alarm Accounts as of the Closing Date and multiplying such sum by 28 (the "RMR
Downward Adjustment"); provided, however, that no charge shall be made against
the Escrow Account if the Recurring Monthly Revenue is reduced because
Purchaser has reduced the monthly charges to its customers, except for
reductions promised in writing by Seller prior to Closing.
Section 7. Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to Seller that on the date hereof and
on each day thereafter to the Closing Date:
(a) Organization and Standing. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and
7
<PAGE> 8
Purchaser has all requisite corporate power and authority to own, operate and
lease its properties and carry on its business as now being conducted and to
enter into this Agreement and to perform its obligations hereunder.
(b) Authority Relative to this Agreement. The
execution, delivery and performance by Purchaser of this Agreement has been
duly authorized and no further corporate action is necessary on the part of the
Purchaser to make this agreement valid and binding upon Purchaser in accordance
with its terms.
(c) No Violation. Neither the execution nor the
delivery of this Agreement by Purchaser nor the consummation of the
transactions contemplated herein, nor compliance by Purchaser with any of the
provisions hereof:
(i) violates or conflicts with or
results in the breach or termination of any term or provision of, nor
constitutes a default or acceleration of the performance required under, the
certificate of incorporation, bylaws or resolutions of the Purchaser, or any
indenture, mortgage, deed, trust or other contract or agreement to which
Purchaser is a party or by which its properties are bound;
(ii) violates any order, writ, injunction
or decree of any court, administrative agency or governmental body; or
(iii) requires the consent of any other
person, entity or governmental authority.
(d) Brokerage Fees. Purchaser is not obligated
nor has it agreed to pay any brokerage commissions, finders fees or other
similar fees or charges in connection with the purchase of the Purchased Assets
pursuant to this Agreement.
Section 8. Representations and Warranties of Seller. Seller
represents and warrants to Purchaser that on the date hereof and on each day
thereafter to the Closing Date:
(a) Organization and Standing. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas. Seller has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business as
it has been and currently is being conducted and to enter into this Agreement
and to perform its obligations hereunder.
(b) Authority Relative to this Agreement. The
execution, delivery and performance by Seller of this Agreement has been duly
authorized by the board of directors and stockholders of Seller, and no further
corporate action is necessary on the part of Seller to make this Agreement
valid and binding upon the Seller in accordance with its terms.
8
<PAGE> 9
(c) No Violation. Neither the execution nor the
delivery of this Agreement by Seller nor the consummation of the transactions
contemplated herein, nor compliance by Seller with any of the provisions
hereof:
(i) violates or conflicts with or
results in the breach or termination of any term or provision of, nor
constitutes a default or acceleration of the performance required under, the
articles of incorporation, bylaws or resolutions of Seller, or under any
indenture, mortgage, deed, trust or other contract or agreement to which Seller
is a party or by which its properties are bound;
(ii) violates any order, writ, injunction
or decree of any court, administrative agency or governmental body; or
(iii) requires the consent of any other
person, entity or governmental Authority.
(d) Brokerage Fees. Seller is not obligated nor
has it agreed to pay brokerage commissions, finders fees, or other similar fees
or charges in connection with the purchase of the Purchased Assets pursuant to
this Agreement.
(e) Title to Purchased Assets. Seller warrants
that on the date hereof it has good and marketable title to all of the
Purchased Assets, and the Purchased Assets shall not be subject to any pledge,
option, conditional sale agreement, security interest, consensual lien,
judgment lien, encumbrance or charge of any kind. Seller warrants that the
Alarm Accounts acquired by Purchaser are valid and are binding upon and
enforceable against the customers of Seller executing same in accordance with
their terms, and the obligations of the customers of Seller thereunder are not
subject to set-off or claims resulting from the conduct of Seller's business
prior to their conveyance to Purchaser.
(f) Compliance with the Law. To the best of
Seller's knowledge except for the violations set forth on Schedule 8(f), the
Business has been and is being conducted in compliance with all applicable
laws, regulations and requirements of each jurisdiction in which it is carried
on and is not in breach of any such laws, regulations or requirements. Except
for the violations set forth on Schedule 8(f) Seller warrants to hold Purchaser
harmless from and against any violations of applicable laws, regulations or
requirements arising out of non-compliance therewith prior to the Closing Date.
(g) Actions, etc. Except as set forth on
Schedule 8(g):
(i) there are no actions, suits,
proceedings or investigations pending against or relating to the Business or
the Purchased Assets and Seller has not received any notice or written or oral
communication reflecting an intention or threat to institute any such action,
suite proceeding or investigation;
9
<PAGE> 10
(ii) there are no actions, suits,
proceedings, or investigations pending before any court or governmental agency
in which it is sought to restrain or prohibit the carrying out of this
Agreement or the consummation of the transactions contemplated herein in
connection therewith and there is no such action, suit, proceeding or
investigation threatened;
(iii) Seller is not subject to any
judgment, order, writ, court decree, governmental decree or injunction relating
to the Business;
(iv) there are no known defects or
deficiencies in the products or services provided by Seller prior to the date
hereof as a result of which any claim or suit may arise.
(h) Tax Returns. Seller has timely filed all tax
reports and returns required to be filed and has timely paid all taxes
(including, without limitation, income, payroll withholding, sales and use
taxes) and all other charges due or claimed to be due from it by federal, state
or local taxing authorities in respect of the periods covered by such returns.
(i) Alarm Account Requirements. Each of the
Alarm Accounts must:
(i) be evidenced by a properly executed
written monitoring agreement which to the best of Seller's knowledge is valid
and enforceable;
(ii) as of the Closing Date not have been
repudiated by the customer. An Alarm Account shall be deemed repudiated if to
the best of Seller's knowledge: (A) the customer has abandoned the premises at
which the security monitoring system has been installed; (B) the customer is
insolvent; or (C) the customer has cancelled or issued notice of termination of
an Alarm Account, notwithstanding the fact that an Alarm Account may remain
enforceable against the customer;
(iii) have generated cash receipts
representing service charges for at least one full billing cycle or prepayment
for at least one month's service; and
(iv) except for the Alarm Accounts that
have accounts receivable balances over 60 days past due from the invoice due
date that are specifically reviewed and approved by Purchaser prior to the
Closing Date, have no charges that have been outstanding and unpaid for more
than 60 days from the invoice due date as of the Closing Date.
(j) Benefit Plans. No profit-sharing, bonus,
stock option, pension, retirement, stock purchase, hospitalization insurance or
similar plan or agreement, formal or informal, providing benefits to any
current or former employee, or any other employee benefit or employee welfare
plan subject to the provisions of the Employee Retirement Income Security Act
of 1974, as amended, maintained by Seller shall obligate Purchaser to make any
contributions thereto or payments in respect thereof with regard to employees
of Seller who may be hired by Purchaser on or after the Closing Date.
10
<PAGE> 11
(k) Medical Information. To the best of Seller's
knowledge, except for Mr. Blas Seguin who has a heart condition and
specifically requested a hand held medical panic pendant, Seller has not
entered into any contract or other agreement with any or all of its customers
which would require Purchaser to provide any specific medical or health
information on its customers to any third party and Seller is not obligated to
keep or obtain medical or health information on any or all of its customers.
Medical alert buttons on the monitoring keypads and hand held medical pendants
that do not require specific medical information relating to the Alarm Account
customers are exempt from this representation.
(l) Insurance. Seller has "occurrence basis"
general liability insurance coverage covering the Purchased Assets in an amount
equal to or greater than one million dollars ($1,000,000.00) per single
occurrence and workers compensation insurance coverage equal to or greater than
that required by law. Attached hereto as Schedule 8(l) is a list of all of the
insurance policies covering the Purchased Assets. All such policies are in
full force and effect and Seller has not received notice of cancellation with
respect thereto. For purposes of this Agreement, "occurrence basis" means if a
claim arose after the Closing Date for an event which occurred prior to the
Closing Date, Seller's applicable insurance policy in existence on the date
such event occurred would cover such claim.
(m) Disclosure. No representation or warranty of
Seller, and no statement contained in this Agreement and no information
contained in any schedule furnished to Purchaser by or on behalf of Seller
pursuant to this Agreement, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading. Each of the separate representations and
warranties set forth in the various subsections of this Section 8 is intended
to be, and shall be interpreted as, an independent representation and warranty
as to matters referred to therein, and the applicability or inapplicability of
any particular subsection of this Section 8 shall not affect the interpretation
of any other such subsection.
Section 9. Conditions Precedent to Obligations of Purchaser.
Purchaser's obligation to purchase the Purchased Assets under this Agreement is
subject to the fulfillment, prior to or at the Closing Date of each of the
following conditions:
(a) Representations True on the Closing Date.
The representations and warranties of Seller contained in this Agreement shall
be true on the date hereof, and at the time of the Closing Date as though made
on the Closing Date.
(b) Performance. Seller shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
11
<PAGE> 12
(c) Seller's Closing Certificate. Seller shall
have delivered to Purchaser a Closing Certificate of the president or any
authorized representative of Seller dated as of the Closing Date substantially
in the form attached hereto as Schedule 9(c).
(d) Schedules. Seller shall have updated the
Schedules hereto in accordance with Section 13(g) hereof. Purchaser shall have
determined, in good faith, that taking into account the changes to the
information in the updated Schedules, the transactions contemplated by this
Agreement are as beneficial to Purchaser as prior to the updating of the
Schedules.
(e) Consents to Assignments. Seller shall have
taken all action necessary and appropriate, and obtained all necessary
consents, waivers and approvals required under any leases or other agreements
to consummate the sale of the Purchased Assets pursuant to this Agreement in
writing on terms acceptable to Purchaser in its sole discretion.
(f) Litigation. No litigation or proceeding
shall be pending or threatened to restrain, set aside or invalidate the
transactions contemplated by this Agreement or any portion thereof, including,
without limitation, any claims by creditors of Seller against the Purchased
Assets.
(g) Opinion of Seller's Counsel. Seller shall
have delivered to Purchaser an opinion of counsel for Seller, dated as of the
Closing Date and in form satisfactory to Purchaser's counsel, to the effect
that:
(i) Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas; the location and character of the properties owned or leased and the
business conducted by Seller do not make qualification or licensing as a
foreign corporation necessary in any other state or jurisdiction; and Seller
has the corporate power and authority to own its properties and to carry on its
business as now being conducted;
(ii) This Agreement has been duly
executed and delivered by Seller and constitutes a legal and binding obligation
of Seller, enforceable in accordance with its terms except as enforcement of
the same may be limited by bankruptcy, insolvency, reorganization or other laws
relating to or affecting the enforcement of creditors' rights and by general
equity principles;
(iii) All instruments of transfer and
other documents necessary to effect the transfer to Purchaser of the Purchased
Assets have been duly authorized, executed and delivered by Seller and are in
proper form to transfer to Purchaser all right, title and interest of Seller in
and to the Purchased Assets;
(iv) Except as set forth on Schedule
8(g), such counsel does not know of any litigation, proceeding, governmental
investigation or claim pending or threatened
12
<PAGE> 13
against or relating to the Business, the Purchased Assets or the transactions
contemplated by this Agreement; and
(v) The execution and delivery of this
Agreement and the consummation by Seller of the transactions contemplated
hereby:
(A) do not and will not violate any
provision of the articles of incorporation or bylaws of Seller;
(B) do not and will not violate, or
result, with the giving of notice or the lapse of time or both, in a violation
of any provision of, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, or result in the creation or imposition of, any lien, lease,
agreement, license, instrument, law, ordinance, regulation, order, arbitration
award, judgment or decree known to such counsel to which Seller is a party or
by which it is bound;
(C) do not and will not constitute
an event permitting termination of any lease, agreement, license or instrument
known to such counsel to which Seller is a party; and
(D) when combined with the execution
of the Bill of Sale (as defined herein) are sufficient to, and do transfer all
right, title and interest in the Purchased Assets from Seller to Purchaser.
(h) Certified Resolutions. Seller shall have
delivered to Purchaser copies, certified by the secretary or an assistant
secretary of Seller, of the resolutions of Seller's board of directors and
stockholders authorizing the execution and delivery of this Agreement.
(i) Certificates of Good Standing. Seller shall
have delivered to Purchaser a certificate of good standing of Seller issued by
the Comptroller of the State of Texas dated as of a date within 45 days prior
to Closing Date.
(j) Instruments of Transfer. Seller shall have
delivered to Purchaser a Bill of Sale, Assignment and Assumption Agreement
substantially in the form attached hereto as Schedule 9(j) (the "Bill of Sale")
and other good and sufficient instruments of transfer and conveyance, as in the
reasonable opinion of Purchaser's counsel, shall be effective to vest in
Purchaser good and marketable title to the Purchased Assets.
(k) Non-Solicitation Agreement. Seller shall
have delivered to Purchaser Non-Solicitation Agreements substantially in the
forms attached hereto as Schedule 9(k) executed by Steven W. Biediger in his
individual capacity, and by Seller.
(l) Notice to Subscribers. Seller shall have
mailed on the Closing Date to each customer set forth on Schedules 1(a) and
1(d) hereto a notice in the form attached hereto
13
<PAGE> 14
as Schedule 9(1). Seller shall be solely responsible for the costs associated
with the creation and mailing of such notices.
(m) Payment of Accrued Vacation Pay, etc. Seller
shall pay to each of Seller's employees who render services to the Business
that are to be discharged on or after the Closing Date all accrued and unpaid
vacation pay, sick pay and all other accrued obligations to which such
employees are entitled as a result of the termination of their employment with
Seller.
Section 10. Conditions Precedent to Obligations of Seller.
Seller's obligations to sell and transfer the Purchased Assets to Purchaser
under this Agreement are subject to the fulfillment, prior to or on the Closing
Date of each of the following conditions:
(a) Representations True on the Closing Date.
Purchaser's representations and warranties contained in this Agreement shall be
true at the date hereof, and at the Closing Date as though made on the Closing
Date.
(b) Performance. Purchaser shall have performed
and complied with all agreements and conditions required by this Agreement to
be performed or complied with by it prior to or on the Closing Date.
(c) Bill of Sale. Purchaser shall have executed
and delivered the Bill of Sale.
(d) Minimum Purchase Price. If the total
Purchase Price-All Purchased Assets less the Fire Code Violation Credit as
described in Section 2(e)(i) (collectively referred to as the "Seller
Proceeds") is less than $740,000.00, then Seller shall not be obligated to
consummate the transaction proposed according to this Agreement; provided,
however, that Purchaser, in its sole discretion, can enforce this transaction
by making a lump sum payment to Seller of $740,000.00 less the Seller Proceeds.
Section 11. Indemnification. Seller, on the one hand, and
Purchaser, on the other hand (the "Indemnitor") shall indemnify, hold harmless,
defend and bear all costs of defending the other party (the "Indemnitee"),
together with its successors and assigns, from, against and with respect to any
and all damage, loss, deficiency, expense (including any reasonable attorney
and accountant fees, legal costs or expenses), action, suit, proceeding,
demand, assessment or judgment to or against the Indemnitee arising out of or
in connection with any breach or violation of, or nonperformance by, the
Indemnitor of any of its representations, warranties, covenants or agreements
contained in this Agreement or in any document, certificate or schedule
required to be furnished pursuant to this Agreement.
14
<PAGE> 15
Section 12. Assignment. Purchaser may, without the consent of
Seller, collaterally assign its rights under this Agreement to one or more
banks, insurance companies or other financial institution for purposes of
financing. Seller shall not assign its rights or delegate its obligations
under this Agreement without the prior written consent of Purchaser.
Section 13. Agreements Prior to Closing.
(a) Fulfillment of Conditions. Seller shall use
its best efforts to take or cause to be taken all action reasonably necessary
or appropriate to cause each of the conditions set forth in Section 9 to be
fulfilled prior to or on the Closing Date. Purchaser shall use its best
efforts to take or cause to be taken all action reasonably necessary or
appropriate to cause each of the conditions set forth in Section 10 to be
fulfilled prior to or on the Closing Date.
(b) Access to Information. Between the date of
this Agreement and the Closing, Seller shall allow the officers, directors,
employees, representatives, attorneys and accountants of Purchaser free access
at all reasonable times to the records, files, correspondence, audits and
properties of Seller which pertain to the Business.
(c) Confidentiality. Purchaser agrees (i) to
hold all information it obtains pursuant to its review of the records, files,
correspondence, audits and properties of Seller in confidence; (ii) to only use
such information in connection with the transactions contemplated by this
Agreement; and (iii) not to disclose such information to any third party,
except for:
(A) information known by Purchaser and
obtained from sources other than Seller;
(B) disclosure that is authorized by
Seller in writing;
(C) disclosure to Purchaser's
professional advisors and to persons who are expected to be lenders to
Purchaser; or
(D) disclosure of information where such
information is required to be filed with any governmental agency or required to
be produced before any court or tribunal or otherwise required by law to be
disclosed. Except in connection with Seller's filing of tax returns and as
otherwise required by law, Seller shall not disseminate to any person other
than officers, directors, employees, representatives, attorneys and accountants
of Seller any information relating to the Purchase Price or other consideration
contemplated to be paid under this Agreement.
(d) Conduct of Business. Between the date of
this Agreement and the Closing Date, Seller shall cause the Business to be
conducted in its usual and ordinary course
15
<PAGE> 16
including, but not limited to, not increasing the price and/or rate of any
product or service relating to the Alarm Accounts and Contracts-in-Process
without the prior written consent of Purchaser.
(e) Preservation of Existing Relationships.
Between the date of this Agreement and the Closing Date, Seller shall use its
best efforts to continue existing relationships with customers, suppliers,
employees and others having business relations with respect to Seller.
(f) No Negotiations with Third Parties. So long
as this Agreement is in effect, Seller shall not enter into any negotiations,
arrangements, understandings, commitments, options or other agreements
regarding the sale, transfer or other disposition of any of the shares of stock
of Seller or of all or substantially all of the assets of Seller that relate in
any way to the Business, or regarding any merger or consolidation of Seller
with or into any corporation or other business entity.
(g) Updated Schedules. Seller agrees to update
the Schedules hereto as of the Closing Date to reflect changes occurring after
the date hereof; provided, however, that if any of the Schedules attached
hereto on the date hereof are materially inaccurate or incorrect, Seller may
correct such Schedules only with Purchaser's prior written consent. Any
updated Schedules shall be attached to this Agreement and for all purposes be
deemed to be a part of this Agreement.
Section 14. No Joint Venture. The relationship between the
parties hereto is that of purchaser/seller and does not constitute a
partnership or joint venture. Both parties agree not to make any
representations or statements to any other person which contradict the
foregoing.
Section 15. Seller's Employees. Purchaser shall be under no
obligation to employ after the Closing Date any of Seller's employees. After
this Agreement is signed and prior to the Closing Date, Purchaser may interview
any of Seller's employees regarding possible employment with Purchaser as of
the Closing Date, so long as Purchaser does not materially interfere with the
conduct of Seller's business. If Purchaser and any of Seller's employees reach
agreement as to terms of employment to commence on or after the Closing Date,
no inference shall be created that Purchaser has assumed any of Seller's
obligations to its employees; provided, however, that if Purchaser hires any of
Seller's employees then Seller shall provide Purchaser a copy of any and all
personnel records relating to such employees. Seller shall furnish to
Purchaser on request a list of all employees of the Business, setting forth
their compensation, job description, hire date and a summary of all benefits
provided.
Section 16. Post-Closing Covenants. Seller agrees to use its
best efforts to cooperate in the conversion of the Alarm Accounts and
Contracts-in-Process to Purchaser's central station
16
<PAGE> 17
and billing system within 90 days after the Closing Date by providing
information to Purchaser related to the Alarm Accounts (e.g. panel programming,
billing history) on an as needed basis. Seller agrees to transfer to Purchaser
all Alarm Account Communication Lines for fire monitoring of Alarm Accounts
without a change in priority or position. After Closing and upon compilation
of Alarm Account monitoring data in Purchaser's central monitoring station
("CMS"), Seller will remote call forward the Alarm Account Communication Lines
to Purchaser's CMS. In connection with this conversion of monitoring the Alarm
Accounts and to the extent that any of the Alarm Accounts are not included in
the remote call forwarding to Purchaser's CMS, Seller shall either (i) at its
sole expense, secure new telephone numbers and/or lines for those Alarm
Accounts and Contracts-in-Process, which share telephone numbers and/or lines
with third parties; or (ii) credit the Purchase Price in accordance with
Section 2(e)(iii) or credit the Escrow Account (the "Conversion Adjustment").
The Conversion Adjustment shall equal $50 per each Alarm Account that requires
a post-Closing panel reprogramming service call by Purchaser because the
respective Alarm Account panel does not dial to the Alarm Account Communication
Lines.
Section 17. Risk of Loss. The risk of any loss or damage to the
Purchased Assets resulting from fire, theft, explosion, earthquake, windstorm,
flood, accident, act of God, war, seizure, activities of the armed forces or
other casualty, reasonable wear and tear excepted, shall be borne by Seller at
all times prior to the Closing Date, and Seller shall be entitled to all
insurance proceeds resulting from such loss or damage.
Section 18. Miscellaneous.
(a) Pronouns. Whenever used herein and unless
otherwise indicated by the context, the masculine pronoun shall include and
also mean the feminine and the neuter, and the singular shall include and also
mean the plural.
(b) Expenses. Each party shall pay all expenses
incurred by it in connection with the preparation, execution and performance of
this Agreement.
(c) Entire Agreement. This Agreement, together
with the Schedules hereto, sets forth the entire understanding of the parties,
and supersedes all prior agreements, arrangements and communications, whether
oral or written, with respect to the subject matter hereof. This Agreement
shall not be modified or amended except by written agreement of Purchaser and
Seller. Captions appearing in this Agreement are for convenience only and
shall not be deemed to explain, limit or amplify the provisions hereof. All
Schedules to this Agreement are incorporated into and made a part of this
Agreement for all purposes to the same extent as if fully set forth herein.
17
<PAGE> 18
(d) Severability. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if the invalid or unenforceable provision was omitted.
(e) Binding Effect; Assignment. All the terms,
provisions, covenants and conditions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by and against the parties
hereto and their respective successors and assigns.
(f) Notices. Any notice required or permitted to
be delivered pursuant to the terms of this Agreement shall be considered to
have been sufficiently delivered within five days after posting, if mailed by
U.S. Mail, certified or registered, return receipt requested, postage prepaid
or, upon receipt by overnight courier maintaining records of receipt by
addressee or if delivered by hand or telecopied with the original notice being
mailed the same day by one of the foregoing methods and addressed as follows:
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLER AT:
102 Tortoise Lane
Georgetown, Texas 78628
Attention: Steven W. Biediger
18
<PAGE> 19
WITH COPY TO:
Soules & Wallace
100 W. Houston
Suite 1500
San Antonio, Texas 78205-1457
Attention: Marc Schnall, Esq.
FACSIMILE: (210) 224-7073
or at such other address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
(g) Further Assurances. Purchaser and Seller
shall execute such other instruments, documents and other papers and shall take
such further actions as may be reasonably required or desirable to carry out
the provisions hereof and to consummate the transactions contemplated hereby.
(h) Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas,
excluding its conflict of laws principles.
(i) Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original.
(j) Survival. The representations and warranties
of the parties hereto shall survive the date of this Agreement.
(k) Drafting Presumption. Each of the parties
hereto has participated in the negotiation and drafting of this Agreement and
agree that no one party has prepared this document to the exclusion of the
other party and that in construing this agreement there should be no
presumption based upon which party drafted this Agreement.
(l) Intended Beneficiary. Purchaser and Seller
hereby acknowledge that the Purchase Price for the Purchased Assets may be
funded from a loan provided by State Street Bank and Trust Company to
Purchaser; therefore, in the event that State Street Bank and Trust Company
participates in the funding of this transaction, Purchaser and Seller further
acknowledge that State Street Bank and Trust Company is an intended beneficiary
of this Agreement and shall rely upon the representations, warranties and
agreements of Purchaser and Seller contained herein.
19
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
PURCHASER
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
----------------------------------
Its: VP Corporate Development
------------------------------
SELLER
DELTRON, INC.
d/b/a San Antonio Alarm
By: /s/ Steven W. Biediger
-----------------------------------
Its: President
------------------------------
20
<PAGE> 21
LIST OF SCHEDULES
Schedule 1(a) - Alarm Accounts
Schedule 1(b) - Inventory
Schedule 1(c) - Fixed Assets
Schedule 1(d) - Contracts-in-Process
Schedule 1(e) - Other Contracts
Schedule 1(f) - Receivables
Schedule 1(g) - Intangible Personal Property
Schedule 1(h) - Telephone Lines and Numbers
Schedule 1(i) - Vehicles
Schedule 2(a) - Prepaid Revenue
Schedule 2(h)(i) - Fire Code Violation Credit
Schedule 2(i) - Allocation of Purchase Price
Schedule 2(j) - Receivables from Installations and Add-Ons
Schedule 3(a) - Escrow Agreement
Schedule 3(b) - Escrow Account Distribution
Schedule 5 - Assumed Liabilities
Schedule 8(f) - Violations
Schedule 8(g) - Pending Seller Litigation
Schedule 8(l) - Insurance
Schedule 9(c) - Seller's Closing Certificate
Schedule 9(j) - Bill of Sale, Assignment and Assumption Agreement
Schedule 9(k) - Non-Solicitation Agreement
Schedule 9(l) - Notice to Subscribers
<PAGE> 1
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made effective as of the 30th
day of June, 1995, by and among MASADA SECURITY, INC., a Delaware Corporation
("Purchaser"); DELTRON, INC. d/b/a San Antonio Alarm, a Texas corporation
(collectively referred to as "Seller"); and SouthTrust Bank of Alabama, N.A.
("Escrow Agent").
RECITALS
WHEREAS, Seller and Purchaser have entered into an Asset Purchase
Agreement dated June 30, 1995 (the "Purchase Agreement"), pursuant to which the
Seller agrees to sell and Purchaser agrees to purchase all of the customer
accounts and certain other assets of Seller related to the monitoring of
security alarm systems in San Antonio, Texas, as more fully described therein;
WHEREAS, the Purchase Agreement requires Escrow Agent to hold
$39,373.10 of the purchase price in escrow for approximately six months pending
certain possible adjustments in accordance with the Purchase Agreement;
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. ESCROW AGENT: Purchaser and Seller hereby designate and
appoint the Escrow Agent as the Escrow Agent for the purposes herein set forth.
The Escrow Agent hereby accepts such appointment on the terms and conditions
herein set forth. Escrow Agent is not a party to and is not bound by any
agreement between Purchaser and Seller except this Agreement.
2. DEPOSIT IN ESCROW:
(a) Escrow Agent hereby acknowledges the receipt from
Purchaser of the sum of ________________________ ($39,373.10) Dollars (the
"Escrowed Funds"). Escrow Agent agrees to hold and dispose of said sum, and
all interest and gains earned thereon, in accordance with all the terms,
conditions and provisions of this Agreement. Escrow Agent acts hereunder as a
depository. All deposits are warranted by Purchaser to be valid deposits.
(b) Escrow Agent shall invest the Escrowed Funds as
directed by the joint written instructions of Seller and Purchaser. All
earnings received by Escrow Agent as a result of such investment shall be added
to the Escrowed Funds. In the absence of any joint direction by Seller and
Purchaser to the contrary, Escrow Agent, in its discretion, shall invest all
portions of the Escrowed Funds in certificates of deposit (90 day), and/or
money market funds.
<PAGE> 2
3. DISTRIBUTIONS:
(a) On or after December 30, 1995, Purchaser and Seller
shall jointly give signed written notice ("Payment Notice") to Escrow Agent
which Payment Notice shall list the parties entitled to the Escrowed Funds and
a breakdown of the amounts each party is entitled to. Upon receipt of the
Payment Notice, the Escrow Agent shall pay to the appropriate parties the
Escrowed Funds within ten days after the receipt of such Payment Notice. The
Payment Notice shall set forth a brief description of the basis entitling such
parties to be paid the Escrowed Funds.
(b) If the Escrow Agent receives a Payment Notice which
is (i) signed by Purchaser but not by Seller, or (ii) signed by Seller but not
by Purchaser, the Escrow Agent shall give notice, along with a copy of such
Payment Notice, to the other party (the "Non-Signing Party"). If the
Non-Signing Party gives notice to the Escrow Agent of its agreement with the
Payment Notice, or fails to respond to the notice from the Escrow Agent, within
seven days after the date of such notice, then the Escrow Agent shall pay to
Seller (or its designee) the Escrowed Funds, within ten days after the
expiration of such seven day period. If the Non-Signing Party gives notice to
the Escrow Agent of its disagreement with the Payment Notice, within such seven
day period, then the Escrow Agent shall pay the undisputed portion, if any, of
the Escrowed Funds, but shall not pay any portion of the Escrowed Funds subject
to dispute, which disputed funds shall continue to be held by the Escrow Agent
pending resolution of such dispute and further direction from Purchaser and
Seller, or from an authorized arbitrator.
(c) In the event of any disagreement resulting in adverse
claims or demands being made in connection with the subject matter of this
Agreement, or in the event that the Escrow Agent is in doubt as to what action
it should take hereunder, the Escrow Agent may, at its option, refuse to comply
with any claim or demand on it, or refuse to take any other action hereunder,
so long as such disagreement continues or such doubt exists, and in any such
event, the Escrow Agent shall not be or become liable in any way or to any
person for its failure or refusal to act, and the Escrow Agent shall be
entitled to continue to so refrain from acting until (i) the rights of all
parties have been fully and finally decided by an arbitrator selected in
accordance with Section 3(c) of the Purchase Agreement, which is incorporated
herein by this reference, or (ii) all differences shall have been decided and
all doubt resolved by agreement between Purchaser and Seller, and the Escrow
Agent shall have been notified thereof in a writing signed by Purchaser and
Seller. In addition to the foregoing remedies, the Escrow Agent is hereby
authorized in the event of any doubt as to the course of action it should take
under this Agreement, to petition the United States District Court for the
Northern District of Alabama and/or the Circuit Court in and for Jefferson
County, Alabama for instructions or to interplead the funds or assets so held
into such court. For purposes of this Agreement the parties agree to the
jurisdiction of either of said courts over their persons as well as the
Escrowed Funds and agree that service of process by certified mail, return
receipt requested, to the address set forth in Paragraph 9 below shall
constitute adequate service. Purchaser and Seller hereby agree to indemnify
and hold the Escrow Agent harmless from any liability or losses occasioned
thereby and to pay any and all of its costs, expenses, and reasonable
attorney's fees incurred in any such
<PAGE> 3
action and agree that on such petition or interpleader action that the Escrow
Agent, its servants, agents, attorneys, employees and officers will be relieved
of further liability. Escrow Agent is hereby given a lien upon, security
interest in, and right of setoff against, the Escrowed Funds to secure Escrow
Agent's rights to payment or reimbursement for any and all costs, expenses, and
fees incurred by it hereunder.
(d) If a Non-Signing Party shall be determined by (i) a
court of competent jurisdiction, (ii) an arbitrator's binding award, or (iii) a
written release between the parties, to have acted in a frivolous manner and in
bad faith, the other party shall be entitled to reimbursement of all its
reasonable costs incurred in connection with the Payment Notice (including,
without limitation, reasonable attorney's fees).
4. TERMINATION: This Agreement shall terminate on the date that
no Escrowed Funds continue to be held by the Escrow Agent.
5. LIMITATIONS ON LIABILITY OF ESCROW AGENT: In order to induce
the Escrow Agent to act as the escrow agent under this Agreement, Seller and
Purchaser agree as follows:
(a) The Escrow Agent may rely upon and shall be protected
in acting or refraining from acting upon any written notice, instruction or
request received by the Escrow Agent and believed by the Escrow Agent in good
faith to be genuine and signed by Seller and Purchaser. The Escrow Agent shall
not be responsible for the sufficiency, correctness, genuineness or validity of
any notice or instructions delivered to the Escrow Agent. The Escrow Agent
shall not be liable for any error of judgment, or any act or omission under
this Agreement taken in good faith, except for the Escrow Agent's own gross
negligence or willful misconduct.
(b) Seller and Purchaser shall jointly and severally
indemnify and hold harmless the Escrow Agent from and against any claims,
costs, damages, reasonable attorney's fees, expenses, obligations or charges
made against the Escrow Agent by reason of its action or failure to act in
connection with any of the transactions contemplated by this Agreement, unless
caused by the Escrow Agent's gross negligence or willful misconduct.
(c) In the event the Escrow Agent receives or becomes
aware of conflicting instructions, demands or claims with respect to this
Agreement or the sums deposited hereunder, the Escrow Agent shall have the
right to discontinue any and all further acts until such conflict is resolved
to the Escrow Agent's satisfaction. The Escrow Agent shall have the further
right to commence or defend any action or proceeding for the termination of
such conflict. Seller and Purchaser jointly and severally agree to pay all
costs, damages, judgments and expenses, including reasonable attorneys' fees,
suffered or incurred by the Escrow Agent in connection with such action or
proceeding. In the event the Escrow Agent files a suit in interpleader, the
Escrow Agent shall thereupon be fully released and discharged from all further
obligations imposed by this Agreement with respect to sums deposited with a
court of competent jurisdiction pursuant to such suit in interpleader.
<PAGE> 4
6. ESCROW FEES: The Escrow Agent shall not be entitled to
receive a fee for serving as the Escrow Agent; provided, however, that the
Escrowed Funds shall be subject to the Escrow Agent's standard fees and service
charges as provided in the Escrow Agent's Rules and Regulations Governing
Deposit Accounts.
7. RESIGNATION: The Escrow Agent may resign at any time upon
giving the parties hereto 30 days advance written notice to that effect. In
such event, the successor escrow agent shall be mutually selected by Seller and
Purchaser. However, in no instance shall the Escrow Agent's resignation be
effective until a successor escrow agent has agreed to act but, Escrow Agent
shall have the right to discontinue any and all future acts until such
successor escrow agent has agreed to act.
8. INTEREST INFORMATION: Unless otherwise agreed to in writing
by both parties: (i) the Escrow Agent shall list the employer tax
identification number of the Seller for federal, state and local tax purposes
and for other necessary purposes; and (ii) all interest earned shall be the
sole and exclusive property of the Seller; and (iii) any and all of Escrow
Agent's fees and charges as provided for in Paragraph (6) of this Agreement
shall first be charged against interest earned and then charged against
principal.
9. NOTICE: Any notice or other communication hereunder shall be
in writing and shall be (i) delivered by hand, (ii) delivered by an overnight
courier service with guaranteed next day delivery, (iii) sent by telecopy, or
(iv) mailed by certified mail, postage prepaid, return receipt requested, and
addressed as follows:
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
<PAGE> 5
FACSIMILE: (205) 458-5100
IF TO SELLER AT:
102 Tortoise Lane
Georgetown, Texas 78628
Attention: Steven W. Biediger
WITH COPY TO:
Soules & Wallace
100 W. Houston
Suite 1500
San Antonio, Texas 78205-1457
Attention: Marc Schnall, Esq.
FACSIMILE: (210) 224-7073
IF TO ESCROW AGENT:
SouthTrust Bank of Alabama, N.A.
420 North 20th Street
Birmingham, Alabama 35203
Attention: Mr. Robert W. Wilkerson
FACSIMILE: (205) 254-5989
or to such other address as may have been furnished to the party giving notice
by the party to whom notice is to be given. Notice shall be deemed given upon
the earlier of (i) three days after deposit in the U.S. Mail by certified mail,
or (ii) actual receipt thereof.
10. MISCELLANEOUS:
(a) SUCCESSORS AND ASSIGNS: This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
<PAGE> 6
(b) COUNTERPARTS: This Agreement may be executed in any
number of counterparts, each of which shall be an original, but which together
shall constitute one and the same instrument.
(c) GOVERNING LAW: This Agreement shall be governed by
and construed and interpreted in accordance with the laws of the State of
Alabama.
(d) AMENDMENT: This Agreement may not be modified,
changed, waived or terminated, in whole or in part, except by a supplemental
agreement signed by all of the parties hereto.
(e) HEADINGS: The headings assigned to Paragraphs of
this Agreement are for convenience only and shall be disregarded in construing
this Agreement.
(f) NO ASSIGNMENT: Neither Seller nor Purchaser shall
pledge, hypothecate or otherwise transfer or attempt to transfer any right,
title or interest hereunder without the prior written consent to the other
party hereto.
<PAGE> 7
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-----------------------------------------
Its: Vice President Corporate Development
-------------------------------------
DELTRON, INC.
d/b/a San Antonio Alarm
By: /s/ Steven W. Biediger
-----------------------------------------
Its: President
-------------------------------------
Tax I.D. No.: 74-257-6929
------------------------------
SOUTHTRUST BANK OF ALABAMA, N.A
By: /s/ Robert W. Wilkerson
-----------------------------------------
Its: Senior Vice President
-------------------------------------
<PAGE> 1
NON-SOLICITATION AGREEMENT
This Agreement is made and entered into this 30th day of June, 1995,
by and between MASADA SECURITY, INC., a Delaware corporation ("Masada") and
DELTRON, INC. D/B/A SAN ANTONIO ALARM, a Texas corporation (collectively
referred to as "Deltron").
RECITALS
Pursuant to the terms of an Asset Purchase Agreement dated of June 30,
1995 (the "Purchase Agreement"), Masada is purchasing certain of the assets and
properties of Deltron.
Deltron is uniquely experienced in the development and operation of
the security alarm system business, and Masada is unwilling to acquire the
assets referenced in the Purchase Agreement without first obtaining the
agreement of Deltron not to solicit Masada's customers.
As an inducement to the consummation of the transactions evidenced by
the Purchase Agreement, Deltron is willing to issue this Non-Solicitation
Agreement to Masada and acknowledges that valuable direct consideration will be
paid to it as a result of its execution and delivery of this Agreement.
<PAGE> 2
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which are hereby acknowledged, and intending to be
legally bound, agree as follows:
SECTION 1. NON-SOLICITATION COVENANT. Deltron shall not in any
manner, directly or indirectly, through any corporation, partnership or any
other entity, solicit or provide security monitoring services to any person or
entity set forth on Schedules 1(a) and 1(d) to the Purchase Agreement, or
otherwise take any action which would adversely affect Masada's interest in the
Alarm Accounts and Contracts-in-Process (as such terms are defined in the
Purchase Agreement) purchased from Seller. Furthermore, Deltron shall not use,
communicate, inform or otherwise divulge to any third party any information
pertaining to the persons and entities set forth on Schedules 1(a) and 1(d) to
the Purchase Agreement.
SECTION 2. CONSIDERATION. Deltron acknowledges that sufficient and
adequate consideration has been paid to it for the execution and delivery to
Masada of this Agreement.
SECTION 3. REMEDIES FOR BREACH. Deltron recognizes that in the event
of a breach of any covenant herein contained, which breach remains uncured
after five (5) days written notice by Masada, it will be difficult to determine
the damages Masada would suffer, and therefore, Deltron agrees and acknowledges
that Masada may obtain injunctive relief to prevent further breaches of the
covenants herein contained, in addition to provable damages. It is
specifically
<PAGE> 3
understood that in the event of litigation arising from a breach of the
covenants herein contained, Masada shall be entitled to recover, in addition to
damages and injunctive relief, all costs incurred, including attorneys' fees.
SECTION 4. PARTIAL INVALIDITY. In the event any provision or portion
of this Agreement is deemed to be invalid or unenforceable in whole or in part
for any reason, the remainder shall not be invalidated, rendered unenforceable,
or otherwise adversely affected. Without limiting the generality of the
forgoing, if the provisions of the covenant not to solicit contained herein
shall be deemed to create a restriction which is unreasonable as to duration or
geographical area or both, the parties agree that the provisions of this
Agreement shall be enforced for such duration and in such geographical area as
any court of any competent jurisdiction may determine to be reasonable.
SECTION 5. SUCCESSORS AND ASSIGNS. Deltron acknowledges that the
covenants contained herein are unique and personal, and that Deltron may not
assign any of its rights or delegate any of its duties or obligations under
this Agreement. The rights and obligations of Masada under this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
Masada.
SECTION 6. NOTICES. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage
<PAGE> 4
prepaid or, upon receipt by overnight courier maintaining records of receipt by
addressee or if delivered by hand or telecopied with the original notice being
mailed the same day by one of the foregoing methods and addressed as follows:
IF TO MASADA AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: (800) 531-3293
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO DELTRON AT:
102 Tortoise Lane
Georgetown, Texas 78628
Attention: Steven W. Biediger
WITH COPY TO:
Soules & Wallace
100 W. Houston
Suite 1500
San Antonio, Texas 78205-1457
<PAGE> 5
Attention: Marc Schnall, Esq.
FACSIMILE: (210) 224-7073
or at such other address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
SECTION 7. WAIVER OF BREACH. The waiver by Masada of a breach of any
provision of this Agreement by Deltron shall not operate or be construed as a
waiver of any subsequent breach by Deltron. No waiver shall be valid unless in
writing and signed by an authorized representative of Masada.
SECTION 8. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements, arrangements
and communications, whether oral or written, pertaining to the subject matter
hereof. This Agreement may not be modified or amended except by an agreement
in writing signed by each of the parties hereto.
SECTION 9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, excluding its
conflict of laws principles.
55
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
------------------------------------
Its: VP Corporate Development
-------------------------------
DELTRON, INC.
d/b/a San Antonio Alarm
By: /s/ Steven W. Biediger
------------------------------------
Its: President
-------------------------------
56
<PAGE> 1
NON-SOLICITATION AGREEMENT
This Agreement is made and entered into this 30th day of June, 1995,
by and between MASADA SECURITY, INC., a Delaware corporation ("Masada") and
Steven W. Biediger, an individual resident of the State of Texas ("Biediger").
RECITALS
Pursuant to the terms of an Asset Purchase Agreement dated as of June
30, 1995 (the "Purchase Agreement"), Masada is purchasing certain of the assets
and properties of Deltron, Inc. d/b/a San Antonio Alarm ("Seller").
Biediger is a shareholder and key employee of Seller and is uniquely
experienced in the development and operation of the security alarm system
business, and Masada is unwilling to acquire the assets referenced in the
Purchase Agreement without first obtaining the agreement of Biediger not to
solicit Masada's customers.
As an inducement to the consummation of the transactions evidenced by
the Purchase Agreement, Biediger is willing to issue this Non-Solicitation
Agreement to Masada and acknowledges that (i) he is the sole shareholder of
Seller, (ii) Seller is orgainized as a subchapter S corporation and (iii)
valuable consideration will be given to him from Seller as a result of his
execution and delivery of this Agreement.
<PAGE> 2
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which are hereby acknowledged, and intending to be
legally bound, agree as follows:
SECTION 1. NON-SOLICITATION COVENANT. Biediger shall not in any
manner, directly or indirectly, through any corporation, partnership or any
other entity, solicit or provide security monitoring services to any person or
entity set forth on Schedules 1(a) and 1(d) to the Purchase Agreement, or
otherwise take any action which would adversely affect Masada's interest in the
Alarm Accounts and Contracts-in-Process (as such terms are defined in the
Purchase Agreement) purchased from Seller. Biediger shall not use,
communicate, inform or otherwise divulge to any third party any information
pertaining to the persons and entities set forth on Schedules 1(a) and 1(d) to
the Purchase Agreement.
SECTION 2. CONSIDERATION. Biediger acknowledges that sufficient and
adequate consideration has been or will be given to him after the completion of
the transactions contemplated by the Purchase Agreement.
SECTION 3. REMEDIES FOR BREACH. Biediger recognizes that in the
event of a breach of any covenant herein contained, which breach remains
uncured after five (5) days written notice by Masada, it will be difficult to
determine the damages Masada would suffer, and therefore,
<PAGE> 3
Biediger agrees and acknowledges that Masada may obtain injunctive relief to
prevent further breaches of the covenants herein contained, in addition to
provable damages. It is specifically understood that in the event of
litigation arising from a breach of the covenants herein contained, Masada
shall be entitled to recover, in addition to damages and injunctive relief, all
costs incurred, including attorneys' fees.
SECTION 4. PARTIAL INVALIDITY. In the event any provision or portion
of this Agreement is deemed to be invalid or unenforceable in while or in part
for any reason, the remainder shall not be invalidated, rendered unenforceable,
or otherwise adversely affected. Without limiting the generality of the
foregoing, if the provisions of the covenant not to solicit contained herein
shall be deemed to create a restriction which is unreasonable as to duration of
geographical area or both, the parties agree that the provisions of this
Agreement shall be enforced for such duration and in such geographical area as
any court of any competent jurisdiction may determine to be reasonable.
SECTION 5. SUCCESSORS AND ASSIGNS. Biediger acknowledges that the
covenants contained herein are unique and personal, and that Biediger may not
assign any of his rights or delegate any of his duties or obligations under
this Agreement. The rights and obligations of Masada under this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
Masada.
59
<PAGE> 4
SECTION 6. NOTICES. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
IF TO MASADA AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: (800) 531-3293
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO BIEDIGER AT:
102 Tortoise Lane
Georgetown, Texas 78628
Attention: Steven W. Biediger
<PAGE> 5
WITH COPY TO:
Soules & Wallace
100 W. Houston
Suite 1500
San Antonio, Texas 78205-1457
Attention: Marc Schnall, Esq.
FACSIMILE: (210) 224-7073
or at such other address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
SECTION 7. WAIVER OF BREACH. The waiver by Masada of a breach of any
provision of this Agreement by Biediger shall not operate or be construed as a
waiver of any subsequent breach by Biediger. No waiver shall be valid unless
in writing and signed by an authorized representative of Masada.
SECTION 8. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements, arrangements
and communications, whether oral or written, pertaining to the subject matter
hereof. This Agreement may not be modified or amended except by an agreement
in writing signed by each of the parties hereto.
SECTION 9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, excluding its
conflict of laws principles.
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
----------------------------------
Its: VP Corporate Development
-----------------------------
/s/ Steven W. Biediger
-------------------------------------
Steven W. Biediger
<PAGE> 1
ASSET PURCHASE AGREEMENT
This Agreement is made and entered into this 26th day of July, 1995, by
and between MASADA SECURITY, INC., a Delaware corporation ("Purchaser") and
NETWORK MULTI-FAMILY SECURITY CORPORATION, a Delaware corporation ("Seller").
RECITALS
Seller is engaged in the business of operating a security alarm system
monitoring business in the Dallas, Texas metropolitan area (the "Business").
Seller desires to sell to Purchaser and Purchaser desires to buy from
Seller certain of the customer account contracts and certain other assets of
Seller pertaining to the Business, and Purchaser and Seller desire to make
certain other arrangements between them relating to the purchase and sale of
such assets, all upon the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, the parties hereto in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which is hereby acknowledged, and intending to be
legally bound, agree as follows:
Section 1. Agreement to Purchase and Sell. In accordance with the terms
and conditions contained herein and in reliance on the respective
representations and warranties of the parties hereto, Seller hereby agrees to
sell, convey, transfer and assign to Purchaser, and Purchaser hereby agrees to
purchase, accept and acquire from Seller in the manner provided herein, the
assets described below (collectively referred to as the "Purchased Assets"):
(a) Alarm Accounts. All right, title and interest of Seller in and to
the written contracts for the rendering of security monitoring services to
existing customers of Seller which meet all of the requirements listed in
Section 8(i) and as specifically set forth on Schedule 1(a) hereto (the "Alarm
Accounts");
(b) Non-Conforming Alarm Accounts. All right, title and interest of
Seller in and to the contracts for the rendering of security monitoring services
to existing customers of Seller which meet all of the requirements listed in
Section 8(i) with the exception of Section 8(i)(i) and as specifically set forth
on Schedule 1(b) hereto (the "Non-Conforming Alarm Accounts");
<PAGE> 2
(c) Other Contracts. All right, title and interest of Seller in and
to those contracts and benefits of Seller substantially all of which are listed
on Schedule 1(c) hereto (the "Other Contracts"), with the Other Contracts,
including, without limitation, all executory contracts, agreements, leases and
all accepted orders for the sale or installation by Seller of alarm systems
which are not yet installed or in the process of being installed as of the
Closing Date (as defined in Section 5(a));
(d) Receivables. The accounts receivable, trade accounts, notes
receivable and other debts owed to Seller for monitoring services rendered
pertaining to the Alarm Accounts and Non-Conforming Alarm Accounts prior to the
Closing Date substantially all of which are listed on Schedule 1(d) hereto (the
"Receivables");
(e) Intangible Personal Property. The unexpired copyrights and
licenses owned by or accruing to the benefit of Seller pertaining to the
Purchased Assets, including all non-competition or non-solicitation agreements
accruing to the benefit of Seller and pertaining to the Purchased Assets to
which it is a party (the "Intangible Personal Property"), substantially all of
which are listed on Schedule 1(e) hereto;
(f) Other Assets. All files, records and incidental documentation of
Seller pertaining to the Alarm Accounts and Non-Conforming Alarm Accounts,
including, without limitation, all computer lists, contract information, credit
records and information, purchase and sales records, catalogs, circulars,
advertising materials and other information (the "Other Assets").
Section 2. Purchase Price and Payment.
(a) Purchase Price. The purchase price for the Purchased Assets (the
"Purchase Price") shall be the product of 24 times the aggregate Monthly Revenue
Equivalent (as defined herein) of each Alarm Account and each Non-Conforming
Alarm Account less an amount equal to the prepaid revenue relating to each Alarm
Account and each Non-Conforming Alarm Account (as set forth on Schedule 2(a)
hereto) computed on a per diem basis to the Closing Date.
(b) Adjustment to Purchase Price. The Purchase Price shall be
adjusted for items of expense and income prorated as of the Closing Date in the
manner provided below:
(i) Liabilities or credits for personal property taxes, if any,
in respect of the Purchased Assets shall be prorated on the basis of the current
taxable year, to and including the Closing Date; provided that if the assessed
value of any Purchased Asset or rate of tax with respect thereto shall not have
been determined prior to the Closing Date, the value and rate shall be
determined on the basis of the amount of the previous year in which the same was
determined; and
2
<PAGE> 3
(ii) Other liabilities or credits, prepaid items and deferred
charges relating to the Purchased Assets existing on the Closing Date shall be
adjusted as of the Closing Date by prorating the aforementioned items for credit
to Seller or Purchaser, as the case may be, in accordance with generally
accepted accounting principles.
(c) Payment of Purchase Price.
(i) 85% of the Purchase Price subject to the adjustments as set
forth in Section 2(b) (the "Initial Payment") shall be paid by Purchaser to
Seller by wire transfer or other mutually agreeable means on the Closing Date;
(ii) The remaining 15% of the Purchase Price (the "Deferred
Payment Amount") shall be paid in accordance with Section 3 hereof.
(d) Allocation of Purchase Price. The Purchase Price, subject to the
adjustments set forth in Section 2(b) above, shall be allocated as set forth in
Schedule 2(d). Purchaser and Seller agree for income tax purposes they shall
report the transactions contemplated by this Agreement in a manner consistent
with such allocation.
(e) Guarantee Period.
(i) Seller warrants that beginning on the Closing Date and for
the 6 month period immediately after the Closing Date (the "Guarantee Period")
all Alarm Accounts purchased by Purchaser pursuant to this Agreement and
described on Schedule 1(a) shall continue to meet the requirements specified in
Section 8(i) and that payments from customers shall be made in a timely manner.
For purposes of this Agreement, payments by customers shall be considered timely
if they are received by Purchaser on or before the 60th day following the
applicable payment due date. For purposes of this Agreement, a "Defaulted
Contract" shall be defined as any Alarm Account that no longer meets the
requirements specified in Section 8(i) or any Alarm Account the payments from
which shall not have been made in a timely manner. Seller shall be charged
against the Escrow Account as provided for in Section 3, an amount equal to 24
times the Monthly Revenue Equivalent of the Defaulted Contracts ("Defaulted
Contract Credits").
(ii) Seller warrants that if any or all of the Non-Conforming
Alarm Accounts purchased by Purchaser pursuant to this Agreement and listed on
Schedule 1(b) do not meet all of the requirements listed in Section 8(i) at the
end of the Guarantee Period then Seller, within 30 days following receipt of
written notice from Purchaser that Purchaser intends to cease providing
monitoring services to such Non-Conforming Alarm Accounts, shall be charged
against the Escrow Account an amount equal to 24 times the Monthly Revenue
Equivalent of such Non-Conforming Alarm Accounts; provided, however, that
Purchaser shall use its best efforts to have the Section 8(i)(i) requirements
met during the Guarantee Period.
3
<PAGE> 4
Section 3. Deferred Payment Amount.
(a) Escrow Agreement. On or prior to the Closing Date, Seller and
Purchaser agree to execute an Escrow Agreement substantially in the form
attached hereto as Schedule 3(a) (the "Escrow Agreement") and Purchaser agrees
to deposit with SouthTrust Bank of Alabama, N.A. (the "Escrow Agent"), the
Deferred Payment Amount to be held in an escrow account (the "Escrow Account")
pursuant to the terms of the Escrow Agreement (the "Deferred Payment Amount"
together with all earnings thereon shall collectively hereinafter be referred to
as the "Escrow Amount").
(b) Payment and Escrow Amount. Within 30 days from the expiration of
the Guarantee Period, Purchaser shall submit to Seller substantially in the form
attached hereto as Schedule 3(b) along with all appropriate supporting
documentation, a report reflecting: (i) the Escrow Amount; (ii) the total
Defaulted Contract Credits credited to Purchaser calculated in accordance with
Section 2(e); and (iii) the resulting difference between Section 3(b)(i) less
the Purchaser's credits associated with Section 3(b)(ii) (the "Resulting
Difference"). If Seller does not notify Purchaser of a dispute regarding such
report within ten business days from the date such report is received by Seller
or if Seller notifies Purchaser of its acceptance of such report, such report
shall be deemed complete and accurate and Seller and Purchaser shall notify
Escrow Agent to pay the sums computed below to Seller or Purchaser, as the case
may be, and the Escrow Account shall then be closed after payment by the Escrow
Agent of all funds held by it in the Escrow Account. If the Resulting
Difference is a positive amount then Seller and Purchaser shall instruct the
Escrow Agent to first pay the Seller the Resulting Difference and the remainder
of the Escrow Amount shall be paid by Escrow Agent to Purchaser. If the
Resulting Difference is a negative amount, then Seller and Purchaser shall
instruct the Escrow Agent to pay Purchaser the entire Escrow Amount. Seller's
guarantee of the Alarm Accounts and Non-Conforming Alarm Accounts shall in all
events be limited to the Deferred Payment Amount deposited in the Escrow
Account.
(c) Dispute. All disputes and differences with respect to the
computation of the Resulting Difference and the Escrow Account shall be
determined by binding arbitration under the rules then in effect of the American
Arbitration Association, such arbitration hearing to be held in Dallas County,
State of Texas. The arbitration proceedings shall be heard by one arbitrator
selected from the proposed panel of arbitrators issued by the American
Arbitration Association, Seller, on the one hand, and Purchaser, on the other
hand, shall attempt to select a mutually acceptable arbitrator. If the parties
are unable to select a mutually acceptable arbitrator within five business days
following the issuance of the list of potential arbitrators by the American
Arbitration Association, Seller, on the one hand, and Purchaser, on the other
hand, shall each select one person from the list, and those two persons selected
shall appoint a third person from the list, which person shall be the arbitrator
for the dispute. All arbitration awards shall include an award of expenses
including, but not limited to, legal and accounting fees.
4
<PAGE> 5
Section 4. Monthly Revenue Equivalent. For purposes of this Agreement, the
term "Monthly Revenue Equivalent" with respect to the Alarm Accounts and
Non-Conforming Alarm Accounts acquired from Seller by Purchaser shall be the
charge for monitoring services, (including, without limitation, maintenance and
other alarm related services), exclusive of any direct wire telephone line
charges associated with monitoring, payable by the customer for each applicable
billing period expressed in terms of a monthly amount regardless of whether the
billing period is annual, semi-annual, quarterly or monthly.
Section 5. The Closing.
(a) Place. The closing of the purchase and sale of the Purchased
Assets (the "Closing") shall take place on July 26, 1995, or such other date
as shall be mutually agreeable to Seller and Purchaser (the "Closing Date"), and
shall take place at a location mutually agreeable to Seller and Purchaser.
(c) Closing Deliveries. On the Closing Date, Seller shall make the
deliveries specified by Section 9 and Purchaser shall make the deliveries
specified by Section 10.
(c) Closing Procedure. All proceedings to be taken and all documents
to be delivered and executed on the Closing Date shall be deemed to have been
taken, delivered and executed simultaneously, and no proceeding shall be deemed
taken nor documents deemed executed or delivered until all have been taken,
delivered and executed. At the Closing Seller and Purchaser shall execute and
deliver the instruments and documents referenced in Sections 9 and 10 and
Purchaser shall pay the Purchase Price in accordance with Section 2 hereof.
Section 6. Assumption of Liabilities. Purchaser shall not assume any
liability, debt or obligation of Seller except the responsibility of rendering
security monitoring services pursuant to the Alarm Accounts, Non-Conforming
Alarm Accounts and Other Contracts set forth on Schedules 1(a), 1(b) and 1(c)
and those liabilities and obligations of Seller arising after the Closing Date
that are set forth on Schedule 6 hereto. Seller shall indemnify and save
harmless Purchaser from any loss, liability or expense (including attorneys'
fees) which result from Seller's use of the Purchased Assets or its conduct
related to the Purchased Assets prior to and including the Closing Date.
Purchaser shall indemnify and save harmless Seller from any loss, liability or
expense (including attorneys' fees) which result from Purchaser's use of the
Purchased Assets or its conduct related to the Purchased Assets subsequent to
the Closing Date.
Section 7. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller that on the date hereof:
(a) Organization and Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and Purchaser has all requisite corporate power and authority to own,
operate and lease its properties and carry on its business as now being
conducted and to enter into this Agreement and to perform its obligations
hereunder.
5
<PAGE> 6
(b) Authority Relative to this Agreement. The execution, delivery and
performance by Purchaser of this Agreement has been duly authorized by the
stockholder of Purchaser, and no further corporate action is necessary on the
part of Purchaser to make this Agreement valid and binding upon Purchaser in
accordance with its terms.
(c) No Violation. Neither the execution nor the delivery of this
Agreement by Purchaser nor the consummation of the transactions contemplated
herein, nor compliance by Purchaser with any of the provisions hereof, violates
or conflicts with or results in the breach or termination of any term or
provision of, nor constitutes a default or acceleration of the performance
required under, the certificate of incorporation, bylaws or resolutions of the
Purchaser; any indenture, mortgage, deed, trust or other contract or agreement
to which Purchaser is a party or by which its properties are bound, or violates
any order, writ, injunction or decree of any court, administrative agency or
governmental body.
(d) Brokerage Fees. Purchaser is not obligated nor has it agreed to
pay any brokerage commissions, finders fees or other similar fee or charge in
connection with the purchase of the Purchased Assets pursuant to this Agreement.
Section 8. Representations and Warranties of Seller. Seller represents
and warrants to Purchaser that on the date hereof:
(a) Organization and Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and Seller has all requisite corporate power and authority to own,
operate and lease its properties and carry on its business as it has been and
currently is being conducted and to enter into this Agreement and to perform its
obligations hereunder.
(b) Authority Relative to this Agreement. The execution, delivery and
performance by Seller of this Agreement has been duly authorized by the board of
directors and stockholders of Seller, and no further corporate action is
necessary on the part of Seller to make this Agreement valid and binding upon
the Seller in accordance with its terms.
(c) No Violation. Neither the execution nor the delivery of this
Agreement by Seller nor the consummation of the transactions contemplated
herein, nor compliance by Seller with any of the provisions hereof:
(i) violates or conflicts with or results in the breach or
termination of any term or provision of, nor constitutes a default or
acceleration of the performance required under, the articles of incorporation,
bylaws or resolutions of Seller, or under any indenture, mortgage, deed, trust,
lease, license or other contract or agreement to which Seller is a party or by
which its properties are bound;
6
<PAGE> 7
(ii) violates any law, ordinance, regulation, arbitration,
award, judgment, order, writ, injunction or decree to which Seller is a party or
to which it is bound; or
(iii) requires the consent of any other person, entity or
governmental authority.
(d) Brokerage Fees. Seller is not obligated nor has it agreed to pay
any brokerage commissions, finders fees or other similar fee or charge in
connection with the purchase of the Purchased Assets pursuant to this Agreement.
(e) Title to Purchased Assets. Seller warrants that on the date
hereof it has good and marketable title to all of the Purchased Assets, and the
Purchased Assets shall not be subject to any pledge, option, conditional sale
agreement, security interest, consensual lien, judgment lien, encumbrance or
charge of any kind. Seller warrants that the Alarm Accounts acquired by
Purchaser are valid and are binding upon and enforceable against the customers
of Seller executing same in accordance with their terms, and the obligations of
the customers of Seller thereunder are not subject to set-off or claims
resulting from the conduct of Seller's business prior to their conveyance to
Purchaser. The Bill of Sale (as defined herein) is sufficient to, and does,
transfer all right, title and interest in the Purchased Assets from Seller to
Purchaser.
(f) Compliance with the Law. The business of Seller has been and is
being conducted in compliance with all applicable laws, regulations and
requirements of each jurisdiction in which Seller's business is carried on and
is not in breach of any such laws, regulations or requirements, and Seller
warrants to hold Purchaser harmless from and against any violations of
applicable laws, regulations or requirements arising out of non-compliance
therewith prior to the Closing Date.
(g) Actions, etc.
(i) There are no actions, suits, proceedings or investigations
pending against or relating to the Purchased Assets and Seller has not received
any notice or written or oral communication reflecting an intention or threat to
institute any such action suit, proceeding or investigation.
(ii) There are no action suits, proceedings or investigations
pending before any court or governmental agency in which it is sought to
restrain or prohibit the carrying out of this Agreement or the consummation of
the transactions contemplated herein in connection therewith and there is no
such action suit proceeding or investigation threatened.
(iii) Seller is not subject to any judgment, order, writ, court
decree, governmental decree or injunction relating to the Purchased Assets.
7
<PAGE> 8
(iv) To the best of Seller's knowledge there are no known
defects or deficiencies in the products or services provided by Seller prior to
the date hereof as a result of which any claim or suit may arise.
(h) Tax Returns. Seller has timely filed all tax reports and returns
required to be filed and has timely paid all taxes (including, without
limitation, income, payroll withholding, sales and use taxes) and all other
charges due or claimed to be due from it by Federal, State or local taxing
authorities in respect to the periods covered by such returns.
(i) Alarm Account Requirements. Each of the Alarm Accounts:
(i) is evidenced by a valid, enforceable and properly executed
monitoring agreement;
(ii) has not repudiated monitoring services. An Alarm Account
shall be deemed to have repudiated monitoring services if: (A) the customer has
abandoned the premises at which the security monitoring system has been
installed; (B) the customer is insolvent; or (C) the customer has cancelled or
issued notice of termination of the Alarm Account, notwithstanding the fact that
the Alarm Account may remain enforceable against the customer;
(iii) has generated cash receipts representing service charges
for at least one full billing cycle or has been prepaid for at least one month's
service;
(iv) has no charges that have been outstanding and unpaid for
more than 60 days from the invoice due date as of the Closing Date; and
(v) is monitored using digital data signals transmitted from the
customer's premises to a central monitoring station.
(j) Insurance. Seller has "occurrence basis" general liability
insurance coverage which covers the Purchased Assets in an amount equal to or
greater than one million dollars ($1,000,000.00) per single occurrence and
workers compensation insurance coverage equal to or greater than that required
by law.
(k) Disclosure. No representation or warranty of Seller, and no
statement contained in this Agreement and no information contained in any
schedule furnished to Purchaser by or on behalf of Seller pursuant to this
Agreement, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading. Each of the separate representations and warranties set forth in
the various subsections of this Section 8 is intended to be, and shall be
interpreted as, an independent representation and warranty as to matters
referred to therein, and the applicability or inapplicability of any particular
subsection of this Section 8 shall not affect the interpretation of any other
subsection.
8
<PAGE> 9
Section 9. Conditions Precedent to Obligations of Purchaser. Purchaser's
obligation to purchase the Purchased Assets under this Agreement is subject to
the fulfillment, prior to or at the Closing Date, of each of the following
conditions:
(a) Representations True on the Closing Date. The representations and
warranties of Seller contained in this Agreement shall be true on the date
hereof, and at the time of the Closing Date as though made on the Closing Date.
(b) Performance. Seller shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or complied
with by it prior to the Closing Date.
(c) Seller's Closing Certificate. Seller shall have delivered to
Purchaser a closing certificate of the president, or any other authorized
representative of Seller dated as of the Closing Date substantially in the form
attached hereto as Schedule 9(c).
(d) Schedules. Seller shall have updated the Schedules hereto in
accordance with Section 14(e) hereof. Purchaser shall have determined, in good
faith, that taking into account any material changes to the information in the
updated Schedules, the transactions contemplated by this Agreement are as
beneficial to Purchaser as prior to the updating of Schedules.
(e) Consents to Assignments. Seller shall have taken all action
necessary and appropriate, and obtained all necessary consents, waivers and
approvals required under any leases or other agreements to consummate the sale
of the Purchased Assets pursuant to this Agreement in writing on terms
reasonably acceptable to Purchaser, and Purchaser shall reasonably cooperate
with Seller in its efforts to obtain such consents, waivers and approvals.
(f) Litigation. No action, suit, proceeding or investigation shall be
pending or threatened to restrain, set aside or invalidate the transactions
contemplated by this Agreement or any portion thereof, including without
limitation any claims by creditors of Seller against the Purchased Assets.
However, if Seller becomes aware of any pending or threatened action, suit,
proceeding or investigation which involves the Purchased Assets between the date
of this Agreement and the Closing Date then Seller shall promptly notify
Purchaser in writing of any such action, suit, proceeding or investigation.
(g) Certified Resolutions. Seller shall have delivered to Purchaser
copies, certified by the secretary or an assistant secretary of Seller, of the
resolutions of Seller's board of directors and stockholders authorizing the
execution and delivery of this Agreement.
(h) Certificate of Good Standing. Seller shall have delivered to
Purchaser a certificate of good standing of Seller issued by the Secretary of
State of Texas dated within 10 days prior to the Closing Date.
9
<PAGE> 10
(i) Instruments of Transfer. Seller shall have delivered to Purchaser
a Bill of Sale, Assignment and Assumption Agreement substantially in the form
attached hereto as Schedule 9(i) (the "Bill of Sale") and other good and
sufficient instruments of transfer and conveyance, as in the reasonable opinion
of Purchaser's counsel, shall be effective to vest in Purchaser good and
marketable title to the Purchased Assets.
(j) Non-Solicitation Agreements. Seller shall have delivered to
Purchaser non-solicitation agreements substantially in the form attached hereto
as Schedule 9(j) executed by Tom K. Gleason, in his individual capacity, and by
Seller.
(k) Notice to Subscribers. Seller shall have delivered within seven
days after the Closing Date to each customer set forth on Schedule 1(a) and 1(b)
hereto a notice in the form attached hereto as Schedule 9(k). Purchaser and
Seller shall equally share the costs associated with the creation and delivery
of such notices.
(l) Monitoring Agreement. Purchaser shall have entered into a
monitoring agreement with Texas Security Central, Inc. for the monitoring and
servicing of the Alarm Accounts and the Non-Conforming Alarm Accounts on terms
acceptable to Purchaser, in its sole discretion.
Section 10. Conditions Precedent to Obligations of Seller. Seller's
obligations to sell and transfer the Purchased Assets to Purchaser under this
Agreement are subject to the fulfillment, prior to or on the Closing Date, of
each of the following conditions.
(a) Representations True on the Closing. Purchaser's representations
and warranties contained in this Agreement shall be true at the date hereof, and
at the Closing Date as though made on the Closing Date.
(b) Performance. Purchaser shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or complied
with by it prior to or on the Closing Date.
(c) Bill of Sale. Purchaser shall have executed and delivered the
Bill of Sale.
Section 11. Indemnification. Seller, on the one hand, and Purchaser, on
the other hand, shall indemnify and hold each other harmless from and against
any and all losses, liabilities, damages and expenses, including reasonable
attorneys' fees, that they may suffer or become liable for as a result of or in
connection with any breach of a representation, warranty, covenant or agreement
contained in this Agreement.
Section 12. Bulk Sales Law. The sale and purchase described in this
Agreement may constitute a "bulk transfer" of assets and if so, Seller
represents and warrants that the sale and purchase described in this Agreement
will be conducted according to, and in full compliance with, the requirements of
the bulk transfer provisions of the Uniform Commercial Code as
10
<PAGE> 11
adopted in the State of Texas. In addition to its indemnity under Sections
6 and 11, Seller hereby agrees to indemnify and hold Purchaser harmless from
any and all liability to anyone arising from its failure to comply with the
provisions of Texas Business and Commercial Code Ann. Section 6.101 et seq.,
relating to bulk transfers. Such indemnity shall survive Closing.
Section 13. Assignment. Purchaser may, without the consent of Seller,
assign its rights and delegate its obligations under this Agreement, to any
corporation, limited liability company, partnership, association, proprietorship
or any other business entity who acquires all or a substantial part of the
assets of Purchaser in connection with the sale of all or a substantial part of
its business and agrees in writing to be bound by all terms and obligations of
this Agreement. Upon any such assignment Purchaser shall be relieved and
discharged from any further obligations under this Agreement. Furthermore,
Purchaser may, without the consent of Seller, collaterally assign its rights
under this Agreement to one or more banks, insurance companies or other
financial institution for purposes of financing. Except as provided above,
neither party may assign its rights or delegate its obligations under the
Agreement without the written consent of the other party.
Section 14. Agreements Prior to Closing.
(a) Fulfillment of Conditions. Seller shall use its best efforts to
take or cause to be taken all action reasonably necessary or appropriate to
cause each of the conditions set forth in Section 9 to be fulfilled prior to or
on the Closing Date. Purchaser shall use its best efforts to take or cause to
be taken all action reasonably necessary or appropriate to cause each of the
conditions set forth in Section 10 to be fulfilled prior to or on the Closing
Date.
(b) Access to Information. Between the date of this Agreement and the
Closing Date, Seller shall allow the employees, representatives, attorneys and
accountants of Purchaser free access at all reasonable times to the records,
files, correspondence, audits and properties of Seller which pertain to the
Business.
(c) Conduct of Business. Between the date of this Agreement and the
Closing Date, Seller shall cause the Business to be conducted in its usual and
ordinary course.
(d) Preservation of Existing Relationships. Between the date of this
Agreement and the Closing Date, Seller shall use its best efforts to continue
existing relationships with customers, suppliers, employees and others having
business relations with respect to Seller.
(e) Updated Schedules. Seller agrees to update the Schedules hereto
as of the Closing Date to reflect changes occurring after the date hereof;
provided, however, that if any of the Schedules attached hereto on the date
hereof are materially inaccurate or incorrect, Seller may correct such Schedules
only with Purchaser's written consent. Any updated Schedules shall be attached
to this Agreement and for all purposes be deemed to be a part of this Agreement.
11
<PAGE> 12
Section 15. No Joint Venture. The relationship between the parties
hereto is that of purchaser/seller and does not constitute a partnership or
joint venture. Both parties agree not to make any representations or
statements to any other person which contradict the foregoing.
Section 16. Seller's Employees. Purchaser shall be under no obligation
to employ after the Closing Date any of Seller's employees.
Section 17. Post Closing Covenants. Seller agrees to use its best
efforts to accommodate the conversion of the customer accounts relating to the
Purchased Assets to Purchaser's central station and billing system, including,
but not limited to billing customers listed on Schedules 1(a), 1(b) and 1(c)
for services rendered in June, 1995.
Section 18. Risk of Loss. The risk of any loss or damage to the
Purchased Assets resulting from fire, theft, explosion, earthquake, windstorm,
flood, accident, act of God, war, seizure, activities of the armed forces or
other casualty, reasonable wear and tear excepted, shall be borne by Seller at
all times prior to the Closing Date, and Seller shall be entitled to all
insurance proceeds resulting from such loss or damage.
Section 19. Miscellaneous.
(a) Pronouns. Whenever used herein and unless otherwise indicated by
the context, the masculine pronoun shall include and also mean the feminine and
the neuter, and the singular shall include and also mean the plural.
(b) Expenses. Each party shall pay all expenses incurred by it in
connection with the preparation, execution and performance of this Agreement.
(c) Entire Agreement. This Agreement, together with the Schedules
hereto, sets forth the entire understanding of the parties, and supersedes all
prior agreements, arrangements and communications, whether oral or written, with
respect to the subject matter hereof. This Agreement shall not be modified or
amended except by written agreement of Purchaser and Seller. Captions appearing
in this Agreement are for convenience only and shall not be deemed to explain,
limit or amplify the provisions hereof. All Schedules to this Agreement are
incorporated into and made a part of this Agreement for all purposes to the same
extent as if fully set forth herein.
(d) Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if the invalid
or unenforceable provision was omitted.
(e) Binding Effect; Assignment. All the terms, provisions, covenants
and conditions of this Agreement shall be binding upon and inure to the benefit
of and be enforceable by and against the parties hereto and their respective
successors and assigns.
12
<PAGE> 13
(f) Notices. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Terry W. Johnson
TELECOPY: 1-800-531-3293
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
(205) 251-3000
Attention: W. Lee Thuston, Esq.
TELECOPY: (205) 458-5100
IF TO SELLER AT:
Network Multi-Family Security Corporation
14275 Midway Road, Suite 440
Dallas, Texas 75244
Attention: Stephen D. Parker
TELECOPY: (214) 419-3170
13
<PAGE> 14
or at such other address as the party may designate by 10 days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
(g) Further Assurances. Purchaser and Seller shall execute such other
instruments, documents and other papers and shall take such further actions as
may be reasonably required or desirable to carry out the provisions hereof and
to consummate the transactions contemplated hereby.
(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the substantive laws of the State of Alabama without regard
to its rules containing conflicts of laws.
(i) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original.
(j) Survival. The representations, warranties, covenants and
agreements of the parties hereto shall survive the date of this Agreement.
(k) Drafting Presumption. Each of the parties hereto has participated
in the negotiation and drafting of this Agreement and agree that no one party
has prepared this document to the exclusion of the other party and that in
construing this Agreement there should be no presumption based upon which party
drafted this Agreement.
(l) Intended Beneficiary. Purchaser and Seller hereby acknowledge
that the Purchase Price for the Purchased Assets will be funded from a loan
provided by State Street Bank and Trust Company to Purchaser; therefore,
Purchaser and Seller further acknowledge that State Street Bank and Trust
Company is an intended beneficiary of this Agreement and shall rely upon the
representations, warranties and agreements of Purchaser and Seller contained
herein. Purchaser shall obtain from State Street Bank and Trust Company,
authorization of this transaction as a condition of closing.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.
"Purchaser"
MASADA SECURITY, INC.
By: /s/ Terry W. Johnson
------------------------------------
Its: President
------------------------------------
"Seller"
NETWORK MULTI-FAMILY
SECURITY CORPORATION
By: /s/ Tom K. Gleason
------------------------------------
Its: President
--------------------------------
15
<PAGE> 16
LIST OF SCHEDULES
Schedule 1(a) - Alarm Accounts
Schedule 1(b) - Non-Conforming Alarm Accounts
Schedule 1(c) - Other Contracts
Schedule 1(d) - Receivables
Schedule 1(e) - Intangible Personal Property
Schedule 2(a) - Purchase Price
Schedule 2(d) - Allocation of Purchase Price
Schedule 3(a) - Escrow Agreement
Schedule 3(b) - Escrow Account Distribution
Schedule 6 - Assumed Liabilities
Schedule 9(c) - Seller's Closing Certificate
Schedule 9(i) - Bill of Sale, Assignment and Assumption Agreement
Schedule 9(j) - Non-Solicitation Agreement
Schedule 9(k) - Notice Form
<PAGE> 1
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made effective as of the 26th day
of July, 1995, by and among Masada Security, Inc., a Delaware Corporation
("Purchaser"); Network Multi-Family Security Corporation, ("Seller"); and
SouthTrust Bank of Alabama, N.A. ("Escrow Agent").
RECITALS
WHEREAS, Seller and Purchaser have entered into an Asset Purchase Agreement
dated July 26, 1995 (the "Purchase Agreement"), pursuant to which the Seller
agrees to sell and Purchaser agrees to purchase all of the customer accounts and
certain other assets of Seller related to the monitoring of security alarm
systems in the Dallas, Texas metropolitan area, as more fully described therein;
WHEREAS, the Purchase Agreement requires Escrow Agent to hold $24,244.38 of
the purchase price in escrow for approximately six months pending certain
possible adjustments in accordance with the Purchase Agreement;
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. ESCROW AGENT: Purchaser and Seller hereby designate and appoint
the Escrow Agent as the Escrow Agent for the purposes herein set forth. The
Escrow Agent hereby accepts such appointment on the terms and conditions herein
set forth. Escrow Agent is not a party to and is not bound by any agreement
between Purchaser and Seller except this Agreement.
2. DEPOSIT IN ESCROW:
(a) Escrow Agent hereby acknowledges the receipt from Purchaser
of the sum of ________________________ ($24,244.38) Dollars (the "Escrowed
Funds"). Escrow Agent agrees to hold and dispose of said sum, and all interest
and gains earned thereon, in accordance with all the terms, conditions and
provisions of this Agreement. Escrow Agent acts hereunder as a depository.
All deposits are warranted by Purchaser to be valid deposits.
(b) Escrow Agent shall invest the Escrowed Funds as directed by
the joint written instructions of Seller and Purchaser. All earnings received
by Escrow Agent as a result of such investment shall be added to the Escrowed
Funds. In the absence of any joint direction by Seller and Purchaser to the
contrary, Escrow Agent, in its discretion, shall invest all portions of the
Escrowed Funds in certificates of deposit (90 day), and/or money market funds.
<PAGE> 2
3. DISTRIBUTIONS:
(a) On or after January 26, 1996, Purchaser and Seller shall
jointly give signed written notice ("Payment Notice") to Escrow Agent which
Payment Notice shall list the parties entitled to the Escrowed Funds and a
breakdown of the amounts each party is entitled to. Upon receipt of the Payment
Notice, the Escrow Agent shall pay to the appropriate parties the Escrowed Funds
within ten days after the receipt of such Payment Notice. The Payment Notice
shall set forth a brief description of the basis entitling such parties to be
paid the Escrowed Funds.
(b) If the Escrow Agent receives a Payment Notice which is (i)
signed by Purchaser but not by Seller, or (ii) signed by Seller but not by
Purchaser, the Escrow Agent shall give notice, along with a copy of such Payment
Notice, to the other party (the "Non-Signing Party"). If the Non-Signing Party
gives notice to the Escrow Agent of its agreement with the Payment Notice, or
fails to respond to the notice from the Escrow Agent, within seven days after
the date of such notice, then the Escrow Agent shall pay to Seller (or its
designee) the Escrowed Funds, within ten days after the expiration of such seven
day period. If the Non-Signing Party gives notice to the Escrow Agent of its
disagreement with the Payment Notice, within such seven day period, then the
Escrow Agent shall pay the undisputed portion, if any, of the Escrowed Funds,
but shall not pay any portion of the Escrowed Funds subject to dispute, which
disputed funds shall continue to be held by the Escrow Agent pending resolution
of such dispute and further direction from Purchaser and Seller, or from an
authorized arbitrator.
(c) In the event of any disagreement resulting in adverse
claims or demands being made in connection with the subject matter of this
Agreement, or in the event that the Escrow Agent is in doubt as to what action
it should take hereunder, the Escrow Agent may, at its option, refuse to comply
with any claim or demand on it, or refuse to take any other action hereunder, so
long as such disagreement continues or such doubt exists, and in any such event,
the Escrow Agent shall not be or become liable in any way or to any person for
its failure or refusal to act, and the Escrow Agent shall be entitled to
continue to so refrain from acting until (i) the rights of all parties have been
fully and finally decided by an arbitrator selected in accordance with Section
3(c) of the Purchase Agreement, which is incorporated herein by this reference,
or (ii) all differences shall have been decided and all doubt resolved by
agreement between Purchaser and Seller, and the Escrow Agent shall have been
notified thereof in a writing signed by Purchaser and Seller. In addition to
the foregoing remedies, the Escrow Agent is hereby authorized in the event of
any doubt as to the course of action it should take under this Agreement, to
petition the United States District Court for the Northern District of Alabama
and/or the Circuit Court in and for Jefferson County, Alabama for instructions
or to interplead the funds or assets so held into such court. For purposes of
this Agreement the parties agree to the jurisdiction of either of said courts
over their persons as well as the Escrowed Funds and agree that service of
process by certified mail, return receipt requested, to the address set forth in
Paragraph 9 below shall constitute adequate service. Purchaser and Seller
hereby agree to indemnify and hold the Escrow Agent harmless from any liability
or losses occasioned thereby and to pay any and all of its costs, expenses, and
reasonable attorney's fees incurred in any such
2
<PAGE> 3
action and agree that on such petition or interpleader action that the Escrow
Agent, its servants, agents, attorneys, employees and officers will be relieved
of further liability. Escrow Agent is hereby given a lien upon, security
interest in, and right of setoff against, the Escrowed Funds to secure Escrow
Agent's rights to payment or reimbursement for any and all costs, expenses, and
fees incurred by it hereunder.
(d) If a Non-Signing Party shall be determined by (i) a court
of competent jurisdiction, (ii) an arbitrator's binding award, or (iii) a
written release between the parties, to have acted in a frivolous manner and in
bad faith, the other party shall be entitled to reimbursement of all its
reasonable costs incurred in connection with the Payment Notice (including,
without limitation, reasonable attorney's fees).
4. TERMINATION: This Agreement shall terminate on the date that no
Escrowed Funds continue to be held by the Escrow Agent.
5. LIMITATIONS ON LIABILITY OF ESCROW AGENT: In order to induce the
Escrow Agent to act as the escrow agent under this Agreement, Seller and
Purchaser agree as follows:
(a) The Escrow Agent may rely upon and shall be protected in
acting or refraining from acting upon any written notice, instruction or request
received by the Escrow Agent and believed by the Escrow Agent in good faith to
be genuine and signed by Seller and Purchaser. The Escrow Agent shall not be
responsible for the sufficiency, correctness, genuineness or validity of any
notice or instructions delivered to the Escrow Agent. The Escrow Agent shall
not be liable for any error of judgment, or any act or omission under this
Agreement taken in good faith, except for the Escrow Agent's own gross
negligence or willful misconduct.
(b) Seller and Purchaser shall jointly and severally indemnify
and hold harmless the Escrow Agent from and against any claims, costs, damages,
reasonable attorney's fees, expenses, obligations or charges made against the
Escrow Agent by reason of its action or failure to act in connection with any of
the transactions contemplated by this Agreement, unless caused by the Escrow
Agent's gross negligence or willful misconduct.
(c) In the event the Escrow Agent receives or becomes aware of
conflicting instructions, demands or claims with respect to this Agreement or
the sums deposited hereunder, the Escrow Agent shall have the right to
discontinue any and all further acts until such conflict is resolved to the
Escrow Agent's satisfaction. The Escrow Agent shall have the further right to
commence or defend any action or proceeding for the termination of such
conflict. Seller and Purchaser jointly and severally agree to pay all costs,
damages, judgments and expenses, including reasonable attorneys' fees, suffered
or incurred by the Escrow Agent in connection with such action or proceeding. In
the event the Escrow Agent files a suit in interpleader, the Escrow Agent shall
thereupon be fully released and discharged from all further obligations imposed
by this Agreement with respect to sums deposited with a court of competent
jurisdiction pursuant to such suit in interpleader.
3
<PAGE> 4
6. ESCROW FEES: The Escrow Agent shall not be entitled to receive a
fee for serving as the Escrow Agent; provided, however, that the Escrowed Funds
shall be subject to the Escrow Agent's standard fees and service charges as
provided in the Escrow Agent's Rules and Regulations Governing Deposit Accounts.
7. RESIGNATION: The Escrow Agent may resign at any time upon giving
the parties hereto 30 days advance written notice to that effect. In such
event, the successor escrow agent shall be mutually selected by Seller and
Purchaser. However, in no instance shall the Escrow Agent's resignation be
effective until a successor escrow agent has agreed to act but, Escrow Agent
shall have the right to discontinue any and all future acts until such successor
escrow agent has agreed to act.
8. INTEREST INFORMATION: Unless otherwise agreed to in writing by
both parties: (i) the Escrow Agent shall list the employer tax identification
number of the Seller for federal, state and local tax purposes and for other
necessary purposes; and (ii) all interest earned shall be the sole and exclusive
property of the Seller; and (iii) any and all of Escrow Agent's fees and charges
as provided for in Paragraph (6) of this Agreement shall first be charged
against interest earned and then charged against principal.
9. NOTICE: Any notice or other communication hereunder shall be in
writing and shall be (i) delivered by hand, (ii) delivered by an overnight
courier service with guaranteed next day delivery, (iii) sent by telecopy, or
(iv) mailed by certified mail, postage prepaid, return receipt requested, and
addressed as follows:
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
WITH COPY TO:
Burr & Forman
420 North 20th Street
Suite 3100
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
4
<PAGE> 5
IF TO SELLER AT:
Network Multi-Family Security Corporation
14275 Midway Road, Suite 440
Dallas, Texas 75244
Attention: Stephen D. Parker
FACSIMILE: (214) 419-3170
IF TO ESCROW AGENT:
SouthTrust Bank of Alabama, N.A.
420 North 20th Street
Birmingham, Alabama 35203
Attention: Mr. Robert W. Wilkerson
FACSIMILE: (205) 254-5989
or to such other address as may have been furnished to the party giving notice
by the party to whom notice is to be given. Notice shall be deemed given upon
the earlier of (i) three days after deposit in the U.S. Mail by certified mail,
or (ii) actual receipt thereof.
10. MISCELLANEOUS:
(a) SUCCESSORS AND ASSIGNS: This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
(b) COUNTERPARTS: This Agreement may be executed in any number
of counterparts, each of which shall be an original, but which together shall
constitute one and the same instrument.
(c) GOVERNING LAW: This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of Alabama.
(d) AMENDMENT: This Agreement may not be modified, changed,
waived or terminated, in whole or in part, except by a supplemental agreement
signed by all of the parties hereto.
(e) HEADINGS: The headings assigned to Paragraphs of this
Agreement are for convenience only and shall be disregarded in construing this
Agreement.
5
<PAGE> 6
(f) NO ASSIGNMENT: Neither Seller nor Purchaser shall pledge,
hypothecate or otherwise transfer or attempt to transfer any right, title or
interest hereunder without the prior written consent to the other party hereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
day and year first above written.
MASADA SECURITY, INC.
By: /s/ Terry W. Johnson
-------------------------------------
Its: President
-------------------------------------
NETWORK MULTI-FAMILY
SECURITY CORPORATION
By: /s/ Tom K. Gleason
------------------------------------
Its: President
-----------------------------------
Tax I.D. No.: 75-205-0133
--------------------------
SOUTHTRUST BANK OF ALABAMA, N.A.
By: /s/ Robert W. Wilkerson
-----------------------------------
Its: Senior Vice President
----------------------------------
6
<PAGE> 1
NON-SOLICITATION AGREEMENT
This Agreement is made and entered into this 26th day of July, 1995, by
and among MASADA SECURITY, INC., a Delaware corporation ("Masada") and NETWORK
MULTI-FAMILY SECURITY CORPORATION, a Delaware corporation ("Seller").
RECITALS
Pursuant to the terms of an Asset Purchase Agreement dated as of July
26th, 1995 (the "Purchase Agreement"), Masada is purchasing certain of the
assets and properties of Seller.
Seller is uniquely experienced in the development and operation of the
security alarm system business, and Masada is unwilling to acquire the assets
referenced in the Purchase Agreement without first obtaining the agreement of
Seller not to solicit Masada's business.
As an inducement to the consummation of the transactions evidenced by
the Purchase Agreement, Seller is willing to issue this Non-Solicitation
Agreement to Masada and acknowledges that valuable direct consideration will be
paid to it as a result of its execution and delivery of this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which is hereby acknowledged, and intending to be
legally bound, agree as follows:
Section 1. Non-Solicitation Covenant. Seller shall not in any manner,
directly or indirectly, through any corporation, partnership or any other
entity (i) solicit or provide security monitoring services to any person or
entity set forth on Schedules 1(a), 1(b) and 1(c) to the Purchase Agreement,
(ii) use, communicate, inform or otherwise divulge to any third party any
information pertaining to the persons and entities set forth on Schedules 1(a),
1(b) and 1(c) to the Purchase Agreement, or (iii) otherwise take any action
which would adversely affect Masada's interest in the Alarm Accounts,
Non-Conforming Alarm Accounts, and Other Contracts (as such terms are defined
in the Purchase Agreement) purchased from Seller.
Section 2. Consideration. Seller acknowledges that the consideration
paid to it pursuant to the Purchase Agreement constitutes sufficient and
adequate consideration for the execution and delivery to Masada of this
Agreement.
Section 3. Remedies for Breach. Seller recognizes that in the event of
a breach of the covenants herein contained, it will be difficult to determine
the damages which would be suffered by Masada, and therefore, Seller agrees and
acknowledges that Masada may obtain injunctive relief to prevent further
breaches of the covenants herein contained, in addition to provable damages.
It is specifically understood that in the event of litigation arising from a
<PAGE> 2
breach of the covenants herein contained, Masada shall be entitled to recover
in addition to damages and injunctive relief, all costs incurred, including
reasonable attorneys' fees.
Section 4. Partial Invalidity. In the event any provision or portion
of this Agreement is deemed to be invalid or unenforceable in whole or in part
for any reason, the remainder thereof shall not be invalidated or rendered
unenforceable or otherwise adversely affected. Without limiting the generality
of the foregoing, if the provisions of non-solicitation covenant shall be
deemed to create a restriction which is unreasonable as to duration or
geographical area or both, the parties agree that the provisions of this
Agreement shall be enforced for such duration and in such geographical area as
any court of any competent jurisdiction may determine to be reasonable.
Section 5. Successors and Assigns. Seller acknowledges that the
covenants contained herein are unique and personal, and that Seller may not
assign any of its rights or delegate any of its duties or obligations under
this Agreement. The rights and obligations of Masada under this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
Masada.
Section 6. Notices. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
IF TO MASADA AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, AL 35203
Attention: Terry W. Johnson
TELECOPY: 1-800-531-3293
2
<PAGE> 3
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
TELECOPY: (205) 458-5100
IF TO SELLER AT:
Network Multi-Family Security Corporation
14275 Midway Road, Suite 440
Dallas, Texas 75244
Attention: Stephen D. Parker
TELECOPY: (214) 419-3170
or at such other address as the party may designate by 10 days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
Section 7. Waiver of Breach. The waiver by Masada of a breach of any
provision of this Agreement by Seller shall not operate or be construed as a
waiver of any subsequent breach by Seller. No waiver shall be valid unless in
writing and signed by an authorized representative of Masada.
Section 8. Entire Agreement. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements, arrangements
and communications, whether oral or written, pertaining to the subject matter
hereof. This Agreement may not be modified or amended except by an agreement
in writing signed by each of the parties hereto.
Section 9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Alabama, excluding its
conflict of laws principles.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
MASADA SECURITY, INC.
By: /s/ Terry W. Johnson
--------------------------
Its: President
----------------------
NETWORK MULTI-FAMILY
SECURITY CORPORATION
By: /s/ Tom K. Gleason
-------------------------
Its: President
---------------------
<PAGE> 1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made and entered into
this 1st day of September, 1995, by and between MASADA SECURITY, INC., a
Delaware corporation ("Purchaser") and TEL*STAR CELLULAR CORPORATION, a
California corporation ("Seller").
Recitals
Seller is engaged in the business of operating a security alarm system
monitoring business in Irvine, California and the surrounding area (the
"Business").
Seller desires to sell to Purchaser and Purchaser desires to buy from
Seller all of the customer account contracts and certain other assets of Seller
pertaining to the Business, and Purchaser and Seller desire to make certain
other arrangements between them relating to the purchase and sale of such
assets, all upon the terms and conditions hereinafter set forth.
Agreement
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which are hereby acknowledged, and intending to be
legally bound, agree as follows:
Section 1. Agreement to Purchase and Sell. In accordance with
the terms and conditions contained herein and in reliance on the respective
representations and warranties of the parties hereto, Seller hereby agrees to
sell, convey, transfer and assign to Purchaser, and Purchaser hereby agrees to
purchase, accept and acquire from Seller in the manner provided herein, the
following assets (collectively referred to as the "Purchased Assets"):
(a) Alarm Accounts. All right, title and
interest of Seller in and to the contracts for the rendering of security
monitoring services to existing customers of Seller which meet all of the
requirements listed in Section 8(i) and are specifically listed on Schedule
1(a) hereto (the "Alarm Accounts");
(b) Inventory. All right, title and interest of
Seller in and to all inventory pertaining to the Business maintained by Seller
at its branch offices, all of which are listed on Schedule 1(b) hereto (the
"Inventory"), with the Inventory, including, without limitation, items
purchased by Seller for resale and all purchase orders relating to the
foregoing;
<PAGE> 2
(c) Furniture and Fixtures. All right, title and
interest of Seller in and to all furniture and fixtures used in connection with
the Business, all of which are listed on Schedule 1(c) hereto (the "Furniture
and Fixtures");
(d) Contracts-in-Process. All right, title and
interest of Seller in and to those contracts and benefits of Seller related to
all accepted orders for the sale or installation by Seller of alarm systems
which are not yet installed or not completely installed as of the Closing Date
(as defined herein), all of which are listed on Schedule 1(d) hereto (the
"Contracts-in-Process");
(e) Other Contracts. All right, title and
interest of Seller in and to all executory contracts, agreements and leases,
all of which are listed on Schedule 1(e) hereto (the "Other Contracts"), the
Other Contracts to include, without limitation all non-competition or
non-solicitation agreements accruing to the benefit of the Seller.
(f) Receivables. The accounts receivable, trade
accounts, notes receivable and other debts owed to Seller for monitoring
services rendered pertaining to the Alarm Accounts and Contracts-in-Process;
provided, however, that all such debts owed to Seller for monitoring services
must be for previously rendered monitoring services and not for future
monitoring services, all of which are listed on Schedule 1(f) hereto (the
"Receivables");
(g) Intangible Personal Property. The unexpired
trademarks (whether registered or unregistered), trade names, logos, copyrights
and licenses owned by or accruing to the benefit of Seller pertaining to the
Business all of which are listed on Schedule 1(g) hereto (the "Intangible
Personal Property");
(h) Telephone Lines and Numbers. All right,
title and interest of Seller in and to the local and long distance telephone
numbers, digital dialer telephone lines that transmit signals from customer
locations to Seller's central station, and "ring-down" lines, all of which are
listed on Schedule 1(h) hereto (the "Telephone Lines and Numbers");
(i) Vehicles. All right, title and interest of
Seller in and to the vehicles specifically listed on Schedule 1(i) hereto (the
"Vehicles");
(j) Equipment Finance Agreements. All right,
title and interest of Seller and Norwest Financial, Inc. in and to equipment
finance agreements all of which are listed on Schedule 1(j) hereto (the
"Equipment Finance Agreements"), such list to include detail by account of (i)
monthly payments for long-term financing of equipment installation (equipment
and other) (such monthly finance charges are hereafter referred to as "MFC"),
(ii) expiration dates of the Equipment Finance Agreements, and (iii) the
Monthly Recurring Revenue associated with each account upon Equipment Finance
Agreement expiration; and
(k) Alarm Account Information. All files,
records and incidental documentation of Seller pertaining to the Alarm Accounts
and Contracts-in-Process (the "Alarm
2
<PAGE> 3
Account Information"), including, without limitation, all computer lists,
contract information, accounting history, service records and information,
credit records and information, and purchase and sales records and information.
Section 2. Purchase Price and Payment.
(a) Purchase Price-Ordinary Business Assets. The
purchase price for the Purchased Assets referred to in Section 1(a), 1(b),
1(d), 1(e), 1(f), 1(g), 1(h) and 1(k) (the "Purchase Price Ordinary Business
Assets") shall be the product of 30 times the aggregate of the Monthly
Recurring Revenue of the Alarm Accounts less an amount equal to the prepaid
revenue relating to the Alarm Accounts (as set forth on Schedule 2(a) hereto)
computed on a per diem basis to the Closing Date. For purposes of this
Agreement, the term "Monthly Recurring Revenue" with respect to the Alarm
Accounts acquired from Seller by Purchaser shall be the charge for gross alarm
monitoring services, (including, without limitation, maintenance and other
alarm related services), exclusive of sales or intangible taxes, equipment or
other finance charges, and any direct wire telephone line charges associated
with monitoring, payable by the customer for each applicable billing period
expressed in terms of a monthly amount regardless of whether the billing period
is annual, semi-annual, quarterly or monthly.
(b) Purchase Price-Furniture and Fixtures. The
purchase price for the Furniture and Fixtures (the "Purchase Price-Furniture
and Fixtures") shall be $2,100.00.
(c) Purchase Price-Vehicles. The purchase price
for the Vehicles (the "Purchase Price-Vehicles") shall be determined in
accordance with the average wholesale price list in the current version of the
Black Book Official Truck and Van Guide published by National Auto Research
Division Hearst Business Media Corporation as of the Closing Date.
(d) Purchase Price-Equipment Finance Agreements.
The purchase price for the Finance Agreements (the "Purchase Price-Equipment
Finance Agreements") shall be the sum resultant from the calculation of: the
number of days between the Closing Date and the expiration of the respective
Equipment Finance Agreements (the "Finance Period") multiplied by one-half of
the average daily MFC associated with the respective Equipment Finance
Agreements.
(e) Purchase Price-All Purchased Assets. The sum
of (i) the Purchase Price-Ordinary Business Assets, (ii) the Purchase
Price-Furniture and Fixtures, (iii) the Purchase Price-Vehicles, and (iv) the
Purchase Price-Equipment Finance Agreements shall hereafter be referred to as
the "Purchase Price-All Purchased Assets".
(f) Payment of Purchase Price-All Purchased
Assets.
(i) The aggregate of: (A) 90% of the
Purchase Price-Ordinary Business Assets; (B) the Purchase Price-Furniture and
Fixtures; (C) the Purchase Price-Vehicles; (D) 90% of the Purchase
Price-Equipment Finance Agreements; and (E) the adjustments
3
<PAGE> 4
calculated in accordance with Section 2(g) (collectively referred to as the
"Initial Payment") shall be paid by Purchaser to Seller by wire transfer or
other mutually agreeable means on the Closing Date; provided, however, that if
any of the Purchased Assets are owned by third parties or are subject to third
party liens or other encumbrances as of the Closing Date, including without
limitation Norwest Financial, Inc., then such third party rights or liens shall
be terminated or released at Closing due to payment of the full amount due as
of the Closing Date and a UCC-3 termination statement or other release shall be
provided to Purchaser which shall be sufficient to vest Purchaser with full and
complete title in the Purchased Assets.
(ii) The Purchase Price-All Purchased Assets
less the Initial Payment (the "Deferred Payment Amount") shall be paid in
accordance with Section 3 hereof.
(g) Adjustment to Purchase Price. The Purchase
Price-All Purchased Assets shall be adjusted for items of expense and income
prorated as of the Closing Date in the manner provided below:
(i) Liabilities or credits for personal
property taxes, if any, in respect of the Purchased Assets shall be prorated on
the basis of the current taxable year, to and including the Closing Date;
provided that if the assessed value of any Purchased Asset or rate of tax with
respect thereto shall not have been determined prior to the Closing Date, the
value and rate shall be determined on the basis of the amount of the previous
year in which the same was determined; and
(ii) Other liabilities or credits,
prepaid items and deferred charges relating to the Purchased Assets existing on
the Closing Date shall be adjusted as of the Closing Date by prorating the
aforementioned items for credit to Seller or Purchaser, as the case may be, in
accordance with generally accepted accounting principles.
(h) Allocation of Purchase Price-All Purchased
Assets. The Purchase Price-All Purchased Assets, subject to the adjustments
set forth in Section 2(g), shall be allocated as set forth in this Schedule
2(h). Purchaser and Seller agree for income tax purposes they shall report the
transactions contemplated by this Agreement in a manner consistent with such
allocation.
Section 3. Deferred Payment Amount.
(a) Escrow Agreement. On or prior to the Closing
Date, Seller and Purchaser agree to execute an Escrow Agreement substantially
in the form attached hereto as Schedule 3(a) (the "Escrow Agreement") and
Purchaser agrees to deposit with SouthTrust Bank of Alabama, N.A. (the "Escrow
Agent"), the Deferred Payment Amount to be held in an escrow account (the
"Escrow Account") pursuant to the terms of the Escrow Agreement (the "Deferred
Payment Amount" together with all earnings thereon shall collectively
hereinafter be referred to as the "Escrow Amount").
4
<PAGE> 5
(b) Payment and Escrow Amount. Within 30 days after
the first year anniversary of the Closing Date, Purchaser shall submit to
Seller substantially in the form attached hereto as Schedule 3(b) along with
all appropriate supporting documentation, a report reflecting: (i) the Escrow
Amount; (ii) the total Repurchase Amounts, if any, credited to Purchaser
calculated in accordance with Section 6 (a) (the "Total Repurchase Amounts");
(iii) the MRR Downward Adjustment, if any, credited to Purchaser calculated in
accordance with Section 6(b); (iv) the Conversion Adjustment, if any, credited
to Purchaser calculated in accordance with Section 17 and (v) the resulting
difference between Schedule 3(b)(i) less the Purchaser's credits associated
with Section 3(b)(ii), (iii) and (iii) (the "Resulting Difference"). If Seller
does not notify Purchaser of a dispute regarding such report within ten
business days from the date such report is submitted by Purchaser to Seller or
if Seller notifies Purchaser of its acceptance of such report, such report
shall be deemed complete and accurate and Seller and Purchaser shall notify
Escrow Agent to pay the sums computed below to Seller or Purchaser, as the case
may be, and the Escrow Account shall then be closed after payment by the Escrow
Agent of all funds held by it in the Escrow Account. If the Resulting
Difference is a positive amount then Seller and Purchaser shall instruct the
Escrow Agent to first pay the Seller the Resulting Difference and the remainder
of the Escrow Amount shall be paid by Escrow Agent to Purchaser. If the
Resulting Difference is equal to zero or is a negative amount, then Seller and
Purchaser shall instruct the Escrow Agent to pay Purchaser the entire Escrow
Amount and Seller shall owe no further amount to Purchaser.
(c) Dispute. All disputes and differences with
respect to the computation of the Resulting Difference and the Escrow Account
shall be determined by binding arbitration under the rules then in effect of
the American Arbitration Association, such arbitration hearing to be held in
Birmingham, Alabama. The arbitration proceedings shall be heard by one
arbitrator selected from the proposed panel of arbitrators issued by the
American Arbitration Association, Seller, on the one hand, and Purchaser, on
the other hand, shall attempt to select a mutually acceptable arbitrator. If
the parties are unable to select a mutually acceptable arbitrator within five
business days following the issuance of the list of potential arbitrators by
the American Arbitration Association, Seller, on the one hand, and Purchaser,
on the other hand, shall each select one person from the list, and those two
persons selected shall appoint a third person from the list, which person shall
be the arbitrator for the dispute. All arbitration awards shall include an
award of expenses including, but not limited to, legal and accounting fees.
Section 4. The Closing.
(a) Date and Place. The closing of the purchase
and sale of the Purchased Assets shall take place on September 7, 1995 or such
other date as shall be mutually acceptable to Purchaser and Seller (the
"Closing Date") and shall take place at a location mutually acceptable to
Purchaser and Seller.
5
<PAGE> 6
(b) Closing Deliveries. On the Closing Date,
Seller shall make the deliveries specified by Section 9 and Purchaser shall
make the deliveries specified by Section 10.
(c) Closing Procedure. All proceedings to be
taken and all documents to be delivered and executed on the Closing Date shall
be deemed to have been taken, delivered and executed simultaneously, and no
proceeding shall be deemed taken nor documents deemed executed or delivered
until all have been taken, delivered and executed. On the Closing Date, Seller
and Purchaser shall execute and deliver the instruments and documents
referenced in Sections 9 and 10 and Purchaser shall make the Initial Payment
and shall deposit the Deferred Payment Amount with the Escrow Agent.
(d) Termination. In the event that any of the
conditions set forth in Section 9 are not satisfied or waived in writing prior
to or on the Closing Date, then Purchaser may terminate this Agreement by
written notice to Seller. In the event that Purchaser exercises such right of
termination, this Agreement thereupon shall become wholly void and be of no
further force or effect, except for the confidentiality provisions contained in
Section 14(c) and there shall be no further liability on the part of Seller or
its respective officers, directors, stockholders, employees or agents with
respect to the transactions contemplated hereby.
(e) Specific Performance. In the event that
Purchaser complies with all of the requirements set forth in Schedule 10, then
Purchaser shall have the right of specific performance against the Seller as to
the Purchased Assets.
Section 5. Assumption of Liabilities. Purchaser shall not
assume any liability, debt or obligation of Seller except the responsibility of
rendering security monitoring services pursuant to the Alarm Accounts and
Contracts-in-Process set forth on Schedules 1(a) and 1(d) and those
liabilities and obligations of Seller arising after the Closing Date that are
set forth on Schedule 5 hereto. Seller shall continue to be responsible for,
and shall indemnify and save harmless Purchaser from and against, all of
Seller's known and unknown liabilities, debts and obligations, arising prior
to, in connection with, or subsequent to the Closing Date that are not
specifically assumed by Purchaser as set forth on Schedules 1(a), 1(d) and 5.
Section 6. Special Warranties.
(a) Alarm Accounts and Finance Agreements.
Seller warrants that beginning on the Closing Date and for the 12 month period
immediately after the Closing Date (the "Guarantee Period") all Alarm Accounts
purchased by Purchaser pursuant to this Agreement and described on Schedule
1(a) shall continue to meet the requirements specified in Section 8(i) and that
all payments from customers shall be made in a timely manner. Seller also
warrants that during the Guarantee Period all payments from Finance Agreement
customers described on Schedule 1(j) shall be made in a timely manner. For
purposes of this Agreement, payments by
6
<PAGE> 7
customers shall be considered timely if they are received by Purchaser on or
before the 60th day following the applicable date of billing. For purposes of
this Agreement a "Defaulted Contract" shall be defined as: (i) any Alarm
Account that no longer meets the requirements specified in Section 8(i); or
(ii) any Alarm Account or Finance Agreement in which payments from customers
shall not have been made in a timely manner. Purchaser shall give Seller
written monthly notice of any and all Defaulted Contracts as soon as reasonably
possible. Seller shall have 30 days from the receipt of such written notice to
return such Defaulted Contracts to compliance with the requirements of Alarm
Accounts as specified in Section 8(i) and timeliness; provided, however, that
Seller shall not, either directly or indirectly, make payments to or provide
other assistance to or on the behalf of the customers who have Defaulted
Contracts. If at the end of such 30 day period Purchaser, in its sole
discretion, determines that any or all such Alarm Accounts or Finance
Agreements are still Defaulted Contracts, then Seller shall repurchase such
Alarm Accounts from Purchaser for 30 times the Monthly Recurring Revenue of
such Defaulted Contracts as of the Closing Date or shall repurchase such
Finance Agreements for the product of the Finance Period multiplied by one-half
of the average daily MFC (collectively referred to as the "Repurchase Amount")
or shall replace the Defaulted Contracts with other contracts that meet all of
the requirements listed in Section 8(i) and have Monthly Recurring Revenue or
MFC, as appropriate, greater than or equal to that of such Defaulted Contracts.
If the Seller does not repurchase or replace the Defaulted Contracts within
such 30 day period, Seller shall be charged against the Escrow Account an
amount equal to the Repurchase Amount plus the interest accruing thereon from
the Closing Date at the rate then applicable to the Escrow Account; provided,
however, the aggregate Repurchase Amount charged against the Escrow Account
shall only exceed the amount of the Escrow Account in the case of fraud on
behalf of Seller.
(b) Monthly Recurring Revenue and MFC Downward
Adjustment. Seller warrants that (i) the Monthly Recurring Revenue used in
computing the Purchase Price-Ordinary Business Assets shall equal or exceed the
actual Monthly Recurring Revenue of the Alarm Accounts at the expiration of the
Guarantee Period and (ii) the MFC used in computing the Purchase Price-Finance
Agreements shall equal or exceed the actual MFC of the Finance Agreements at
the expiration of the Guarantee Period. A charge shall be made against the
Escrow Account for the benefit of Purchaser for each (i) Alarm Account for
which it is determined the Monthly Recurring Revenue used in computing the
Purchase Price-Ordinary Business Assets exceeded the actual Monthly Recurring
Revenue for such Alarm Accounts at the expiration of the Guarantee Period and
(ii) Finance Agreement for which it is determined the MFC used in computing the
Purchase Price-Finance Agreements exceeded the actual MFC for such Finance
Agreement at the expiration of the Guarantee Period. The amount of such charge
shall be determined by (i) computing the amount by which the Monthly Recurring
Revenue of the Alarm Accounts used in computing the Purchase Price-Ordinary
Business Assets exceeds the actual Monthly Recurring Revenue of such Alarm
Accounts at the expiration of the Guarantee Period and multiplying such sum by
30 and (ii) computing the amount by which the average daily MFC used in
computing the Purchase Price-Finance Agreements exceeds the actual average
daily MFC of such Finance Agreements as of the expiration of the Guarantee
Period and
7
<PAGE> 8
multiplying such sum by the Finance Period of the respective Finance Agreement
(collectively referred to as the "MRR Downward Adjustment").
Section 7. Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to Seller that on the date hereof and
on each day thereafter to the Closing Date:
(a) Organization and Standing. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and Purchaser has all requisite corporate power
and authority to own, operate and lease its properties and carry on its
business as now being conducted and to enter into this Agreement and to perform
its obligations hereunder.
(b) Authority Relative to this Agreement. The
execution, delivery and performance by Purchaser of this Agreement has been
duly authorized and no further corporate action is necessary on the part of the
Purchaser to make this agreement valid and binding upon Purchaser in accordance
with its terms.
(c) No Violation. Neither the execution nor the
delivery of this Agreement by Purchaser nor the consummation of the
transactions contemplated herein, nor compliance by Purchaser with any of the
provisions hereof:
(i) violates or conflicts with or
results in the breach or termination of any term or provision of, nor
constitutes a default or acceleration of the performance required under, the
certificate of incorporation, bylaws or resolutions of the Purchaser, or any
indenture, mortgage, deed, trust or other contract or agreement to which
Purchaser is a party or by which its properties are bound;
(ii) violates any order, writ, injunction
or decree of any court, administrative agency or governmental body; or
(iii) requires the consent of any other
person, entity or governmental authority.
(d) Brokerage Fees. Purchaser is not obligated
nor has it agreed to pay any brokerage commissions, finders fees or other
similar fees or charges in connection with the purchase of the Purchased Assets
pursuant to this Agreement.
(e) Compliance with Laws. Purchaser's business
has been and is being conducted with all applicable laws, regulations and
requirements of each jurisdiction in which it is carried on and is not in
material breach of any such laws, regulations or requirements. Purchaser
warrants to hold Seller harmless from and against any violations of applicable
laws, regulations or requirements arising out of non-compliance therewith after
the Closing Date.
8
<PAGE> 9
Section 8. Representations and Warranties of Seller. Seller
represents and warrants to Purchaser that on the date hereof and on each day
thereafter to the Closing Date:
(a) Organization and Standing. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California. Seller has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business as
it has been and currently is being conducted and to enter into this Agreement
and to perform its obligations hereunder.
(b) Authority Relative to this Agreement. The
execution, delivery and performance by Seller of this Agreement has been duly
authorized by the board of directors and stockholders of Seller, and no further
corporate action is necessary on the part of Seller to make this Agreement
valid and binding upon the Seller in accordance with its terms.
(c) No Violation. Neither the execution nor the
delivery of this Agreement by Seller nor the consummation of the transactions
contemplated herein, nor compliance by Seller with any of the provisions
hereof:
(i) violates or conflicts with or
results in the breach or termination of any term or provision of, nor
constitutes a default or acceleration of the performance required under, the
articles of incorporation, bylaws or resolutions of Seller, or under any
indenture, mortgage, deed, trust or other contract or agreement to which Seller
is a party or by which its properties are bound;
(ii) violates any order, writ, injunction
or decree of any court, administrative agency or governmental body; or
(iii) requires the consent of any other
person, entity or governmental authority.
(d) Brokerage Fees. Seller is obligated and has
agreed to pay brokerage commissions to Paul Keast in connection with the
purchase of the Purchased Assets pursuant to this Agreement as detailed on
Schedule 8(d). Seller agrees that Purchaser shall cause the brokerage
commission to be paid directly to Paul Keast as a reduction of the Initial
Payment due to Seller, via a wire transfer or any other mutually agreeable means
on the Closing Date.
(e) Title to Purchased Assets. Seller warrants
that as of the Closing Date it will have good and marketable title to all of
the Purchased Assets, and the Purchased Assets shall not be subject to any
pledge, option, conditional sale agreement, security interest, consensual lien,
judgment lien, encumbrance or charge of any kind. Seller warrants that the
Alarm Accounts acquired by Purchaser are valid and are binding upon and
enforceable against the customers of Seller executing same in accordance with
their terms, and the obligations of the customers of Seller thereunder are not
subject to set-off or claims resulting from the conduct of Seller's business
prior to their conveyance to Purchaser.
9
<PAGE> 10
(f) Compliance with the Law. The Business has
been and is being conducted in compliance with all applicable laws, regulations
and requirements of each jurisdiction in which it is carried on and is not in
breach of any such laws, regulations or requirements. Seller warrants to hold
Purchaser harmless from and against any violations of applicable laws,
regulations or requirements arising out of non-compliance therewith prior to
the Closing Date.
(g) Actions, etc. Except as set forth on
Schedule 8(g):
(i) there are no actions, suits,
proceedings or investigations pending against or relating to the Business or
the Purchased Assets and Seller has not received any notice or written or oral
communication reflecting an intention or threat to institute any such action,
suite proceeding or investigation;
(ii) there are no actions, suits,
proceedings, or investigations pending before any court or governmental agency
in which it is sought to restrain or prohibit the carrying out of this
Agreement or the consummation of the transactions contemplated herein in
connection therewith and there is no such action, suit, proceeding or
investigation threatened;
(iii) Seller is not subject to any
judgment, order, writ, court decree, governmental decree or injunction relating
to the Business;
(iv) there are no known defects or
deficiencies in the products or services provided by Seller prior to the date
hereof as a result of which any claim or suit may arise.
(h) Tax Returns. Seller has timely filed all tax
reports and returns required to be filed and has timely paid all taxes
(including, without limitation, income, payroll withholding, sales and use
taxes) and all other charges due or claimed to be due from it by federal, state
or local taxing authorities in respect of the periods covered by such returns.
(i) Alarm Account Requirements. Each of the Alarm
Accounts must:
(i) be evidenced by a valid, enforceable
and properly executed written monitoring agreement which is in compliance with
all laws, rules and regulations including without limitation all
truth-in-lending requirements;
(ii) not been repudiated by the customer.
An Alarm Account shall be deemed repudiated if: (A) the customer has abandoned
the premises at which the security monitoring system has been installed; (B)
the customer is insolvent; or (C) the customer has cancelled or issued notice
of termination of an Alarm Account, notwithstanding the fact that an Alarm
Account may remain enforceable against the customer;
10
<PAGE> 11
(iii) have generated cash receipts
representing service charges for at least one full billing cycle or prepayment
for at least one month's service; and
(iv) have no charges that have been
outstanding and unpaid for more than 60 days from the invoice due date as of
the Closing Date.
(j) Benefit Plans. No profit-sharing, bonus,
stock option, pension, retirement, stock purchase, hospitalization insurance or
similar plan or agreement, formal or informal, providing benefits to any
current or former employee, or any other employee benefit or employee welfare
plan subject to the provisions of the Employee Retirement Income Security Act
of 1974, as amended, maintained by Seller shall obligate Purchaser to make any
contributions thereto or payments in respect thereof with regard to employees
of Seller who may be hired by Purchaser on or after the Closing Date.
(k) Product Warranties and Medical Information.
Except for the standard warranty of three years on parts and labor, there are
no written warranties or oral warranties given by Seller applicable to any of
the Alarm Accounts or Contracts-in-Process. Seller has not entered into any
contract or other agreement with any or all of its customers which would
require Purchaser to provide any medical or health information on its customers
to any third party and Seller is not obligated to keep or obtain medical or
health information on any or all of its customers.
(l) Insurance. Seller has "occurrence basis"
general liability insurance coverage covering the Purchased Assets in an amount
equal to or greater than one million dollars ($1,000,000.00) per single
occurrence and workers compensation insurance coverage equal to or greater than
that required by law. Attached hereto as Schedule 8(l) is (i) a list of all of
the insurance policies covering the Purchased Assets, and (ii) a list of all
insurance claims related to the Purchased Assets for the three previous years.
All such policies are in full force and effect and Seller has not received
notice of cancellation with respect thereto. For purposes of this Agreement,
"occurrence basis" means if a claim arose after the Closing Date for an event
which occurred prior to the Closing Date, Seller's applicable insurance policy
in existence on the date such event occurred would cover such claim.
(m) Right of Rescission. Seller has provided
each residential customer with the three-day right of rescission in strict
compliance with the provisions of 16 C.F.R. Part 429 (Cooling-Off Period for
Door-to Door Sales) and any applicable state laws. Seller acknowledges that
any failure on its behalf to strictly comply with such regulation and laws in
connection with the execution and delivery of any contract involving a
residential customer may result in such customer having the right to rescind or
cancel any such contract. Seller further acknowledges that Buyer desires not
to assume any risk for any liability that might arise as a result of any such
rescission or cancellation.
(n) Business Position. The Business has at least
500 Alarm Accounts and $14,500 of Monthly Recurring Revenue. Seller's gross
attrition rate over the last two (2)
11
<PAGE> 12
years has not exceeded four percent (4%) per year. There has been no general,
overall increase in Seller's rates in the last six months.
(o) Disclosure. No representation or warranty of
Seller, and no statement contained in this Agreement and no information
contained in any schedule furnished to Purchaser by or on behalf of Seller
pursuant to this Agreement, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading. Each of the separate representations and
warranties set forth in the various subsections of this Section 8 is intended
to be, and shall be interpreted as, an independent representation and warranty
as to matters referred to therein, and the applicability or inapplicability of
any particular subsection of this Section 8 shall not affect the interpretation
of any other such subsection.
Section 9. Conditions Precedent to Obligations of Purchaser.
Purchaser's obligation to purchase the Purchased Assets under this Agreement is
subject to the fulfillment, prior to or at the Closing Date of each of the
following conditions:
(a) Representations True on the Closing Date.
The representations and warranties of Seller contained in this Agreement shall
be true on the date hereof, and at the time of the Closing Date as though made
on the Closing Date.
(b) Performance. Seller shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
(c) Seller's Closing Certificate. Seller shall
have delivered to Purchaser a Closing Certificate of the president or any
authorized representative of Seller dated as of the Closing Date substantially
in the form attached hereto as Schedule 9(c).
(d) Schedules. Seller shall have updated the
Schedules hereto in accordance with Section 14(g) hereof. Purchaser shall have
determined, in good faith, that taking into account the changes to the
information in the updated Schedules, the transactions contemplated by this
Agreement are as beneficial to Purchaser as prior to the updating of the
Schedules.
(e) Consents. Seller shall have taken all
action necessary and appropriate, and obtained all necessary consents, waivers
and approvals required under any leases or other agreements to consummate the
sale of good and marketable title to all the Purchased Assets free of all
claims, liens or encumbrance of any type, pursuant to this Agreement in writing
on terms acceptable to Purchaser in its sole discretion, including, without
limitation, (i) the written consent by Norwest Financial, Inc. to transfer any
and all interest it might have in the Purchased Assets to Purchaser no later
than the Closing Date and (ii) the written consent of the landlord to the
sublease of approximately 700 square feet at $.75 per
12
<PAGE> 13
square foot located at 1730 S.E. Street, San Bernardino, California 92408,
which consent is attached hereto as Schedule 9(e).
(f) Litigation. No litigation or proceeding
shall be pending or threatened to restrain, set aside or invalidate the
transactions contemplated by this Agreement or any portion thereof, including,
without limitation, any claims by creditors of Seller against the Purchased
Assets.
(g) Opinion of Seller's Counsel. Seller shall
have delivered to Purchaser an opinion of counsel for Seller, dated as of the
Closing Date and in form satisfactory to Purchaser's counsel, to the effect
that:
(i) Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California; the location and character of the properties owned or leased and
the business conducted by Seller do not make qualification or licensing as a
foreign corporation necessary in any other state or jurisdiction; and Seller
has the corporate power and authority to own its properties and to carry on its
business as now being conducted;
(ii) This Agreement has been duly
executed and delivered by Seller and constitutes a legal and binding obligation
of Seller, enforceable in accordance with its terms except as enforcement of
the same may be limited by bankruptcy, insolvency, reorganization or other laws
relating to or affecting the enforcement of creditors' rights and by general
equity principles;
(iii) All instruments of transfer and
other documents necessary to effect the transfer to Purchaser of the Purchased
Assets have been duly authorized, executed and delivered by Seller and are in
proper form to transfer to Purchaser all right, title and interest of Seller in
and to the Purchased Assets;
(iv) Except as set forth on Schedule
8(g), such counsel does not know of any litigation, proceeding, governmental
investigation or claim pending or threatened against or relating to the
Business, the Purchased Assets or the transactions contemplated by this
Agreement; and
(v) The execution and delivery of this
Agreement and the consummation by Seller of the transactions contemplated
hereby:
(A) do not and will not violate any
provision of the articles of incorporation or bylaws of Seller;
(B) do not and will not violate, or
result, with the giving of notice or the lapse of time or both, in a violation
of any provision of, or result in the
13
<PAGE> 14
acceleration of or entitle any party to accelerate (whether after the giving of
notice or lapse of time or both) any obligation under, or result in the
creation or imposition of, any lien, lease, agreement, license, instrument,
law, ordinance, regulation, order, arbitration award, judgment or decree known
to such counsel to which Seller is a party or by which it is bound; and
(C) do not and will not constitute an
event permitting termination of any lease, agreement, license or instrument
known to such counsel to which Seller is a party.
(h) Certified Resolutions. Seller shall have
delivered to Purchaser copies, certified by the secretary or an assistant
secretary of Seller, of the resolutions of Seller's board of directors and
stockholders authorizing the execution and delivery of this Agreement.
(i) Certificates of Good Standing. Seller shall
have delivered to Purchaser a certificate of good standing of Seller issued by
the Secretary of State of the State of California dated as of a date within 30
days prior to Closing Date.
(j) Instruments of Transfer. Seller shall have
delivered to Purchaser a Bill of Sale, Assignment and Assumption Agreement
substantially in the form attached hereto as Schedule 9(j) (the "Bill of Sale")
and other good and sufficient instruments of transfer and conveyance, as in the
reasonable opinion of Purchaser's counsel, shall be effective to vest in
Purchaser good and marketable title to the Purchased Assets.
(k) Non-Solicitation Agreement. Seller shall
have delivered to Purchaser a Non-Solicitation Agreement substantially in the
form attached hereto as Schedule 9(k) executed by Guy W. Steele, John P.
Thompson, Kent McClure, David Sessions and Ron Serber in their individual
capacities, and by Seller.
(l) Notice to Subscribers. Within five business
days of Closing, Seller shall have mailed on the Closing Date to each customer
set forth on Schedules 1(a) and 1(d) hereto a notice in the form attached
hereto as Schedule 9(1). Seller shall be solely responsible for the costs
associated with the creation and mailing of such notices.
(m) Payment of Accrued Vacation Pay, etc. Seller
shall pay to each of Seller's employees who render services to the Business
that are to be discharged on or after the Closing Date all accrued and unpaid
vacation pay, sick pay and all other accrued obligations to which such
employees are entitled as a result of the termination of their employment with
Seller.
Section 10. Conditions Precedent to Obligations of Seller.
Seller's obligations to sell and transfer the Purchased Assets to Purchaser
under this Agreement are subject to the fulfillment, prior to or on the Closing
Date of each of the following conditions:
14
<PAGE> 15
(a) Representations True on the Closing Date.
Purchaser's representations and warranties contained in this Agreement shall be
true at the date hereof, and at the Closing Date as though made on the Closing
Date.
(b) Performance. Purchaser shall have performed
and complied with all agreements and conditions required by this Agreement to
be performed or complied with by it prior to or on the Closing Date.
(c) Bill of Sale. Purchaser shall have executed
and delivered the Bill of Sale.
Section 11. Indemnification. Seller, on the one hand, and
Purchaser, on the other hand (the "Indemnitor") shall indemnify, hold harmless,
defend and bear all costs of defending the other party (the "Indemnitee"),
together with its successors and assigns, from, against and with respect to any
and all damage, loss, deficiency, expense (including any reasonable attorney
and accountant fees, legal costs or expenses), action, suit, proceeding,
demand, assessment or judgment to or against the Indemnitee arising out of or
in connection with any breach or violation of, or nonperformance by, the
Indemnitor of any of its representations, warranties, covenants or agreements
contained in this Agreement or in any document, certificate or schedule
required to be furnished pursuant to this Agreement.
Section 12. Bulk Sales Law. If applicable, the sale and purchase
described in this Agreement will be conducted according to, and in full
compliance with, the requirements of the bulk transfer provisions of the
Uniform Commercial Code as adopted in the State of California. In addition to
its indemnity under Sections 5 and 11, Seller hereby agrees to indemnify and
hold Purchaser harmless from any and all liability to anyone arising from its
failure to comply with the provisions of the bulk transfer provisions of the
Uniform Commercial Code as adopted in the State of California. Such indemnity
shall survive Closing.
Section 13. Assignment. Purchaser may, without the consent of
Seller, assign its rights and delegate its obligations under this Agreement in
writing, to any corporation, limited liability company, partnership,
association, proprietorship or other business entity who acquires all or a
substantial part of the assets of Purchaser in connection with the sale of all
or a substantial part of its business. Upon any such assignment Purchaser
shall be relieved and discharged from any further obligations under this
Agreement. Furthermore, Purchaser may, without the consent of Seller,
collaterally assign its rights under this Agreement to one or more banks,
insurance companies or other financial institution for purposes of financing.
Seller shall not assign its rights or delegate its obligations under this
Agreement without the prior written consent of Purchaser.
15
<PAGE> 16
Section 14. Agreements Prior to Closing.
(a) Fulfillment of Conditions. Seller shall use
its best efforts to take or cause to be taken all action reasonably necessary
or appropriate to cause each of the conditions set forth in Section 9 to be
fulfilled prior to or on the Closing Date. Purchaser shall use its best
efforts to take or cause to be taken all action reasonably necessary or
appropriate to cause each of the conditions set forth in Section 10 to be
fulfilled prior to or on the Closing Date.
(b) Access to Information. Between the date of
this Agreement and the Closing, Seller shall allow the officers, directors,
employees, representatives, attorneys and accountants of Purchaser free access
at all reasonable times to the records, files, correspondence, audits and
properties of Seller which pertain to the Business.
(c) Confidentiality. Purchaser agrees to hold
all information it obtains pursuant to its review of the records, files,
correspondence, audits and properties of Seller in confidence and not to
disclose such information to any third party, except for:
(i) information known by Purchaser and
obtained from sources other than Seller;
(ii) disclosure that is authorized by
Seller in writing;
(iii) disclosure to Purchaser's
professional advisors and to persons who are expected to be lenders to
Purchaser; or
(iv) disclosure of information where such
information is required to be filed with any governmental agency or required to
be produced before any court or tribunal or otherwise required by law to be
disclosed. Except in connection with Seller's filing of tax returns and as
otherwise required by law, Seller shall not disseminate to any person other
than officers, directors, employees, representatives, attorneys and accountants
of Seller any information relating to the Purchase Price or other consideration
contemplated to be paid under this Agreement.
(d) Conduct of Business. Between the date of
this Agreement and the Closing Date, Seller shall cause the Business to be
conducted in its usual and ordinary course including, but not limited to, not
increasing the price and/or rate of any product or service relating to the
Alarm Accounts and Contracts-in-Process without the prior written consent of
Purchaser.
(e) Preservation of Existing Relationships.
Between the date of this Agreement and the Closing Date, Seller shall use its
best efforts to continue existing relationships with customers, suppliers,
employees and others having business relations with respect to Seller.
16
<PAGE> 17
(f) No Negotiations with Third Parties. So long
as this Agreement is in effect, Seller shall not enter into any negotiations,
arrangements, understandings, commitments, options or other agreements
regarding the sale, transfer or other disposition of any of the shares of stock
of Seller or of all or substantially all of the assets of Seller that relate in
any way to the Business, or regarding any merger or consolidation of Seller
with or into any corporation or other business entity.
(g) Updated Schedules. Seller agrees to update
the Schedules hereto as of the Closing Date to reflect changes occurring after
the date hereof; provided, however, that if any of the Schedules attached
hereto on the date hereof are materially inaccurate or incorrect, Seller may
correct such Schedules only with Purchaser's prior written consent. Any
updated Schedules shall be attached to this Agreement and for all purposes be
deemed to be a part of this Agreement.
Section 15. No Joint Venture. The relationship between the
parties hereto is that of purchaser/seller and does not constitute a
partnership or joint venture. Both parties agree not to make any
representations or statements to any other person which contradict the
foregoing.
Section 16. Seller's Employees. Purchaser shall be under no
obligation to employ after the Closing Date any of Seller's employees. After
this Agreement is signed and prior to the Closing Date, Purchaser may interview
any of Seller's employees regarding possible employment with Purchaser as of
the Closing Date, so long as Purchaser does not materially interfere with the
conduct of Seller's business. If Purchaser and any of Seller's employees reach
agreement as to terms of employment to commence on or after the Closing Date,
no inference shall be created that Purchaser has assumed any of Seller's
obligations to its employees; provided, however, that if Purchaser hires any of
Seller's employees then Seller shall provide Purchaser a copy of any and all
personnel records relating to such employees. Seller shall furnish to
Purchaser on request a list of all employees of the Business, setting forth
their compensation, job description, hire date and a summary of all benefits
provided.
Section 17. Post-Closing Covenants. Seller agrees to use its
best efforts to cooperate to make preparation for the conversion of the Alarm
Accounts and Contracts-in-Process to Purchaser's central station and billing
system on or before the Closing Date. Seller agrees to transfer to Purchaser
all "ring down lines" for fire monitoring of Alarm Accounts without a change in
priority or position. In connection with the conversion of the Alarm Accounts
and the Contracts-in-Process, Seller shall either (i) at its sole expense,
secure new telephone numbers and/or lines for those Alarm Accounts and
Contracts-in-Process, which share telephone numbers and/or lines with third
parties; or (ii) credit the Purchase Price in accordance with Section 2(h) or
credit the Escrow Account (the "Conversion Adjustment"). Such Conversion
Adjustment shall equal $50 per Alarm Account or Contract-in-Process that
requires a post-Closing alarm panel "chip change" service call by Purchaser.
Additionally, if requested to do so by Purchaser,
17
<PAGE> 18
Seller will assist in the orderly transition of the Alarm Account and
Contracts-in-Process base by updating customer account information and mailing
the September 1995 invoices associated with the Alarm Accounts and
Contracts-in-Process.
Section 18. Risk of Loss. The risk of any loss or damage to the
Purchased Assets resulting from fire, theft, explosion, earthquake, windstorm,
flood, accident, act of God, war, seizure, activities of the armed forces or
other casualty, reasonable wear and tear excepted, shall be borne by Seller at
all times prior to the Closing Date, and Seller shall be entitled to all
insurance proceeds resulting from such loss or damage.
Section 19. Miscellaneous.
(a) Pronouns. Whenever used herein and unless
otherwise indicated by the context, the masculine pronoun shall include and
also mean the feminine and the neuter, and the singular shall include and also
mean the plural.
(b) Expenses. Each party shall pay all expenses
incurred by it in connection with the preparation, execution and performance of
this Agreement.
(c) Entire Agreement. This Agreement, together
with the Schedules hereto, sets forth the entire understanding of the parties,
and supersedes all prior agreements, arrangements and communications, whether
oral or written, with respect to the subject matter hereof. This Agreement
shall not be modified or amended except by written agreement of Purchaser and
Seller. Captions appearing in this Agreement are for convenience only and
shall not be deemed to explain, limit or amplify the provisions hereof. All
Schedules to this Agreement are incorporated into and made a part of this
Agreement for all purposes to the same extent as if fully set forth herein.
(d) Severability. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if the invalid or unenforceable provision was omitted.
(e) Binding Effect; Assignment. All the terms,
provisions, covenants and conditions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by and against the parties
hereto and their respective successors and assigns.
(f) Notices. Any notice required or permitted to
be delivered pursuant to the terms of this Agreement shall be considered to
have been sufficiently delivered within five days after posting, if mailed by
U.S. Mail, certified or registered, return receipt requested, postage prepaid
or, upon receipt by overnight courier maintaining records of receipt by
addressee or if delivered by hand or telecopied with the original notice being
mailed the same day by one of the foregoing methods and addressed as follows:
18
<PAGE> 19
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLER AT:
Tel*Star Cellular Corporation
17092 Pullman Avenue
Irvine, California 92714-5524
Attention: Guy W. Steele
FACSIMILE: _______________
WITH COPY TO:
Stradling, Yocca, Carlson & Rauth
Suite 1600, Wells Fargo Building
660 Newport Center Drive
Newport Beach, California 92660-6441
Attention: Nicholas J. Yocca
FACSIMILE: (714) 725-4100
19
<PAGE> 20
or at such other address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
(g) Further Assurances. Purchaser and Seller
shall execute such other instruments, documents and other papers and shall take
such further actions as may be reasonably required or desirable to carry out
the provisions hereof and to consummate the transactions contemplated hereby.
(h) Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Alabama,
excluding its conflict of laws principles.
(i) Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original.
(j) Survival. The representations and warranties
of the parties hereto shall survive the date of this Agreement.
(k) Drafting Presumption. Each of the parties
hereto has participated in the negotiation and drafting of this Agreement and
agree that no one party has prepared this document to the exclusion of the
other party and that in construing this agreement there should be no
presumption based upon which party drafted this Agreement.
(l) Intended Beneficiary. Purchaser and Seller
hereby acknowledge that the Purchase Price for the Purchased Assets may be
funded from a loan provided by State Street Bank and Trust Company to
Purchaser; therefore, in the event that State Street Bank and Trust Company
participates in the funding of this transaction, Purchaser and Seller further
acknowledge that State Street Bank and Trust Company is an intended beneficiary
of this Agreement and shall rely upon the representations, warranties and
agreements of Purchaser and Seller contained herein.
20
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
PURCHASER
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-------------------------------
Its: VP Corporate Development
------------------------------
SELLER
TEL*STAR CELLULAR CORPORATION
By: /s/ Guy Steele
--------------------------------
Its: CEO
----------------------------
21
<PAGE> 22
LIST OF SCHEDULES
Schedule 1(a) - Alarm Accounts
Schedule 1(b) - Inventory
Schedule 1(c) - Furniture and Fixtures
Schedule 1(d) - Contracts-in-Process
Schedule 1(e) - Other Contracts
Schedule 1(f) - Receivables
Schedule 1(g) - Intangible Personal Property
Schedule 1(h) - Telephone Lines and Numbers
Schedule 1(i) - Vehicles
Schedule 1(j) - Finance Agreement
Schedule 2(a) - Prepaid Revenue
Schedule 2(h) - Allocation of Purchase Price
Schedule 3(a) - Escrow Agreement
Schedule 3(b) - Escrow Account Distribution
Schedule 5 - Assumed Liabilities
Schedule 8(d) - Broker Fees
Schedule 8(g) - Pending Seller Litigation
Schedule 8(l) - Insurance
Schedule 9(c) - Seller's Closing Certificate
Schedule 9(e) - Landlord's Consent
Schedule 9(j) - Bill of Sale, Assignment and Assumption Agreement
Schedule 9(k) - Noncompetition, Nonsolicitation and Nondisclosure Agreement
Schedule 9(l) - Notice to Subscribers
<PAGE> 1
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made effective as of the 11th
day of September, 1995, by and among MASADA SECURITY, INC., a Delaware
Corporation ("Purchaser"); TEL*STAR CELLULAR CORPORATION, a California
corporation ("Seller"); and SOUTHTRUST BANK OF ALABAMA, N.A. ("Escrow Agent").
RECITALS
WHEREAS, Seller and Purchaser have entered into an Asset Purchase
Agreement dated September 1, 1995 (the "Purchase Agreement"), pursuant to which
the Seller agrees to sell and Purchaser agrees to purchase all of the customer
accounts and certain other assets of Seller related to the monitoring of
security alarm systems in Irvine, California, as more fully described therein;
WHEREAS, the Purchase Agreement requires Escrow Agent to hold
$47,673.84 of the purchase price in escrow for approximately one year pending
certain possible adjustments in accordance with the Purchase Agreement;
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. ESCROW AGENT: Purchaser and Seller hereby designate and
appoint the Escrow Agent as the Escrow Agent for the purposes herein set forth.
The Escrow Agent hereby accepts such appointment on the terms and conditions
herein set forth. Escrow Agent is not a party to and is not bound by any
agreement between Purchaser and Seller except this Agreement.
2. DEPOSIT IN ESCROW:
(a) Escrow Agent hereby acknowledges the receipt from
Purchaser of the sum of ________________________ ($47,673.84) Dollars (the
"Escrowed Funds"). Escrow Agent agrees to hold and dispose of said sum, and
all interest and gains earned thereon, in accordance with all the terms,
conditions and provisions of this Agreement. Escrow Agent acts hereunder as a
depository. All deposits are warranted by Purchaser to be valid deposits.
(b) Escrow Agent shall invest the Escrowed Funds as
directed by the joint written instructions of Seller and Purchaser. All
earnings received by Escrow Agent as a result of such investment shall be added
to the Escrowed Funds. In the absence of any joint direction by Seller and
Purchaser to the contrary, Escrow Agent, in its discretion, shall invest all
portions of the Escrowed Funds in certificates of deposit (90 day), and/or
money market funds.
<PAGE> 2
3. DISTRIBUTIONS:
(a) On or after September 11, 1996, Purchaser and Seller
shall jointly give signed written notice ("Payment Notice") to Escrow Agent
which Payment Notice shall list the parties entitled to the Escrowed Funds and
a breakdown of the amounts each party is entitled to. Upon receipt of the
Payment Notice, the Escrow Agent shall pay to the appropriate parties the
Escrowed Funds within ten days after the receipt of such Payment Notice. The
Payment Notice shall set forth a brief description of the basis entitling such
parties to be paid the Escrowed Funds.
(b) If the Escrow Agent receives a Payment Notice which
is (i) signed by Purchaser but not by Seller, or (ii) signed by Seller but not
by Purchaser, the Escrow Agent shall give notice, along with a copy of such
Payment Notice, to the other party (the "Non-Signing Party"). If the
Non-Signing Party gives notice to the Escrow Agent of its agreement with the
Payment Notice, or fails to respond to the notice from the Escrow Agent, within
seven days after the date of such notice, then the Escrow Agent shall pay to
Seller (or its designee) the Escrowed Funds, within ten days after the
expiration of such seven day period. If the Non-Signing Party gives notice to
the Escrow Agent of its disagreement with the Payment Notice, within such seven
day period, then the Escrow Agent shall pay the undisputed portion, if any, of
the Escrowed Funds, but shall not pay any portion of the Escrowed Funds subject
to dispute, which disputed funds shall continue to be held by the Escrow Agent
pending resolution of such dispute and further direction from Purchaser and
Seller, or from an authorized arbitrator.
(c) In the event of any disagreement resulting in adverse
claims or demands being made in connection with the subject matter of this
Agreement, or in the event that the Escrow Agent is in doubt as to what action
it should take hereunder, the Escrow Agent may, at its option, refuse to comply
with any claim or demand on it, or refuse to take any other action hereunder,
so long as such disagreement continues or such doubt exists, and in any such
event, the Escrow Agent shall not be or become liable in any way or to any
person for its failure or refusal to act, and the Escrow Agent shall be
entitled to continue to so refrain from acting until (i) the rights of all
parties have been fully and finally decided by an arbitrator selected in
accordance with Section 3(c) of the Purchase Agreement, which is incorporated
herein by this reference, or (ii) all differences shall have been decided and
all doubt resolved by agreement between Purchaser and Seller, and the Escrow
Agent shall have been notified thereof in a writing signed by Purchaser and
Seller. In addition to the foregoing remedies, the Escrow Agent is hereby
authorized in the event of any doubt as to the course of action it should take
under this Agreement, to petition the United States District Court for the
Northern District of Alabama and/or the Circuit Court in and for Jefferson
County, Alabama for instructions or to interplead the funds or assets so held
into such court. For purposes of this Agreement the parties agree to the
jurisdiction of either of said courts over their persons as well as the
Escrowed Funds and agree that service of process by certified mail, return
receipt requested, to the address set forth in Paragraph 9 below shall
constitute adequate service. Purchaser and Seller hereby agree to indemnify
and hold the Escrow Agent harmless from any liability or losses occasioned
thereby
<PAGE> 3
and to pay any and all of its costs, expenses, and reasonable attorney's fees
incurred in any such action and agree that on such petition or interpleader
action that the Escrow Agent, its servants, agents, attorneys, employees and
officers will be relieved of further liability. Escrow Agent is hereby given a
lien upon, security interest in, and right of setoff against, the Escrowed
Funds to secure Escrow Agent's rights to payment or reimbursement for any and
all costs, expenses, and fees incurred by it hereunder.
(d) If a Non-Signing Party shall be determined by (i) a
court of competent jurisdiction, (ii) an arbitrator's binding award, or (iii) a
written release between the parties, to have acted in a frivolous manner and in
bad faith, the other party shall be entitled to reimbursement of all its
reasonable costs incurred in connection with the Payment Notice (including,
without limitation, reasonable attorney's fees).
4. TERMINATION: This Agreement shall terminate on the date that
no Escrowed Funds continue to be held by the Escrow Agent.
5. LIMITATIONS ON LIABILITY OF ESCROW AGENT: In order to induce
the Escrow Agent to act as the escrow agent under this Agreement, Seller and
Purchaser agree as follows:
(a) The Escrow Agent may rely upon and shall be protected
in acting or refraining from acting upon any written notice, instruction or
request received by the Escrow Agent and believed by the Escrow Agent in good
faith to be genuine and signed by Seller and Purchaser. The Escrow Agent shall
not be responsible for the sufficiency, correctness, genuineness or validity of
any notice or instructions delivered to the Escrow Agent. The Escrow Agent
shall not be liable for any error of judgment, or any act or omission under
this Agreement taken in good faith, except for the Escrow Agent's own gross
negligence or willful misconduct.
(b) Seller and Purchaser shall jointly and severally
indemnify and hold harmless the Escrow Agent from and against any claims,
costs, damages, reasonable attorney's fees, expenses, obligations or charges
made against the Escrow Agent by reason of its action or failure to act in
connection with any of the transactions contemplated by this Agreement, unless
caused by the Escrow Agent's gross negligence or willful misconduct.
(c) In the event the Escrow Agent receives or becomes
aware of conflicting instructions, demands or claims with respect to this
Agreement or the sums deposited hereunder, the Escrow Agent shall have the
right to discontinue any and all further acts until such conflict is resolved
to the Escrow Agent's satisfaction. The Escrow Agent shall have the further
right to commence or defend any action or proceeding for the termination of
such conflict. Seller and Purchaser jointly and severally agree to pay all
costs, damages, judgments and expenses, including reasonable attorneys' fees,
suffered or incurred by the Escrow Agent in connection with such action or
proceeding. In the event the Escrow Agent files a suit in interpleader, the
Escrow Agent shall thereupon be fully released and discharged from all further
obligations
<PAGE> 4
imposed by this Agreement with respect to sums deposited with a court of
competent jurisdiction pursuant to such suit in interpleader.
6. ESCROW FEES: The Escrow Agent shall not be entitled to
receive a fee for serving as the Escrow Agent; provided, however, that the
Escrowed Funds shall be subject to the Escrow Agent's standard fees and service
charges as provided in the Escrow Agent's Rules and Regulations Governing
Deposit Accounts.
7. RESIGNATION: The Escrow Agent may resign at any time upon
giving the parties hereto 30 days advance written notice to that effect. In
such event, the successor escrow agent shall be mutually selected by Seller and
Purchaser. However, in no instance shall the Escrow Agent's resignation be
effective until a successor escrow agent has agreed to act but, Escrow Agent
shall have the right to discontinue any and all future acts until such
successor escrow agent has agreed to act.
8. INTEREST INFORMATION: Unless otherwise agreed to in writing
by both parties: (i) the Escrow Agent shall list the employer tax
identification number of the Seller for federal, state and local tax purposes
and for other necessary purposes; and (ii) all interest earned shall be the
sole and exclusive property of the Seller; and (iii) any and all of Escrow
Agent's fees and charges as provided for in Paragraph (6) of this Agreement
shall first be charged against interest earned and then charged against
principal.
9. NOTICE: Any notice or other communication hereunder shall be
in writing and shall be (i) delivered by hand, (ii) delivered by an overnight
courier service with guaranteed next day delivery, (iii) sent by telecopy, or
(iv) mailed by certified mail, postage prepaid, return receipt requested, and
addressed as follows:
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
<PAGE> 5
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLER AT:
Tel*Star Cellular Corporation
17092 Pullman Avenue
Irvine, California 92714-5524
Attention: Guy W. Steele
FACSIMILE: _______________
WITH COPY TO:
Stradling, Yocca, Carlson & Rauth
Suite 1600, Wells Fargo Building
660 Newport Center Drive
Newport Beach, California 92660-6441
Attention: Nicholas J. Yocca
FACSIMILE: (714) 725-4100
IF TO ESCROW AGENT:
SouthTrust Bank of Alabama, N.A.
420 North 20th Street
Birmingham, Alabama 35203
Attention: Mr. Robert W. Wilkerson
FACSIMILE: (205) 254-5989
<PAGE> 6
or to such other address as may have been furnished to the party giving notice
by the party to whom notice is to be given. Notice shall be deemed given upon
the earlier of (i) three days after deposit in the U.S. Mail by certified mail,
or (ii) actual receipt thereof.
10. MISCELLANEOUS:
(a) SUCCESSORS AND ASSIGNS: This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
(b) COUNTERPARTS: This Agreement may be executed in any
number of counterparts, each of which shall be an original, but which together
shall constitute one and the same instrument.
(c) GOVERNING LAW: This Agreement shall be governed by
and construed and interpreted in accordance with the laws of the State of
Alabama.
(d) AMENDMENT: This Agreement may not be modified,
changed, waived or terminated, in whole or in part, except by a supplemental
agreement signed by all of the parties hereto.
(e) HEADINGS: The headings assigned to Paragraphs of
this Agreement are for convenience only and shall be disregarded in construing
this Agreement.
(f) NO ASSIGNMENT: Neither Seller nor Purchaser shall
pledge, hypothecate or otherwise transfer or attempt to transfer any right,
title or interest hereunder without the prior written consent to the other
party hereto.
<PAGE> 7
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
--------------------------
Its: VP Corp. Development
-----------------------
TEL*STAR CELLULAR CORPORATION
By: /s/ Guy Steele
-------------------------
Its: CFO
---------------------
Tax I.D. No.: 33-0357045
--------------
SOUTHTRUST BANK OF ALABAMA, N.A.
By: /s/ Robert W. Wilkson
--------------------------
Its: SR. V.P.
------------------------
<PAGE> 1
NONCOMPETITION, NONSOLICITATION
AND NONDISCLOSURE AGREEMENT
This Agreement made as of this 11th day of September, 1995, by and
among MASADA SECURITY, INC., a Delaware corporation ("Masada"), and TEL*STAR
CELLULAR CORPORATION, a California corporation ("Tel*Star"), and GUY W. STEELE,
an individual ("Steele"), JOHN P. THOMPSON, an individual ("Thompson"), KENT
MCCLURE, an individual ("McClure"), DAVID SESSIONS, an individual ("Sessions"),
and RON SERBER, an individual ("Serber"). ( Tel*Star, Steele, Thompson,
McClure, Sessions and Serber and their affiliates are collectively called the
"Sellers").
STATEMENT OF FACTS
A. Masada is purchasing certain security monitoring accounts more
particularly listed on Schedules 1(a) and 1(d) of the Asset Purchase Agreement
between Masada and Tel*Star which is incorporated herein by this reference (the
"Accounts") from Tel*Star. This Agreement applies to the customer who is the
Account, as well as the Account's location.
B. Steele, Thompson, McClure, Sessions and Serber are the sole
shareholders and principals of Tel*Star and will derive financial benefit from
Tel*Star selling the Accounts to Masada.
C. In consideration of the payment of $472,005.97 to Tel*Star at
the closing of Masada's purchase of the Accounts from Tel*Star, the Sellers are
willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and for good and
valuable consideration, receipt of which is acknowledged, the parties,
intending to be legally bound, covenant and agree as follows:
1. Nonsolicitation and Nonacceptance. The Sellers agree that
following the Closing Date as defined in the above-mentioned Asset Purchase
Agreement between Masada and Tel*Star, they will not, directly or indirectly
through affiliates, solicit nor accept (if the Accounts contact them) any
business from any of the Accounts, including business for the purpose of
providing electronic security, intercom, central vacuum, home automation, audio
systems or related services (collectively, the "Services"). If contacted by
the Accounts, the Sellers will inform them that the Seller can no longer
provide the Services to the Accounts. The Sellers agree to do so in a polite
manner, and to refer the Accounts to Masada with a positive recommendation.
<PAGE> 2
2. Noncompetition. The Sellers also agree that, for a period of
two (2) years following the date of this Agreement, they will not, directly or
indirectly through affiliates, take any action in competition with Masada in
connection with the Accounts. Without limiting the generality of the
foregoing, the Sellers will not, directly or indirectly through affiliates:
(a) manage, operate, join, control, participate or become
interested in or be connected with, as an employee, partner, officer, director,
stockholder, investor or otherwise, any business providing any of the Services
to the Accounts;
(b) lend their credit or money for the purpose of
establishing or operating any business providing any of the Services to the
Accounts;
(c) furnish consultation or advice to any business except
for Masada providing any of the Services to the Accounts;
(d) permit their names to be used in connection with any
business providing any of the Services to the Accounts; or
(e) sell or rent any equipment ancillary or necessary to
any business providing any of the Services to the Accounts.
The Sellers represent and warrant to Masada that all of the employees
and subcontractors used by the Sellers that have provided service to the
Accounts have signed enforceable noncompetition and noninterference agreements
with respect to such Accounts.
3. Nondisclosure.
(a) The Sellers acknowledge that they possess certain
confidential, proprietary and trade secret information, materials and business
concepts with respect to the Accounts, including information regarding sales,
maintenance, service and marketing, customer lists and files, accounting data
and methods, operating procedures, pricing policies, strategic plans,
intellectual property, contracts and manufacturer's warranties (collectively,
the "Proprietary Information"). In fact, the Sellers acknowledge that the
Accounts' information included on Schedules 1(a), 1(d) and 1(f) of the
above-mentioned Asset Purchase Agreement between Masada and Tel*Star
constitutes proprietary information.
(b) The Sellers agree (i) never to publish, copy,
disclose, allow to be disclosed, or use for their own benefit or for the
benefit of any other person, firm, corporation or entity the Proprietary
Information and (ii) to maintain strictly the confidentiality of the
Proprietary Information at all times. The Sellers agree to take all necessary
precautions to protect the Proprietary Information from unauthorized disclosure
or use.
<PAGE> 3
(c) In addition, the Sellers agree to deliver to Masada
on the date of this Agreement all of the Proprietary Information in their
possession, without retaining any copies in any format or any summaries of the
Proprietary Information.
4. Acknowledgment. The Sellers acknowledge and recognize that:
(a) this Agreement is necessary for the protection of the
legitimate business interests of Masada in purchasing the Accounts;
(b) the execution and delivery of this Agreement is a
mandatory condition precedent to Masada's closing its purchase of the Accounts
from Tel*Star, without which such transactions will not close;
(c) the scope of this Agreement regarding duration and
the level of activities restricted is reasonable;
(d) none of the Sellers, individually or jointly, has any
intention of violating this Agreement during the time period set forth above;
and
(e) the breach of this Agreement will be such that Masada
will not have an adequate remedy at law because of the unique nature of the
assets being conveyed and the confusion to the Accounts that a breach would
create.
5. Remedy. The Sellers and Masada agree that the amount of
damages resulting to Masada from the breach of this Agreement by the Sellers is
difficult to ascertain. In the event that Masada in its sole discretion,
elects to pursue a damage award the Sellers agree that Masada is entitled to
liquidated damages from the Sellers of 40 times the monthly recurring revenue
from the affected Accounts. The Sellers acknowledge and agree that the rights
of Masada under this Agreement are of a specialized and unique character and
that immediate and irreparable damage will result to Masada if the Sellers fail
to or refuse to perform their obligations under this Agreement and,
notwithstanding any election by Masada to claim damages from the Sellers as a
result of any such failure or refusal, Masada may, in addition to any other
remedies and damages available, seek an injunction in a court of competent
jurisdiction,without the need to post a bond or other security to restrain any
such failure or refusal. The Sellers represent and warrant that their
expertise and capabilities are such that their obligations under this Agreement
(and the enforcement thereof by injunction or otherwise) will not prevent them
from earning a livelihood. The Sellers also agree that Masada's remedy for a
breach by the Sellers of this Agreement will not be limited to the payment made
from Masada to the Sellers.
6. Severability. If any provisions of this Agreement as applied
to any part or to any circumstances will be adjudged by a court to be invalid
or unenforceable, the same will in no way affect any other provision of this
Agreement, the application of such provision in any other circumstances, or the
validity or enforceability of this Agreement. Masada, and the Sellers intend
this Agreement to be enforced as written. If any provision or any part thereof
is held to
<PAGE> 4
be invalid or unenforceable because of the duration thereof or the level of
restrictions, all parties agree that the court making such determination will
have the power to reduce the duration and/or restrictions of such provision,
and/or to delete specific words or phrases and in its modified form such
provision will then be enforceable.
7. Consent to Jurisdiction, Service and Venue. For the purpose
of any suit, action or proceeding arising out of or relating to this Agreement,
the Sellers hereby irrevocably consent and submit to the jurisdiction and venue
of any of the courts of the State of Alabama or of any federal court located in
Alabama. The Sellers hereby irrevocably waive any objection which they may now
or hereafter have to the venue of any such suit, action or proceeding brought
in such court and any claim that such suit, action or proceeding brought in
such court has been brought in an inconvenient forum and agree that service of
process in accordance with the foregoing sentence will be deemed in every
respect effective and valid personal service of process upon the Sellers. The
provisions of this Section will not limit or otherwise affect the right of
Masada to institute and conduct an action in any other appropriate manner,
jurisdiction or court.
8. WAIVER OF JURY TRIAL. MASADA AND THE SELLERS WAIVE ALL RIGHT
TO A TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT.
9. Notices. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
IF TO MASADA AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
<PAGE> 5
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLERS AT:
Tel*Star Cellular Corporation
17092 Pullman Avenue
Irvine, California 92714-5524
Attention: Guy W. Steele
FACSIMILE: ____________________
WITH COPY TO:
Stradling, Yocca, Carlson & Rauth
Suite 1600, Wells Fargo Building
660 Newport Center Drive
Newport Beach, California 92660-6441
Attention: Nicholas J. Yocca
FACSIMILE: (714) 725-4100
or at such address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
10. Entire Agreement. This Agreement is an integrated document,
contains the entire agreement between the parties, and wholly cancels,
terminates and supersedes any and all previous and/or contemporaneous oral
agreements, negotiations, commitments and writings between Masada and the
Sellers with respect to such subject matter. No change, modification,
extension, termination, discharge, abandonment or waiver of this Agreement or
any of its
<PAGE> 6
provisions, nor any representation, promise or condition relating to this
Agreement, will be binding upon the parties unless made in writing and signed
by the parties.
11. Interpretation. The descriptive headings of the Sections are
for ease of reference only and will in no way affect or be used to construe or
interpret this Agreement. All references to Sections and subsections contained
in this Agreement are references to the Sections and subsections of this
Agreement. The terms and conditions of this Agreement will not be construed
against this drafter. The word "including" means "including without
limitation."
12. Remedies Cumulative. It is agreed that the rights and
remedies herein provided in case of any default or breach by the Sellers of
this Agreement are cumulative and will not affect in any manner any other
remedies that Masada may have by reason of such default or breach by the
Sellers. The exercise of any right or remedy will be without prejudice to the
right to exercise any other right or remedy provided herein, by law or by
equity.
13. Waiver. No waiver of any right or remedy allowed hereunder
will be implied by the failure to enforce any such right or remedy. No express
waiver will affect any such right or remedy other than that to which the waiver
is applicable and only for that occurrence.
14. Parties in Interest. This Agreement is binding upon and
inures to the benefit of Masada and its successors and assigns and the
permitted heirs, successors and assigns of the Sellers.
15. Assignment. Masada has the right to assign this Agreement to
any third party without the consent of the Sellers. The Sellers have no right
to assign this Agreement.
16. Governing Law. This Agreement and the rights and the
obligations of the parties are governed by and construed and enforced in
accordance with the laws of the State of Alabama without regard to its
conflicts of law provisions.
17. Joint and Several Obligations. The Sellers acknowledge that
all of their agreements and covenants contained in this Agreement are made on a
joint and several basis.
18. Expenses. Masada and the Sellers each agree to pay all of
their respective costs and expenses incident to the negotiation and preparation
of this Agreement and to the performance and compliance with all agreements and
conditions contained herein on their part to be performed or complied with,
including the fees and costs of their counsel and accountants; provided,
however, that the Sellers agree to pay all of Masada's reasonable legal fees
and costs in this event Masada must go to court to enforce this Agreement.
19. Counterparts; Telecopy. This Agreement may be executed in one
or more counterparts, each of which when taken together all comprise one
instrument. Delivery of executed signature pages hereof by facsimile
transmission will constitute effective and binding execution and delivery.
<PAGE> 7
20. Consultation. The Sellers acknowledge that they have: (a)
carefully read and fully understand all of the provisions of this Agreement,
and (b) had an opportunity to consult with their respective attorneys prior to
executing this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
----------------------------------
Title: VP. Corp. Development
----------------------------
TEL*STAR CELLULAR CORPORATION
By: /s/ Guy Steele
---------------------------------
Title: C.F.O.
----------------------------
/s/ Guy W. Steel
------------------------------------
GUY W. STEELE, an individual
/s/ John Thompson
-----------------------------------
JOHN P. THOMPSON, an individual
/s/ Ken McClure
----------------------------------
KENT MCCLURE, an individual
/s/ S. David Sessions
---------------------------------
DAVID SESSIONS, an individual
/s/ Ron Serber
---------------------------------
RON SERBER, an individual
<PAGE> 1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made and entered into
this 22nd day of September, 1995, by and between MASADA SECURITY, INC., a
Delaware corporation ("Purchaser") and ALARM DATA GROUP, INC., a Maryland
corporation ("Seller").
Recitals
Seller is engaged in the business of operating a security alarm system
monitoring business in Beltsville, Maryland and the surrounding area (the
"Business").
Seller desires to sell to Purchaser and Purchaser desires to buy from
Seller all of the customer account contracts referenced on Schedule 1(a) hereto
and certain other assets of Seller pertaining to the Business, and Purchaser
and Seller desire to make certain other arrangements between them relating to
the purchase and sale of such assets, all upon the terms and conditions
hereinafter set forth.
Agreement
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which are hereby acknowledged, and intending to be
legally bound, agree as follows:
Section 1. Agreement to Purchase and Sell. In accordance with
the terms and conditions contained herein and in reliance on the respective
representations and warranties of the parties hereto, Seller hereby agrees to
sell, convey, transfer and assign to Purchaser, and Purchaser hereby agrees to
purchase, accept and acquire from Seller in the manner provided herein, the
following assets (collectively referred to as the "Purchased Assets"):
(a) Alarm Accounts. All right, title and
interest of Seller in and to the contracts for the rendering of security
monitoring services to existing customers of Seller which meet all of the
requirements listed in Section 8(i) and are specifically listed on Schedule
1(a) hereto (the "Alarm Accounts");
(b) Contract Monitoring Accounts. All right,
title and interest of Seller in and to the contracts for rendering of security
monitoring services, all of which are listed on Schedule 1(b) hereto (the
"Contract Monitoring Accounts");
<PAGE> 2
(c) Other Contracts. All right, title and
interest of Seller in and to all executory contracts, agreements and leases,
all of which are listed on Schedule 1(c) hereto (the "Other Contracts"), the
Other Contracts to include, without limitation all non-competition or
non-solicitation agreements accruing to the benefit of the Seller.
(d) Receivables. The accounts receivable, trade
accounts, notes receivable and other debts owed to Seller for monitoring
services rendered pertaining to the Alarm Accounts and Contract Monitoring
Accounts as of the Closing Date, all of which are listed on Schedule 1(d)
hereto (the "Receivables"). The Receivables as listed on Schedule 1(d) shall
be broken down into two categories which are (i) the Receivables related to RMR
("RMR Receivables"), and (ii) the Receivables related to one-time non
contracted service work and installations ("Service Receivables").
(e) Telephone Lines and Numbers. All right,
title and interest of Seller in and to all of the local and long distance
business telephone numbers used by Seller and which relate to all aspects of
maintaining the Alarm Accounts and Contract Monitoring Accounts, including but
not limited to, lines used for sales and marketing, technical service,
administration and monitoring (including digital dialer telephone lines that
transmit signals from customer locations to Seller's central station and
"ring-down" lines), all of which are listed on Schedule 1(e) hereto (the
"Telephone Lines and Numbers");
(f) Alarm Account Information. All files,
records and incidental documentation of Seller pertaining to the Alarm Accounts
and Contract Monitoring Accounts (the "Alarm Account Information"), including,
without limitation, all computer lists, contract information, accounting
history, service records and information, credit records and information, and
purchase and sales records and information.
Section 2. Purchase Price and Payment.
(a) Purchase Price for the Purchased Assets
Excluding Receivables. The purchase price for the Purchased Assets excluding
Receivables (the "Purchase Price Excluding Receivables") shall be the product
of 35 times the aggregate of the RMR of the Alarm Accounts less an amount equal
to the prepaid revenue relating to the Alarm Accounts (as set forth on Schedule
2(a) hereto) computed on a per diem basis to the Closing Date. For purposes of
this Agreement, the term "RMR" with respect to the Alarm Accounts acquired from
Seller by Purchaser shall be the charge for gross alarm monitoring services,
(including, without limitation, maintenance and other alarm related services),
exclusive of sales or intangible taxes, if any, and any direct wire telephone
line or other utility charges associated with monitoring, payable by the
customer for each applicable billing period expressed in terms of a monthly
amount regardless of whether the billing period is annual, semi-annual,
quarterly or monthly.
2
<PAGE> 3
(b) Purchase Price-Receivables.
(i) The purchase price for the RMR
Receivables (the "Purchase Price-RMR Receivables") shall equal 90% of the face
value of the RMR Receivables. The Purchase Price-RMR Receivables only applies
to amounts which are less than 60 days delinquent from the date of the
applicable original due date.
(ii) The reimbursement for Service
Receivables shall be made after the Closing Date in accordance Section 17(b).
(c) Purchase Price-All Purchased Assets. The sum
of the Purchase Price Excluding Receivables and the Purchase Price-RMR
Receivables shall hereafter be referred to as the "Purchase Price-All Purchased
Assets".
(d) Payment of Purchase Price-All Purchased
Assets.
(i) The aggregate of: (A) 90% of the
Purchase Price Excluding Receivables; (B) the Purchase Price-RMR Receivables;
and (C) the adjustments calculated in accordance with Section 2(e)
(collectively referred to as the "Initial Payment") shall be paid by Purchaser
to Seller by wire transfer or other mutually agreeable means on the Closing
Date; provided, however, that if any of the Purchased Assets are subject to
third party liens or other encumbrances as of the Closing Date, then such third
party rights or liens shall be terminated or released at Closing due to payment
of the full amount due as of the Closing Date and a UCC-3 termination statement
or other release shall be provided to Purchaser which shall be sufficient to
vest Purchaser with full and complete title in the Purchased Assets.
(ii) The Purchase Price-All Purchased
Assets less the Initial Payment (the "Deferred Payment Amount") shall be paid
in accordance with Section 3 hereof.
(e) Adjustment to Purchase Price. The Purchase
Price-All Purchased Assets shall be adjusted for items of expense and income
prorated as of the Closing Date in the manner provided below:
(i) An "AR Adjustment" shall equal the
difference resulting from the calculation of RMR Receivables less "Unearned"AR
less "Unearned" Income. "Unearned" AR would relate to RMR Receivables
resulting from advance billing for monitoring and/or other contracted services
which have not yet been performed by Seller. "Unearned" Income results from
customer prepayment for services which have not yet been performed by Seller.
If the AR Adjustment is negative, it will result in a purchase price reduction
to the benefit of Purchaser; if it is positive, it will result in a purchase
price increase to the benefit of Seller. The Service Receivables will be
excluded from calculation of the AR Adjustment because Seller is being
compensated directly as this income is received in accordance with Section
17(b).
3
<PAGE> 4
(ii) Liabilities or credits for personal
property taxes, if any, in respect of the Purchased Assets shall be prorated on
the basis of the current taxable year, to and including the Closing Date;
provided that if the assessed value of any Purchased Asset or rate of tax with
respect thereto shall not have been determined prior to the Closing Date, the
value and rate shall be determined on the basis of the amount of the previous
year in which the same was determined; and
(iii) Other liabilities or credits,
prepaid items and deferred charges relating to the Purchased Assets existing on
the Closing Date shall be adjusted as of the Closing Date by prorating the
aforementioned items for credit to Seller or Purchaser, as the case may be, in
accordance with generally accepted accounting principles.
(f) Allocation of Purchase Price-All Purchased
Assets. The Purchase Price-All Purchased Assets, subject to the adjustments
set forth in Section 2(e), shall be allocated as set forth in this Schedule
2(f). Purchaser and Seller agree for income tax purposes they shall report the
transactions contemplated by this Agreement in a manner consistent with such
allocation.
Section 3. Deferred Payment Amount.
(a) Escrow Agreement. On or prior to the Closing
Date, Seller and Purchaser agree to execute an Escrow Agreement substantially
in the form attached hereto as Schedule 3(a) (the "Escrow Agreement") and
Purchaser agrees to deposit with SouthTrust Bank of Alabama, N.A. (the "Escrow
Agent"), the Deferred Payment Amount to be held in an escrow account (the
"Escrow Account") pursuant to the terms of the Escrow Agreement (the "Deferred
Payment Amount" together with all earnings thereon shall collectively
hereinafter be referred to as the "Escrow Amount").
(b) Payment and Escrow Amount. Within 30 days
after the first year anniversary of the Closing Date, Purchaser shall submit to
Seller substantially in the form attached hereto as Schedule 3(b) along with
all appropriate supporting documentation, a report reflecting: (i) the Escrow
Amount; (ii) the total Repurchase Amounts, if any, credited to Purchaser
calculated in accordance with Section 6(a) (the "Total Repurchase Amounts");
(iii) the RMR Downward Adjustment, if any, credited to Purchaser calculated in
accordance with Section 6(b); (iv) the Receivables Downward Adjustment, if any,
credited to Purchaser calculated in accordance in Section 6(c); (v) the
Conversion Adjustment, if any, credited to Purchaser calculated in accordance
with Section 17(a) and (vi) the resulting difference between Schedule 3(b)(i)
less the Purchaser's credits associated with Section 3(b)(ii), (iii) (iv) and
(v)(the "Resulting Difference"). If Seller does not notify Purchaser of a
dispute regarding such report within ten business days from the date such
report is submitted by Purchaser to Seller or if Seller notifies Purchaser of
its acceptance of such report, such report shall be deemed complete and
accurate and Seller and Purchaser shall notify Escrow Agent to pay the sums
computed below to Seller or Purchaser, as the case may be, and the Escrow
Account shall then be closed
4
<PAGE> 5
after payment by the Escrow Agent of all funds held by it in the Escrow
Account. If the Resulting Difference is a positive amount then Seller and
Purchaser shall instruct the Escrow Agent to first pay the Seller the Resulting
Difference and the remainder of the Escrow Amount shall be paid by Escrow Agent
to Purchaser. If the Resulting Difference is equal to zero or is a negative
amount, then Seller and Purchaser shall instruct the Escrow Agent to pay
Purchaser the entire Escrow Amount and Seller shall owe no further amount to
Purchaser.
(c) Dispute. All disputes and differences with
respect to the computation of the Resulting Difference and the Escrow Account
shall be determined by binding arbitration under the rules then in effect of
the American Arbitration Association, such arbitration hearing to be held in
Birmingham, Alabama. The arbitration proceedings shall be heard by one
arbitrator selected from the proposed panel of arbitrators issued by the
American Arbitration Association, Seller, on the one hand, and Purchaser, on
the other hand, shall attempt to select a mutually acceptable arbitrator. If
the parties are unable to select a mutually acceptable arbitrator within five
business days following the issuance of the list of potential arbitrators by
the American Arbitration Association, Seller, on the one hand, and Purchaser,
on the other hand, shall each select one person from the list, and those two
persons selected shall appoint a third person from the list, which person shall
be the arbitrator for the dispute. All arbitration awards shall include an
award of expenses including, but not limited to, legal and accounting fees.
Section 4. The Closing.
(a) Date and Place. The closing of the purchase
and sale of the Purchased Assets shall take place on September 28, 1995 or such
other date as shall be mutually acceptable to Purchaser and Seller (the
"Closing Date") and shall take place at a location mutually acceptable to
Purchaser and Seller.
(b) Closing Deliveries. On the Closing Date,
Seller shall make the deliveries specified by Section 9 and Purchaser shall
make the deliveries specified by Section 10.
(c) Closing Procedure. All proceedings to be
taken and all documents to be delivered and executed on the Closing Date shall
be deemed to have been taken, delivered and executed simultaneously, and no
proceeding shall be deemed taken nor documents deemed executed or delivered
until all have been taken, delivered and executed. On the Closing Date, Seller
and Purchaser shall execute and deliver the instruments and documents
referenced in Sections 9 and 10 and Purchaser shall make the Initial Payment
and shall deposit the Deferred Payment Amount with the Escrow Agent.
(d) Termination. In the event that any of the
conditions set forth in Section 9 are not satisfied or waived in writing prior
to or on the Closing Date, then Purchaser may terminate this Agreement by
written notice to Seller. In the event that Purchaser exercises such right of
termination, this Agreement thereupon shall become wholly void and be of no
5
<PAGE> 6
further force or effect, except for the confidentiality provisions contained in
Section 14(c) and there shall be no further liability on the part of Seller or
its respective officers, directors, stockholders, employees or agents with
respect to the transactions contemplated hereby.
(e) Specific Performance. In the event that
Purchaser complies with all of the requirements set forth in Section 10, then
Purchaser shall have the right of specific performance against the Seller as to
the Purchased Assets.
Section 5. Assumption of Liabilities. Purchaser shall not
assume any liability, debt or obligation of Seller except the responsibility of
rendering security monitoring services pursuant to the Alarm Accounts and
Contract Monitoring Accounts set forth on Schedules 1(a) and 1(b) and those
liabilities and obligations of Seller arising after the Closing Date that are
set forth on Schedule 5 hereto. Seller shall continue to be responsible for,
and shall indemnify and save harmless Purchaser from and against, all of
Seller's known and unknown liabilities, debts and obligations, arising prior
to, in connection with, or subsequent to the Closing Date that are not
specifically assumed by Purchaser as set forth on Schedules 1(a), 1(b), and 5.
Section 6. Special Warranties.
(a) Alarm Accounts. Seller warrants that
beginning on the Closing Date and for the 12 month period immediately after the
Closing Date (the "Guarantee Period") all Alarm Accounts purchased by Purchaser
pursuant to this Agreement and described on Schedule 1(a) shall continue to
meet the requirements specified in Section 8(i) and that all payments from
customers shall be made in a timely manner. For purposes of this Agreement,
payments by customers shall be considered timely if they are received by
Purchaser on or before the 60th day following the applicable invoice due date.
For purposes of this Agreement a "Defaulted Contract" shall be defined as: (i)
any Alarm Account that no longer meets the requirements specified in Section
8(i); or (ii) any Alarm Account in which payments from customers shall not have
been made in a timely manner. Purchaser shall give Seller written monthly
notice of any and all Defaulted Contracts as soon as reasonably possible.
Seller shall have 30 days from the receipt of such written notice to return
such Defaulted Contracts to compliance with the requirements of Alarm Accounts
as specified in Section 8(i) and timeliness; provided, however, that Seller
shall not, either directly or indirectly, make payments to or provide other
assistance to or on the behalf of the customers who have Defaulted Contracts.
If at the end of such 30 day period Purchaser, in its sole discretion,
determines that any or all such Alarm Accounts are still Defaulted Contracts,
then Seller shall repurchase such Alarm Accounts from Purchaser for 35 times
the RMR of such Defaulted Contracts as of the Closing Date (the "Repurchase
Amount") or shall replace the Defaulted Contracts with other contracts that
meet all of the requirements listed in Section 8(i) and have RMR greater than
or equal to that of such Defaulted Contracts. If the Seller does not
repurchase or replace the Defaulted Contracts within such 30 day period, Seller
shall be charged against the Escrow Account an amount equal to the Repurchase
Amount plus the interest accruing thereon from the Closing Date at the rate
then
6
<PAGE> 7
applicable to the Escrow Account; provided, however, the aggregate Repurchase
Amount charged against the Escrow Account shall only exceed the amount of the
Escrow Account in the case of fraud on behalf of Seller.
(b) RMR. Seller warrants that the RMR used in
computing the Purchase Price Excluding Receivables shall equal or exceed the
actual RMR of the Alarm Accounts at the expiration of the Guarantee Period. A
charge shall be made against the Escrow Account for the benefit of Purchaser
for each Alarm Account for which it is determined the RMR used in computing the
Purchase Price Excluding Receivables exceeded the actual RMR for such Alarm
Accounts at the expiration of the Guarantee Period. The amount of such charge
shall be determined by computing the amount by which the RMR of the Alarm
Accounts used in computing the Purchase Price Excluding Receivables exceeds the
actual RMR of such Alarm Accounts at the expiration of the Guarantee Period and
multiplying such sum by 35 (the "RMR Downward Adjustment").
(c) RMR Receivables. Seller warrants that all
amounts associated with the RMR Receivables will be paid to Purchaser. If
amounts associated with the RMR Receivables are uncollected at the end of the
Guarantee Period, Seller shall be charged against the Escrow Account an amount
equal to such uncollected Receivables ("Receivables Downward Adjustment");
provided, however, that if the Resulting Difference is a negative amount then
Seller or Dennis V. Riley, individually, shall pay Purchaser an amount equal
to the lesser of the Resulting Difference (reflected as a positive amount) or
the Receivables Downward Adjustment.
Section 7. Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to Seller that on the date hereof and
on each day thereafter to the Closing Date:
(a) Organization and Standing. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and Purchaser has all requisite corporate power
and authority to own, operate and lease its properties and carry on its
business as now being conducted and to enter into this Agreement and to perform
its obligations hereunder.
(b) Authority Relative to this Agreement. The
execution, delivery and performance by Purchaser of this Agreement has been
duly authorized and no further corporate action is necessary on the part of the
Purchaser to make this agreement valid and binding upon Purchaser in accordance
with its terms.
(c) No Violation. Neither the execution nor the
delivery of this Agreement by Purchaser nor the consummation of the
transactions contemplated herein, nor compliance by Purchaser with any of the
provisions hereof:
(i) violates or conflicts with or
results in the breach or termination of any term or provision of, nor
constitutes a default or acceleration of the
7
<PAGE> 8
performance required under, the certificate of incorporation, bylaws or
resolutions of the Purchaser, or any indenture, mortgage, deed, trust or other
contract or agreement to which Purchaser is a party or by which its properties
are bound;
(ii) violates any order, writ, injunction
or decree of any court, administrative agency or governmental body; or
(iii) requires the consent of any other
person, entity or governmental authority.
(d) Brokerage Fees. Purchaser is not obligated
nor has it agreed to pay any brokerage commissions, finders fees or other
similar fees or charges in connection with the purchase of the Purchased Assets
pursuant to this Agreement.
Section 8. Representations and Warranties of Seller. Seller
represents and warrants to Purchaser that on the date hereof and on each day
thereafter to the Closing Date:
(a) Organization and Standing. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland. Seller has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business as
it has been and currently is being conducted and to enter into this Agreement
and to perform its obligations hereunder.
(b) Authority Relative to this Agreement. The
execution, delivery and performance by Seller of this Agreement has been duly
authorized by the board of directors and stockholders of Seller, and no further
corporate action is necessary on the part of Seller to make this Agreement
valid and binding upon the Seller in accordance with its terms.
(c) No Violation. Neither the execution nor the
delivery of this Agreement by Seller nor the consummation of the transactions
contemplated herein, nor compliance by Seller with any of the provisions
hereof:
(i) violates or conflicts with or
results in the breach or termination of any term or provision of, nor
constitutes a default or acceleration of the performance required under, the
articles of incorporation, bylaws or resolutions of Seller, or under any
indenture, mortgage, deed, trust or other contract or agreement to which Seller
is a party or by which its properties are bound;
(ii) violates any order, writ, injunction
or decree of any court, administrative agency or governmental body; or
(iii) requires the consent of any other
person, entity or governmental authority.
8
<PAGE> 9
(d) Brokerage Fees. Seller is not obligated nor
has it agreed to pay brokerage commissions, finders fees or other similar fees
or charges in connection with the purchase of the Purchased Assets pursuant to
this Agreement.
(e) Title to Purchased Assets. Seller warrants
that as of the Closing Date it will have good and marketable title to all of
the Purchased Assets, and the Purchased Assets shall not be subject to any
pledge, option, conditional sale agreement, security interest, consensual lien,
judgment lien, encumbrance or charge of any kind. Seller warrants that the
Alarm Accounts acquired by Purchaser are valid and are binding upon and
enforceable against the customers of Seller executing same in accordance with
their terms, and the obligations of the customers of Seller thereunder are not
subject to set-off or claims resulting from the conduct of Seller's business
prior to their conveyance to Purchaser.
(f) Compliance with the Law. The Business has
been and is being conducted in compliance with all applicable laws, regulations
and requirements of each jurisdiction in which it is carried on and is not in
breach of any such laws, regulations or requirements. Seller warrants to hold
Purchaser harmless from and against any violations of applicable laws,
regulations or requirements arising out of non-compliance therewith prior to
the Closing Date.
(g) Actions, etc. Except as set forth on
Schedule 8(g):
(i) there are no actions, suits,
proceedings or investigations pending against or relating to the Business or
the Purchased Assets and Seller has not received any notice or written or oral
communication reflecting an intention or threat to institute any such action,
suite proceeding or investigation;
(ii) there are no actions, suits,
proceedings, or investigations pending before any court or governmental agency
in which it is sought to restrain or prohibit the carrying out of this
Agreement or the consummation of the transactions contemplated herein in
connection therewith and there is no such action, suit, proceeding or
investigation threatened;
(iii) Seller is not subject to any
judgment, order, writ, court decree, governmental decree or injunction relating
to the Business;
(iv) there are no known defects or
deficiencies in the products or services provided by Seller prior to the date
hereof as a result of which any claim or suit may arise.
(h) Tax Returns. Seller has timely filed all tax
reports and returns required to be filed and has timely paid all taxes
(including, without limitation, income, payroll withholding, sales and use
taxes) and all other charges due or claimed to be due from it by federal, state
or local taxing authorities in respect of the periods covered by such returns.
9
<PAGE> 10
(i) Alarm Account Requirements. Each of the
Alarm Accounts must:
(i) be evidenced by a valid, enforceable
and properly executed written Monitoring Agreement which is in compliance with
all laws, rules and regulations including without limitation all
truth-in-lending requirements;
(ii) not been repudiated by the customer.
An Alarm Account shall be deemed repudiated if: (A) the customer has abandoned
the premises at which the security monitoring system has been installed; (B)
the customer is insolvent; or (C) the customer has cancelled or issued notice
of termination of an Alarm Account, notwithstanding the fact that an Alarm
Account may remain enforceable against the customer;
(iii) have generated cash receipts
representing service charges for at least one full billing cycle or prepayment
for at least one month's service; and
(iv) have no charges that have been
outstanding and unpaid for more than 60 days from the invoice due date as of
the Closing Date.
(v) must not have been a customer of
Purchaser within the twelve months immediately prior to the Closing Date.
(j) Benefit Plans. No profit-sharing, bonus,
stock option, pension, retirement, stock purchase, hospitalization insurance or
similar plan or agreement, formal or informal, providing benefits to any
current or former employee, or any other employee benefit or employee welfare
plan subject to the provisions of the Employee Retirement Income Security Act
of 1974, as amended, maintained by Seller shall obligate Purchaser to make any
contributions thereto or payments in respect thereof with regard to employees
of Seller who may be hired by Purchaser on or after the Closing Date.
(k) Product Warranties and Medical Information.
Except for the standard warranties on installations listed on Schedule 8(k),
there are no written warranties or oral warranties given by Seller applicable
to any of the Alarm Accounts or Contract Monitoring Accounts. Seller has not
entered into any contract or other agreement with any or all of its customers
which would require Purchaser to provide any medical or health information on
its customers to any third party and Seller is not obligated to keep or obtain
medical or health information on any or all of its customers.
(l) Insurance. Seller has "occurrence basis"
general liability insurance coverage covering the Purchased Assets in an amount
equal to or greater than one million dollars ($1,000,000.00) per single
occurrence and workers compensation insurance coverage equal to or greater than
that required by law. Attached hereto as Schedule 8(l) is (i) a list of all of
the insurance policies covering the Purchased Assets, and (ii) a list of all
insurance claims related to the Purchased Assets for the three previous years.
All such policies are in full force and
10
<PAGE> 11
effect as of the Closing Date and Seller has not received notice of
cancellation with respect thereto. For purposes of this Agreement, "occurrence
basis" means if a claim arose after the Closing Date for an event which
occurred prior to the Closing Date, Seller's applicable insurance policy in
existence on the date such event occurred would cover such claim.
(m) Right of Rescission. Seller has provided
each residential customer with the three-day right of rescission in strict
compliance with the provisions of 16 C.F.R. Part 429 (Cooling-Off Period for
Door-to Door Sales) and any applicable state laws. Seller acknowledges that
any failure on its behalf to strictly comply with such regulation and laws in
connection with the execution and delivery of any contract involving a
residential customer may result in such customer having the right to rescind or
cancel any such contract. Seller further acknowledges that Buyer desires not
to assume any risk for any liability that might arise as a result of any such
rescission or cancellation.
(n) Business Position. The Business has at least
2,800 Alarm Accounts and $64,000 of RMR associated with the Alarm Accounts.
The Business has approximately 1,000 Contract Monitoring Accounts and $6,000 of
RMR associated with the Contract Monitoring Accounts. Seller's gross revenue
attrition rate over the last two (2) years has not exceeded seven percent (7%)
per year. Within the six months immediately preceding the Closing Date, there
has been (i) no general, overall increase in Seller's monitoring or other
recurring service change - related rates, and (ii) no credits issued outside
the normal course of business for accounts receivable outstanding relating to
the Alarm Accounts or Contract Monitoring Accounts.
(o) Chain Accounts. Schedule 8(o) provides a
full list of any business, governmental, or other entity for which the RMR paid
by such entity is greater than 2.5% of the total RMR listed on Schedule 1(a)
("Chain Accounts").
(p) Contract Monitoring Accounts. Seller has
informed each of its Contract Monitoring Account dealers that after the
respective Contract Monitoring Accounts are forwarded, re-programmed, or
otherwise sent to Purchaser's central monitoring station the dispatchers will
answer incoming calls for the Contract Monitoring Accounts as "Masada
Security."
(q) Disclosure. No representation or warranty of
Seller, and no statement contained in this Agreement and no information
contained in any schedule furnished to Purchaser by or on behalf of Seller
pursuant to this Agreement, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading. Each of the separate representations and
warranties set forth in the various subsections of this Section 8 is intended
to be, and shall be interpreted as, an independent representation and warranty
as to matters referred to therein, and the applicability or inapplicability of
any particular subsection of this Section 8 shall not affect the interpretation
of any other such subsection.
11
<PAGE> 12
Section 9. Conditions Precedent to Obligations of Purchaser.
Purchaser's obligation to purchase the Purchased Assets under this Agreement is
subject to the fulfillment, prior to or at the Closing Date of each of the
following conditions:
(a) Representations True on the Closing Date.
The representations and warranties of Seller contained in this Agreement shall
be true on the date hereof, and at the time of the Closing Date as though made
on the Closing Date.
(b) Performance. Seller shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
(c) Seller's Closing Certificate. Seller shall
have delivered to Purchaser a Closing Certificate of the president or any
authorized representative of Seller dated as of the Closing Date in the form
attached hereto as Schedule 9(c).
(d) Schedules. Seller shall have updated the
Schedules hereto in accordance with Section 14(g) hereof. Purchaser shall have
determined, in good faith, that taking into account the changes to the
information in the updated Schedules, the transactions contemplated by this
Agreement are as beneficial to Purchaser as prior to the updating of the
Schedules.
(e) Consents and Assignments. Seller shall have
taken all action necessary and appropriate, and obtained all necessary
consents, waivers and approvals required under any leases or other agreements
to consummate the sale of good and marketable title to all the Purchased Assets
free of all claims, liens or encumbrance of any type, pursuant to this
Agreement in writing on terms acceptable to Purchaser in its sole discretion.
Seller shall have taken all action necessary and appropriate to assign to
Purchaser all noncompetition/nonsolicitation agreements executed by its
employees and subcontractors.
(f) Litigation. No litigation or proceeding
shall be pending or threatened to restrain, set aside or invalidate the
transactions contemplated by this Agreement or any portion thereof, including,
without limitation, any claims by creditors of Seller against the Purchased
Assets.
(g) Opinion of Seller's Counsel. Seller shall
have delivered to Purchaser an opinion of counsel for Seller, dated as of the
Closing Date and in form satisfactory to Purchaser's counsel, to the effect
that:
(i) Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland; the location and character of the properties owned or leased and the
business conducted by Seller do not make qualification or licensing as a
foreign corporation necessary in any other state or jurisdiction; and Seller
has the corporate power and authority to own its properties and to carry on its
business as now being conducted;
12
<PAGE> 13
(ii) This Agreement has been duly
executed and delivered by Seller and constitutes a legal and binding obligation
of Seller, enforceable in accordance with its terms except as enforcement of
the same may be limited by bankruptcy, insolvency, reorganization or other laws
relating to or affecting the enforcement of creditors' rights and by general
equity principles;
(iii) All instruments of transfer and
other documents necessary to effect the transfer to Purchaser of the Purchased
Assets have been duly authorized, executed and delivered by Seller and are in
proper form to transfer to Purchaser all right, title and interest in and to
the Purchased Assets;
(iv) Except as set forth on Schedule
8(g), such counsel does not know of any litigation, proceeding, governmental
investigation or claim pending or threatened against or relating to the
Business, the Purchased Assets or the transactions contemplated by this
Agreement; and
(v) The execution and delivery of this
Agreement and the consummation by Seller of the transactions contemplated
hereby:
(A) do not and will not violate any
provision of the articles of incorporation or bylaws of Seller;
(B) do not and will not violate, or
result, with the giving of notice or the lapse of time or both, in a violation
of any provision of, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, or result in the creation or imposition of, any lien, lease,
agreement, license, instrument, law, ordinance, regulation, order, arbitration
award, judgment or decree known to such counsel to which Seller is a party or
by which it is bound; and
(C) do not and will not constitute
an event permitting termination of any lease, agreement, license or instrument
known to such counsel to which Seller is a party.
(h) Certified Resolutions. Seller shall have
delivered to Purchaser copies, certified by the secretary or an assistant
secretary of Seller, of the resolutions of Seller's board of directors and
stockholders authorizing the execution and delivery of this Agreement.
(i) Certificates of Good Standing. Seller shall
have delivered to Purchaser a certificate of good standing of Seller issued by
the Secretary of State of the State of Maryland dated as of a date within 30
days prior to Closing Date.
(j) Instruments of Transfer. Seller shall have
delivered to Purchaser a Bill of Sale, Assignment and Assumption Agreement
substantially in the form attached hereto as Schedule 9(j) (the "Bill of Sale")
and other good and sufficient instruments of transfer and
13
<PAGE> 14
conveyance, as in the reasonable opinion of Purchaser's counsel, shall be
effective to vest in Purchaser good and marketable title to the Purchased
Assets.
(k) Non-Solicitation Agreement. Seller shall
have delivered to Purchaser a Non-Solicitation Agreement substantially in the
form attached hereto as Schedule 9(k) executed by Dennis V. Riley in his
individual capacity, and by Seller.
(l) Notice to Subscribers. Seller shall have
mailed on the Closing Date to each customer set forth on Schedules 1(a), 1(b)
and 1(c) hereto a notice in the form attached hereto as Schedule 9(1). Seller
shall be solely responsible for the costs associated with the creation and
mailing of such notices.
(m) Payment of Accrued Vacation Pay, etc. Seller
shall pay to each of Seller's employees who render services to the Business
that are to be discharged on or after the Closing Date all accrued and unpaid
vacation pay, sick pay and all other accrued obligations to which such
employees are entitled as a result of the termination of their employment with
Seller.
(n) Chain Account Assignment. Seller shall have
executed with all entities listed on Schedule 8(o) an assignment in a form
acceptable to Purchaser of the respective existing monitoring agreement(s) to
Purchaser. The assignment will be enforceable by Purchaser against the
respective Chain Accounts for not less than 48 months after the Closing Date.
(o) Monitoring Agreements and Contract Monitoring
Accounts. Seller shall have executed with the respective Contract Monitoring
Account dealers in a form acceptable to Purchaser either (i) an assignment of
all of its rights in any Third Party Monitoring Agreement(s) related to the
Contract Monitoring Accounts; or (ii) a new Third Party Monitoring Agreement in
the form attached as Schedule 9(o).
(p) Alarm Account Monitoring Agreement. Seller
shall have entered into a Third Party Monitoring Agreement, a form of which is
attached hereto as Schedule 9(p), which will require Seller to continue to
monitor the Alarm Accounts and Contract Monitoring Accounts in a manner
consistent or greater than the services provided before the Closing Date for a
period not to exceed 90 days.
Section 10. Conditions Precedent to Obligations of Seller.
Seller's obligations to sell and transfer the Purchased Assets to Purchaser
under this Agreement are subject to the fulfillment, prior to or on the Closing
Date of each of the following conditions:
(a) Representations True on the Closing Date.
Purchaser's representations and warranties contained in this Agreement shall be
true at the date hereof, and at the Closing Date as though made on the Closing
Date.
14
<PAGE> 15
(b) Performance. Purchaser shall have performed
and complied with all agreements and conditions required by this Agreement to
be performed or complied with by it prior to or on the Closing Date.
(c) Bill of Sale. Purchaser shall have executed
and delivered the Bill of Sale.
Section 11. Indemnification. Seller, on the one hand, and
Purchaser, on the other hand (the "Indemnitor") shall indemnify, hold harmless,
defend and bear all costs of defending the other party (the "Indemnitee"),
together with its successors and assigns, from, against and with respect to any
and all damage, loss, deficiency, expense (including any reasonable attorney
and accountant fees, legal costs or expenses), action, suit, proceeding,
demand, assessment or judgment to or against the Indemnitee arising out of or
in connection with any breach or violation of, or nonperformance by, the
Indemnitor of any of its representations, warranties, covenants or agreements
contained in this Agreement or in any document, certificate or schedule
required to be furnished pursuant to this Agreement.
Section 12. Bulk Sales Law. If applicable, the sale and purchase
described in this Agreement will be conducted according to, and in full
compliance with, the requirements of the bulk transfer provisions of the
Uniform Commercial Code as adopted in the State of Maryland. In addition to
its indemnity under Sections 5 and 11, Seller hereby agrees to indemnify and
hold Purchaser harmless from any and all liability to anyone arising from its
failure to comply with the provisions of the bulk transfer provisions of the
Uniform Commercial Code as adopted in the State of Maryland. Such indemnity
shall survive Closing.
Section 13. Assignment. Purchaser may, without the consent of
Seller, assign its rights and delegate its obligations under this Agreement in
writing, to any corporation, limited liability company, partnership,
association, proprietorship or other business entity who acquires all or a
substantial part of the assets of Purchaser in connection with the sale of all
or a substantial part of its business. Upon any such assignment Purchaser
shall be relieved and discharged from any further obligations under this
Agreement. Furthermore, Purchaser may, without the consent of Seller,
collaterally assign its rights under this Agreement to one or more banks,
insurance companies or other financial institution for purposes of financing.
Seller shall not assign its rights or delegate its obligations under this
Agreement without the prior written consent of Purchaser.
Section 14. Agreements Prior to Closing.
(a) Fulfillment of Conditions. Seller shall use
its best efforts to take or cause to be taken all action reasonably necessary
or appropriate to cause each of the
15
<PAGE> 16
conditions set forth in Section 9 to be fulfilled prior to or on the Closing
Date. Purchaser shall use its best efforts to take or cause to be taken all
action reasonably necessary or appropriate to cause each of the conditions set
forth in Section 10 to be fulfilled prior to or on the Closing Date.
(b) Access to Information. Between the date of
this Agreement and the Closing, Seller shall allow the officers, directors,
employees, representatives, attorneys and accountants of Purchaser free access
at all reasonable times to the records, files, correspondence, audits and
properties of Seller which pertain to the Business.
(c) Confidentiality. Purchaser on the one hand
and Seller on the other hand agrees to hold all information it obtains pursuant
to its review of the records, files, correspondence, audits and properties of
the other party in confidence and not to disclose such information to any third
party, except for:
(i) information known by such party and
obtained from sources other than the other party;
(ii) disclosure that is authorized by the
other party in writing;
(iii) disclosure to such party's
professional advisors and to persons who are expected to be lenders to
Purchaser; or
(iv) disclosure of information where such
information is required to be filed with any governmental agency or required to
be produced before any court or tribunal or otherwise required by law to be
disclosed. Except in connection with filing of tax returns and as otherwise
required by law, the parties shall not disseminate to any person other than
officers, directors, employees, representatives, attorneys and accountants of
both parties any information relating to the Purchase Price or other
consideration contemplated to be paid under this Agreement.
(d) Conduct of Business. Between the date of
this Agreement and the Closing Date, Seller shall cause the Business to be
conducted in its usual and ordinary course including, but not limited to, not
increasing the price and/or rate of any product or service relating to the
Alarm Accounts and Contract Monitoring Accounts without the prior written
consent of Purchaser.
(e) Preservation of Existing Relationships.
Between the date of this Agreement and the Closing Date, Seller shall use its
best efforts to continue existing relationships with customers, suppliers,
employees and others having business relations with respect to Seller.
16
<PAGE> 17
(f) No Negotiations with Third Parties. So long
as this Agreement is in effect, Seller shall not enter into any negotiations,
arrangements, understandings, commitments, options or other agreements
regarding the sale, transfer or other disposition of any of the shares of stock
of Seller or of all or substantially all of the assets of Seller that relate in
any way to the Business, or regarding any merger or consolidation of Seller
with or into any corporation or other business entity.
(g) Updated Schedules. Seller agrees to update
the Schedules hereto as of the Closing Date to reflect changes occurring after
the date hereof; provided, however, that if any of the Schedules attached
hereto on the date hereof are materially inaccurate or incorrect, Seller may
correct such Schedules only with Purchaser's prior written consent. Any
updated Schedules shall be attached to this Agreement and for all purposes be
deemed to be a part of this Agreement.
Section 15. No Joint Venture. The relationship between the
parties hereto is that of purchaser/seller and does not constitute a
partnership or joint venture. Both parties agree not to make any
representations or statements to any other person which contradict the
foregoing.
Section 16. Seller's Employees. Purchaser shall be under no
obligation to employ after the Closing Date any of Seller's employees. After
this Agreement is signed and prior to the Closing Date, Purchaser may interview
any of Seller's employees regarding possible employment with Purchaser as of
the Closing Date, so long as Purchaser does not materially interfere with the
conduct of Seller's business. If Purchaser and any of Seller's employees reach
agreement as to terms of employment to commence on or after the Closing Date,
no inference shall be created that Purchaser has assumed any of Seller's
obligations to its employees; provided, however, that if Purchaser hires any of
Seller's employees then Seller shall provide Purchaser a copy of any and all
personnel records relating to such employees. Seller shall furnish to
Purchaser on request a list of all employees of the Business, setting forth
their compensation, job description, hire date and a summary of all benefits
provided.
Section 17. Post-Closing Covenants.
(a) By Seller.
(i) Seller agrees to use its best
efforts to cooperate to make preparation for the conversion of the Alarm
Accounts and Contract Monitoring Accounts to Purchaser's central station and
billing system within 90 days of the Closing Date. Seller agrees to transfer
to Purchaser all "ring down lines" for fire monitoring of Alarm Accounts
without a change in priority or position. In connection with the conversion of
the Alarm Accounts and the Contract Monitoring Accounts, Seller shall either
17
<PAGE> 18
(A) at its sole expense, secure new
telephone numbers and/or lines for those Alarm Accounts and Contract Monitoring
Accounts which share telephone numbers and/or lines with third parties within
five (5) business days after notification from Purchaser that a "chip change"
service call is required to reprogram the Alarm Account's alarm panel to dial
to Purchaser's central monitoring station on a telephone number approved by
Purchaser; or
(B) (1) credit the Purchase Price
in accordance with Section 2(e) or if such "chip change" is not completed
within five (5) business days after notification by Purchaser, at Purchaser's
sole discretion, either (2) allow Seller an extension period to complete the
"chip change", or (3) credit the Escrow Account (the "Conversion Adjustment").
Such Conversion Adjustment shall equal $50 per Alarm Account or Contract
Monitoring Account that requires a post-Closing alarm panel "chip change"
service call by Purchaser.
(ii) If requested to do so by Purchaser,
Seller will assist in the orderly transition of the Alarm Accounts and Contract
Monitoring Accounts base by updating customer account information and mailing
the next scheduled invoices associated with the Alarm Accounts and Contract
Monitoring Accounts after the Closing Date.
(iii) Seller or any entity owned directly
or indirectly by Dennis V. Riley shall not sell, transfer or otherwise assign
its ownership interests in the central monitoring station used to monitor the
Alarm Accounts and Contract Monitoring Accounts until after all of the Alarm
Accounts and Contract Monitoring Accounts have been transferred to Purchaser's
central monitoring station.
(iv) If requested to do so by Purchaser,
Seller shall cooperate with Purchaser in prohibiting Purchaser's employees,
former employees, subcontractors and former subcontractors from soliciting or
disclosing the names and/or locations of the Alarm Accounts and Contract
Monitoring Accounts including, without limitation filing and diligently
pursuing injunctive or other legal actions against such persons.
(b) By Purchaser. Purchaser shall forward to
Seller 90% of all payments received by Purchaser after Closing that are
attributable to the Service Receivables. Purchaser shall retain 10% of any
Service Receivables collected by Purchaser as collection fees.
Section 18. Risk of Loss. The risk of any loss or damage to the
Purchased Assets resulting from fire, theft, explosion, earthquake, windstorm,
flood, accident, act of God, war, seizure, activities of the armed forces or
other casualty, reasonable wear and tear excepted, shall be borne by Seller at
all times prior to the Closing Date, and Seller shall be entitled to all
insurance proceeds resulting from such loss or damage.
18
<PAGE> 19
Section 19. Miscellaneous.
(a) Pronouns. Whenever used herein and unless
otherwise indicated by the context, the masculine pronoun shall include and
also mean the feminine and the neuter, and the singular shall include and also
mean the plural.
(b) Expenses. Each party shall pay all expenses
incurred by it in connection with the preparation, execution and performance of
this Agreement.
(c) Entire Agreement. This Agreement, together
with the Schedules hereto, sets forth the entire understanding of the parties,
and supersedes all prior agreements, arrangements and communications, whether
oral or written, with respect to the subject matter hereof. This Agreement
shall not be modified or amended except by written agreement of Purchaser and
Seller. Captions appearing in this Agreement are for convenience only and
shall not be deemed to explain, limit or amplify the provisions hereof. All
Schedules to this Agreement are incorporated into and made a part of this
Agreement for all purposes to the same extent as if fully set forth herein.
(d) Severability. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if the invalid or unenforceable provision was omitted.
(e) Binding Effect; Assignment. All the terms,
provisions, covenants and conditions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by and against the parties
hereto and their respective successors and assigns.
(f) Notices. Any notice required or permitted to
be delivered pursuant to the terms of this Agreement shall be considered to
have been sufficiently delivered within five days after posting, if mailed by
U.S. Mail, certified or registered, return receipt requested, postage prepaid
or, upon receipt by overnight courier maintaining records of receipt by
addressee or if delivered by hand or telecopied with the original notice being
mailed the same day by one of the foregoing methods and addressed as follows:
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
19
<PAGE> 20
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLER AT:
Alarm Data Group, Inc.
10741 Tucker Street
Beltsville, Maryland 20705
Attention: Dennis V. Riley
FACSIMILE:
---------------
WITH COPY TO:
Dennis V. Riley
6913 Lady Anne Court
Greenbelt, Maryland 20770
or at such other address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
(g) Further Assurances. Purchaser and Seller
shall execute such other instruments, documents and other papers and shall take
such further actions as may be reasonably required or desirable to carry out
the provisions hereof and to consummate the transactions contemplated hereby.
(h) Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Alabama,
excluding its conflict of laws principles.
20
<PAGE> 21
(i) Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original.
(j) Survival. The representations and warranties
of the parties hereto shall survive the date of this Agreement.
(k) Drafting Presumption. Each of the parties
hereto has participated in the negotiation and drafting of this Agreement and
agree that no one party has prepared this document to the exclusion of the
other party and that in construing this agreement there should be no
presumption based upon which party drafted this Agreement.
(l) Intended Beneficiary. Purchaser and Seller
hereby acknowledge that the Purchase Price for the Purchased Assets may be
funded from a loan provided by State Street Bank and Trust Company to
Purchaser; therefore, in the event that State Street Bank and Trust Company
participates in the funding of this transaction, Purchaser and Seller further
acknowledge that State Street Bank and Trust Company is an intended beneficiary
of this Agreement and shall rely upon the representations, warranties and
agreements of Purchaser and Seller contained herein.
21
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
PURCHASER
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-----------------------------------------
Its: Vice President - Corporate Development
--------------------------------------
SELLER
ALARM DATA GROUP, INC.
By: /s/ Dennis V. Riley
------------------------------------------
Its: President
-----------------------------------------
/s/ Dennis V. Riley
--------------------------------------------
DENNIS V. RILEY
22
<PAGE> 23
LIST OF SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 1(a) - Alarm Accounts
Schedule 1(b) - Contract Monitoring Accounts
Schedule 1(c) - Other Contracts
Schedule 1(d) - Receivables
Schedule 1(e) - Telephone Lines and Numbers
Schedule 2(a) - Prepaid Revenue
Schedule 2(f) - Allocation of Purchase Price
Schedule 3(a) - Escrow Agreement
Schedule 3(b) - Escrow Account Distribution
Schedule 5 - Assumed Liabilities
Schedule 8(g) - Pending Seller Litigation
Schedule 8(k) - Product Warranties
Schedule 8(l) - Insurance
Schedule 8(o) - Chain Accounts
Schedule 9(c) - Seller's Closing Certificate
Schedule 9(j) - Bill of Sale, Assignment and Assumption Agreement
Schedule 9(k) - Noncompetition, Nonsolicitation and Nondisclosure Agreement
Schedule 9(l) - Notice to Subscribers
Schedule 9(o) - Monitoring Agreements Relating to Contract Monitoring Accounts
Schedule 9(p) - Third Party Monitoring Agreement
Schedule 17(b) - Service Receivables
</TABLE>
<PAGE> 1
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made effective as of the 29th
day of September, 1995, by and among MASADA SECURITY, INC., a Delaware
Corporation ("Purchaser"); ALARM DATA GROUP, INC., a Maryland corporation
("Seller"); and SOUTHTRUST BANK OF ALABAMA, N.A. ("Escrow Agent").
RECITALS
WHEREAS, Seller and Purchaser have entered into an Asset Purchase
Agreement dated Sept. 22nd, 1995 (the "Purchase Agreement"), pursuant to which
the Seller agrees to sell and Purchaser agrees to purchase all of the customer
accounts and certain other assets of Seller related to the monitoring of
security alarm systems in Beltsville, Maryland, as more fully described
therein;
WHEREAS, the Purchase Agreement requires Escrow Agent to hold
$__________ of the purchase price in escrow for approximately one year pending
certain possible adjustments in accordance with the Purchase Agreement;
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. ESCROW AGENT: Purchaser and Seller hereby designate and
appoint the Escrow Agent as the Escrow Agent for the purposes herein set forth.
The Escrow Agent hereby accepts such appointment on the terms and conditions
herein set forth. Escrow Agent is not a party to and is not bound by any
agreement between Purchaser and Seller except this Agreement.
2. DEPOSIT IN ESCROW:
(a) Escrow Agent hereby acknowledges the receipt from
Purchaser of the sum of ________________________ ($218,963.82) Dollars (the
"Escrowed Funds"). Escrow Agent agrees to hold and dispose of said sum, and
all interest and gains earned thereon, in accordance with all the terms,
conditions and provisions of this Agreement. Escrow Agent acts hereunder as a
depository. All deposits are warranted by Purchaser to be valid deposits.
(b) Escrow Agent shall invest the Escrowed Funds as
directed by the joint written instructions of Seller and Purchaser. All
earnings received by Escrow Agent as a result of such investment shall be added
to the Escrowed Funds. In the absence of any joint direction by Seller and
Purchaser to the contrary, Escrow Agent, in its discretion, shall invest all
portions of the Escrowed Funds in certificates of deposit (90 day), and/or
money market funds.
<PAGE> 2
3. DISTRIBUTIONS:
(a) On or after Sept. 30, 1996, Purchaser and Seller
shall jointly give signed written notice ("Payment Notice") to Escrow Agent
which Payment Notice shall list the parties entitled to the Escrowed Funds and
a breakdown of the amounts each party is entitled to. Upon receipt of the
Payment Notice, the Escrow Agent shall pay to the appropriate parties the
Escrowed Funds within ten days after the receipt of such Payment Notice. The
Payment Notice shall set forth a brief description of the basis entitling such
parties to be paid the Escrowed Funds.
(b) If the Escrow Agent receives a Payment Notice which
is (i) signed by Purchaser but not by Seller, or (ii) signed by Seller but not
by Purchaser, the Escrow Agent shall give notice, along with a copy of such
Payment Notice, to the other party (the "Non-Signing Party"). If the
Non-Signing Party gives notice to the Escrow Agent of its agreement with the
Payment Notice, or fails to respond to the notice from the Escrow Agent, within
seven days after the date of such notice, then the Escrow Agent shall pay to
Seller (or its designee) the Escrowed Funds, within ten days after the
expiration of such seven day period. If the Non-Signing Party gives notice to
the Escrow Agent of its disagreement with the Payment Notice, within such seven
day period, then the Escrow Agent shall pay the undisputed portion, if any, of
the Escrowed Funds, but shall not pay any portion of the Escrowed Funds subject
to dispute, which disputed funds shall continue to be held by the Escrow Agent
pending resolution of such dispute and further direction from Purchaser and
Seller, or from an authorized arbitrator.
(c) In the event of any disagreement resulting in adverse
claims or demands being made in connection with the subject matter of this
Agreement, or in the event that the Escrow Agent is in doubt as to what action
it should take hereunder, the Escrow Agent may, at its option, refuse to comply
with any claim or demand on it, or refuse to take any other action hereunder,
so long as such disagreement continues or such doubt exists, and in any such
event, the Escrow Agent shall not be or become liable in any way or to any
person for its failure or refusal to act, and the Escrow Agent shall be
entitled to continue to so refrain from acting until (i) the rights of all
parties have been fully and finally decided by an arbitrator selected in
accordance with Section 3(c) of the Purchase Agreement, which is incorporated
herein by this reference, or (ii) all differences shall have been decided and
all doubt resolved by agreement between Purchaser and Seller, and the Escrow
Agent shall have been notified thereof in a writing signed by Purchaser and
Seller. In addition to the foregoing remedies, the Escrow Agent is hereby
authorized in the event of any doubt as to the course of action it should take
under this Agreement, to petition the United States District Court for the
Northern District of Alabama and/or the Circuit Court in and for Jefferson
County, Alabama for instructions or to interplead the funds or assets so held
into such court. For purposes of this Agreement the parties agree to the
jurisdiction of either of said courts over their persons as well as the
Escrowed Funds and agree that service of process by certified mail, return
receipt requested, to the address set forth in Paragraph 9 below shall
constitute adequate service. Purchaser and Seller hereby agree to indemnify
and hold the Escrow Agent harmless from any liability or losses occasioned
thereby
<PAGE> 3
and to pay any and all of its costs, expenses, and reasonable attorney's fees
incurred in any such action and agree that on such petition or interpleader
action that the Escrow Agent, its servants, agents, attorneys, employees and
officers will be relieved of further liability. Escrow Agent is hereby given a
lien upon, security interest in, and right of setoff against, the Escrowed
Funds to secure Escrow Agent's rights to payment or reimbursement for any and
all costs, expenses, and fees incurred by it hereunder.
(d) If a Non-Signing Party shall be determined by (i) a
court of competent jurisdiction, (ii) an arbitrator's binding award, or (iii) a
written release between the parties, to have acted in a frivolous manner and in
bad faith, the other party shall be entitled to reimbursement of all its
reasonable costs incurred in connection with the Payment Notice (including,
without limitation, reasonable attorney's fees).
4. TERMINATION: This Agreement shall terminate on the date that
no Escrowed Funds continue to be held by the Escrow Agent.
5. LIMITATIONS ON LIABILITY OF ESCROW AGENT: In order to induce
the Escrow Agent to act as the escrow agent under this Agreement, Seller and
Purchaser agree as follows:
(a) The Escrow Agent may rely upon and shall be protected
in acting or refraining from acting upon any written notice, instruction or
request received by the Escrow Agent and believed by the Escrow Agent in good
faith to be genuine and signed by Seller and Purchaser. The Escrow Agent shall
not be responsible for the sufficiency, correctness, genuineness or validity of
any notice or instructions delivered to the Escrow Agent. The Escrow Agent
shall not be liable for any error of judgment, or any act or omission under
this Agreement taken in good faith, except for the Escrow Agent's own gross
negligence or willful misconduct.
(b) Seller and Purchaser shall jointly and severally
indemnify and hold harmless the Escrow Agent from and against any claims,
costs, damages, reasonable attorney's fees, expenses, obligations or charges
made against the Escrow Agent by reason of its action or failure to act in
connection with any of the transactions contemplated by this Agreement, unless
caused by the Escrow Agent's gross negligence or willful misconduct.
(c) In the event the Escrow Agent receives or becomes
aware of conflicting instructions, demands or claims with respect to this
Agreement or the sums deposited hereunder, the Escrow Agent shall have the
right to discontinue any and all further acts until such conflict is resolved
to the Escrow Agent's satisfaction. The Escrow Agent shall have the further
right to commence or defend any action or proceeding for the termination of
such conflict. Seller and Purchaser jointly and severally agree to pay all
costs, damages, judgments and expenses, including reasonable attorneys' fees,
suffered or incurred by the Escrow Agent in connection with such action or
proceeding. In the event the Escrow Agent files a suit in interpleader, the
Escrow Agent shall thereupon be fully released and discharged from all further
obligations
<PAGE> 4
imposed by this Agreement with respect to sums deposited with a court of
competent jurisdiction pursuant to such suit in interpleader.
6. ESCROW FEES: The Escrow Agent shall not be entitled to
receive a fee for serving as the Escrow Agent; provided, however, that the
Escrowed Funds shall be subject to the Escrow Agent's standard fees and service
charges as provided in the Escrow Agent's Rules and Regulations Governing
Deposit Accounts.
7. RESIGNATION: The Escrow Agent may resign at any time upon
giving the parties hereto 30 days advance written notice to that effect. In
such event, the successor escrow agent shall be mutually selected by Seller and
Purchaser. However, in no instance shall the Escrow Agent's resignation be
effective until a successor escrow agent has agreed to act but, Escrow Agent
shall have the right to discontinue any and all future acts until such
successor escrow agent has agreed to act.
8. INTEREST INFORMATION: Unless otherwise agreed to in writing
by both parties: (i) the Escrow Agent shall list the employer tax
identification number of the Seller for federal, state and local tax purposes
and for other necessary purposes; and (ii) all interest earned shall be the
sole and exclusive property of the Seller; and (iii) any and all of Escrow
Agent's fees and charges as provided for in Paragraph (6) of this Agreement
shall first be charged against interest earned and then charged against
principal.
9. NOTICE: Any notice or other communication hereunder shall be
in writing and shall be (i) delivered by hand, (ii) delivered by an overnight
courier service with guaranteed next day delivery, (iii) sent by telecopy, or
(iv) mailed by certified mail, postage prepaid, return receipt requested, and
addressed as follows:
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
<PAGE> 5
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLER AT:
Alarm Data Group, Inc.
10741 Tucker Street
Beltsville, Maryland 20705
Attention: Dennis V. Riley
FACSIMILE: 301-595-8219
WITH COPY TO:
Dennis V. Riley
6913 Lady Anne Court
Greenbelt, Maryland 20770
IF TO ESCROW AGENT:
SouthTrust Bank of Alabama, N.A.
420 North 20th Street
Birmingham, Alabama 35203
Attention: Mr. Robert W. Wilkerson
FACSIMILE: (205) 254-5989
or to such other address as may have been furnished to the party giving notice
by the party to whom notice is to be given. Notice shall be deemed given upon
the earlier of (i) three days after deposit in the U.S. Mail by certified mail,
or (ii) actual receipt thereof.
<PAGE> 6
10. MISCELLANEOUS:
(a) SUCCESSORS AND ASSIGNS: This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
(b) COUNTERPARTS: This Agreement may be executed in any
number of counterparts, each of which shall be an original, but which together
shall constitute one and the same instrument.
(c) GOVERNING LAW: This Agreement shall be governed by
and construed and interpreted in accordance with the laws of the State of
Alabama.
(d) AMENDMENT: This Agreement may not be modified,
changed, waived or terminated, in whole or in part, except by a supplemental
agreement signed by all of the parties hereto.
(e) HEADINGS: The headings assigned to Paragraphs of
this Agreement are for convenience only and shall be disregarded in construing
this Agreement.
(f) NO ASSIGNMENT: Neither Seller nor Purchaser shall
pledge, hypothecate or otherwise transfer or attempt to transfer any right,
title or interest hereunder without the prior written consent to the other
party hereto.
<PAGE> 7
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
--------------------------------------------
Its: Vice President of Corporate Development
----------------------------------------
ALARM DATA GROUP, INC.
By: /s/ Dennis V. Riley
--------------------------------------------
Its: President
----------------------------------------
Tax I.D. No.: 51-1785-746
----------------------------------
SOUTHTRUST BANK OF ALABAMA, N.A.
By: /s/ Robert W. Wilkerson
--------------------------------------------
Its: Senior Vice President
----------------------------------------
<PAGE> 1
NONCOMPETITION, NONSOLICITATION
AND NONDISCLOSURE AGREEMENT
This Agreement made as of this 22 day of September, 1995, by and among
MASADA SECURITY, INC., a Delaware corporation ("Masada"), and ALARM DATA GROUP,
INC., a Maryland corporation ("Alarm Data"), and DENNIS V. RILEY ("Riley"),
(Alarm Data and Riley and their affiliates are collectively called the
"Sellers").
STATEMENT OF FACTS
A. Masada is purchasing certain security monitoring accounts more
particularly listed on Schedules 1(a) and 1(b) of the Asset Purchase Agreement
between Masada and Alarm Data which is incorporated herein by this reference
(the "Accounts") from Alarm Data. This Agreement applies to the customer who
is the Account, as well as the Account's location.
B. Riley is the sole shareholder and principal of Alarm Data and
will derive financial benefit from Alarm Data selling the Accounts to Masada.
C. In consideration of the payment of $1,412,762.92 to Alarm
Data at the closing of Masada's purchase of the Accounts from Alarm Data, the
Sellers are willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and for good and
valuable consideration, receipt of which is acknowledged, the parties,
intending to be legally bound, covenant and agree as follows:
1. Nonsolicitation and Nonacceptance. The Sellers agree that
following the Closing Date as defined in the above-mentioned Asset Purchase
Agreement between Masada and Alarm Data, they will not, directly or indirectly
through affiliates, solicit nor accept (if the Accounts contact them) any
business from any of the Accounts, including business for the purpose of
providing electronic security, intercom, central vacuum, home automation, audio
systems or related services (collectively, the "Services"). If contacted by
the Accounts, the Sellers will inform them that the Seller can no longer
provide the Services to the Accounts. The Sellers agree to do so in a polite
manner, and to refer the Accounts to Masada with a positive recommendation.
2. Noncompetition. The Sellers also agree that, for a period of
five (5) years following the date of this Agreement, they will not, directly or
indirectly through affiliates, take any action in competition with Masada in
connection with the Accounts. Without limiting the generality of the
foregoing, the Sellers will not, directly or indirectly through affiliates:
<PAGE> 2
(a) manage, operate, join, control, participate or become
interested in or be connected with, as an employee, partner, officer, director,
stockholder, investor or otherwise, any business providing any of the Services
to the Accounts;
(b) lend their credit or money for the purpose of
establishing or operating any business providing any of the Services to the
Accounts;
(c) furnish consultation or advice to any business except
for Masada providing any of the Services to the Accounts;
(d) permit their names to be used in connection with any
business providing any of the Services to the Accounts; or
(e) sell or rent any equipment ancillary or necessary to
any business providing any of the Services to the Accounts.
3. Nondisclosure.
(a) The Sellers acknowledge that they possess certain
confidential, proprietary and trade secret information, materials and business
concepts with respect to the Accounts, including information regarding sales,
maintenance, service and marketing, customer lists and files, accounting data
and methods, operating procedures, pricing policies, strategic plans,
intellectual property, contracts and manufacturer's warranties (collectively,
the "Proprietary Information"). In fact, the Sellers acknowledge that the
Accounts' information included on Schedules 1(a), 1(b) and 1(d) of the
above-mentioned Asset Purchase Agreement between Masada and Alarm Data
constitutes proprietary information.
(b) The Sellers agree (i) never to publish, copy,
disclose, allow to be disclosed, or use for their own benefit or for the
benefit of any other person, firm, corporation or entity the Proprietary
Information and (ii) to maintain strictly the confidentiality of the
Proprietary Information at all times. The Sellers agree to take all necessary
precautions to protect the Proprietary Information from unauthorized disclosure
or use.
(c) In addition, the Sellers agree to deliver to Masada
on the date of this Agreement all of the Proprietary Information in their
possession, without retaining any copies in any format or any summaries of the
Proprietary Information.
4. Acknowledgment. The Sellers acknowledge and recognize that:
(a) this Agreement is necessary for the protection of the
legitimate business interests of Masada in purchasing the Accounts;
<PAGE> 3
(b) the execution and delivery of this Agreement is a
mandatory condition precedent to Masada's closing its purchase of the Accounts
from Alarm Data, without which such transactions will not close;
(c) the scope of this Agreement regarding duration and
the level of activities restricted is reasonable;
(d) none of the Sellers, individually or jointly, has any
intention of violating this Agreement during the time period set forth above;
and
(e) the breach of this Agreement will be such that Masada
will not have an adequate remedy at law because of the unique nature of the
assets being conveyed and the confusion to the Accounts that a breach would
create.
5. Remedy. The Sellers and Masada agree that the amount of
damages resulting to Masada from the breach of this Agreement by the Sellers is
difficult to ascertain. In the event that Masada in its sole discretion,
elects to pursue a damage award the Sellers agree that Masada is entitled to
liquidated damages from the Sellers of 45 times the monthly recurring revenue
from the affected Accounts. The Sellers acknowledge and agree that the rights
of Masada under this Agreement are of a specialized and unique character and
that immediate and irreparable damage will result to Masada if the Sellers fail
to or refuse to perform their obligations under this Agreement and,
notwithstanding any election by Masada to claim damages from the Sellers as a
result of any such failure or refusal, Masada may, in addition to any other
remedies and damages available, seek an injunction in a court of competent
jurisdiction,without the need to post a bond or other security to restrain any
such failure or refusal. The Sellers represent and warrant that their
expertise and capabilities are such that their obligations under this Agreement
(and the enforcement thereof by injunction or otherwise) will not prevent them
from earning a livelihood. The Sellers also agree that Masada's remedy for a
breach by the Sellers of this Agreement will not be limited to the payment made
from Masada to the Sellers.
6. Severability. If any provisions of this Agreement as applied
to any part or to any circumstances will be adjudged by a court to be invalid
or unenforceable, the same will in no way affect any other provision of this
Agreement, the application of such provision in any other circumstances, or the
validity or enforceability of this Agreement. Masada, and the Sellers intend
this Agreement to be enforced as written. If any provision or any part thereof
is held to be invalid or unenforceable because of the duration thereof or the
level of restrictions, all parties agree that the court making such
determination will have the power to reduce the duration and/or restrictions of
such provision, and/or to delete specific words or phrases and in its modified
form such provision will then be enforceable.
7. Consent to Jurisdiction, Service and Venue. For the purpose
of any suit, action or proceeding arising out of or relating to this Agreement,
the Sellers hereby irrevocably consent and submit to the jurisdiction and venue
of any of the courts of the State of Alabama or of any federal court located in
Alabama. The Sellers hereby irrevocably waive any objection which
<PAGE> 4
they may now or hereafter have to the venue of any such suit, action or
proceeding brought in such court and any claim that such suit, action or
proceeding brought in such court has been brought in an inconvenient forum and
agree that service of process in accordance with the foregoing sentence will be
deemed in every respect effective and valid personal service of process upon
the Sellers. The provisions of this Section will not limit or otherwise affect
the right of Masada to institute and conduct an action in any other appropriate
manner, jurisdiction or court.
8. WAIVER OF JURY TRIAL. MASADA AND THE SELLERS WAIVE ALL RIGHT
TO A TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT.
9. Notices. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
IF TO MASADA AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
<PAGE> 5
IF TO SELLERS AT:
Alarm Data Group, Inc.
10741 Tucker Street
Beltsville, Maryland 20705
Attention: Dennis V. Riley
FACSIMILE: 301-595-8219
WITH COPY TO:
Dennis V. Riley
6913 Lady Anne Court
Greenbelt, Maryland 20770
or at such address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
10. Entire Agreement. This Agreement is an integrated document,
contains the entire agreement between the parties, and wholly cancels,
terminates and supersedes any and all previous and/or contemporaneous oral
agreements, negotiations, commitments and writings between Masada and the
Sellers with respect to such subject matter. No change, modification,
extension, termination, discharge, abandonment or waiver of this Agreement or
any of its provisions, nor any representation, promise or condition relating to
this Agreement, will be binding upon the parties unless made in writing and
signed by the parties.
11. Interpretation. The descriptive headings of the Sections are
for ease of reference only and will in no way affect or be used to construe or
interpret this Agreement. All references to Sections and subsections contained
in this Agreement are references to the Sections and subsections of this
Agreement. The terms and conditions of this Agreement will not be construed
against this drafter. The word "including" means "including without
limitation."
12. Remedies Cumulative. It is agreed that the rights and
remedies herein provided in case of any default or breach by the Sellers of
this Agreement are cumulative and will not affect in any manner any other
remedies that Masada may have by reason of such default or breach by the
Sellers. The exercise of any right or remedy will be without prejudice to the
right to exercise any other right or remedy provided herein, by law or by
equity.
<PAGE> 6
13. Waiver. No waiver of any right or remedy allowed hereunder
will be implied by the failure to enforce any such right or remedy. No express
waiver will affect any such right or remedy other than that to which the waiver
is applicable and only for that occurrence.
14. Parties in Interest. This Agreement is binding upon and
inures to the benefit of Masada and its successors and assigns and the
permitted heirs, successors and assigns of the Sellers.
15. Assignment. Masada has the right to assign this Agreement to
any third party without the consent of the Sellers. The Sellers have no right
to assign this Agreement.
16. Governing Law. This Agreement and the rights and the
obligations of the parties are governed by and construed and enforced in
accordance with the laws of the State of Alabama without regard to its
conflicts of law provisions.
17. Joint and Several Obligations. The Sellers acknowledge that
all of their agreements and covenants contained in this Agreement are made on a
joint and several basis.
18. Expenses. Masada and the Sellers each agree to pay all of
their respective costs and expenses incident to the negotiation and preparation
of this Agreement and to the performance and compliance with all agreements and
conditions contained herein on their part to be performed or complied with,
including the fees and costs of their counsel and accountants; provided,
however, that the Sellers agree to pay all of Masada's reasonable legal fees
and costs in this event Masada must go to court to enforce this Agreement.
19. Counterparts; Telecopy. This Agreement may be executed in one
or more counterparts, each of which when taken together all comprise one
instrument. Delivery of executed signature pages hereof by facsimile
transmission will constitute effective and binding execution and delivery.
20. Consultation. The Sellers acknowledge that they have: (a)
carefully read and fully understand all of the provisions of this Agreement,
and (b) had an opportunity to consult with their respective attorneys prior to
executing this Agreement.
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
------------------------------------------------
Title: Vice President of Corporate Development
----------------------------------------
ALARM DATA GROUP, INC.
By: /s/ Dennis V. Riley
-----------------------------------------------
Title: President
----------------------------------------
/s/ Dennis V. Riley
---------------------------------------------------
DENNIS V. RILEY, an individual
<PAGE> 1
MONITORING AGREEMENT
This Monitoring Agreement ("Agreement") is made and entered into on
this the 29th day of September, 1995, by and between MASADA SECURITY, INC., a
Delaware corporation ("Masada") and ALARM DATA GROUP, INC., a Maryland
corporation ("ADG").
RECITALS
WHEREAS, Masada and ADG have entered into an Asset Purchase Agreement
dated September 29, 1995 (the "Purchase Agreement"), pursuant to which ADG
agreed to sell and Masada agreed to purchase certain customer accounts
("Accounts") located in Washington, D.C. and its surrounding areas, as more
fully described therein; and
WHEREAS, the Purchase Agreement requires that ADG shall continue to
monitor the Accounts until each of the Accounts is reprogrammed to Masada's
central monitoring station;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Duration. This Agreement shall become effective
contemporaneous with the Closing of the proposed purchase of Accounts. Masada
shall have the unilateral right to terminate this Agreement in whole or in part
by providing ADG with 30 days' advance written notice of its intent to
terminate.
2. Monitoring Fees. During the term of this Agreement, ADG
agrees to continue performing monitoring services to the Accounts in its normal
and customary manner, in
<PAGE> 2
exchange for which Masada agrees to pay ADG monthly fees as set forth on
Exhibit "A". All such fees shall be prorated and paid on a monthly basis.
3. Obligations. ADG's obligations under this Agreement shall be
to continue in its normal and customary manner to monitor and respond to
signals received from the security alarm systems ("Systems") associated with
the Accounts not yet programmed to Masada's central monitoring station and to
reprogram selected Accounts, as requested by Masada, to Masada's central
monitoring station. Upon receipt of a signal from a System, ADG shall make
every reasonable effort to promptly notify, by telephone or other reasonable
means, the agencies and/or persons whose names and telephone numbers are set
forth on the emergency information data for such Account unless there is
reasonable cause to believe that the receipt of such signal does not warrant
such action. Upon the request of Masada, ADG shall provide Masada with a
written summary of the signals received from all Systems during the period of
this Agreement. Consistent with industry standards, ADG may also take such
other action as they deem appropriate in responding to a signal from a System.
4. System Damage. In the event that any System becomes disabled
or substantially damaged so that further monitoring to such System is
impractical, Masada shall notify ADG of such disability or damage and ADG shall
cooperate with Masada in attempting to reestablish service to such System.
5. Indemnification. ADG shall indemnify and hold Masada harmless
from and against any and all losses, liabilities, damages and expenses,
including reasonable attorneys' fees, that Masada may suffer or become liable
for as a result or in connection with any intentional conduct, fraud or
negligence on behalf of ADG, its officers, employees, agents,
2
<PAGE> 3
subcontractors or representatives arising in connection with the monitoring or
reprogramming of the Systems.
6. Account Modifications. Masada shall notify ADG immediately of
any modification or termination of any Account. ADG shall take whatever action
is required due to such modification or termination including, but not limited
to, changing the emergency information data of an Account or disconnecting an
Account.
7. Assignment. ADG shall not assign this Agreement in whole or
in part. Masada shall have the right to assign this Agreement in whole or in
part to any other corporation, limited liability company, partnership,
association, proprietorship, or other business entity.
8. Miscellaneous.
(a) Conflict with Purchase Agreement. If this Agreement
is found to be in conflict with the Purchase Agreement, then the provisions of
the Purchase Agreement shall control to the extent there is such a conflict.
(b) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns (where permitted).
(c) Governing Law. This Agreement shall be governed by
and construed and interpreted in accordance with the laws of the State of
Alabama.
(d) Amendment. This Agreement may not be modified,
changed, waived, or terminated, in whole or in part, except by a supplemental
agreement signed by all of the parties hereto.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
---------------------------------------------
Its: Vice President of Corporate Development
----------------------------------------
ALARM DATA GROUP, INC.
By: /s/ Dennis V. Riley
---------------------------------------------
Its: President
----------------------------------------
4
<PAGE> 1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made and entered into
this 11th day of September, 1995, by and between MASADA SECURITY, INC., a
Delaware corporation ("Purchaser") and LAFAYETTE SECURITY AND ELECTRONICS
SYSTEMS, INC., a Louisiana corporation ("Seller").
Recitals
Seller is engaged in the business of operating a security alarm system
monitoring business in New Orleans, Louisiana and the surrounding area (the
"Business").
Seller desires to sell to Purchaser and Purchaser desires to buy from
Seller subject to the approval from the United States Bankruptcy Court located
in the Eastern District of the State of Louisiana ("Bankruptcy Court") certain
of the customer account contracts and other assets of Seller pertaining to the
Business, and Purchaser and Seller desire to make certain other arrangements
between them relating to the purchase and sale of such assets, all upon the
terms and conditions hereinafter set forth.
Agreement
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which are hereby acknowledged, and intending to be
legally bound, agree as follows:
Section 1. Agreement to Purchase and Sell. In accordance with
the terms and conditions contained herein and in reliance on the respective
representations and warranties of the parties hereto and subject to the prior
approval of the Bankruptcy Court, Seller hereby agrees to sell, convey,
transfer and assign to Purchaser, and Purchaser hereby agrees to purchase,
accept and acquire from Seller in the manner provided herein, the following
assets (collectively referred to as the "Purchased Assets"):
(a) Alarm Accounts. All right, title and
interest of Seller in and to the contracts for the rendering of security
monitoring services to existing customers of Seller which meet all of the
requirements listed in Section 8(i) and are specifically listed on Schedule
1(a)(i) hereto (the "Alarm Accounts"). If a contract does not meet all of the
requirements of Section 8(i), then Purchaser in its sole discretion has the
option of waiving any or all of the requirements
<PAGE> 2
of Section 8(i), treating such contract as an Alarm Account and listing such
contract on Schedule 1(a)(ii);
(b) Inventory. All right, title and interest of
Seller in and to all inventory pertaining to the Business maintained by Seller
at its branch offices, all of which are listed on Schedule 1(b) hereto (the
"Inventory"), with the Inventory, including, without limitation, items
purchased by Seller for resale and all purchase orders relating to the
foregoing;
(c) Contracts-in-Process. All right, title and
interest of Seller in and to those contracts and benefits of Seller related to
all accepted orders for the sale or installation by Seller of alarm systems
which are not yet installed or not completely installed as of the Closing Date
(as defined herein), all of which are listed on Schedule 1(c) hereto (the
"Contracts-in-Process");
(d) Other Contracts. All right, title and
interest of Seller in and to all executory contracts, agreements and leases,
all of which are listed on Schedule 1(d) hereto (the "Other Contracts"), the
Other Contracts to include, without limitation all non-competition or
non-solicitation agreements accruing to the benefit of the Seller.
(e) Receivables. The accounts receivable, trade
accounts, notes receivable and other debts owed to Seller for monitoring
services rendered pertaining to the Alarm Accounts and Contracts-in-Process,
all of which are listed on Schedule 1(e) hereto (the "Receivables");
(f) Telephone Lines and Numbers. All right,
title and interest of Seller in and to the local and long distance business
telephone numbers, digital dialer telephone lines that transmit signals from
customer locations to Seller's central station, and "ring-down" lines all of
which are listed on Schedule 1(f) hereto (the "Telephone Lines and Numbers");
and
(g) Alarm Account Information. All files,
records and incidental documentation of Seller pertaining to the Alarm Accounts
and Contracts-in-Process (the "Alarm Account Information"), including, without
limitation, all computer lists, contract information, accounting history,
service records and information, credit records and information, and purchase
and sales records and information,
Section 2. Purchase Price and Payment.
(a) Purchase Price for the Purchased Assets
Excluding Branch Assets. The purchase price for the Purchased Assets excluding
Branch Assets (the "Purchase Price Excluding Inventory") shall be the product
of 26 times the aggregate of the Monthly Recurring Revenue of the Alarm
Accounts less an amount equal to the prepaid revenue relating to the Alarm
Accounts (as set forth on Schedule 2(a) hereto) computed on a per diem basis to
the Closing Date. For purposes of this Agreement, the term "Monthly Recurring
Revenue" with
2
<PAGE> 3
respect to the Alarm Accounts acquired from Seller by Purchaser shall be the
charge for gross alarm monitoring services, (including, without limitation,
maintenance and other alarm related services), exclusive of sales or intangible
taxes, equipment finance charges, and any direct wire telephone line charges
associated with monitoring, payable by the customer for each applicable billing
period expressed in terms of a monthly amount regardless of whether the billing
period is annual, semi-annual, quarterly or monthly.
(b) Purchase Price-Inventory. The purchase price
for the Inventory (the "Purchase Price-Inventory") shall be for a price
mutually agreeable by the parties, if the parties fail to agree then the
Inventory shall be excluded from this Agreement.
(c) Purchase Price-All Purchased Assets. The sum
of (i) the Purchase Price Excluding Inventory and (ii) the Purchase
Price-Inventory shall hereafter be referred to as the "Purchase Price-All
Purchased Assets".
(d) Payment of Purchase Price-All Purchased
Assets.
(i) The aggregate of (i) 85% of the
Purchase Price for Purchased Assets Excluding Inventory, (ii) the Purchase
Price-Inventory, and (iii) the adjustments calculated in accordance with
Section 2(e) (collectively referred to as the "Initial Payment") shall be paid
by Purchaser to Seller by wire transfer or other mutually agreeable means on
the Closing Date.
(ii) The Purchase Price-All Purchased
Assets less the Initial Payment (the "Deferred Payment Amount") shall be paid
in accordance with Section 3 hereof.
(e) Adjustment to Purchase Price. The Purchase
Price-All Purchased Assets shall be adjusted for items of expense and income
prorated as of the Closing Date in the manner provided below:
(i) Liabilities or credits for personal
property taxes, if any, in respect of the Purchased Assets shall be prorated on
the basis of the current taxable year, to and including the Closing Date;
provided that if the assessed value of any Purchased Asset or rate of tax with
respect thereto shall not have been determined prior to the Closing Date, the
value and rate shall be determined on the basis of the amount of the previous
year in which the same was determined; and
(ii) Other liabilities or credits,
prepaid items and deferred charges relating to the Purchased Assets existing on
the Closing Date shall be adjusted as of the Closing Date by prorating the
aforementioned items for credit to Seller or Purchaser, as the case may be, in
accordance with generally accepted accounting principles.
(f) Allocation of Purchase Price-All Purchased
Assets. The Purchase Price-All Purchased Assets, subject to the adjustments
set forth in Section 2(e), shall be allocated
3
<PAGE> 4
as set forth on Schedule 2(f). Purchaser and Seller agree for income tax
purposes they shall report the transactions contemplated by this Agreement in a
manner consistent with such allocation.
Section 3. Deferred Payment Amount.
(a) Escrow Agreement. On or prior to the Closing
Date, Seller and Purchaser agree to execute an Escrow Agreement substantially
in the form attached hereto as Schedule 3(a) (the "Escrow Agreement") and
Purchaser agrees to deposit with SouthTrust Bank of Alabama, N.A. (the "Escrow
Agent"), the Deferred Payment Amount to be held in an escrow account (the
"Escrow Account") pursuant to the terms of the Escrow Agreement (the "Deferred
Payment Amount" together with all earnings thereon shall collectively
hereinafter be referred to as the "Escrow Amount").
(b) Monthly Report. Purchaser shall provide to
Seller or Seller's representative a monthly report of the status of any
adjustments, credits, charges, etc. to the Escrow Amount. This report will be
due on or before the 30th day of the following month.
(c) Payment and Escrow Amount. Within 30 days of
the first year anniversary of the Closing Date, Purchaser shall submit to
Seller substantially in the form attached hereto as Schedule 3(c) along with
all appropriate supporting documentation, a report reflecting: (i) the Escrow
Amount; (ii) the total Repurchase Amounts, if any, credited to Purchaser
calculated in accordance with Section 6(a) (the "Total Repurchase Amounts");
(iii) the MRR Downward Adjustment, if any, calculated in accordance with
Section 6(b); (iv) the Conversion Adjustment, if any, credited to Purchaser
calculated in accordance with Section 16; (v) the resulting difference between
Schedule 3(c)(i) and the credits associated with Section 3(c)(ii),(iii) and
(iv) (the "Resulting Difference"). If Seller does not notify Purchaser of a
dispute regarding such report within ten business days from the date such
report is submitted by Purchaser to Seller or if Seller notifies Purchaser of
its acceptance of such report, such report shall be deemed complete and
accurate and Seller and Purchaser shall notify Escrow Agent to pay the sums
computed below to Seller or Purchaser, as the case may be, and the Escrow
Account shall then be closed after payment by the Escrow Agent of all funds
held by it in the Escrow Account. If the Resulting Difference is a positive
amount then Seller and Purchaser shall instruct the Escrow Agent to first pay
the Seller the Resulting Difference and the remainder of the Escrow Amount
shall be paid by Escrow Agent to Purchaser. If the Resulting Difference is a
equal to zero or is a negative amount, then Seller and Purchaser shall instruct
the Escrow Agent to pay Purchaser the entire Escrow Amount and Seller shall owe
no further amount to Purchaser.
(d) Dispute. All disputes and differences with
respect to the computation of the Resulting Difference and the Escrow Account
shall be determined by a final order from the Bankruptcy Court.
4
<PAGE> 5
Section 4. The Closing.
(a) Date and Place. The closing of the purchase
and sale of the Purchased Assets shall take place within ten business days of
the final order from the Bankruptcy Court approving this proposed transaction
or such other date as shall be mutually acceptable to Purchaser and Seller (the
"Closing Date") and shall take place in New Orleans, Louisiana; provided,
however that if the final order from the Bankruptcy Court is not issued by
October 21, 1995 then Purchaser shall have the unilateral option of terminating
this Agreement in accordance with Section 4(d).
(b) Closing Deliveries. On the Closing Date,
Seller shall make the deliveries specified by Section 9 and Purchaser shall
make the deliveries specified by Section 10.
(c) Closing Procedure. All proceedings to be
taken and all documents to be delivered and executed on the Closing Date shall
be deemed to have been taken, delivered and executed simultaneously, and no
proceeding shall be deemed taken nor documents deemed executed or delivered
until all have been taken, delivered and executed. On the Closing Date, Seller
and Purchaser shall execute and deliver the instruments and documents
referenced in Sections 9 and 10 and Purchaser shall make the Initial Payment
and shall deposit the Deferred Payment Amount with the Escrow Agent.
(d) Termination. In the event that (i) the final
order from the Bankruptcy Court approving this transaction is not issued by
October 21, 1995 or (ii) any of the conditions set forth in Section 9 are not
satisfied or waived in writing prior to or on the Closing Date, then Purchaser
may unilaterally terminate this Agreement by written notice to Seller. In the
event that Purchaser exercises such right of termination, this Agreement
thereupon shall become wholly void and be of no further force or effect, except
for the confidentiality provisions contained in Section 13(c) and there shall
be no further liability on the part of Seller or its respective officers,
directors, stockholders, employees or agents with respect to the transactions
contemplated hereby.
(e) Specific Performance. In the event that
Purchaser complies with all of the requirements set forth in Section 10 and the
Bankruptcy Court has issued a final order approving this transaction, then
Purchaser shall have the right of specific performance against the Seller as to
the Purchased Assets. In the event that Seller complies with all of the
requirements of Section 9, then Seller shall have the right of specific
performance against Purchaser.
Section 5. Assumption of Liabilities. Purchaser shall
not assume any liability, debt or obligation of Seller except the
responsibility of rendering security monitoring services pursuant to the Alarm
Accounts and Contracts-in-Process set forth on Schedules 1(a)(i), 1(a)(ii) and
1(c) and those liabilities and obligations of Seller arising after the Closing
Date that are set forth on Schedule 5 hereto. Seller shall continue to be
responsible for, and shall indemnify
5
<PAGE> 6
and save harmless Purchaser from and against, all of Seller's known and unknown
liabilities, debts and obligations, arising prior to the Closing Date that are
not specifically assumed by Purchaser as set forth on Schedules 1(a)(i),
1(a)(ii), 1(c) and 5, including without limitation, all creditors of Seller as
listed in the records of the Bankruptcy Court and the ongoing litigation with
Security Center Protection Services, Inc., Ademco Distribution, Inc., William
B. Allen Supply Co., Inc., Southern Radio Supply Co. Inc., Quincy Jones
Broadcasting, Inc. d/b/a WNOL-TV, Phase II Broadcasting, Inc. and Taylor Temps,
Inc..
Section 6. Seller's Warranty of Alarm Accounts and Monthly
Recurring Revenue.
(a) Alarm Accounts. Seller warrants that
beginning on the Closing Date and for the 12 month period immediately after the
Closing Date (the "Guarantee Period") all Alarm Accounts purchased by Purchaser
pursuant to this Agreement and described on Schedule 1(a) shall continue to
meet the requirements specified in Section 8(i) unless such requirements have
been waived in writing by Purchaser in its sole discretion at the time of
Closing and that all payments from customers shall be made in a timely manner.
For purposes of this Agreement, payments by customer shall be considered timely
if they are received by Purchaser on or before the 60th day following the
invoice due date. The "invoice due date" is generally considered the 10th day
of the month following the date of invoice (i.e. the invoice for services to be
performed in the fourth calendar quarter would be sent and dated in September
with an invoice due date of October 10th). For purposes of this Agreement a
"Defaulted Contract" shall be defined as (i) any Alarm Account that no longer
meets the requirements specified in Section 8(i) unless such requirements have
been waived in writing by Purchaser in its sole discretion at the time of
Closing; or (ii) any Alarm Account in which payments from customers shall not
have been made in a timely manner; provided, however, that a Defaulted Contract
shall not include any Alarm Account which (A) payments have not been made in a
timely manner specifically and exclusively due to rate (monitoring and/or
service) increases instituted by Purchaser or (B) has defaulted due to an act
or omission of Purchaser, if no act or omission of Seller or Cliff C. Northon
contributed to such default. Purchaser shall give Seller written monthly
notice of any and all Defaulted Contracts as soon as reasonably possible.
Seller shall have 30 days from the receipt of such written notice to return
such Defaulted Contracts to compliance with the requirements of Alarm Accounts
as specified in Section 8(i) and timeliness; provided, however, that Seller
shall not, either directly or indirectly, make payments to or provide other
assistance to or on the behalf of the customers who have Defaulted Contracts.
If at the end of such 30 day period Purchaser determines that any or all such
Alarm Accounts are still Defaulted Contracts, then Seller shall either
repurchase the Defaulted Contracts from Purchaser for 26 times the Monthly
Recurring Revenue of the Defaulted Contracts as of the Closing Date (the
"Repurchase Amount") or shall replace the Defaulted Contracts with other
contracts that meet all of the requirements listed in Section 8(i) unless
waived in writing by Purchaser and have Monthly Recurring Revenue greater than
or equal to that of such Defaulted Contracts. If the Seller does not
repurchase or replace the Defaulted Contracts within such 30 day period, Seller
shall be charged against the Escrow Account an amount equal to the Repurchase
Amount less the product of the revenue of such Defaulted Contracts received by
6
<PAGE> 7
Purchaser after the Closing Date multiplied by six percent (6%) ([MRR of
Defaulted Contracts x 26] - [post Closing revenue of Defaulted Contracts x
6%]).
(b) Monthly Recurring Revenue Downward
Adjustment. Seller warrants that the Monthly Recurring Revenue used in
computing the Purchase Price Excluding Branch Assets shall equal or exceed the
actual Monthly Recurring Revenue of the Alarm Accounts as of the Closing Date.
A charge shall be made against the Escrow Account for the benefit of Purchaser
for each Alarm Account that it is determined the Monthly Recurring Revenue used
in computing the Purchase Price Excluding Branch Assets exceeded the actual
Monthly Recurring Revenue for such Alarm Accounts as of the Closing Date. The
amount of such charge shall be determined by computing the amount by which the
Monthly Recurring Revenue of the Alarm Accounts used in computing the Purchase
Price Excluding Branch Assets exceeds the actual Monthly Recurring Revenue of
such Alarm Accounts as of the Closing Date and multiplying such sum by 26 (the
"MRR Downward Adjustment"); provided, however, that no charge shall be made
against the Escrow Account if the Monthly Recurring Revenue is reduced because
Purchaser has reduced the monthly charges to all of the Alarm Accounts.
Section 7. Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to Seller that on the date hereof and
on each day thereafter to the Closing Date:
(a) Organization and Standing. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and Purchaser has all requisite corporate power
and authority to own, operate and lease its properties and carry on its
business as now being conducted and to enter into this Agreement and to perform
its obligations hereunder.
(b) Corporate Authority Relative to this
Agreement. The execution, delivery and performance by Purchaser of this
Agreement has been duly authorized and no further corporate action is necessary
on the part of the Purchaser to make this agreement valid and binding upon
Purchaser in accordance with its terms.
(c) No Violation. Neither the execution nor the
delivery of this Agreement by Purchaser nor the consummation of the
transactions contemplated herein, nor compliance by Purchaser with any of the
provisions hereof:
(i) violates or conflicts with or
results in the breach or termination of any term or provision of, nor
constitutes a default or acceleration of the performance required under, the
certificate of incorporation, bylaws or resolutions of the Purchaser, or any
indenture, mortgage, deed, trust or other contract or agreement to which
Purchaser is a party or by which its properties are bound;
(ii) violates any order, writ, injunction
or decree of any court, administrative agency or governmental body; or
7
<PAGE> 8
(iii) requires the consent of any other
person, entity or governmental authority.
(d) Brokerage Fees. Purchaser is
not obligated nor has it agreed to pay any brokerage commissions, finders fees
or other similar fees or charges in connection with the purchase of the
Purchased Assets pursuant to this Agreement.
(e) Conduct of Business. Between the Closing
Date and the one year anniversary thereafter, Purchaser shall cause the Alarm
Accounts to be serviced in Purchaser's usual and ordinary manner, including
alarm account monitoring provided by a central monitoring station that meets
Underwriters Laboratories, Inc. requirements.
Section 8. Representations and Warranties of Seller. Seller
represents and warrants to Purchaser that on the date hereof and on each day
thereafter to the Closing Date:
(a) Organization and Standing. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Louisiana. Seller has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business as
it has been and currently is being conducted and subject to a final order from
the Bankruptcy Court, to enter into this Agreement and to perform its
obligations hereunder.
(b) Authority Relative to this Agreement. The
execution, delivery and performance by Seller of this Agreement has been duly
authorized by the board of directors and stockholders of Seller, and no further
corporate action is necessary on the part of Seller to make this Agreement
valid and binding upon the Seller in accordance with its terms.
(c) No Violation. Neither the execution nor the
delivery of this Agreement by Seller nor the consummation of the transactions
contemplated herein, nor compliance by Seller with any of the provisions
hereof:
(i) violates or conflicts with or
results in the breach or termination of any term or provision of, nor
constitutes a default or acceleration of the performance required under, the
articles of incorporation, bylaws or resolutions of Seller, or under any
indenture, mortgage, deed, trust or other contract or agreement to which Seller
is a party or by which its properties are bound;
(ii) violates any order, writ,
injunction or decree of any court, administrative agency or governmental body;
or
(iii) requires the consent of any other
person, entity or governmental authority except for a final order approving
this transaction from the Bankruptcy Court.
8
<PAGE> 9
(d) Brokerage Fees. Seller is not obligated nor
has it agreed to pay brokerage commissions, finders fees, or other similar fees
or charges in connection with the purchase of the Purchased Assets pursuant to
this Agreement.
(e) Title to Purchased Assets. Subject to a
final order from the Bankruptcy Court, Seller warrants that on the date hereof
it has good and marketable title to all of the Purchased Assets, and the
Purchased Assets shall not be subject to any pledge, option, conditional sale
agreement, security interest, consensual lien, judgment lien, encumbrance or
charge of any kind. Seller warrants that the Alarm Accounts acquired by
Purchaser are valid and are binding upon and enforceable against the customers
of Seller executing same in accordance with their terms, and the obligations of
the customers of Seller thereunder are not subject to set-off or claims
resulting from the conduct of Seller's business prior to their conveyance to
Purchaser.
(f) Compliance with the Law. The Business has
been and is being conducted in compliance with all applicable laws, regulations
and requirements of each jurisdiction in which it is carried on and is not in
breach of any such laws, regulations or requirements. Seller warrants to hold
Purchaser harmless from and against any violations of applicable laws,
regulations or requirements arising out of non-compliance therewith prior to
the Closing Date.
(g) Actions, etc. Except as set forth on
Schedule 8(g):
(i) there are no actions, suits,
proceedings or investigations pending against or relating to the Business or
the Purchased Assets and Seller has not received any notice or written or oral
communication reflecting an intention or threat to institute any such action,
suite proceeding or investigation;
(ii) there are no actions, suits,
proceedings, or investigations pending before any court or governmental agency
in which it is sought to restrain or prohibit the carrying out of this
Agreement or the consummation of the transactions contemplated herein in
connection therewith and there is no such action, suit, proceeding or
investigation threatened;
(iii) Seller is not subject to any
judgment, order, writ, court decree, governmental decree or injunction relating
to the Business;
(iv) there are no known defects or
deficiencies in the products or services provided by Seller prior to the date
hereof as a result of which any claim or suit may arise.
(h) Tax Returns. Seller has timely filed all tax
reports and returns required to be filed and has timely paid all taxes
(including, without limitation, income, payroll withholding, sales and use
taxes) and all other charges due or claimed to be due from it by federal, state
or local taxing authorities in respect of the periods covered by such returns.
9
<PAGE> 10
(i) Alarm Account Requirements. Unless waived in
writing by Purchaser and listed on Schedule 1(a)(ii), each of the Alarm
Accounts must:
(i) be evidenced by a properly executed
written monitoring agreement which is in compliance with all laws, rules and
regulations, including without limitation, all truth-in-lending requirements;
(ii) not been repudiated by the customer.
An Alarm Account shall be deemed repudiated if: (A) the customer has abandoned
the premises at which the security monitoring system has been installed; (B)
the customer is insolvent; or (C) the customer has cancelled or issued notice
of termination of an Alarm Account, notwithstanding the fact that an Alarm
Account may remain enforceable against the customer;
(iii) have generated cash receipts
representing service charges for at least one full billing cycle or prepayment
for at least one month's service; and
(iv) have no charges that have been
outstanding and unpaid for more than 60 days from the invoice due date as of
the Closing Date.
(j) Benefit Plans. No profit-sharing, bonus,
stock option, pension, retirement, stock purchase, hospitalization insurance or
similar plan or agreement, formal or informal, providing benefits to any
current or former employee, or any other employee benefit or employee welfare
plan subject to the provisions of the Employee Retirement Income Security Act
of 1974, as amended, maintained by Seller shall obligate Purchaser to make any
contributions thereto or payments in respect thereof with regard to employees
of Seller who may be hired by Purchaser on or after the Closing Date.
(k) Product Warranties and Medical Information.
Except for the one year warranty from date of installation on materials and
workmanship relating to the Alarm Accounts and Contracts-in-Process, there are
no written warranties or oral warranties with respect to the Alarm Accounts or
Contracts-in-Process. Seller has not entered into any contract or other
agreement with any or all of its customers which would require Purchaser to
provide any medical or health information on its customers to any third party
and Seller is not obligated to keep or obtain medical or health information on
any or all of its customers.
(l) Insurance. Seller has "occurrence basis"
general liability insurance coverage covering the Purchased Assets in an amount
equal to or greater than one million dollars ($1,000,000.00) per single
occurrence and workers compensation insurance coverage equal to or greater than
that required by law. Attached hereto as Schedule 8(l) is (i) a list of all of
the insurance policies covering the Purchased Assets and (ii) a list of all
insurance claims filed against the Purchased Assets within the last five years.
All such policies are in full force and effect and Seller has not received
notice of cancellation with respect thereto. For purposes of this Agreement,
"occurrence basis" means if a claim arose after the Closing Date for an event
10
<PAGE> 11
which occurred prior to the Closing Date, Seller's applicable insurance policy
in existence on the date such event occurred would cover such claim.
(m) Disclosure. No representation or warranty of
Seller, and no statement contained in this Agreement and no information
contained in any schedule furnished to Purchaser by or on behalf of Seller
pursuant to this Agreement, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading. Each of the separate representations and
warranties set forth in the various subsections of this Section 8 is intended
to be, and shall be interpreted as, an independent representation and warranty
as to matters referred to therein, and the applicability or inapplicability of
any particular subsection of this Section 8 shall not affect the interpretation
of any other such subsection.
Section 9. Conditions Precedent to Obligations of Purchaser.
Purchaser's obligation to purchase the Purchased Assets under this Agreement is
subject to the fulfillment, prior to or at the Closing Date of each of the
following conditions:
(a) Representations True on the Closing Date.
The representations and warranties of Seller contained in this Agreement shall
be true on the date hereof, and at the time of the Closing Date as though made
on the Closing Date.
(b) Performance. Seller shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
(c) Seller's Closing Certificate. Seller shall
have delivered to Purchaser a Closing Certificate of the president or any
authorized representative of Seller dated as of the Closing Date substantially
in the form attached hereto as Schedule 9(c).
(d) Schedules. Seller shall have updated the
Schedules hereto in accordance with Section 13(g) hereof. Purchaser shall have
determined, in good faith, that taking into account the changes to the
information in the updated Schedules there has not been greater than a 10%
reduction in the Monthly Recurring Revenue of the Alarm Accounts as compared the
information listed on the Schedules as of the date of the execution of this
Agreement.
(e) Consents to Assignments. Seller shall have
taken all action necessary and appropriate, and obtained all necessary
consents, waivers and approvals required under any leases or other agreements
to consummate the sale of the Purchased Assets pursuant to this Agreement in
writing on terms acceptable to Purchaser in its sole discretion.
(f) Bankruptcy Court Approval. Seller shall have
submitted all documents to be filed with the Bankruptcy Court relating to this
Agreement to Purchaser in
11
<PAGE> 12
advance of filing such documents with the Bankruptcy Court. Purchaser shall
have the opportunity to review these documents and request reasonable changes.
If Purchaser and Seller cannot agree on the language or terms to be contained
in the documents to be filed with the Bankruptcy Court, then Purchaser and
Seller shall both have the right to submit documents to the Bankruptcy Court
and make an appearance in the Bankruptcy Court.
(g) Litigation. Seller shall have received a
final order approving this transaction from the Bankruptcy Court and no other
litigation or proceeding shall be pending or threatened to restrain, set aside
or invalidate the transactions contemplated by this Agreement or any portion
thereof, including, without limitation, any claims by creditors of Seller
against the Purchased Assets.
(h) Opinion of Seller's Counsel. Seller shall
have delivered to Purchaser an opinion of counsel for Seller, dated as of the
Closing Date and in form satisfactory to Purchaser's counsel, to the effect
that:
(i) Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Louisiana; the location and character of the properties owned or leased and the
business conducted by Seller do not make qualification or licensing as a
foreign corporation necessary in any other state or jurisdiction; and Seller
has the corporate power and authority to own its properties and to carry on its
business as now being conducted;
(ii) This Agreement has been duly
executed and delivered by Seller and constitutes a legal and binding obligation
of Seller, enforceable in accordance with its terms and has been approved by a
final order from the Bankruptcy Court;
(iii) All instruments of transfer and
other documents necessary to effect the transfer to Purchaser of the Purchased
Assets including but not limited to a final order from the Bankruptcy Court,
have been duly authorized, executed and delivered by Seller and are in proper
form to transfer to Purchaser all right, title and interest of Seller in and to
the Purchased Assets;
(iv) Except as set forth on Schedule
8(g), such counsel does not know of any litigation, proceeding, governmental
investigation or claim pending or threatened against or relating to the
Business, the Purchased Assets or the transactions contemplated by this
Agreement; and
(v) The execution and delivery of this
Agreement and the consummation by Seller of the transactions contemplated
hereby:
(A) do not and will not violate any
provision of the articles of incorporation or bylaws of Seller; and
12
<PAGE> 13
(B) do not and will not constitute an
event permitting termination or result in the acceleration of any lease,
agreement, license or instrument known to such counsel to which Seller is a
party
(i) Certified Resolutions. Seller shall have
delivered to Purchaser copies, certified by the secretary or an assistant
secretary of Seller, of the resolutions of Seller's board of directors and
stockholders authorizing the execution and delivery of this Agreement.
(j) Certificates of Good Standing. Seller shall
have delivered to Purchaser a certificate of good standing of Seller issued by
the Secretary of State of the State of Louisiana dated as of a date within 30
days prior to Closing Date.
(k) Instruments of Transfer. Seller shall have
delivered to Purchaser a Bill of Sale, Assignment and Assumption Agreement
substantially in the form attached hereto as Schedule 9(k) (the "Bill of Sale")
and other good and sufficient instruments of transfer and conveyance, as in the
reasonable opinion of Purchaser's counsel, shall be effective to vest in
Purchaser good and marketable title to the Purchased Assets.
(l) Non-Solicitation Agreement. Seller shall
have delivered to Purchaser the Non-Solicitation Agreement substantially in
the form attached hereto as Schedule 9(l) executed by Cliff C. Northon in his
individual capacity, and by Seller.
(m) Consulting Agreement. Seller shall have
delivered to Purchaser a Consulting Agreement substantially in the form
attached hereto as Schedule 9(m) executed by Cliff C. Northon in his individual
capacity.
(n) Notice to Subscribers. Seller shall have
executed a notice jointly prepared by Purchaser and Seller, in the form
attached hereto as Schedule 9(n) and Seller shall have provided sufficient
envelopes with Seller's name and logo on such envelopes, so that the notice may
be sent to each customer set forth on Schedules 1(a)(i), 1(a)(ii) and 1(c).
(o) Confidentiality of Alarm Accounts. The
names, addresses, and telephone numbers of the customers represented by the
account numbers and Monthly Recurring Revenue as set forth on Schedules
1(a)(i), 1(a)(ii) and 1(c) shall have been kept confidential and in no way made
available to the public as a result of the ongoing bankruptcy proceedings of
Seller or otherwise.
Section 10. Conditions Precedent to Obligations of Seller.
Seller's obligations to sell and transfer the Purchased Assets to Purchaser
under this Agreement are subject to the fulfillment, prior to or on the Closing
Date of each of the following conditions:
13
<PAGE> 14
(a) Representations True on the Closing Date.
Purchaser's representations and warranties contained in this Agreement shall be
true at the date hereof, and at the Closing Date as though made on the Closing
Date.
(b) Performance. Purchaser shall have performed
and complied with all agreements and conditions required by this Agreement to
be performed or complied with by it prior to or on the Closing Date.
(c) Bill of Sale. Purchaser shall have executed
and delivered the Bill of Sale.
(d) Bankruptcy Court Approval. The Bankruptcy
Court shall have approved this transaction in form and substance reasonably
satisfactory to Purchaser.
(e) Minimum Purchase Price. If the Purchase
Price Excluding Branch Assets is less than $700,000.00, then Seller shall not
be obligated to consummate the transaction proposed according to this
Agreement; provided, however, that the Purchaser, in its sole discretion, can
enforce this transaction by making a lump sum payment to Seller of $700,000.00.
Section 11. Indemnification. Seller, on the one hand, and
Purchaser, on the other hand (the "Indemnitor") shall indemnify, hold harmless,
defend and bear all costs of defending the other party (the "Indemnitee"),
together with its successors and assigns, from, against and with respect to any
and all damage, loss, deficiency, expense (including any reasonable attorney
and accountant fees, legal costs or expenses), action, suit, proceeding,
demand, assessment or judgment to or against the Indemnitee arising out of or
in connection with any breach or violation of, or nonperformance by, the
Indemnitor of any of its representations, warranties, covenants or agreements
contained in this Agreement or in any document, certificate or schedule
required to be furnished pursuant to this Agreement.
Section 12. Assignment. Purchaser may, without the consent of
Seller, assign its rights and the assumption of its obligations under this
Agreement, to any corporation, limited liability company, partnership,
association, proprietorship or other business entity who acquires all or a
substantial part (30% or more) of the total assets of Purchaser in connection
with the sale of all or a substantial part of its business. Upon any such
assignment Purchaser shall be relieved and discharged from any further
obligations under this Agreement. Furthermore, Purchaser may, without the
consent of Seller, collaterally assign its rights under this Agreement to one
or more banks, insurance companies or other financial institution for purposes
of financing. Seller shall not assign its rights or delegate its obligations
under this Agreement without the prior written consent of Purchaser.
14
<PAGE> 15
Section 13. Agreements Prior to Closing.
(a) Fulfillment of Conditions. Seller shall use
its best efforts to take or cause to be taken all action reasonably necessary
or appropriate to cause each of the conditions set forth in Section 9 to be
fulfilled prior to or on the Closing Date. Purchaser shall use its best
efforts to take or cause to be taken all action reasonably necessary or
appropriate to cause each of the conditions set forth in Section 10 to be
fulfilled prior to or on the Closing Date.
(b) Access to Information. Between the date of
this Agreement and the Closing, and upon advance request, Seller shall provide
the officers, directors, employees, representatives, attorneys and accountants
of Purchaser access at all reasonable times to the records, files,
correspondence, audits and properties of Seller which pertain to the Business.
(c) Confidentiality. Purchaser agrees to hold
all information it obtains pursuant to its review of the records, files,
correspondence, audits and properties of Seller in confidence not to disclose
such information to any third party, except for:
(i) information known by Purchaser and
obtained from sources other than Seller;
(ii) disclosure that is authorized by
Seller in writing;
(iii) disclosure to Purchaser's
professional advisors and to persons who are expected to be lenders to
Purchaser; or
(iv) disclosure of information where such
information is required to be filed with any governmental agency or required to
be produced before any court or tribunal or otherwise required by law to be
disclosed. Except in connection with Seller's filing of tax returns and as
otherwise required by law, Seller shall not disseminate to any person other
than officers, directors, employees, representatives, attorneys and accountants
of Seller any information relating to the Purchase Price or other consideration
contemplated to be paid under this Agreement.
(d) Conduct of Business. Between the date of
this Agreement and the Closing Date, Seller shall cause the Business to be
conducted in its usual and ordinary course including, but not limited to, not
increasing the price and/or rate of any product or service relating to the
Alarm Accounts and Contracts-in-Process without the prior written consent of
Purchaser.
(e) Preservation of Existing Relationships.
Between the date of this Agreement and the Closing Date, Seller shall use its
best efforts to continue existing relationships with customers, suppliers,
employees and others having business relations with respect to Seller.
15
<PAGE> 16
(f) No Negotiations with Third Parties. So long
as this Agreement is in effect, neither Seller nor any of its officers,
directors or agents shall enter into any negotiations, arrangements,
understandings, commitments, options or other agreements regarding the sale,
transfer or other disposition of any of the shares of stock of Seller or of all
or substantially all of the assets of Seller that relate in any way to the
Business, or regarding any merger or consolidation of Seller with or into any
corporation or other business entity.
(g) Updated Schedules. Seller agrees to update
the Schedules hereto as of the Closing Date to reflect changes occurring after
the date hereof; provided, however, that if any of the Schedules attached
hereto on the date hereof are materially inaccurate or incorrect, Seller may
correct such Schedules only with Purchaser's prior written consent. Any
updated Schedules shall be attached to this Agreement and for all purposes be
deemed to be a part of this Agreement.
Section 14. No Joint Venture. The relationship between the
parties hereto is that of purchaser/seller and does not constitute a
partnership or joint venture. Both parties agree not to make any
representations or statements to any other person which contradict the
foregoing.
Section 15. Seller's Employees. Seller shall remain exclusively
liable to pay to each of Seller's employees that are to be discharged on or
after the Closing Date all accrued and unpaid vacation pay, sick pay and all
other accrued obligations to which such employees are entitled as a result of
the termination of their employment with Seller. Purchaser shall be under no
obligation to employ after the Closing Date any of Seller's employees. After
this Agreement is signed and approved by the Bankruptcy Court and prior to the
Closing Date, Purchaser may interview any of Seller's employees regarding
possible employment with Purchaser as of the Closing Date, so long as Purchaser
does not materially interfere with the conduct of Seller's business. If
Purchaser and any of Seller's employees reach agreement as to terms of
employment to commence on or after the Closing Date, no inference shall be
created that Purchaser has assumed any of Seller's obligations to its
employees; provided, however, that if Purchaser hires any of Seller's employees
then Seller shall provide Purchaser a copy of any and all personnel records
relating to such employees. Seller shall furnish to Purchaser on request a
list of all employees of the Business, setting forth their compensation, job
description, hire date and a summary of all benefits provided.
Section 16. Post-Closing Covenants. Seller agrees to use its
best efforts to cooperate in the conversion of the Alarm Accounts and
Contracts-in-Process to Purchaser's central station and billing system within
30 days of the Closing Date. If requested by Purchaser, Seller agrees to
perform its normal monitoring services in accordance with the Monitoring
Agreement attached hereto as Schedule 16 to the Alarm Accounts and
Contracts-in-Process for a price of $7 per month per Alarm Account or
Contract-in-Process until the earlier of (i) notification by Purchaser to cease
providing such services or (ii) 60 days after Closing. Seller agrees to
transfer to
16
<PAGE> 17
Purchaser all "ring down lines" for fire monitoring of Alarm Accounts without a
change in priority or position. In connection with the conversion of the Alarm
Accounts and the Contracts-in-Process, Seller shall either (i) at its sole
expense, secure new telephone numbers and/or lines for those Alarm Accounts and
Contracts-in-Process, which share telephone numbers and/or lines with third
parties; or (ii) credit the Purchase Price in accordance with Section 2(e) or
credit the Escrow Account (the "Conversation Adjustment"). Such Conversion
Adjustment shall equal $50 per Alarm Account or Contract-in-Process that
requires a post-Closing alarm panel "chip change" service call by Purchaser;
provided, however that Seller shall have the option to perform any necessary
"chip change" service call and if performed within ten business days after
requested in writing by Purchaser then there would be no charge against the
Purchase Price or Escrow Account. Additionally, if requested to do so by
Purchaser, Seller will assist in the orderly transition of the Alarm Account
and Contracts-in-Process base by updating customer account information and
mailing the fourth quarter invoices associated with the Alarm Accounts and
Contracts-in-Process.
Section 17. Risk of Loss. The risk of any loss or damage to the
Purchased Assets resulting from fire, theft, explosion, earthquake, windstorm,
flood, accident, act of God, war, seizure, activities of the armed forces or
other casualty, reasonable wear and tear excepted, shall be borne by Seller at
all times prior to the Closing Date, and Seller shall be entitled to all
insurance proceeds resulting from such loss or damage.
Section 18. Miscellaneous.
(a) Pronouns. Whenever used herein and unless
otherwise indicated by the context, the masculine pronoun shall include and
also mean the feminine and the neuter, and the singular shall include and also
mean the plural.
(b) Expenses. Each party shall pay all expenses
incurred by it in connection with the preparation, execution and performance of
this Agreement.
(c) Entire Agreement. This Agreement, together
with the Schedules hereto, sets forth the entire understanding of the parties,
and supersedes all prior agreements, arrangements and communications, whether
oral or written, with respect to the subject matter hereof. This Agreement
shall not be modified or amended except by written agreement of Purchaser and
Seller. Captions appearing in this Agreement are for convenience only and
shall not be deemed to explain, limit or amplify the provisions hereof. All
Schedules to this Agreement are incorporated into and made a part of this
Agreement for all purposes to the same extent as if fully set forth herein.
(d) Severability. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if the invalid or unenforceable provision was omitted.
17
<PAGE> 18
(e) Binding Effect; Assignment. All the terms,
provisions, covenants and conditions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by and against the parties hereto and
their respective successors and assigns.
(f) Notices. Any notice required or permitted to
be delivered pursuant to the terms of this Agreement shall be considered to
have been sufficiently delivered within five days after posting, if mailed by
U.S. Mail, certified or registered, return receipt requested, postage prepaid
or, upon receipt by overnight courier maintaining records of receipt by
addressee or if delivered by hand or telecopied with the original notice being
mailed the same day by one of the foregoing methods and addressed as follows:
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLER AT:
Lafayette Security and Electronics Systems, Inc.
197 Chateau Latour
Kenner, Louisiana 70065
Attention: Cliff C. Northon
18
<PAGE> 19
WITH COPY TO:
Turner, Young, Hebbler & Babin
424 Gravier Street
New Orleans, Louisiana 70130
Attention: Emile L. Turner, Jr., Esq.
FACSIMILE: (504) 581-4962
or at such other address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
(g) Further Assurances. Purchaser and Seller
shall execute such other instruments, documents and other papers and shall take
such further actions as may be reasonably required or desirable to carry out
the provisions hereof and to consummate the transactions contemplated hereby.
(h) Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Louisiana, excluding its conflict of laws principles.
(i) Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original.
(j) Survival. The representations and warranties
of the parties hereto shall survive the date of this Agreement.
(k) Drafting Presumption. Each of the parties
hereto has participated in the negotiation and drafting of this Agreement and
agree that no one party has prepared this document to the exclusion of the
other party and that in construing this agreement there should be no
presumption based upon which party drafted this Agreement.
(l) Intended Beneficiary. Purchaser and Seller
hereby acknowledge that the Purchase Price for the Purchased Assets may be
funded from a loan provided by State Street Bank and Trust Company to
Purchaser; therefore, in the event that State Street Bank and Trust Company
participates in the funding of this transaction, Purchaser and Seller further
acknowledge that State Street Bank and Trust Company is an intended beneficiary
of this Agreement and shall rely upon the representations, warranties and
agreements of Purchaser and Seller contained herein.
19
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
PURCHASER
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
------------------------------------------
Its: Vice President Corporate Development
-------------------------------------
SELLER
LAFAYETTE SECURITY AND
ELECTRONICS SYSTEMS, INC.
By: /s/ Cliff C. Northon
-----------------------------------------
Its: President
------------------------------------
20
<PAGE> 21
LIST OF SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 1(a)(i) - Alarm Accounts - Full Compliance
Schedule 1(a)(ii) - Alarm Accounts - Waived Noncompliance
Schedule 1(b) - Inventory
Schedule 1(c) - Contracts-in-Process
Schedule 1(d) - Other Contracts
Schedule 1(e) - Receivables
Schedule 1(f) - Telephone Lines and Numbers
Schedule 2(a) - Prepaid Revenue
Schedule 2(f) - Allocation of Purchase Price
Schedule 3(a) - Escrow Agreement
Schedule 3(c) - Escrow Account Distribution
Schedule 5 - Assumed Liabilities
Schedule 8(g) - Pending Seller Litigation
Schedule 8(l) - Insurance
Schedule 9(c) - Seller's Closing Certificate
Schedule 9(k) - Bill of Sale, Assignment and Assumption Agreement
Schedule 9(l) - Noncompetition, Nonsolicitation and Nondisclosure Agreement
Schedule 9(m) - Consulting Agreement
Schedule 9(n) - Notice to Subscribers
Schedule 16 - Monitoring Agreement
</TABLE>
<PAGE> 1
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made effective as of the 10th
day of October, 1995, by and among MASADA SECURITY, INC., a Delaware
Corporation ("Purchaser"); LAFAYETTE SECURITY AND ELECTRONICS SYSTEMS, INC., a
Louisiana corporation (collectively referred to as "Seller"); and SOUTHTRUST
BANK OF ALABAMA, N.A. ("Escrow Agent").
RECITALS
WHEREAS, Seller and Purchaser have entered into an Asset Purchase
Agreement dated September 11, 1995 (the "Purchase Agreement"), pursuant to
which the Seller agrees to sell and Purchaser agrees to purchase subject to the
approval from the United States Bankruptcy Court located in the Eastern
District of the State of Louisiana ("Bankruptcy Court") all of the customer
accounts and certain other assets of Seller related to the monitoring of
security alarm systems in New Orleans, Louisiana, as more fully described
therein;
WHEREAS, the Purchase Agreement requires Escrow Agent to hold
$116,333.14 of the purchase price in escrow for approximately one year pending
certain possible adjustments in accordance with the Purchase Agreement;
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. ESCROW AGENT: Purchaser and Seller hereby designate and
appoint the Escrow Agent as the Escrow Agent for the purposes herein set forth.
The Escrow Agent hereby accepts such appointment on the terms and conditions
herein set forth. Escrow Agent is not a party to and is not bound by any
agreement between Purchaser and Seller except this Agreement.
2. DEPOSIT IN ESCROW:
(a) Escrow Agent hereby acknowledges the receipt from
Purchaser of the sum of $116,333.14 Dollars (the "Escrowed Funds"). Escrow
Agent agrees to hold and dispose of said sum, and all interest and gains earned
thereon, in accordance with all the terms, conditions and provisions of this
Agreement. Escrow Agent acts hereunder as a depository. All deposits are
warranted by Purchaser to be valid deposits.
(b) Escrow Agent shall invest the Escrowed Funds as
directed by the joint written instructions of Seller and Purchaser. All
earnings received by Escrow Agent as a result of such investment shall be added
to the Escrowed Funds. In the absence of any joint direction by Seller and
Purchaser to the contrary, Escrow Agent, in its discretion, shall invest all
portions of the Escrowed Funds in certificates of deposit (90 day), and/or
money market funds.
<PAGE> 2
3. DISTRIBUTIONS:
(a) On or after October 10, 1996, Purchaser and Seller
shall jointly give signed written notice ("Payment Notice") to Escrow Agent
which Payment Notice shall list the parties entitled to the Escrowed Funds and
a breakdown of the amounts each party is entitled to. Upon receipt of the
Payment Notice, the Escrow Agent shall pay to the appropriate parties the
Escrowed Funds within ten days after the receipt of such Payment Notice. The
Payment Notice shall set forth a brief description of the basis entitling such
parties to be paid the Escrowed Funds.
(b) If the Escrow Agent receives a Payment Notice which
is (i) signed by Purchaser but not by Seller, or (ii) signed by Seller but not
by Purchaser, the Escrow Agent shall give notice, along with a copy of such
Payment Notice, to the other party (the "Non-Signing Party"). If the
Non-Signing Party gives notice to the Escrow Agent of its agreement with the
Payment Notice, or fails to respond to the notice from the Escrow Agent, within
seven days after the date of such notice, then the Escrow Agent shall pay to
Seller (or its designee) the Escrowed Funds, within ten days after the
expiration of such seven day period. If the Non-Signing Party gives notice to
the Escrow Agent of its disagreement with the Payment Notice, within such seven
day period, then the Escrow Agent shall pay the undisputed portion, if any, of
the Escrowed Funds, but shall not pay any portion of the Escrowed Funds subject
to dispute, which disputed funds shall continue to be held by the Escrow Agent
pending resolution of such dispute and further direction from Purchaser and
Seller, or from the Bankruptcy Court.
(c) In the event of any disagreement resulting in adverse
claims or demands being made in connection with the subject matter of this
Agreement, or in the event that the Escrow Agent is in doubt as to what action
it should take hereunder, the Escrow Agent may, at its option, refuse to comply
with any claim or demand on it, or refuse to take any other action hereunder,
so long as such disagreement continues or such doubt exists, and in any such
event, the Escrow Agent shall not be or become liable in any way or to any
person for its failure or refusal to act, and the Escrow Agent shall be
entitled to continue to so refrain from acting until (i) the rights of all
parties have been fully and finally decided by the Bankruptcy Court, or (ii)
all differences shall have been decided and all doubt resolved by agreement
between Purchaser and Seller, and the Escrow Agent shall have been notified
thereof in a writing signed by Purchaser and Seller. In addition to the
foregoing remedies, the Escrow Agent is hereby authorized in the event of any
doubt as to the course of action it should take under this Agreement, to
petition the United States District Court for the Northern District of Alabama
and/or the Circuit Court in and for Jefferson County, Alabama for instructions
or to interplead the funds or assets so held into such court. For purposes of
this Agreement the parties agree to the jurisdiction of either of said courts
over their persons as well as the Escrowed Funds and agree that service of
process by certified mail, return receipt requested, to the address set forth
in Paragraph 9 below shall constitute adequate service. Purchaser and Seller
hereby agree to indemnify and hold the Escrow Agent harmless from any liability
or losses occasioned thereby and to pay any and all of its costs, expenses, and
reasonable attorney's fees incurred in any such action and agree that on such
petition or interpleader action that the Escrow Agent, its servants,
2
<PAGE> 3
agents, attorneys, employees and officers will be relieved of further liability.
Escrow Agent is hereby given a lien upon, security interest in, and right of
setoff against, the Escrowed Funds to secure Escrow Agent's rights to payment or
reimbursement for any and all costs, expenses, and fees incurred by it
hereunder.
(d) If a Non-Signing Party shall be determined by (i) a
court of competent jurisdiction, (ii) the Bankruptcy Court, or (iii) a written
release between the parties, to have acted in a frivolous manner and in bad
faith, the other party shall be entitled to reimbursement of all its reasonable
costs incurred in connection with the Payment Notice (including, without
limitation, reasonable attorney's fees).
4. TERMINATION: This Agreement shall terminate on the date that
no Escrowed Funds continue to be held by the Escrow Agent.
5. LIMITATIONS ON LIABILITY OF ESCROW AGENT: In order to induce
the Escrow Agent to act as the escrow agent under this Agreement, Seller and
Purchaser agree as follows:
(a) The Escrow Agent may rely upon and shall be protected
in acting or refraining from acting upon any written notice, instruction or
request received by the Escrow Agent and believed by the Escrow Agent in good
faith to be genuine and signed by Seller and Purchaser. The Escrow Agent shall
not be responsible for the sufficiency, correctness, genuineness or validity of
any notice or instructions delivered to the Escrow Agent. The Escrow Agent
shall not be liable for any error of judgment, or any act or omission under
this Agreement taken in good faith, except for the Escrow Agent's own gross
negligence or willful misconduct.
(b) Seller and Purchaser shall jointly and severally
indemnify and hold harmless the Escrow Agent from and against any claims,
costs, damages, reasonable attorney's fees, expenses, obligations or charges
made against the Escrow Agent by reason of its action or failure to act in
connection with any of the transactions contemplated by this Agreement, unless
caused by the Escrow Agent's gross negligence or willful misconduct.
(c) In the event the Escrow Agent receives or becomes
aware of conflicting instructions, demands or claims with respect to this
Agreement or the sums deposited hereunder, the Escrow Agent shall have the
right to discontinue any and all further acts until such conflict is resolved
to the Escrow Agent's satisfaction. The Escrow Agent shall have the further
right to commence or defend any action or proceeding for the termination of
such conflict. Seller and Purchaser jointly and severally agree to pay all
costs, damages, judgments and expenses, including reasonable attorneys' fees,
suffered or incurred by the Escrow Agent in connection with such action or
proceeding. In the event the Escrow Agent files a suit in interpleader, the
Escrow Agent shall thereupon be fully released and discharged from all further
obligations imposed by this Agreement with respect to sums deposited with a
court of competent jurisdiction pursuant to such suit in interpleader.
3
<PAGE> 4
6. ESCROW FEES: The Escrow Agent shall not be entitled to
receive a fee for serving as the Escrow Agent; provided, however, that the
Escrowed Funds shall be subject to the Escrow Agent's standard fees and service
charges as provided in the Escrow Agent's Rules and Regulations Governing
Deposit Accounts.
7. RESIGNATION: The Escrow Agent may resign at any time upon
giving the parties hereto 30 days advance written notice to that effect. In
such event, the successor escrow agent shall be mutually selected by Seller and
Purchaser. However, in no instance shall the Escrow Agent's resignation be
effective until a successor escrow agent has agreed to act but, Escrow Agent
shall have the right to discontinue any and all future acts until such
successor escrow agent has agreed to act.
8. INTEREST INFORMATION: Unless otherwise agreed to in writing
by both parties: (i) the Escrow Agent shall list the employer tax
identification number of the Seller for federal, state and local tax purposes
and for other necessary purposes; and (ii) all interest earned shall be the
sole and exclusive property of the Seller; and (iii) any and all of Escrow
Agent's fees and charges as provided for in Paragraph (6) of this Agreement
shall first be charged against interest earned and then charged against
principal.
9. NOTICE: Any notice or other communication hereunder shall be
in writing and shall be (i) delivered by hand, (ii) delivered by an overnight
courier service with guaranteed next day delivery, (iii) sent by telecopy, or
(iv) mailed by certified mail, postage prepaid, return receipt requested, and
addressed as follows:
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
4
<PAGE> 5
IF TO SELLER AT:
Lafayette Security and Electronics Systems, Inc.
197 Chateau Latour
Kenner, Louisiana 70065
Attention: Cliff C. Northon
WITH COPY TO:
Turner, Young, Hebbler & Babin
424 Gravier Street
New Orleans, Louisiana 70130
Attention: Emile L. Turner, Jr., Esq.
FACSIMILE: (504) 581-4962
IF TO ESCROW AGENT:
SouthTrust Bank of Alabama, N.A.
420 North 20th Street
Birmingham, Alabama 35203
Attention: Mr. Robert W. Wilkerson
FACSIMILE: (205) 254-5989
or to such other address as may have been furnished to the party giving notice
by the party to whom notice is to be given. Notice shall be deemed given upon
the earlier of (i) three days after deposit in the U.S. Mail by certified mail,
or (ii) actual receipt thereof.
10. MISCELLANEOUS:
(a) SUCCESSORS AND ASSIGNS: This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
(b) COUNTERPARTS: This Agreement may be executed in any
number of counterparts, each of which shall be an original, but which together
shall constitute one and the same instrument.
5
<PAGE> 6
(c) GOVERNING LAW: This Agreement shall be governed by
and construed and interpreted in accordance with the laws of the State of
Alabama.
(d) AMENDMENT: This Agreement may not be modified,
changed, waived or terminated, in whole or in part, except by a supplemental
agreement signed by all of the parties hereto.
(e) HEADINGS: The headings assigned to Paragraphs of
this Agreement are for convenience only and shall be disregarded in construing
this Agreement.
(f) NO ASSIGNMENT: Neither Seller nor Purchaser shall
pledge, hypothecate or otherwise transfer or attempt to transfer any right,
title or interest hereunder without the prior written consent to the other
party hereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the day and year first above written.
MASADA SECURITY, INC.
By: /s/
----------------------------------
Its: Vice President of Acquisitions
-------------------------------
LAFAYETTE SECURITY AND ELECTRONICS
SYSTEMS, INC.
By: /s/
---------------------------------
Its: President
--------------------------------
Tax I.D. No.: 72-1055289
--------------------------------
SOUTHTRUST BANK OF ALABAMA, N.A.
By: /s/ Robert W. Wilkerson
--------------------------------
Its: Sr. Vice Pres.
--------------------------------
6
<PAGE> 1
NONCOMPETITION, NONSOLICITATION
AND NONDISCLOSURE AGREEMENT
This Agreement made as of this 10th day of October, 1995, by and among
MASADA SECURITY, INC., a Delaware corporation ("Masada"), and LAFAYETTE
SECURITY ELECTRONICS SYSTEMS, INC., a Louisiana corporation ("Lafayette"), and
CLIFF C. NORTHON, an individual ("Northon"). (Lafayette and Northon and their
affiliates are collectively called the "Sellers").
STATEMENT OF FACTS
A. Masada is purchasing certain security monitoring accounts
located in (i) Jefferson Parish, Orleans Parish, St. Tammany Parish and St.
Bernard Parish, State of Louisiana; (ii) Gulf Breeze and Pensacola, State of
Florida; (iii) Fort Smith, State of Arkansas; and (iv) Brandon, Picayune,
Hattiesburg, Jackson, Vicksburg, Brookhaven, Clinton, Cleveland, Columbia,
Greenville, McComb and Bay St. Louis, State of Mississippi, listed on Schedules
1(a)(i) and 1(a)(ii) and 1(c) of the Asset Purchase Agreement entered into
between Masada and Lafayette which is incorporated herein by this reference
(collectively referred to as the "Accounts") from Lafayette. This Agreement
applies to the customer who is the Account, as well as the Account's location.
B. Northon is the sole shareholder and principal of Lafayette and
will derive financial benefit from Lafayette selling the Accounts to Masada.
C. Masada understands that Lafayette and Northon intend on
continuing in the business of providing security monitoring services to others
aside from the Accounts.
D. In consideration of the payment of $741,554.25 to Lafayette at
the closing of Masada's purchase of the Accounts from Lafayette, the Sellers
are willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and for good and
valuable consideration, receipt of which is acknowledged, the parties,
intending to be legally bound, covenant and agree as follows:
1. Nonsolicitation and Nonacceptance. Notwithstanding that
Lafayette and Northon intend on continuing in the business of providing
security monitoring services, the Sellers agree that following the date of this
Agreement for a period of two (2) years, they will not solicit nor accept (if
the Accounts contact them) any business from any of the Accounts, including
business for the purpose of providing electronic security, intercom, central
vacuum, home automation, audio systems or related services (collectively, the
"Services"). If contacted by the Accounts, the Sellers will inform them that
the Seller can no longer provide the Services to the Accounts.
<PAGE> 2
The Sellers agree to do so in a polite manner, and to refer the Accounts to
Masada with a positive recommendation.
2. Noncompetition. Notwithstanding that Lafayette and Northon
intend on continuing in the business of providing security monitoring services,
the Sellers also agree that, for a period of two (2) years following the date
of this Agreement, they will not, directly or indirectly through affiliates,
take any action in competition with Masada in connection with the Accounts.
Without limiting the generality of the foregoing, the Sellers will not,
directly or indirectly through affiliates:
(a) manage, operate, join, control, participate or become
interested in or be connected with, as an employee, partner, officer, director,
stockholder, investor or otherwise, any business providing any of the Services
to the Accounts;
(b) lend their credit or money for the purpose of
establishing or operating any business providing any of the Services to the
Accounts;
(c) furnish consultation or advice to any business except
for Masada providing any of the Services to the Accounts; or
(d) permit their names to be used in connection with any
business providing any of the Services to the Accounts.
;provided, however, that Northon may become an employee (but not a partner,
member, officer, director, stockholder or investor) of another organization
engaged generally in security monitoring services after one year following the
date of this Agreement, but in no manner shall Northon provide any of the
aforementioned services related, directly or indirectly, to the Accounts for
the balance of the period mentioned in this Section 2.
3. Nondisclosure.
(a) The Sellers acknowledge that prior to the execution
of this Agreement, they possess certain information, materials, and business
concerns, with respect to the Accounts which is confidential, proprietary, and
trade secret. This information, materials, and business concerns may include
information regarding sales, maintenance, service and marketing, customer lists
and files, accounting data and methods, operating procedures, pricing policies,
strategic plans, listing of accounts, contracts, and manufacturers' warranties
(collectively, the "Proprietary Information.")
(b) The Sellers agree to deliver to Masada on the date of
this Agreement all of the Proprietary Information in their possession, without
retaining any copies in any format or any summaries of the Proprietary
Information.
2
<PAGE> 3
(c) The Sellers agree (i) not to recreate, publish, copy,
reveal, tender, assign, transfer any Proprietary Information, to any other
person, firm, corporation, or entity, and (ii) to maintain strictly the
confidentiality of all Proprietary Information, for a period of five years.
The Sellers agree to take all reasonable precautions to protect the Proprietary
Information transferred by Sellers.
4. Acknowledgment. The Sellers acknowledge and recognize that:
(a) this Agreement is necessary for the protection of the
legitimate business interests of Masada in purchasing the Accounts;
(b) the execution and delivery of this Agreement is a
mandatory condition precedent to Masada's closing its purchase of the Accounts
from Lafayette, without which such transactions will not close;
(c) the scope of this Agreement regarding duration and
the level of activities restricted is reasonable;
(d) none of the Sellers, individually or jointly, has any
intention of violating this Agreement during the time period set forth above;
and
(e) the breach of this Agreement will be such that Masada
will not have an adequate remedy at law because of the unique nature of the
assets being conveyed and the confusion to the Accounts that a breach would
create.
5. Remedy. The Sellers and Masada agree that the amount of
damages resulting to Masada from the breach of this Agreement by the Sellers is
difficult to ascertain. In the event that Masada in its sole discretion,
elects to pursue a damage award the Sellers agree that Masada is entitled to
liquidated damages from the Sellers of 36 times the monthly recurring revenue
from the affected Accounts. The Sellers acknowledge and agree that the rights
of Masada under this Agreement are of a specialized and unique character and
that immediate and irreparable damage will result to Masada if the Sellers fail
to or refuse to perform their obligations under this Agreement and,
notwithstanding any election by Masada to claim damages from the Sellers as a
result of any such failure or refusal, Masada may, in addition to any other
remedies and damages available, seek an injunction in a court of competent
jurisdiction to restrain any such failure or refusal. The Sellers represent
and warrant that their expertise and capabilities are such that their
obligations under this Agreement (and the enforcement thereof by injunction or
otherwise) will not prevent them from earning a livelihood. The Sellers also
agree that Masada's remedy for a breach by the Sellers of this Agreement will
not be limited to the payment made from Masada to the Sellers.
6. Severability. If any provisions of this Agreement as applied
to any part or to any circumstances will be adjudged by a court to be invalid
or unenforceable, the same will in no way affect any other provision of this
Agreement, the application of such provision in any other
3
<PAGE> 4
circumstances, or the validity or enforceability of this Agreement. Masada,
and the Sellers intend this Agreement to be enforced as written. If any
provision or any part thereof is held to be invalid or unenforceable because of
the duration thereof or the level of restrictions, all parties agree that the
court making such determination will have the power to reduce the duration
and/or restrictions of such provision, and/or to delete specific words or
phrases and in its modified form such provision will then be enforceable.
7. Consent to Jurisdiction, Service and Venue. For the purpose
of any suit, action or proceeding arising out of or relating to this Agreement,
the Sellers and Purchaser hereby irrevocably consent and submit to the
jurisdiction and venue of the United States Bankruptcy Court, Eastern District
of the State of Louisiana. The Sellers appoint and constitute Cliff C. Northon
as their agent to accept and acknowledge on their behalf all service of process
in connection with any such matter, copies of which process will be immediately
mailed or delivered to the Sellers. The Sellers hereby irrevocably waive any
objection which they may now or hereafter have to the venue of any such suit,
action or proceeding brought in such court and any claim that such suit, action
or proceeding brought in such court has been brought in an inconvenient forum
and agree that service of process in accordance with the foregoing sentence
will be deemed in every respect effective and valid personal service of process
upon the Sellers. The provisions of this Section will not limit or otherwise
affect the right of Masada to institute and conduct an action in any other
appropriate manner, jurisdiction or court.
8. WAIVER OF JURY TRIAL. MASADA AND THE SELLERS WAIVE ALL RIGHT
TO A TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT.
9. Notices. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
IF TO MASADA AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
4
<PAGE> 5
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLERS AT:
Lafayette Security and Electronics Systems, Inc.
197 Chateau Latour
Kenner, Louisiana 70001
Attention: Cliff C. Northon
FACSIMILE: 504-464-9922
WITH COPY TO:
Turner, Young, Hebbler & Babin
424 Gravier Street
New Orleans, Louisiana 70130
Attention: Emile L. Turner, Jr., Esq.
FACSIMILE: (504) 581-4962
or at such address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
10. Entire Agreement. This Agreement is an integrated document,
contains the entire agreement between the parties, and wholly cancels,
terminates and supersedes any and all previous and/or contemporaneous oral
agreements, negotiations, commitments and writings between Masada and the
Sellers with respect to such subject matter. No change, modification,
extension, termination, discharge, abandonment or waiver of this Agreement or
any of its provisions, nor any representation, promise or condition relating to
this Agreement, will be binding upon the parties unless made in writing and
signed by the parties.
5
<PAGE> 6
11. Interpretation. The descriptive headings of the Sections are
for ease of reference only and will in no way affect or be used to construe or
interpret this Agreement. All references to Sections and subsections contained
in this Agreement are references to the Sections and subsections of this
Agreement. The terms and conditions of this Agreement will not be construed
against this drafter. The word "including" means "including without
limitation."
12. Remedies Cumulative. It is agreed that the rights and
remedies herein provided in case of any default or breach by the Sellers of
this Agreement are cumulative and will not affect in any manner any other
remedies that Masada may have by reason of such default or breach by the
Sellers. The exercise of any right or remedy will be without prejudice to the
right to exercise any other right or remedy provided herein, by law or by
equity.
13. Waiver. No waiver of any right or remedy allowed hereunder
will be implied by the failure to enforce any such right or remedy. No express
waiver will affect any such right or remedy other than that to which the waiver
is applicable and only for that occurrence.
14. Parties in Interest. This Agreement is binding upon and
inures to the benefit of Masada and its successors and assigns and the
permitted heirs, successors and assigns of the Sellers.
15. Assignment. Masada has the right to assign this Agreement to
any third party without the consent of the Sellers. The Sellers have no right
to assign this Agreement.
16. Governing Law. This Agreement and the rights and the
obligations of the parties are governed by and construed and enforced in
accordance with the laws of the State of Louisiana without regard to its
conflicts of law provisions.
17. Joint and Several Obligations. The Sellers acknowledge that
all of their agreements and covenants contained in this Agreement are made on a
joint and several basis.
18. Expenses. Masada and the Sellers each agree to pay all of
their respective costs and expenses incident to the negotiation and preparation
of this Agreement and to the performance and compliance with all agreements and
conditions contained herein on their part to be performed or complied with,
including the fees and costs of their counsel and accountants; provided,
however, that the Sellers agree to pay all of Masada's reasonable legal fees
and costs in the event Seller is found to be in violation of this Agreement and
Masada agrees to pay all of Seller's reasonable legal fees and costs if Seller
is not found to be in violation of this Agreement.
19. Counterparts; Telecopy. This Agreement may be executed in one
or more counterparts, each of which when taken together all comprise one
instrument. Delivery of executed signature pages hereof by facsimile
transmission will constitute effective and binding execution and delivery.
6
<PAGE> 7
20. Consultation. The Sellers acknowledge that they have: (a)
carefully read and fully understand all of the provisions of this Agreement,
and (b) had an opportunity to consult with their respective attorneys prior to
executing this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-------------------------------------
Title: Vice President of Acquisitions
--------------------------------
LAFAYETTE SECURITY ELECTRONICS
SYSTEMS, INC.
By: /s/ Cliff Northon
--------------------------------------
Title: President
-------------------------------
/s/ Cliff Northon
-----------------------------------------
Cliff C. Northon, an individual
7
<PAGE> 1
CONSULTING AGREEMENT
THIS AGREEMENT dated as of this 10th day of October, 1995, by and
between MASADA SECURITY, INC., a Delaware corporation ("Masada") and CLIFF C.
NORTHON, an individual residing in the State of Louisiana ("Northon").
WITNESSETH
WHEREAS, Masada desires to engage Northon as a consultant to the
Company on the terms and conditions as hereinafter set forth; and
WHEREAS, Northon desires to accept such engagement with Masada on the
terms and conditions hereafter set forth;
NOW, THEREFORE, the parties do hereby mutually agree as follows:
1. Consultation Services. Masada hereby engages Northon to
perform and furnish such services to Masada relating to (i) the assimilation of
security alarm monitoring accounts into Masada's monitoring and accounting
systems; (ii) any ongoing service-related issues with respect to specific
security alarm monitoring accounts previously owned by Lafayette Security and
Electronics Systems, Inc. as may be periodically requested from time to time by
Masada; (iii) remote assistance with computer programming as relates to the
alarm panels; and (iv) remote troubleshooting technical service problems with
the alarm panels; provided, however that Northon shall not be required to
perform any physical, manual labor.
2. Term of Agreement. This Agreement will begin on the date
hereof which shall be the later of: (i) the Closing Date of the transaction
between Masada and Lafayette Security and Electronics Systems, Inc. pursuant to
the Asset Purchase Agreement dated September 11, 1995; or (ii) the date the
Alarm Accounts (as defined in the Asset Purchase Agreement) and the
Contracts-in-Process (as defined in the Asset Purchase Agreement) have been
fully transferred to Masada's central monitoring station located in Birmingham,
Alabama and continue for a period of one year.
3. Time Devoted by Northon. It is anticipated that Northon will
be available when needed in fulfilling his obligations under this contract. The
particular amount of time may vary from day to day or week to week but is
expected to average on a yearly basis approximately 10 hours per week during
normal business hours but shall not exceed 30 hours in any one week (except for
the first week of this Agreement in which the hours shall not exceed 40 hours).
If Northon is required to work more than 520 hours in the one year period,
Masada agrees to pay Northon additional compensation, other than as set forth
in Section 4, at the rate of $30 per hour for each hour in excess of 520 hours;
provided, however, that for purposes of computing hours worked by Northon,
pursuant to this Agreement, Northon must be requested by Masada. Any time
spent by Northon in trying to preserve the Escrow Amount (as defined in the
Asset
<PAGE> 2
Purchase Agreement) shall not be taken into account in determining hours worked
pursuant to this Agreement.
4. Payment to Northon. Masada will pay Northon $43,471.25. The
payments to Northon will be made in 12 equal installments which will be paid
monthly beginning on the date of this Agreement and continuing for the next 11
consecutive months.
5. Covenants of Northon. Northon hereby covenants and agrees
that, during the term of this Agreement, he will:
(a) Devote time, energy, skill, attention and effort to
the performance of his services as itemized in Paragraph 1 above; and
(b) Use his best efforts to maintain for the benefit of
Masada the quality and number of security monitoring accounts which were sold
by Lafayette Security and Electronics Systems, Inc. to Masada pursuant to an
Asset Purchase Agreement dated September 11, 1995 and to refrain from making
any negative oral or written statements or drawings concerning Masada and
Masada's business and employees.
6. Non-Disclosure and Non-Use of Confidential Information. In
consideration of the compensation to be paid to Northon by Masada pursuant to
the terms of this Agreement, Northon warrants and agrees that:
(a) All notes, memoranda, and records made by Northon, or
to which he may have or have had access in connection with his engagement
hereunder, and all property, papers and documents of any nature whatsoever,
together with all copies of reproductions of any of the foregoing, are the
exclusive, confidential property of Masada, and that, upon termination of his
services hereunder, whether voluntary or involuntary, Northon will promptly
deliver to or place in the possession of Masada, all such notes, memoranda,
records, property, papers, and documents; and
(b) Northon shall not disclose or make available to
others, or use outside of his employment with Masada, directly or indirectly,
either during such employment or at any time thereafter, any records, data,
information, processes, plans, designs, drawings or compositions of Masada to
which Northon may have or has had access, or of which Northon has acquired or
may acquire knowledge, or which Northon may have prepared by reason of his
services rendered hereunder.
7. Severability. Northon and Masada agree that the covenants and
agreements contained in Sections 5 and 6 of this Agreement, or any of the
paragraphs of those Sections, are severable and separate and the
unenforceability of any specific covenant therein shall not affect the validity
of any other covenant set forth therein.
2
<PAGE> 3
8. Waiver of Breach. The waiver by either party of any term or
provision or of any breach of any provision of this Agreement by the other
shall not operate or be construed as a waiver of any other term, provision or
subsequent breach nor shall any such waiver be deemed or construed as a
continuing waiver of any such term, provision or breach. The failure of either
party to require strict performance of any provision shall not diminish such
party's right thereafter to require strict performances of any provision.
9. Headings. Section headings herein are for convenience only
and shall in no case be considered in construing this Agreement.
10. Entire Agreement, Etc. This Agreement embodies the entire
agreement of the parties hereto relating to the subject matter hereof. No
amendment or modification of this Agreement shall be valid or binding upon
Masada unless made in writing, and signed by a duly authorized officer of
Masada or upon Northon unless made in writing and signed by him.
11. Independent Contractor. Both Masada and Northon agree that
Northon will act as independent contractors in the performance of his services
hereunder. Accordingly, Northon will be responsible for payment of all taxes
including federal, state and local taxes arising out of his activities in
accordance with this Agreement, including by way of illustration but not
limitation, federal and state income taxes, social security taxes, unemployment
insurance taxes, and any other taxes or business license fees as may be
required.
12. Miscellaneous.
(a) This Agreement may not be amended, transferred or
assigned by any party hereto without the written consent of the other parties
hereto.
(b) This Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective heirs, executors,
administrators, successors and permitted assigns.
(c) This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one instrument.
(d) This Agreement shall be governed and interpreted in
accordance with the laws of the State of Louisiana.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
--------------------------------------
Its: Vice President of Acquisitions
/s/ Cliff Northon
------------------------------------------
Cliff C. Northon
4
<PAGE> 1
MONITORING AGREEMENT
This Monitoring Agreement ("Agreement") is made and entered into on
this the 10th day of October, 1995, by and between MASADA SECURITY, INC., a
Delaware corporation ("Masada") and LAFAYETTE SECURITY AND ELECTRONICS SYSTEMS,
INC., a Louisiana corporation ("Lafayette").
RECITALS
WHEREAS, Masada and Lafayette have entered into an Asset Purchase
Agreement dated September 11, 1995 (the "Purchase Agreement"), pursuant to
which Lafayette agreed to sell and Masada agreed to purchase certain customer
accounts ("Accounts") located in the City of New Orleans and its surrounding
areas, State of Louisiana, as more fully described therein; and
WHEREAS, the Purchase Agreement requires that Lafayette shall continue
to monitor the Accounts until each of the Accounts is reprogrammed to Masada's
central monitoring station;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Duration. This Agreement shall become effective on the 1st
day of October, 1995. Masada shall have the unilateral right to terminate this
Agreement in whole or in part by providing Lafayette with 10 days' advance
written notice of its intent to terminate.
2. Monitoring Fees. During the term of this Agreement, Lafayette
agrees to continue performing monitoring services to the Accounts in its normal
and customary manner,
<PAGE> 2
in exchange for which Masada agrees to pay Lafayette monthly fees as set forth
on Exhibit "A". All such fees shall be prorated and paid on a monthly basis.
3. Obligations. Lafayette's obligations under this Agreement
shall be to continue in its normal and customary manner to monitor and respond
to signals received from the security alarm systems ("Systems") associated with
the Accounts not yet programmed to Masada's central monitoring station and to
reprogram the Accounts to Masada's central monitoring station. Upon receipt of
a signal from a System, Lafayette shall make every reasonable effort to
promptly notify, by telephone or other reasonable means, the agencies and/or
persons whose names and telephone numbers are set forth on the emergency
information data for such Account unless there is reasonable cause to believe
that the receipt of such signal does not warrant such action. Upon the request
of Masada, Lafayette shall provide Masada with a written summary of the signals
received from all Systems during the period of this Agreement. Consistent with
industry standards, Lafayette may also take such other action as they deem
appropriate in responding to a signal from a System.
4. System Damage. In the event that any System becomes disabled
or substantially damaged so that further monitoring to such System is
impractical, Masada shall notify Lafayette of such disability or damage and
Lafayette shall cooperate with Masada in attempting to reestablish service to
such System.
5. Indemnification. Lafayette shall indemnify and hold Masada
harmless from and against any and all losses, liabilities, damages and
expenses, including reasonable attorneys' fees, that Masada may suffer or
become liable for as a result or in connection with any intentional conduct,
fraud or negligence on behalf of Lafayette, its officers, employees, agents,
2
<PAGE> 3
subcontractors or representatives arising in connection with the monitoring or
reprogramming of the Systems.
6. Account Modifications. Masada shall notify Lafayette
immediately of any modification or termination of any Account. Lafayette shall
take whatever action is required due to such modification or termination
including, but not limited to, changing the emergency information data of an
Account or disconnecting an Account.
7. Assignment. Lafayette shall not assign this Agreement in
whole or in part. Masada shall have the right to assign this Agreement in
whole or in part to any other corporation, limited liability company,
partnership, association, proprietorship, or other business entity who acquires
all or a substantial part (30% or more) of the total assets of Masada in
connection with the sale of all or a substantial part of its business.
8. Miscellaneous.
(a) Conflict with Purchase Agreement. If this Agreement
is found to be in conflict with the Purchase Agreement, then the provisions of
the Purchase Agreement shall control to the extent there is such a conflict.
(b) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns (where permitted).
(c) Governing Law. This Agreement shall be governed by
and construed and interpreted in accordance with the laws of the State of
Louisiana.
(d) Amendment. This Agreement may not be modified,
changed, waived, or terminated, in whole or in part, except by a supplemental
agreement signed by all of the parties hereto.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-----------------------------------
Its: Vice President of Acquisitions
------------------------------
LAFAYETTE SECURITY AND
ELECTRONICS SYSTEMS, INC.
By: /s/ Cliff Northon
-----------------------------------
Its: President
-------------------------------
4
<PAGE> 1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
THE 593 CORPORATION
(D/B/A CLASSIC ALARMS)
AND
MASADA SECURITY, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. PURCHASE AND SALE OF ASSETS............................................... 1
1.1 Assets to be Acquired............................................... 1
1.2 Excluded Assets..................................................... 2
1.3 Assumed Liabilities................................................. 2
1.4 Excluded Liabilities................................................ 2
2. PURCHASE PRICE AND CLOSING................................................ 3
2.1 Purchase Price...................................................... 3
2.2 Recurring Monthly Revenue........................................... 4
2.3 Escrow.............................................................. 5
2.4 Accounts Receivable.................................................
2.5 Closing Date and Location........................................... 7
2.6 Nonsolicitation Agreement........................................... 7
2.7 Allocation of Purchase Price........................................ 7
2.8 UCC Letter of Credit................................................ 7
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER....................... 8
3.1 Organization of Seller.............................................. 8
3.2 Authority of Seller................................................. 8
3.3 WIP; Proposals and Bids............................................. 8
3.4 Seller's Market..................................................... 9
3.5 Business Documents.................................................. 9
3.6 Title to Property................................................... 9
3.7 Compliance with Laws; Litigation.................................... 10
3.8 Condition of Assets................................................. 10
3.9 Adverse Developments................................................ 11
3.10 Financial Statements................................................ 11
3.11 Customer and Systems Information.................................... 11
3.12 Broker or Finder.................................................... 12
3.13 Agreements with Employees........................................... 13
3.14 Tax Returns and Payments............................................ 13
3.15 Patents, Trademarks and Copyrights.................................. 13
3.16 Labor Relations..................................................... 13
3.17 Bulk Sales Compliance and Transfer Taxes............................ 13
3.18 Burdensome Agreements............................................... 14
3.19 Options, Warrants and Rights of First Refusal....................... 14
3.20 Creditors........................................................... 14
3.21 Disclosure.......................................................... 14
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER........................ 14
4.1 Authority of Buyer.................................................. 14
4.2 Broker or Finder.................................................... 15
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
5. ACTIONS PRIOR TO THE CLOSING DATE......................................... 15
5.1 Investigation....................................................... 15
5.2 Preservation of Representations and Warranties...................... 15
5.3 Consents and Approvals.............................................. 16
5.4 Public Announcements................................................ 16
5.5 Exclusive Dealing................................................... 16
5.6 Lien Searches....................................................... 16
5.7 Maintenance of Business............................................. 16
5.8 Insurance........................................................... 17
5.9 Organization and Transition......................................... 17
5.10 Consummation of Agreement........................................... 17
5.11 Accounts Receivable................................................. 17
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.............................. 18
6.1 Covenants and Warranties............................................ 18
6.2 Corporate Action.................................................... 18
6.3 No Restraint or Litigation.......................................... 18
6.4 Necessary Consents and Permits...................................... 18
6.5 Opinion of Counsel.................................................. 18
6.6 Adverse Change...................................................... 18
6.7 Documents and Certificates.......................................... 19
6.8 Satisfaction of Debts............................................... 19
6.9 Accounts Receivable................................................. 19
6.10 Third Party Monitoring.............................................. 19
6.11 Due Diligence....................................................... 20
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER............................. 20
7.1 Covenants and Warranties............................................ 20
7.2 Delivery of Purchase Price.......................................... 20
7.3 No Restraint or Litigation.......................................... 20
8. INDEMNIFICATION........................................................... 20
8.1 Indemnification by Seller and Mandina............................... 20
8.2 Indemnification by Buyer............................................ 21
8.3 Indemnification by Mandina.......................................... 21
8.4 Notice of Claims.................................................... 21
8.5 Survival of Indemnity Obligation.................................... 22
9. DAMAGE TO PROPERTY AND RISK OF LOSS....................................... 22
10. CERTAIN POST CLOSING COVENANTS............................................ 23
10.1 Chip Change Procedures.............................................. 23
10.2 Transitional Use of Phone System.................................... 23
10.3 Use of Name......................................................... 23
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C> <C>
11. TERMINATION OF AGREEMENT.................................................. 24
12. GENERAL PROVISIONS........................................................ 24
12.1 Survival of Obligations............................................ 24
12.2 Transfer Charges and Taxes......................................... 24
12.3 Arbitration........................................................ 24
12.4 Confidentiality.................................................... 25
12.5 Governing Law...................................................... 25
12.6 Notices............................................................ 25
12.7 Assignment......................................................... 26
12.8 Entire Agreement; Amendments....................................... 26
12.9 Interpretation..................................................... 26
12.10 Waivers............................................................ 26
12.11 Expenses........................................................... 27
12.12 Partial Invalidity................................................. 27
12.13 Further Assurances................................................. 27
12.14 Counterparts....................................................... 27
</TABLE>
- iii -
<PAGE> 5
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of this 2nd day of November, 1995, by and
among The 593 Corporation (d/b/a Classic Alarms), a Louisiana corporation
("Seller"), Anthony T. Mandina, an individual residing in the State of
Louisiana ("Mandina"), and Masada Security, Inc., a Delaware corporation
("Buyer").
BACKGROUND:
WHEREAS, Seller owns and operates an electronic security business serving
New Orleans, Louisiana and its environs (the "Security Business"); and
WHEREAS, Mandina is the majority shareholder of Seller; and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, certain of
the assets of Seller used or useful in connection with the operation of the
Security Business, and Mandina is willing to assume certain indemnification
obligations hereunder, all on the following terms and conditions.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, and intending to be
legally bound, the parties agree as follows:
1. PURCHASE AND SALE OF ASSETS
1.1 Assets to be Acquired.
Upon the terms and subject to the conditions of this Agreement, Seller
shall, on the Closing Date (as defined in Section 2.5), sell, transfer, assign
and deliver to Buyer all of Seller's right, title, interest and benefit in and
to the following assets (the "Assets to be Acquired"):
(a) All of Seller's rights in, to and under all alarm systems
(including local alarm systems installed, sold or acquired by Seller but which
generate no recurring revenue), electronic alarm equipment, alarm test
equipment, machinery, computers and related software, office equipment,
furnishings, two Ford Econoline vans (subject to Seller's existing leases with
Ford Motor Credit included in the Business Documents, as herein defined),
inventory, spare equipment and parts relating to the Security Business (whether
or not allocated to contracts in process), including items purchased for resale
and all purchase orders relating to the foregoing, and all other tangible
personal property of Seller used in connection with the Security Business of any
nature, all of which are set forth on Schedule A (collectively, the "Tangible
Assets").
-1-
<PAGE> 6
(b) All of Seller's rights in, to and under all alarm lease,
maintenance, repair, service and monitoring agreements with customers,
leases of equipment that are related to and used by Seller in the Security
Business, telephone book listing agreements and all other agreements (including
noncompetition and nonsolicitation agreements, if any), licenses (including any
licenses held personally by key employees of Seller), vehicle leases for
Seller's two Ford Econoline vans, permits (including permits relating to
installations which are pending, currently in process or completed) and
manufacturer's warranties on tangible property that are related to Seller's
conduct of the Security Business (all of the foregoing are referred to
individually as a "Business Document" and collectively as the "Business
Documents"), all of which are set forth on Schedule B.
(c) All of Seller's rights in, to and under the following
assets, intangibles and rights that are related to, and presently owned by
Seller and used in, the Security Business: (i) refundable deposits from
customers, prepaid service charges, and prepaid income items; (ii) system
designs and drawings; (iii) options, claims, contract rights, contract
information, patents, copyrights and trade secrets; (iv) accounts receivable;
(v) operating and accounting data; (vi) customer lists and files (including any
lists and files of former customers, credit records and purchase and sale
records); (vii) computer programs; (viii) telephone numbers (including WATS
lines and "ring-down" lines), all of which are listed on Schedule A; (ix) work
in process; (x) outstanding bids and proposals; and (xi) goodwill.
1.2 Excluded Assets.
Seller is not selling or transferring to Buyer, and Buyer is not
purchasing from or exchanging with Seller, any of the following assets: (a)
documents relating to the legal existence of Seller; (b) cash in bank accounts
of Seller; (c) prepaid insurance and surety bonds; (d) rights to refunds of
federal and state taxes (and penalties and interest thereon) previously paid by
Seller; (e) books or records of Seller which pertain to the financial,
accounting and tax aspects of the Security Business prior to the Closing Date;
(f) subject to Section 10.3, any rights to Seller's name or the names of any
predecessors of Seller; and (g) any other rights that accrue to or are
specifically retained by Seller under or by virtue of this Agreement
(collectively, the "Excluded Assets"). To the extent necessary or required,
copies of the foregoing documents shall be made available to Buyer at its
request.
1.3 Assumed Liabilities.
Buyer agrees to assume all liability for the performance of all
obligations arising after the Closing Date with respect to the Business
Documents assigned to Buyer by Seller, to the extent, and only to the extent,
listed on Schedule B.
1.4 Excluded Liabilities.
Except for the liabilities that Buyer will assume pursuant to Section
1.3, Buyer will not assume or be obligated for any other liability,
obligation or commitment of Seller, direct or indirect, known or unknown,
absolute or contingent, including any of the following:
-2-
<PAGE> 7
(a) any foreign, federal, state, county or local income or
other tax arising from the operation of the Security Business or the ownership
of the Assets to be Acquired on or prior to the Closing Date;
(b) any liability, obligation or commitment of Seller to its
creditors, whether arising out of contract or tort, or to any party holding a
lien on any of Seller's assets or any liability to any present or former
shareholder of Seller;
(c) any employee obligation, including any obligation for wages,
commissions, vacation and holiday pay, sick pay, bonuses, severance pay,
pensions, or any obligation under any collective bargaining agreement,
employment agreement or employment at-will relationship, or any obligation to
hire any employee of Seller after the Closing Date (provided that Buyer shall
have the right, if it so desires, to hire any of such employees without
restriction hereunder);
(d) any liability, obligation or commitment incurred by Seller
after the Closing Date;
(e) any liability relating to any predecessor of Seller or
relating to 21st Century Fire & Burglar Alarm Systems, Inc., 21st Century
Burglar Alarm, Inc., 21st Century Enterprises, Inc., Burl Mahl or Burl Mahl III,
or to any of their creditors or shareholders (collectively, " 21st Century");
(f) any liability the existence of which would constitute a
breach of any of the representations, warranties and covenants of Seller
hereunder, including any such liabilities disclosed on any Schedule; or
(g) any other liability, obligation or commitment not
expressly assumed by Buyer hereunder.
2. PURCHASE PRICE AND CLOSING
2.1 Purchase Price.
(a) The purchase price for the Assets to be Acquired (the
"Purchase Price") shall equal a multiple of twenty- six (26) times the RMR (as
defined in Section 2.2) provided by the Security Business (provided that such
Purchase Price shall not exceed $1,100,000) plus the value of accounts
receivable as determined in accordance with Section 2.4.
(b) At Closing, the Purchase Price shall be determined by
Buyer and Seller. Eighty- percent (80%) of the Purchase Price, less the amount
of the Chip Change Credit, as defined in Section 10.1, and less the sum of One
Hundred Fifty-Two Thousand Dollars ($152,000) (the "Tax Liability Amount"),
shall be paid to Seller on the Closing Date by federal funds wire transfer or
other form of immediately available funds. Twenty percent (20%) of the
- 3 -
<PAGE> 8
Purchase Price, plus the amount of the Chip Change Credit, shall be deposited
by Buyer in escrow (the "Attrition Escrow") pursuant to an escrow agreement in
the form of Exhibit 1A (the "Attrition Escrow Agreement"). The Tax Liability
Amount shall be deposited by Buyer in escrow (the "Tax Escrow") pursuant to an
escrow agreement in the form of Exhibit 1B (the "Tax Escrow Agreement").
Amounts held in escrow shall be distributed in accordance with Section 2.3 (the
"Escrow").
(c) The Purchase Price shall be adjusted to reflect, in
accordance with generally accepted accounting principles, the principle that all
expenses of the Security Business attributable to the period after the Closing
Date are for the account of Buyer and all expenses attributable to the period on
or before the Closing Date are for the account of Seller. Accordingly, Seller
shall receive credit for all obligations prepaid by Seller under the Business
Documents; and all other expenses prepaid by Seller relating to the Security
Business. Likewise, Buyer shall receive credit for (i) customer deposits; (ii)
customer prepayments for services to be provided by Buyer after Closing; (iii)
accrued expenses under the Business Documents ; and (iv) all other accrued
expenses relating to the Security Business. If possible, Seller and Buyer shall
make a good faith estimate of such adjustments at Closing and shall increase or
decrease the amount paid to Seller pursuant to Section 2.1(a) by the amount of
such adjustments. Any such adjustments that are not capable of calculation at
Closing shall remain open and be adjusted as soon as possible after Closing.
(d) The Purchase Price shall be increased or decreased,
as the case may be, to the extent that the total payments received by Seller
with respect to all jobs listed on the work in process list (delivered pursuant
to Section 3.3) prior to Closing is greater than or less than the total payments
already received and to be received for all jobs on the work in process list
multiplied by a fraction, the numerator of which is the actual labor and
materials expended and all sales commissions actually paid on all jobs on the
work in process list prior to Closing, and the denominator of which is the total
of the labor and materials and all sales commissions which have been and which
will be expended with respect to all jobs on the work in process list.
2.2 Recurring Monthly Revenue.
The term "RMR" means the amount of recurring monthly revenue
(net of any direct wire telephone line charges or other communication, utility
company or third-party pass-through charges, assessments or taxes which, in each
case, are assessed directly against the customer and net of any customer
discounts) of the Security Business as of the date immediately preceding the
Closing Date and which is derived solely from written, valid, complete and
properly executed monitoring, open/close, service, repair, maintenance and lease
agreements in a form meeting Buyer's underwriting requirements and otherwise
acceptable to Buyer and which have not been repudiated by the customer. RMR
shall not include any revenue: (i) from customers whose balances are more than
sixty (60) days past due from the invoice date or who have not generated cash
receipts representing service charges for at least one full billing cycle or
prepaid at least one month of RMR; (ii) that is not periodic in nature, but
rather relates to installation, purchase payments or one-time assessments or
charges; (iii) from customers from
- 4 -
<PAGE> 9
whom Seller has received notice of a pending termination; (iv) from third-party
monitoring agreements; (v) from customers who were recently added as a result
of extraordinary marketing efforts or an amnesty program; or (vi) that pertains
to lease agreements which expire within twenty-six (26) months of the Closing
Date or which provide the customer with the option of buying the system for a
nominal amount. For purposes of calculating RMR, services or charges billed
quarterly or annually shall be recalculated to a monthly equivalent.
2.3 Escrow.
(a) The Attrition Escrow shall be for a twelve (12) month period
commencing on the Closing Date (the "Attrition Escrow Period"). A determination
shall be made as of the last day of the Attrition Escrow Period of the RMR on
the date immediately preceding the Closing Date attributable to customers who
have, during the Attrition Escrow Period, (i) become more than sixty (60) days
past due from the invoice date (and who remain more than sixty (60) days past
due as of the last day of the Attrition Escrow Period), (ii) who have canceled
or failed to renew for any reason, or (iii) who have been canceled or
terminated by Buyer for excessive false alarms or other customer abuses (the
"Lost RMR"). Buyer shall notify Seller by the end of each calendar month of
all customers who during the prior calendar month went into default (a
"Defaulted Account") so that Seller may have an opportunity to either rectify
such account or repurchase such account within thirty (30) days after
notification. If Seller elects to repurchase the account, the repurchase price
shall be an amount equal to twenty-six (26) times the RMR generated by such
account at Closing less forty percent (40%) of the amount of any recurring
revenue-related payments actually received by Buyer for the period after
Closing from such account prior to repurchase. An account will be deemed to be
in default for purposes of this Section 2.3 if it is canceled (by Buyer for
excessive false alarms or other customer abuses or by the customer for any
reason), fails to renew or if any charges are not paid within sixty (60) days
from the invoice date. If Seller rectifies a Defaulted Account, repurchases
such account or provides a replacement account acceptable to Buyer within
thirty (30) days after notification by Buyer, such Defaulted Account shall not
be included in Lost RMR. The Purchase Price shall be reduced by a multiple of
twenty-six (26) times the Lost RMR less forty percent (40%) of the amount of
any recurring revenue-related payments actually received by Buyer for the
period after Closing from the accounts included in Lost RMR (the "Purchase
Price Deduct"). As soon as possible after the end of the Attrition Escrow
Period, the parties shall direct the escrow agent, in writing, to pay Seller
the difference between the amount of the Attrition Escrow less the amount of
the Purchase Price Deduct. In the event Seller repurchases any accounts under
this Section 2.3, Seller shall indemnify and hold Buyer harmless from and
against any Aggregate Net Loss (as defined in Section 8.1) incurred by Buyer in
connection with such account from and after the date of repurchase.
(b) The Tax Escrow shall provide a source for the settlement
of any tax liabilities of Seller, Seller's shareholders (both past and present)
or 21st Century, or otherwise relating to the operation of the Security Business
prior to Closing, imposed upon or assessed against Buyer. The Tax Escrow shall
be released as follows: (i) upon receipt of documentation from a taxing
authority in a form reasonably acceptable to Buyer evidencing that the
- 5 -
<PAGE> 10
Assets to be Acquired are not covered by a tax lien listed on Schedule 2.3(b),
a sum equal to the principal amount of such tax lien as reflected on Schedule
2.3(b) shall be released to Seller, (ii) upon a full and final discharge by a
taxing authority of a tax lien listed on Schedule 2.3(b), an amount equal to
the principal amount of such tax lien shall be released to Seller, or in the
event Seller is unable to obtain the full and final discharge of all tax liens
of record during the first twelve (12) months of the Tax Escrow Period (as
herein defined), then the Buyer shall have the right to negotiate with all
interested taxing authorities the release of any tax liens filed against Seller
or 21st Century and to cause to be released from the Tax Escrow, at Buyer's
sole direction, for payment to such taxing authorities, such amounts as are
necessary to cause the release of any or all such tax liens, or (iii) at
Buyer's direction, after five (5) days notice to Seller, to any taxing
authority as necessary to avoid foreclosure on any of the Assets to be
Acquired. The Tax Escrow shall remain in effect (the "Tax Escrow Period") for
a period of thirty-six (36) months from Closing.
(c) The Chip Change Credit shall be distributed from escrow in
accordance with Section 10.1.
(d) Nothing herein shall be deemed to limit Buyer's right to
proceed against Seller for account attrition or other liabilities beyond the
amount of the Attrition Escrow or Tax Escrow.
2.4 Accounts Receivable.
Buyer shall acquire all of Seller's accounts receivable, trade accounts,
notes receivable and other debts owed to Seller by customers of the Security
Business (collectively, the "Accounts Receivable") relating to the Security
Business for a purchase price equal to the lesser of $12,500 or the sum of (i)
85% of the face value of any Accounts Receivable for services provided on or
prior to the Closing Date from customers with balances outstanding, for any
reason, 30 days or less from the invoice date, (ii) 65% of the face value of
any Accounts Receivable for services provided on or prior to the Closing Date
from customers with balances outstanding, for any reason, more than 30 days but
60 days or less from the invoice date, and (iii) 20% of the face value of any
Accounts Receivable for services provided on or prior to the Closing Date from
customers with balances outstanding, for any reason, more than 60 days but 90
days or less from the invoice date. Any Accounts Receivable for services
provided on or prior to the Closing Date from customers with balances
outstanding, for any reason, in excess of 90 days from the invoice date and any
Accounts Receivable for services to be provided after the Closing Date shall be
transferred to Buyer hereunder but shall not be taken into account in
calculating the Purchase Price pursuant to the foregoing sentence. It is the
intent of this Section that all Accounts Receivable due from a customer will be
treated in accordance with the oldest outstanding amounts due from such
customer. For example, if a customer has an outstanding
- 6 -
<PAGE> 11
balance of $100.00 of which $30.00 is outstanding less than 30 days, $40.00 is
outstanding more than 30 days but less than 60 days and the remainder is
outstanding more than 60 days but less than 90 days, the purchase price for
such customer's Accounts Receivable would be $20.00 (20% x $100.00).
2.5 Closing Date and Location.
The consummation of the transfer and delivery of the Security Business
to Buyer and the receipt of the consideration therefor by Seller shall
constitute the "Closing." Unless otherwise mutually agreed to by the parties,
the Closing shall take place at 9:00 A.M., local time, at the offices of
Seller's counsel in New Orleans, Louisiana on November 2, 1995, or upon the
satisfaction by Seller of all of the conditions precedent to Buyer's obligation
to consummate this transaction, whichever shall later occur, but in any event no
later than December 31, 1995, which date and time shall constitute the "Closing
Date." The effective date of the sale of the Security Business shall be at
11:59:59 p.m. on the Closing Date and all prorations and allocations provided
for in Section 2.1(c) shall be made as of such date and time.
2.6 Nonsolicitation Agreement.
In connection with the consummation of these transactions, Seller and
its principal officers, directors and shareholders shall have executed a
nonsolicitation agreement in the form of Exhibit 2 (the " Nonsolicitation
Agreement").
2.7 Allocation of Purchase Price.
The parties agree that the Purchase Price shall be allocated as set
forth on Schedule C hereto and agree to file all federal, state and local tax
returns in accordance with such allocation. Any adjustment in the Purchase
Price shall be allocated in accordance with the proportionate allocation
reflected on Schedule C.
2.8 UCC Letter of Credit.
Seller acknowledges and agrees that it is a condition to Buyer's
obligations under this Agreement that all applicable UCC liens and encumbrances
filed of record in any jurisdiction against Seller or 21st Century be released
prior to Closing. In the event any of the liens or encumbrances remain of
record at the time of Closing (other than tax liens which are addressed in
Section 2.3), Seller shall deliver to Buyer a letter of credit in a form
acceptable to Buyer and from an FDIC insured bank acceptable to Buyer for the
full amount of the underlying obligations originally secured or evidenced by
the unreleased liens or encumbrances (the "Underlying Obligations"). The
letter of credit shall provide, among other things, (i) that it shall provide
payment in full to Buyer of any liability imposed upon Buyer or the Assets to
be Acquired relating to the Underlying Obligations, (ii) that it shall remain
in place through December 31, 1996, and (iii) that at the end of such period,
an amount equal to the sum needed to obtain the release of any liens or
encumbrances still of record which have not lapsed as of such date shall be
paid to Buyer for purposes of obtaining the release of any such liens or
encumbrances, provided that in the
- 7 -
<PAGE> 12
event such sums are not used to obtain releases within three (3) months after
distribution, the amounts not used shall be returned to Seller through the bank
issuing the letter of credit.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate
these transactions, Seller represents, warrants and covenants to Buyer and
agrees that as of this date and through and including the Closing Date:
3.1 Organization of Seller.
(a) Seller is a corporation duly incorporated and organized,
validly existing and in good standing under the laws of the State of Louisiana,
and has the requisite corporate power and authority to own or lease all of the
Assets to be Acquired, to own and operate the Security Business, to carry on its
business as now conducted, to enter into this Agreement and to perform the terms
of this Agreement. Seller is qualified as a foreign corporation in all
jurisdictions in which it is required to be so qualified.
(b) Schedule F sets forth all of the names and fictitious names
under which Seller or the predecessors of Seller have conducted the Security
Business.
3.2 Authority of Seller.
Seller has full power and authority to enter into this Agreement, to
consummate these transactions and to comply with the terms, conditions and
provisions hereof. This Agreement has been duly authorized, executed and
delivered by Seller and is, and each other agreement or instrument of Seller
contemplated hereby will be, the legal, valid and binding agreement of Seller,
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement and the other agreements of Seller contemplated
hereby have been duly authorized and approved by the shareholders and board of
directors of Seller and do not require any further authorization or the consent
of any third party, except as set forth on Schedule F. Neither the execution
and delivery of this Agreement nor the consummation of these transactions will
conflict with or result in any violation of or constitute a default under any
term of the Certificate of Incorporation or By-laws of Seller, or any
agreement, mortgage, debt instrument, indenture, or other instrument, judgment,
decree, order, award, law or regulation by which Seller is bound, or result in
the creation of any lien, security interest, charge or encumbrance upon any of
the Assets to be Acquired, except as set forth on Schedule F.
3.3 WIP; Proposals and Bids.
Schedule J, which will be prepared by Seller and delivered to Buyer for
Buyer's approval at least one (1) week before Closing, will set forth all of
the work in process of the Security Business ("WIP") which is outstanding as of
the date thereof. With respect to all WIP, Schedule J shall list the name of
each account, the dollar amount of labor, materials and other
- 8 -
<PAGE> 13
costs needed to complete such work, the dollar amount already received by
Seller from such account, and the outstanding balance owed by such account.
3.4 Seller's Market.
Seller's customers are located in the parishes set forth in Schedule G.
3.5 Business Documents.
(a) Except for the Business Documents and the lease for
Seller's leased premises, Seller has no presently existing material contract,
agreement, lease, permit, consent, license or commitment, whether written or
oral, affecting or relating to the Security Business. All of the Business
Documents are validly existing, legally enforceable obligations of the parties
and are in full force and effect in accordance with their terms. Seller has
delivered copies of all of the Business Documents set forth on Schedule B to
Buyer as of the date hereof. Without limiting the foregoing, Seller represents
that, to the best of its knowledge, the Security Business and all equipment used
in connection therewith are now being utilized, operated and maintained, in all
material respects, in conformity with the Business Documents. Seller warrants
that it has not in any manner at any time failed to so utilize, operate and
maintain the Security Business in a manner that could now or hereafter result in
cancellation or termination of any of the Business Documents, or in liability
for damages under any of the Business Documents, nor has Seller defaulted in its
obligations pursuant to any of the Business Documents, which default could
result in the cancellation of any Business Document or adversely affect the
rights of Seller thereunder. Seller is not a party to any franchise, license,
distributor or other similar type of agreement.
(b) Seller represents that there is no obligation currently to
pay a mileage penalty under either of the leases for Seller's two Ford Econoline
vans.
3.6 Title to Property.
Except as described on Schedule A, Seller has good and marketable title
to all of the Assets to be Acquired, free and clear of all liens, claims,
charges, encumbrances, leases, pledges, security interests, mortgages, defects
in title, equities, covenants and other restrictions of any nature whatsoever.
Seller owns each of the Assets to be Acquired set forth on Schedule A in fee
title and not under lease, with the exception of the leases for Seller's two
Ford Econoline vans.
- 9 -
<PAGE> 14
3.7 Compliance with Laws; Litigation.
(a) Seller has complied with all laws, regulations, rules,
writs, injunctions, ordinances, franchises, decrees or orders of any federal or
state court or of any municipal or governmental department, commission, board,
bureau, agency or instrumentality which are applicable to the Assets to be
Acquired or the Security Business. Seller has obtained all licenses and permits
necessary to operate the Security Business, all of which are listed on Schedule
A.
(b) All reports, schedules and/or returns of any administrative
agency of the federal or any state or local government required to be filed by
Seller have been filed.
(c) Except as set forth on Schedule F, there are no lawsuits,
claims, suits, proceedings or investigations pending or, to the best knowledge
of Seller, threatened against or affecting Seller, nor are there any lawsuits,
claims, suits or proceedings pending in which Seller is the plaintiff or
claimant, that relate to the Assets to be Acquired or the Security Business and
which involve the possibility of any judgment, order, award or other decision
that might impair the ability of Seller to perform this Agreement, or might
impair the quality of title of the Assets to be Acquired, or might adversely
affect the normal operation of the Security Business, or might result in
liability for damages or might otherwise adversely affect Seller's right, title
or interest in the Assets to be Acquired or the Security Business.
3.8 Condition of Assets.
(a) The Tangible Assets are in good operating condition,
ordinary wear and tear excepted. The Tangible Assets are available for
immediate use in the Security Business except for those items being serviced in
the ordinary course of business. The Assets to be Acquired include all such
assets and properties as are necessary to conduct the Security Business as it
is now being conducted.
(b) The Assets to be Acquired include such spare parts as are
set forth on Schedule A, and as have been maintained by Seller in the past in
order to permit the operation of the Security Business without material
interruption.
(c) Schedule D sets forth a true and complete list of all
insurance policies insuring any of the Assets to be Acquired or relating to the
Security Business. All such policies have been in full force and effect since
October, 1993 with claims payable on an "occurrence basis," which means, for
example, that if a claim arose after the Closing Date for an event which
occurred prior to the Closing Date, Seller's applicable insurance policy in
existence on the date such event occurred would cover such claim. All such
policies are in full force and effect and Seller has not received any notice of
cancellation with respect thereto. Since October, 1993, no application by
Seller for insurance with respect to the Assets to be Acquired has been denied
for any reason. Since October, 1993, Seller has not had any claim made against
it by any customer that would adversely affect Seller's insurance rating.
Attached as Exhibit 9 is a copy of Seller's insurance claims history since
October, 1993.
- 10 -
<PAGE> 15
(d) All of the information that Seller has delivered to Buyer in
connection with this transaction is true, correct and complete.
3.9 Adverse Developments.
Since January 1, 1995, no event or condition has occurred which
materially adversely affected the Security Business or Assets to be Acquired,
including: (a) any change in the financial condition, assets or liabilities of
the Security Business, other than changes in the ordinary course of business; or
(b) any damage, destruction, loss or other casualty to the Security Business,
however arising and whether or not covered by insurance.
3.10 Financial Statements.
Exhibit 3 contains copies of the annual financial statements of Seller
relating to the Security Business at December 31, 1994 and unaudited revenue
reports and income statements of Seller relating to the Security Business for
each month during the period January 1995 through September 1995 (the
"Financial Statements"). The Financial Statements are true, complete and
correct and fairly present the financial condition of the Security Business as
of the respective dates thereof. The Financial Statements accurately reflect
all of the income, expenses, equity, liabilities and assets of the Security
Business in existence at the respective dates thereof and the operations of the
Security Business as of such dates. The Assets to be Acquired include all of
the assets reflected in such Financial Statements and all assets acquired since
the date of such Financial Statements, excepting only such assets as have been
consumed in the normal course of business. The Financial Statements, including
the notes thereto (a) are in accordance with the books and records of Seller;
(b) are true, correct and complete and present fairly the financial condition
of Seller as of the respective dates thereof and its results of operations for
the respective periods then ended; and (c) except as indicated in the notes to
such Financial Statements, have been prepared in accordance with generally
accepted accounting principles, consistently applied with prior periods, with
no material difference between such statements and the financial records
maintained, and the accounting methods applied, by Seller for tax purposes.
3.11 Customer and Systems Information.
(a) Seller has entered into written agreements with all of its
customers. All of Seller's agreements with its customers are valid and
enforceable and are assignable to Buyer without obtaining the consent of or
providing notice to any customer. Schedule B sets forth a true and accurate
list of all of Seller's monitoring, open/close, lease, service, maintenance and
repair accounts. All of Seller's monitoring agreements, the forms of which are
attached as Exhibit 4, contain an original term of at least three (3) years.
Seller will deliver originals of all of its contracts with its customers and all
files and documents relating thereto to Buyer at Closing. Schedule E sets forth
a true and accurate list of the amounts which Seller charges its customers for
monitoring, service, maintenance, repairs, open/close, refundable deposits,
reconnect fees and any other services provided by Seller. Seller has no
obligations or liabilities to customers or to other users of Seller's electronic
security services which are material to the Security Business, except (i) with
respect to deposits made by such customers or such other users, if any; and (ii)
the
- 11 -
<PAGE> 16
obligation to supply services to customers in the ordinary course of business.
None of Seller's customers has a history of excessive false alarms. To the
best knowledge of Seller, there are no complaints by customers or other users
of Seller's electronic security services that, individually or in the
aggregate, could have a material adverse effect upon the Assets to be Acquired
or the financial condition or operation of the Security Business. Seller has
no free or discounted service liability to customers existing with respect to
the Security Business, other than as set forth in Schedule G, and nothing would
prohibit Buyer from discontinuing any such free service after Closing. Seller
has no obligation or liability for the refund of monies to its customers other
than obligations to refund deposits made by customers in the ordinary course of
business. Under applicable law, Seller is not required to pay its customers
interest on these refundable deposits. Since September 1, 1994, neither
Seller, nor any of Seller's officers, directors, shareholders, employees or
agents have paid directly or indirectly any accounts receivable of customers.
(b) All of the alarm systems are in good working order and
condition, failure of a customer to report to Seller any problem with an alarm
system known to the customer and customer non-use excepted. All manufacturer's
warranties applicable to any such alarm systems are freely assignable to Buyer.
(c) The Security Business has at least 2,200 accounts and
$42,000 of RMR. Seller's gross attrition rate over the last two (2) years has
not exceeded ten percent (10%) per year.
(d) Seller owns all of the telephone lines applicable to its
accounts and, except as set forth on Schedule K, can convert all such lines to
communicate with Buyer's central station by means of a line switch. Except as
set forth on Schedule K, none of the alarm systems of Seller require an on-site
visit in order to reprogram such system to communicate with Buyer's central
station.
(e) There is no law, rule, regulation or ordinance that would
limit Buyer's ability to provide monitoring services to customers from a central
station located outside of the State of Louisiana.
(f) None of the communities in which the Security Business is
conducted has adopted or currently intends to adopt a false alarm ordinance.
3.12 Broker or Finder.
Neither Seller nor any party acting on its behalf has paid or become
obligated to pay any fee or commission to any broker, finder or intermediary
for or on account of these transactions, except that Seller has engaged the
services of UBI Business Consultants ("UBI"). Seller shall be solely
responsible for all fees payable to UBI.
- 12 -
<PAGE> 17
3.13 Agreements with Employees.
(a) Seller is not a party to any employment agreement, written
or oral, which cannot be terminated at will by Seller.
(b) Except as set forth on Schedule L, Seller does not have
any pension, profit sharing or other employee benefit plan, or any health care,
life insurance or other employee welfare plan, for the employees of the
Security Business.
(c) The names, titles and rates of compensation of all of the
employees of Seller employed in the Security Business are listed on Schedule L.
None of the employees has indicated to Seller any intention to terminate his
employment with Seller.
3.14 Tax Returns and Payments.
All unemployment, social security, franchise, real property, personal
property and all other taxes levied, assessed or imposed upon Seller in
connection with Seller's operation of the Security Business by the United
States, or any state, or governmental subdivision of either, to the extent due
and payable, have been duly paid to date or are being contested through
appropriate administrative or judicial procedures, and no liability for
deficiencies with respect thereto exists. To Seller's best knowledge, no tax
deficiencies have been determined nor proposed tax assessments charged against
Seller in connection with Seller's operation of the Security Business (nor is
there any basis therefor). Seller has filed all federal, state, local, sales,
franchise, withholding, real and personal property tax returns required to be
filed in connection with Seller's operation of the Security Business. No
penalties or other charges are, or will become, due with respect to the late
filing of any such return by Seller.
3.15 Patents, Trademarks and Copyrights.
Seller does not possess in connection with the Security Business any
patent, patent right, trademark or copyright, and is not a party to any license
or royalty agreement with respect to any patent, trademark or copyright.
3.16 Labor Relations.
Seller is not a party to any collective bargaining agreements in
connection with the Security Business.
3.17 Bulk Sales Compliance and Transfer Taxes.
Neither the sale and transfer of the Assets to be Acquired pursuant to
this Agreement, nor Buyer's possession and use thereof from and after Closing
because of such sale and transfer, will result in or be subject to: (a) any
law pertaining to bulk sales or transfers which make such sales or transfers
ineffective as to creditors of Seller; (b) any federal, state or local sales,
use, transfer, excise or license tax, fee, or charge applicable to any of the
Assets to be
- 13 -
<PAGE> 18
Acquired; or (c) the imposition of any liability upon Buyer for appraisal
rights or other liability owing to any shareholder of Seller.
3.18 Burdensome Agreements.
Seller is not a party to any agreement or instrument nor subject to any
restriction which now has or, as far as Seller can foresee, may have a material
adverse effect, financial or otherwise, upon the Security Business or the
Assets to be Acquired.
3.19 Options, Warrants and Rights of First Refusal.
Seller represents that no person or entity has any option, warrant or
right of first refusal to purchase the Assets to be Acquired or the Security
Business.
3.20 Creditors.
Seller warrants that Schedule I sets forth a true, correct and complete
list of each of the creditors of Seller and the amount due by Seller to each
such creditor.
3.21 Disclosure.
No representation or warranty by Seller in this Agreement or any
Schedule or Exhibit, or any statement, list or certificate furnished or to be
furnished by Seller pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading or necessary in order to provide a prospective purchaser of the
Assets to be Acquired and the Security Business with proper information as to
such assets and business.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer hereby represents,
warrants and covenants to Seller and agrees that as of this date and through
and including the Closing Date:
4.1 Authority of Buyer.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Buyer has full corporate
power and authority to enter into this Agreement, to consummate the
transactions contemplated hereby and to comply with the terms, conditions and
provisions hereof. This Agreement is, and each other agreement or instrument
of Buyer contemplated hereby will be, the legal, valid and binding agreement of
Buyer, enforceable in accordance with its terms. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will, in any material respect, conflict with or result in
any material violation of or constitute a material default under any term of
any
- 14 -
<PAGE> 19
agreement, mortgage, debt instrument, indenture, franchise, license, permit,
authorization, lease or other instrument, judgment, decree, order, award, law
or regulation by which Buyer is bound.
4.2 Broker or Finder.
Neither Buyer nor any party acting on its behalf has paid or become
obligated to pay any fee or commission to any broker, finder or intermediary
for or on account of the transactions contemplated by this Agreement.
5. ACTIONS PRIOR TO THE CLOSING DATE
The parties covenant and agree to take the following actions between the
date hereof and the Closing Date:
5.1 Investigation.
Seller shall afford Buyer and its representatives, consistent with the
maintenance of employee morale and so as not to interfere with the conduct of
Seller's business, access during normal business hours to the employees,
properties, facilities and equipment, and books and records of the Security
Business. Seller acknowledges that Buyer also desires to contact a random
sample of Seller's customers in order to explore customer satisfaction with
various aspects of Seller's service (e.g., alarm monitoring dispatch, technical
service and billing). Seller acknowledges that Buyer will conduct such survey
as if on behalf of Seller and Seller agrees to cooperate with Buyer in making
such contact. Buyer agrees to make the results of any such survey available to
Seller. It is the parties intent that Buyer shall have full opportunity to
investigate the business affairs of the Security Business.
5.2 Preservation of Representations and Warranties.
(a) Buyer and Seller shall refrain from knowingly taking any action
which would render untrue any representation, warranty or covenant contained in
this Agreement, and shall not knowingly omit to take any action, the omission
of which would render untrue any such representation, warranty or covenant.
Promptly upon the occurrence of, or promptly upon Seller becoming aware of the
impending or threatened occurrence of, any event which would cause any of the
representations or warranties of Seller contained herein, or in any Schedule or
Exhibit, to be materially inaccurate, Seller shall give detailed written notice
thereof to Buyer and shall use its best efforts to prevent or promptly remedy
the same.
(b) Buyer and Seller shall promptly notify the other party of any
action, suit or proceeding that shall be instituted or threatened against such
party to restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement. Seller shall promptly notify Buyer
of any lawsuit, claim, proceeding or investigation that may be threatened,
brought, asserted or commenced against Seller, and of any damage, destruction
or other casualty, whether or not insured, to the Assets to be Acquired.
- 15 -
<PAGE> 20
5.3 Consents and Approvals.
Promptly after the execution of this Agreement, Seller shall obtain all
necessary third-party consents and approvals.
5.4 Public Announcements.
Neither Buyer nor Seller shall, without the approval of the other party
(which may not be unreasonably withheld), make any press release or other
public announcement concerning the transactions contemplated by this Agreement,
except as and to the extent that such party shall be so obligated by law, in
which case the other party shall be advised and Buyer and Seller shall use
their best efforts to cause a mutually agreeable release or announcement to be
issued. Notwithstanding the foregoing, Buyer shall have the right without the
consent of Seller to announce the completion of the transactions contemplated
hereby in the form of a "tombstone" announcement.
5.5 Exclusive Dealing.
Seller and its affiliates shall deal exclusively with Buyer with respect
to the transactions contemplated hereby and shall not solicit, encourage or
entertain offers of inquiry (nor shall Seller or any of its affiliates
authorize or permit any director, officer, employee, attorney, accountant or
other representative or agent to solicit, encourage or entertain offers or
inquiries) from other companies, persons or entities, provide information to or
participate in any discussions or negotiations with any companies, persons or
entities with a view to an acquisition of any of the Assets to be Acquired or
all or substantially all of the Security Business or any interest therein.
5.6 Lien Searches.
Seller shall have delivered to Buyer, at Seller's expense, at least one
(1) week prior to the Closing Date, lien searches performed by Seller against
Seller, any entity acquired by Seller in connection with the Security Business,
21st Century and any fictitious names used by Seller in connection with the
Security Business showing all UCC-1 financing statements, federal, state or
local tax liens, unsatisfied judgments and pending litigation filed against the
Security Business.
5.7 Maintenance of Business.
Seller shall continue to operate the Security Business, shall maintain
the Assets to be Acquired (including maintenance of the inventories of spare
equipment and parts listed on Schedule A) and shall keep all of its business
books, records and files in connection with the Security Business all in the
ordinary course of business in accordance with past practices consistently
applied. Seller shall not sell, transfer, assign or permit the creation of any
lien, charge or encumbrance on any of the Assets to be Acquired. Seller shall
not permit the amendment or cancellation of any of the Business Documents
without the prior written consent
- 16 -
<PAGE> 21
of Buyer. Seller shall not enter into any contract or commitment nor incur any
indebtedness or other liability or obligation of any kind relating to the
Security Business that is not in the ordinary course of business without the
prior written consent of Buyer. Seller shall not acquire any accounts or any
assets from any third party. Seller shall not itself, nor shall Seller permit
any of its officers, directors, shareholders, agents or employees to pay any of
Seller's accounts receivable from customers. Seller shall not decrease its
customer rates or conduct any marketing programs, including any amnesty
programs, involving credits for free service or reduced rates for service.
Seller shall pay off and obtain title to any of the Assets to be Acquired that
are currently leased from third parties (other than the leases for Seller's two
Ford Econoline vans).
5.8 Insurance.
Seller shall maintain in full force and effect all existing insurance
policies to cover and protect the Assets to be Acquired against damage or
destruction.
5.9 Organization and Transition.
Seller shall use all reasonable efforts consistent with sound business
judgment to preserve intact the present business or organization of the
Security Business, to retain the services of its present employees, to preserve
its relationships with customers, suppliers and others having business
relationships with it and to maintain the goodwill enjoyed within the areas
served by the Security Business. Seller shall provide each of the customers of
the Security Business with written notice of the transactions contemplated by
this Agreement pursuant to a letter in the form of Exhibit 7. Seller shall
cooperate with Buyer to cause an expeditious conversion of the accounts.
Seller agrees to deliver to Buyer all information reasonably requested by
Buyer's central station, including the standard emergency information for each
customer. Seller will deliver originals of the customers' contracts and all
files and documents relating thereto to Buyer at Closing. If requested to do
so by Buyer, Seller will assist in the orderly transition of the customer base
by mailing the customers' next scheduled invoice.
5.10 Consummation of Agreement.
Buyer and Seller shall use their best efforts to perform and fulfill all
obligations and conditions on their part to be performed and fulfilled under
this Agreement, to the end that the transactions contemplated by this Agreement
shall be fully carried out.
5.11 Accounts Receivable.
At least three (3) days prior to the Closing Date, Seller shall
deliver to Buyer an accurate and complete listing of all of the Accounts
Receivable which existed as of a date which is not more than seven (7) days
prior to the Closing Date. Seller acknowledges that all of the Accounts
Receivable existing on the Closing Date are part of the Assets to be Acquired
and shall be transferred to Buyer on the Closing Date in accordance with the
terms of Section 2.4.
- 17 -
<PAGE> 22
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
On or prior to the Closing Date, Seller shall have satisfied each of the
following conditions, unless waived in writing by Buyer:
6.1 Covenants and Warranties.
There shall have been no breach by Seller in the performance of any of
its covenants and agreements herein; each of the representations and
warranties of Seller contained or referred to herein shall be true and correct
in all material respects on the Closing Date as though made on the Closing
Date, and except for changes therein specifically permitted by this Agreement
or resulting from any transaction expressly consented to in writing by Buyer;
and there shall have been delivered to Buyer a certificate to that effect,
dated the Closing Date, from the President or a Vice President of Seller.
6.2 Corporate Action.
Seller shall have taken all corporate action necessary to approve these
transactions, and Seller shall have furnished Buyer with certified copies of
the resolutions adopted by its Shareholders and Board of Directors, in form and
substance satisfactory to counsel for Buyer, in connection with such
transactions.
6.3 No Restraint or Litigation.
No action, suit or proceeding shall by pending or threatened by any
third party or governmental or regulatory agency to restrain, prohibit or
otherwise challenge the legality or validity of these transactions or of any of
the Assets to be Acquired. All threatened or pending claims by any current or
former shareholders of Seller and 21st Century shall have been settled or
otherwise disposed of to Buyer's satisfaction.
6.4 Necessary Consents and Permits.
The parties shall have received all of the consents listed on Schedule
F, including the consent of any lender to Seller, and such consents shall be
valid and enforceable on the Closing Date.
6.5 Opinion of Counsel.
Seller shall have delivered to Buyer the legal opinion of William J.
Dutel, Esq., local Louisiana counsel for Seller, duly executed and in the form
of Exhibit 5.
6.6 Adverse Change.
There shall not have occurred any material adverse change in the
Security Business or in the condition of the Assets to be Acquired.
- 18 -
<PAGE> 23
6.7 Documents and Certificates.
Seller shall have delivered or caused to be delivered to Buyer:
(a) an Assignment and Bill of Sale in the form of Exhibit 6,
duly executed;
(b) the Nonsolicitation Agreement described in Section 2.6,
duly executed;
(c) a Certificate of Good Standing issued by the Secretaries
of State of Louisiana evidencing Seller's corporate good standing in such
state, dated within ten (10) days of the Closing Date;
(d) a certificate issued by the Department of Taxation and
Revenue of the State of Louisiana certifying that there are no tax liens of
record against Seller or against any of the entities listed on Schedule F and
that Seller is and such entities are not obligated for any taxes which are due
and payable but which have not been paid;
(e) the certificate required pursuant to Section 6.1;
(f) the certificate of insurance required pursuant to Section
8.1; and
(g) all other documents and instruments reasonably requested by
Buyer in connection with the consummation of the transactions contemplated by
this Agreement.
6.8 Satisfaction of Debts.
Seller shall have made appropriate arrangements for the termination of
any liens and encumbrances against any of the Assets to be Acquired.
6.9 Accounts Receivable.
Seller shall have delivered to Buyer the list of Accounts Receivable
described in Section 5.11.
6.10 Third Party Monitoring.
Buyer shall have entered into an agreement with Security Central, Inc.,
Seller's third party monitoring company, relating to the monitoring of any
accounts (including those referred in Article X hereof) not converted to
Buyer's central station at Closing, which agreement shall be in a form and at
rates reasonably acceptable to Buyer.
- 19 -
<PAGE> 24
6.11 Due Diligence.
Buyer shall have completed its due diligence review of Seller and be
satisfied in its sole discretion with the results thereof.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
On or prior to the Closing Date, Buyer shall have satisfied each of the
following conditions unless waived in writing by Seller:
7.1 Covenants and Warranties.
There shall have been no breach by Buyer in the performance of any of
its covenants and agreements herein; each of the representations and warranties
of Buyer contained or referred to herein shall be true and correct in all
material respects on the Closing Date as though made on the Closing Date,
except for changes therein specifically permitted by this Agreement or
resulting from any transaction expressly consented to in writing by Seller or
any transaction contemplated by this Agreement; and there shall have been
delivered to Seller a certificate to such effect, dated the Closing Date, and
signed on behalf of Buyer by its President or any Vice President.
7.2 Delivery of Purchase Price.
Buyer shall have delivered the Purchase Price to Seller, less the amount
of the Escrow and any adjustment made hereunder.
7.3 No Restraint or Litigation.
No action, suit or proceeding shall be pending or threatened by any
third party or governmental or regulatory agency to restrain, prohibit or
otherwise challenge the legality or validity of these transactions.
8. INDEMNIFICATION
8.1 Indemnification by Seller.
Seller shall indemnify, hold harmless, defend and bear all costs of
defending Buyer, together with its successors and assigns, from, against and
with respect to any and all damage, loss, deficiency, expense (including any
reasonable attorney and accountant fees, legal costs or expenses), action,
suit, proceedings, demand, assessment or judgment to or against Buyer
(collectively referred to as the "Aggregate Net Loss") arising out of or in
connection with:
(a) any debt, obligation, commitment or liability of Seller or
any predecessor of Seller (including 21st Century) which is not expressly
assumed by Buyer herein or which is expressly assumed by Seller herein, whether
arising prior to, on or after the Closing Date and whether or not disclosed to
Buyer herein;
- 20 -
<PAGE> 25
(b) any breach or violation of, or nonperformance by, Seller
of any of its representations, warranties, covenants or agreements contained in
this Agreement or in any document, certificate or schedule required to be
furnished pursuant to this Agreement;
(c) any Lost RMR suffered by Buyer during the Escrow Period
which is in excess of the amount of the Attrition Escrow; or
(d) any liability relating to a failure to provide each
residential customer of the Security Business with the three-day right of
rescission in strict compliance with the provisions of 16 C.F.R. Part 429
(Cooling-Off Period for Door-to-Door Sales) and any applicable state laws.
Should Buyer and Seller be unable to agree as to the amount of the
Aggregate Net Loss for which Buyer is to be indemnified, either Buyer or Seller
may apply to the American Arbitration Association under its Commercial
Arbitration Rules for the appointment of a panel of three (3) arbitrators for
an arbitration to take place in New Orleans, Louisiana. Buyer and Seller agree
that such location is the most convenient forum for all parties. Buyer and
Seller will share equally the total expense of such arbitration, but each party
shall bear its own legal, accounting and other similar fees and expenses. Such
arbitrators shall proceed in accordance with the Commercial Arbitration Rules
of the American Arbitration Association to determine the Aggregate Net Loss and
to certify such loss to Buyer and Seller. Such arbitration and determination
shall be final and binding on Buyer and Seller, judgment may be entered upon
such determination and award in any court having jurisdiction thereof, and
Buyer and Seller agree that no appeals shall be taken therefrom. Buyer may
offset against amounts due under the Attrition Escrow Agreement any
indemnification or other obligations due to Buyer from Seller or Mandina under
or in connection with this Agreement. Seller agrees to name Buyer as an
additional insured under its general liability insurance policy and to deliver
a certificate of insurance to Buyer evidencing such coverage at Closing.
8.2 Indemnification by Buyer.
Buyer shall indemnify, hold harmless, defend and bear all costs of
defending Seller, together with its successors and assigns, from, against and
with respect to any and all damage, loss, deficiency, expense (including any
reasonable attorney and accountant fees, legal costs or expenses), action,
suit, proceeding, demand, assessment or judgment to or against Seller arising
out of or in connection with any breach or violation of, or nonperformance by,
Buyer of any of its representations, warranties, covenants or agreements
contained in this Agreement or in any document, certificate or schedule
required to be furnished pursuant to this Agreement.
8.3 Indemnification by Mandina.
Mandina shall indemnify, hold harmless, defend and bear all costs of
defending Buyer, together with its successors and assigns, from and against,
and with respect to any damage, loss, deficiency, expense (including any
reasonable attorney and accounting fees, legal costs or expenses), action,
suit, proceeding, demand, assessment or judgment, to or against
- 21 -
<PAGE> 26
Buyer, arising out of or in connection with the tax lien liability and UCC
filings found at Paragraphs 2.3(b) and 2.8 and for any claims by current or
former shareholders of Seller or 21st Century including, without limitation,
those matters entitled Nancy Michelli, wife of/and Frank Carlino Sr. v. Burl
Reuben Mahl, III, et al., No. 94-13672, 22nd Judicial District Court in and for
the Parish of St. Tammany, State of Louisiana, and Carolyn M. Nielsen v. 21st
Century Enterprises, Inc., et al., No. 470-112, 24th Judicial District Court in
and for the Parish of Jefferson, State of Louisiana.
8.4 Notice of Claims.
If any claim is made by or against a party which, if sustained, would
give rise to a liability of the other party hereunder, that party (the
"Claiming Party") shall promptly cause notice of the claim to be delivered to
the other party (the "Indemnifying Party") and shall afford the Indemnifying
Party and its counsel, at the Indemnifying Party's sole expense, the
opportunity to defend or settle the claim (and, with respect to claims made by
third parties, the Claiming Party shall have the right to participate at its
sole expense). Any notice of a claim shall state, with reasonable
specification, the alleged basis for the claim and the amount of liability
asserted by or against the other party by reason of the claim. Alternatively,
if notice is given and the Indemnifying Party fails to assume the defense of
the claim within ten (10) days thereof, the claim may be defended, compromised
or settled by the Claiming Party without the consent of the Indemnifying Party
and the Indemnifying Party shall remain liable under this Article VIII.
8.5 Survival of Indemnity Obligation.
The rights of Buyer and Seller to assert indemnification claims shall
survive the Closing Date and shall expire: (a) with respect to all claims
other than third-party claims and claims related to the nonpayment of taxes
under any federal, state, county or other local taxing statutes, on the fifth
(5th) anniversary of the Closing Date; (b) with respect to third-party claims
and claims relating to the nonpayment of taxes under any federal, state,
county, or other local taxing statutes, upon the expiration of ninety (90) days
following the date on which the running of the statute of limitations with
respect to any such tax or claim shall bar the assessment and collection of
such tax or claim.
9. DAMAGE TO PROPERTY AND RISK OF LOSS
The risk of any loss or damage to the Assets to be Acquired and the
Security Business resulting from fire, theft or any other casualty (except
reasonable wear and tear) shall be borne by Seller at all times prior to
Closing. In the event that any such loss or damage shall be sufficiently
substantial so as to preclude and prevent resumption of normal operations of
any material portion of the Security Business within two (2) days from the
occurrence of the event resulting in such loss or damage, Seller shall
immediately notify Buyer in writing of its inability to resume normal
operations or to replace or restore the lost or damaged property, and Buyer, at
any time within thirty (30) days after receipt of such notice, may elect either
(a) to waive such defect and proceed toward consummation of the transaction in
accordance with terms of this Agreement, or (b) to terminate this Agreement.
- 22 -
<PAGE> 27
If Buyer elects to consummate this transaction despite such loss or
damage and does so, there shall be no diminution of the Purchase Price on
account of such loss or damage and all insurance proceeds payable as a result
of the occurrence of the event resulting in loss or damage to the property,
plus the amount of any deductible upon such insurance coverage, shall be
delivered to Buyer, or the rights thereto shall be assigned to Buyer if not yet
paid over to Seller.
10. CERTAIN POST CLOSING COVENANTS
10.1 Chip Change Procedures.
Seller shall, at its expense, either secure new telephone numbers and/or
lines for those customers which share telephone credit against the Purchase
Price equal to $40.00 for each customer that requires a post-closing "chip
change" service call (the "Chip Change Credit"). Accounts requiring a chip
change are listed on Schedule K. The amount of the Chip Change Credit shall be
estimated by Buyer and Seller at Closing and added to the Escrow. Seller shall
use its best efforts, at its cost and expense using its own personnel or
subcontractors approved by Buyer (provided such subcontractors have signed a
nonsolicitation agreement which may be assigned to Buyer), to complete the chip
change for each of the accounts listed on Schedule K within sixty (60) days
after Closing. Buyer shall release from Escrow to Seller the sum of $40.00 for
each such chip change completed by Seller during such sixty (60) day period.
Thereafter, Buyer shall have the right to complete the chip change and Buyer
shall be entitled to payment of the Chip Change Credit from Escrow from time to
time as Buyer incurs costs relating thereto, and Seller agrees to provide
written notice to the escrow agent in order to permit such amounts to be
released to Buyer.
10.2 Transitional Use of Phone System.
Seller agrees to cause Alvin Beaudean, a shareholder of Seller, to allow
Buyer to use the telephone system currently in place at the premises located at
3231 North I-10 Service Road, Metairie, Louisiana at no cost to Buyer for a
transition period after Closing not to exceed 60 days.
10.3 Use of Name.
Seller shall not authorize or permit any other person or entity (other
than Buyer), to use the name "Classic" or "Classic Alarms" alone or in
conjunction with any other name for any business engaged in the security alarm
business or in any other business where the potential for customer confusion
with Buyer may exist. Seller recognizes that although Buyer will not be
conducting its business under the "Classic" name, Buyer will require the use of
the name during a transition period in order to replace stickers, lawn signs,
etc.
- 23 -
<PAGE> 28
11. TERMINATION OF AGREEMENT
In the event Buyer fails to consummate the purchase of the Assets to be
Acquired and Seller has complied with all of the material terms and conditions
on its part contained herein, then this Agreement shall be automatically
terminated and Seller shall have the right to seek monetary damages arising as
a result of Buyer's breach. In the event Seller fails to consummate the sale
of the Assets to be Acquired and Buyer has complied with all of the material
terms and conditions on its part contained herein, then this Agreement shall be
automatically terminated and Buyer shall have the right, in its discretion, to
seek either specific performance of Seller's obligations hereunder (without the
posting of a bond or other security) or monetary damages arising as a result of
Seller's breach.
12. GENERAL PROVISIONS
12.1 Survival of Obligations.
Seller, Mandina and Buyer acknowledge that the representations,
warranties, covenants and agreements of Seller and Buyer contained herein form
an integral part of the consideration given to Buyer in exchange for the
Purchase Price and to Seller in exchange for the Assets to be Acquired, without
which Buyer would be unwilling to purchase, and Seller would be unwilling to
sell, the Assets to be Acquired. Notwithstanding any investigation and review
made by Buyer pursuant to this Agreement, Seller and Buyer agree that all of
the representations, warranties, covenants and agreements of Seller, Mandina
and Buyer contained in this Agreement or in any exhibit, schedule, statement,
report, certificate or other document or instrument required to be delivered
pursuant to this Agreement shall survive the making of this Agreement, any
investigation or review made by or on behalf of the parties hereto and the
Closing.
12.2 Transfer Charges and Taxes.
Seller shall pay all stamp, sales, income, realty transfer or other
taxes, federal, state or local imposed by law in respect of any and all
transfers pursuant to this Agreement.
12.3 Arbitration.
Except with respect to Buyer electing to bring an action for specific
performance of this Agreement (which action shall be commenced and settled in a
court of competent jurisdiction), any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in New Orleans, Louisiana, by a panel of three (3) arbitrators in
accordance with the Rules of the American Arbitration Association for
Commercial Arbitration. IN THE EVENT OF ANY COURT PROCEEDING HEREUNDER, THE
PARTIES WAIVE THEIR RIGHT TO TRIAL BY JURY.
- 24 -
<PAGE> 29
12.4 Confidentiality.
Buyer and Seller agree that they will treat in confidence all documents,
materials and other information which they have obtained regarding the other
party during the course of the negotiations leading to the consummation of
these transactions, the investigation provided for herein and the preparation
of this Agreement and other related documents. In the event these transactions
are not consummated, all copies of nonpublic documents and material which have
been furnished in connection therewith shall be promptly returned to the party
furnishing such documents and material, shall continue to be treated as
confidential information and shall not be used for the benefit of the party who
returned such confidential information.
12.5 Governing Law.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Alabama, without regard to its
conflicts of law provisions.
12.6 Notices.
All notices or other communications required or permitted hereunder
shall be in writing and shall be deemed given or delivered when delivered
personally, by registered or certified mail, by legible facsimile transmission
or by overnight courier (fare prepaid) addressed as follows:
If to Buyer, to: with a copy to:
Masada Security, Inc. Buchanan Ingersoll
Attention: Charles F. Armstrong Professional Corporation
Vice President Attention: Thomas G. Buchanan, Esq.
950 22nd Street North, Ste. 800 One Oxford Centre
Birmingham, AL 35203 301 Grant Street, 20th Floor
Telecopy: 800-531-3293 Pittsburgh, PA 15219-1410
Telecopy: 412-562-9316
If to Seller, to: with a copy to:
Alvin C. Beaudean William J. Dutel, Esquire
President Suite 2960
The 593 Corporation Energy Centre
3231 North I-10 Service Road 1100 Poydras Street
Metairie, LA 70002 New Orleans, LA 70163-2429
Telecopy: 504-831-8740 Telecopy: (504) 582-2429
or to such address as such party may indicate by a notice delivered to the
other parties hereto. Notice shall be deemed received the same day (when
delivered personally), five (5) days after mailing (when sent by registered or
certified mail), the same business day (when sent by facsimile) and the next
business day (when delivered by overnight courier). Any party to this
- 25 -
<PAGE> 30
Agreement may change its address to which all communications and notices may be
sent by addressing notices of such change in the manner provided.
12.7 Assignment.
This Agreement may not be assigned by Seller without the prior written
consent of Buyer. Buyer shall have the right to assign this Agreement, the
Schedules and Exhibits hereto and the rights and obligations hereunder to its
subsidiaries or affiliates, successors and assigns without the prior written
consent of Seller. To the extent this Agreement is assigned by Buyer, which is
a corporation, to a subsidiary or affiliate of Buyer that is a partnership, all
direct and indirect references herein to Buyer's corporate standing shall be
deemed to refer to partnership standing. If Buyer is a partnership, this
Agreement is nonrecourse to the partners of Buyer.
12.8 Entire Agreement; Amendments.
This Agreement contains the entire agreement between the parties, wholly
cancels, terminates and supersedes any and all previous and/or contemporaneous
oral agreements, negotiations, commitments and writings between the parties
hereto with respect to such subject matter, including the Letter of Intent
between Buyer and Seller dated March 20, 1995. No change, modification,
extension, termination, notice of termination, discharge, abandonment or waiver
of this Agreement or any of the provisions hereof, nor any representation,
promise or condition relating to this Agreement, shall be binding upon any
party hereto unless made in writing and signed by such party.
12.9 Interpretation.
Article titles and headings to Sections herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of any of the provisions of this Agreement. All
references to Sections and subsections contained in this Agreement refer to the
Sections and subsections of this Agreement. All references to Schedules or
Exhibits contained in this Agreement are references to the Schedules or
Exhibits described on the list immediately following the signature page hereto.
All references to the word "including" shall have the same meaning as the
phrase "including without limitation." Any and all Schedules, Exhibits,
statements, reports, certificates or other documents or instruments referred to
herein or attached hereto, including the "Background" portion of this
Agreement, are incorporated herein by reference as though fully set forth at
the point referred to in this Agreement. There shall be no presumption against
any party on the ground that such party was responsible for preparing this
Agreement or any part hereof.
12.10 Waivers.
Any term or provision of this Agreement may be waived, or the time for
its performance may be extended, by the party or parties entitled to the
benefit thereof, but any such waiver must be in writing and must comply with
the notice provisions contained in Section 12.6. The failure of any party to
enforce at any time any provision of this Agreement shall not be
- 26 -
<PAGE> 31
construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach
of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
12.11 Expenses.
Buyer and Seller will each pay all costs and expenses incident to its
negotiation and preparation of this Agreement and to its performance and
compliance with all agreements and conditions herein on its part to be
performed or complied with, including the fees, expenses and disbursements of
its counsel and accountants; provided, however, that in any action to enforce
the terms of this Agreement, the substantially prevailing party in such action
shall be entitled to recover its reasonable attorneys' fees and costs incurred
in connection with such action.
12.12 Partial Invalidity.
Wherever possible, each provision hereof shall be interpreted in such
manner as to be effective and valid under applicable law, but in case any one
or more of these provisions shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein, unless the deletion of
such provision or provisions would result in such a material change as to cause
the completion of these transactions to be unreasonable.
12.13 Further Assurances.
From time to time following the Closing Date, Seller shall (a)
immediately deliver to Buyer any cash or other property that it may receive in
respect of receivables relating to the business and operations of the Security
Business (whether attributable to periods before or after the Closing Date),
and (b) at the request of Buyer and without further consideration, execute and
deliver to Buyer such other instruments of conveyance and transfer as Buyer may
reasonably request or as may be otherwise necessary to more effectively convey
and transfer to, and vest in, Buyer and put Buyer in possession of, any part of
the Assets to be Acquired. In the case of any agreement, contract, lease,
easement or other commitment which is included in the Assets to be Acquired but
which cannot be transferred or assigned effectively without the consent of a
third party, whose consent has not been obtained prior to Closing, Seller shall
cooperate with Buyer at Buyer's request in trying to promptly obtain such
consent.
12.14 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be considered an original instrument and all of which together
shall be considered one and the same agreement, and shall become effective when
counterparts, which together contain the signatures of each party hereto, shall
have been delivered to Buyer and Seller. Delivery of
- 27 -
<PAGE> 32
executed signature pages hereof by facsimile transmission shall constitute
effective and binding execution and delivery hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
/s/ Anthony T. Mandina
------------------------------------------
Anthony T. Mandina, individually
SELLER: THE 593 CORPORATION
/s/ Alvin C. Beaudean
------------------------------------------
By: Alvin C. Beaudean
BUYER: MASADA SECURITY, INC.
/s/ Charles F. Armstrong
-------------------------------------------
By: Charles F. Armstrong
- 28 -
<PAGE> 33
List of Schedules
-----------------
<TABLE>
<CAPTION>
Schedule Description Section Reference
- -------- ----------- -----------------
<S> <C> <C>
A Liens and Encumbrances, Tangible Section Section 1.1(a),1.1.(c),
Personal Property, Excluded Assets, 3.7,3.9(b),5.7
Telephone Lines
B Business Documents (Intangible Personal Section Section 1.1(b),3.5(a),
Property and Real Property Agreements) 3.6
C Allocation of Purchase Price Section 2.7
D Insurance Section 3.8(c)
E List of Services and Rates Section 3.11(a)
F Litigation and Claims, Consents Section Section 3.1(b),3.2,
Notices, Prior Names 3.7(c),6.4, 6.7(d)
G Free Service Liability, Discounted Section Section 3.4, 3.12(a)
Service Liability, Location of Customers
H Tax Returns Section 3.14
I List of Creditors Section 3.20
J WIP, Proposals and Bids Section 3.3
K Chip Change Accounts 3.11(d), 10.1
L List of Employees, Employee Benefit and Welfare Plans 3.13
List of Exhibits
1A Attrition Escrow Agreement Section 2.1(b)
1B Tax Escrow Agreement Section 2.1(b)
2 Nonsolicitation Agreement Section 2.6
3 Financial Statements Section 3.10
4 Seller's Monitoring Agreements Section 3.11
</TABLE>
<PAGE> 34
5 Opinion of Seller's Counsel Section 6.5
6 Assignment and Bill of Sale Section 6.7(a)
7 Customer Notice Section 5.9(a)
8 Insurance Summary Section 3.8(c)
<PAGE> 1
TAX INDEMNITY ESCROW AGREEMENT
This Escrow Agreement made this 2nd day of November, 1995, by and among
The 593 Corporation, d/b/a Classic Alarms, a Louisiana corporation ("Seller"),
Masada Security, Inc., a Delaware corporation ("Buyer"), and SouthTrust Bank of
Alabama, N.A. (the "Escrow Agent").
STATEMENT OF FACTS
1. Buyer and Seller are parties to that certain Asset Purchase Agreement
dated as of the date hereof (the "Purchase Agreement"). All capitalized terms
used herein, but not otherwise defined herein, shall have the meanings given
them in the Purchase Agreement.
2. Pursuant to the Purchase Agreement, Buyer agreed to purchase all of
the Assets to be Acquired.
3. Pursuant to the Purchase Agreement, Buyer and Seller agreed that
Buyer would deposit a portion of the Purchase Price with the Escrow Agent to
provide a source to fund the release or other disposition of any tax liens on
the Assets to be Acquired.
NOW, THEREFORE, in consideration of the Statement of Facts and the
mutual covenants and agreements contained herein, the parties, intending to be
legally bound, covenant and agree as follows:
1. Establishment of Escrow Fund.
1.1 Simultaneously with the execution and delivery of this Escrow
Agreement, Buyer shall deposit the sum of One Hundred Forty-Six Thousand Four
Hundred Seventy-Nine Dollars and Six Cents ($146,479.06) (which deposit,
together with interest accrued thereon, shall be referred to as the "Escrow
Fund") with the Escrow Agent.
2. Appointment of Escrow Agent.
2.1 Buyer and Seller hereby appoint the Escrow Agent to serve as escrow
agent under the terms of this Escrow Agreement, and the Escrow Agent hereby
accepts such appointment.
2.2 The Escrow Agent agrees to place the Escrow Fund in an interest bearing
account, to bear interest at the highest rate offered on accounts available for
immediate withdrawal.
<PAGE> 2
2.3 The Escrow Agent further agrees to carry out the provisions of this
Escrow Agreement on its part to be performed.
3. Purpose of the Escrow Fund.
3.1 The purpose of the Escrow Fund is to deposit a designated portion of
the Purchase Price to provide a source to fund any Chip Change Credit, any
Purchase Price Deduct, the release or other disposition of any tax liens on the
Assets to be Acquired and any indemnification obligation of Seller pursuant to
Section 8.1 of the Purchase Agreement.
4. Distribution of the Escrow Fund.
4.1 The Escrow Agent shall disburse the Escrow Fund, in whole or in part,
(i) upon receipt of joint written instructions executed on behalf of Buyer and
Seller, (ii) upon receipt of Buyer's written instructions accompanied by a
written certification from Buyer that such distribution is to be paid to a
taxing authority pursuant to a negotiated settlement to release one or more tax
liens on the Assets to be Acquired existing at Closing or to avoid foreclosure
on the Assets to be Acquired pursuant to any such tax liens, (iii) on the last
day of the 36th month after the date hereof, (iv) at the direction of the
arbitrators to be selected pursuant to Section 11.3 of the Purchase Agreement
or (v) at the direction of a court of competent jurisdiction.
The Escrow Agent may, at any time, deposit the Escrow Fund with such
arbitrators or court, and upon such deposit, the Escrow Agent shall be relieved
of any further liability or responsibility with respect thereto.
5. Escrow Agent.
5.1 The Escrow Agent shall not in any way be bound or affected by a notice
of modification or cancellation of this Escrow Agreement unless notice thereof
is given to the Escrow Agent by both Seller and Buyer, nor shall the Escrow
Agent be bound by any modification of its obligations hereunder unless the same
shall be consented to by the Escrow Agent in writing. The Escrow Agent shall
be entitled to rely upon any judgment, certification, demand or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any facts stated therein, the propriety or validity of
the service thereof, or the jurisdiction issuing any judgment.
5.2 The Escrow Agent shall not be under any duty to give the property held
by it hereunder any greater care than it gives its own similar property.
-2-
<PAGE> 3
5.3 The Escrow Agent may act in reliance upon any instrument or signature
believed by it to be genuine, and it may assume that any person purporting to
give any notice or make any statement in connection with the provisions hereof
has been duly authorized to do so.
5.4 The Escrow Agent may act in reliance upon advice of counsel in
reference to any matter connected herewith, and shall not be liable for any
mistake of fact or error of judgment, or for any act or omission of any kind
except to the extent that such act or omission constitutes willful misconduct,
gross negligence or fraud.
5.5 The Escrow Agent shall not have any responsibility for the payment of
taxes except with funds furnished to the Escrow Agent for that purpose.
5.6 This Escrow Agreement sets forth exclusively the duties of the Escrow
Agent with respect to any and all matters pertinent hereto. Except as
otherwise expressly provided herein, the Escrow Agent shall not refer to, and
shall not be bound by, the provisions of any other agreement.
5.7 Except with respect to claims based upon the Escrow Agent's willful
misconduct, gross negligence or fraud, Buyer shall indemnify and hold harmless
the Escrow Agent from any claims made against the Escrow Agent by Seller
arising out of or relating to this Escrow Agreement, and Seller shall indemnify
and hold the Escrow Agent harmless from any claims made against the Escrow
Agent by Buyer arising out of or relating to this Escrow Agreement. Buyer and
Seller jointly and severally shall indemnify and hold the Escrow Agent harmless
from any claim made by any third party arising out of or relating to this
Escrow Agreement, such indemnification to include all costs and expenses
incurred by the Escrow Agent, including reasonable attorneys' fees.
5.8 The Escrow Agent shall not be required to institute or defend any
action involving any matters referred to herein or which affect it or its
duties or liability hereunder, unless or until requested to do so by any party
to this Escrow Agreement and then only upon receiving full indemnity, in
character satisfactory to the Escrow Agent, against any and all claims,
liabilities and expenses, including reasonable attorneys' fees, in relation
thereto.
5.9 Upon termination of this Escrow Agreement, the Escrow Agent may
request from Buyer and Seller such additional assurances, certificates,
satisfactions, releases and/or other documents as it may deem appropriate to
evidence the termination of this Escrow Agreement.
5.10 The Escrow Agent shall be entitled to receive a fee for serving as
the Escrow Agent hereunder equal to $250 per year and $25.00 per transaction,
to be shared equally by Buyer and Seller.
-3-
<PAGE> 4
5.11 Buyer and Seller acknowledge that it may be necessary, for federal
income tax or other purposes, for the Escrow Agent to know the employer
identification numbers ("EIN") of Buyer and Seller. Buyer represents that its
EIN is 63-1110400. Seller represents that its EIN is 72-125-0855.
6. Notices.
6.1 All notices or other communications required or permitted hereunder
shall be in writing and shall be deemed given or delivered when delivered (i)
personally, (ii) by registered or certified mail, (iii) by legible facsimile
transmission or (iv) by overnight courier (fare prepaid), in all cases
addressed as follows:
If to Buyer, to: with a copy to:
Masada Security, Inc. Buchanan Ingersoll Professional
Attention: Charles F. Armstrong Corporation
950 22nd Street North, Ste. 800 Attention: Thomas G. Buchanan, Esq.
Birmingham, AL 35203 58th Floor, 600 Grant Street
Telecopy: 800-531-3293 Pittsburgh, PA 15219
Telecopy: 412-562-9316
If to Seller, to: with a copy to:
Alvin C. Beaudeau William J. Dutel
President Suite 2960, Energy Centre
The 593 Corporation 1100 Poydras Street
3231 North I-10 Service Road New Orleans, Louisiana 70163-2960
Metairie, Louisiana 70002
Telecopy: 504-831-8740 Telecopy: 504-582-2422
If to the Escrow Agent, to:
SouthTrust Bank of Alabama, N.A.
420 North 20th Street
Birmingham, Alabama 35203
Attention: Robert W. Wilkerson
Telecopy: 205-254-5989
or to such address as such party may indicate by a notice delivered to the
other parties. Notice shall be deemed received the same day (when delivered
personally), five (5) days after mailing
-4-
<PAGE> 5
(when sent by registered or certified mail), or the next business day (when
sent by facsimile transmission or when delivered by overnight courier). Any
party to this Escrow Agreement may change its address to which all
communications and notices may be sent hereunder by addressing notices of such
change in the manner provided.
7. Miscellaneous.
7.1 This Escrow Agreement and the rights and the obligations of the
parties shall be governed by and construed and enforced in accordance with the
laws of the State of Alabama without regard to its conflicts of law provisions.
7.2 The parties: (i) agree that any legal action concerning any and all
claims, disputes, or controversies arising out of or relating to this Escrow
Agreement shall only be commenced in New Orleans, Louisiana; (ii) consent to
the jurisdiction of the arbitrators selected pursuant to the Purchase
Agreement; and (iii) agree to accept service of any pleadings (and such service
shall be valid), if made by certified or registered mail, return receipt
requested, to the respective parties at the addresses set forth in Section 6 of
this Escrow Agreement. IN THE EVENT OF ANY COURT PROCEEDING HEREUNDER, THE
PARTIES WAIVE THEIR RIGHT TO A TRIAL BY JURY.
7.3 The parties agree to execute and deliver any and all documents and to
take such further action as shall be reasonably required to effectuate the
provisions of this Escrow Agreement.
7.4 This Escrow Agreement contains the entire understandings of the
parties with respect to the subject matter herein contained and shall not be
modified except by a writing signed by all the parties.
7.5 This Escrow Agreement shall inure to the benefit of and be binding
upon the parties and their respective successors and assigns. Seller and the
Escrow Agent cannot assign this Escrow Agreement, but Buyer shall be permitted
to assign this Escrow Agreement and its rights and obligations hereunder to its
affiliates, successors and assigns.
7.6 There shall be no presumption against any party on the ground that
such party was responsible for preparing this Escrow Agreement or any part
hereof. The word "including" means "including without limitation."
7.7 This Escrow Agreement may be executed in one or more counterparts,
each of which when taken together shall comprise one instrument. Delivery of
executed signature pages by facsimile transmission shall constitute effective
and binding execution and delivery.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be
executed and delivered as of the day and year first above written.
THE 593 CORPORATION
By: /s/ Alvin C. Beaudean
------------------------
Alvin C. Beaudean
------------------------
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-------------------------
Charles F. Armstrong
-------------------------
SOUTHTRUST BANK OF ALABAMA, N.A.
By: /s/ Robert W. Wilkerson
--------------------------
Sr. V.P.
---------------------------
-6-
<PAGE> 1
ATTRITION ESCROW AGREEMENT
This Escrow Agreement made this 2nd day of November, 1995, by and among
The 593 Corporation, d/b/a Classic Alarms, a Louisiana corporation ("Seller"),
Masada Security, Inc., a Delaware corporation ("Buyer"), and SouthTrust Bank of
Alabama, N.A. (the "Escrow Agent").
STATEMENT OF FACTS
1. Buyer and Seller are parties to that certain Asset Purchase Agreement
dated as of the date hereof (the "Purchase Agreement"). All capitalized terms
used herein, but not otherwise defined herein, shall have the meanings given
them in the Purchase Agreement.
2. Pursuant to the Purchase Agreement, Buyer agreed to purchase all of the
Assets to be Acquired.
3. Pursuant to the Purchase Agreement, Buyer and Seller agreed that Buyer
would deposit a portion of the Purchase Price with the Escrow Agent to provide
a source to fund any Chip Change Credit, any Purchase Price Deduct and any
indemnification obligation of Seller pursuant to Section 8.1 of the Purchase
Agreement.
NOW, THEREFORE, in consideration of the Statement of Facts and the mutual
covenants and agreements contained herein, the parties, intending to be legally
bound, covenant and agree as follows:
1. Establishment of Escrow Fund.
1.1 Simultaneously with the execution and delivery of this Escrow
Agreement, Buyer shall deposit the sum of Two Hundred Eight Thousand Fifty-Five
Dollars and Twelve Cents ($208,055.12) (which deposit, together with interest
accrued thereon, shall be referred to as the "Escrow Fund") with the Escrow
Agent.
2. Appointment of Escrow Agent.
2.1 Buyer and Seller hereby appoint the Escrow Agent to serve as
escrow agent under the terms of this Escrow Agreement, and the Escrow Agent
hereby accepts such appointment.
2.2 The Escrow Agent agrees to place the Escrow Fund in an interest
bearing account, to bear interest at the highest rate offered on accounts
available for immediate withdrawal.
<PAGE> 2
2.3 The Escrow Agent further agrees to carry out the provisions of
this Escrow Agreement on its part to be performed.
3. Purpose of the Escrow Fund.
3.1 The purpose of the Escrow Fund is to deposit a designated
portion of the Purchase Price to provide a source to fund any Chip Change
Credit, any Purchase Price Deduct, and any indemnification obligation of Seller
pursuant to Section 8.1 of the Purchase Agreement.
4. Distribution of the Escrow Fund.
4.1 The Escrow Agent shall disburse the Escrow Fund, in whole or in
part, only upon receipt of joint written instructions executed on behalf of
Buyer and Seller, or at the direction of the arbitrators to be selected
pursuant to Section 11.3 of the Purchase Agreement or at the direction of a
court of competent jurisdiction.
The Escrow Agent may, at any time, deposit the Escrow Fund with such
arbitrators or court, and upon such deposit, the Escrow Agent shall be relieved
of any further liability or responsibility with respect thereto.
<TABLE>
<S> <C>
4.2 As to any sum due Seller, the distribution shall be made to:
Crescent Bank & Trust
1100 Poydras Street
New Orleans, Louisiana 70163
Attn: Mr. Fred B. Morgan, III, President
For the Account of THE 593 CORPORATION
</TABLE>
5. Escrow Agent.
5.1 The Escrow Agent shall not in any way be bound or affected by a
notice of modification or cancellation of this Escrow Agreement unless notice
thereof is given to the Escrow Agent by both Seller and Buyer, nor shall the
Escrow Agent be bound by any modification of its obligations hereunder unless
the same shall be consented to by the Escrow Agent in writing. The Escrow
Agent shall be entitled to rely upon any judgment, certification, demand or
other writing delivered to it hereunder without being required to determine the
authenticity or the correctness of any facts stated therein, the propriety or
validity of the service thereof, or the jurisdiction issuing any judgment.
5.2 The Escrow Agent shall not be under any duty to give the
property held by it hereunder any greater care than it gives its own similar
property.
-2-
<PAGE> 3
5.3 The Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine, and it may assume that any person
purporting to give any notice or make any statement in connection with the
provisions hereof has been duly authorized to do so.
5.4 The Escrow Agent may act in reliance upon advice of counsel in
reference to any matter connected herewith, and shall not be liable for any
mistake of fact or error of judgment, or for any act or omission of any kind
except to the extent that such act or omission constitutes willful misconduct,
gross negligence or fraud.
5.5 The Escrow Agent shall not have any responsibility for the
payment of taxes except with funds furnished to the Escrow Agent for that
purpose.
5.6 This Escrow Agreement sets forth exclusively the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. Except as
otherwise expressly provided herein, the Escrow Agent shall not refer to, and
shall not be bound by, the provisions of any other agreement.
5.7 Except with respect to claims based upon the Escrow Agent's
willful misconduct, gross negligence or fraud, Buyer shall indemnify and hold
harmless the Escrow Agent from any claims made against the Escrow Agent by
Seller arising out of or relating to this Escrow Agreement, and Seller shall
indemnify and hold the Escrow Agent harmless from any claims made against the
Escrow Agent by Buyer arising out of or relating to this Escrow Agreement.
Buyer and Seller jointly and severally shall indemnify and hold the Escrow
Agent harmless from any claim made by any third party arising out of or
relating to this Escrow Agreement, such indemnification to include all costs
and expenses incurred by the Escrow Agent, including reasonable attorneys' fees.
5.8 The Escrow Agent shall not be required to institute or defend
any action involving any matters referred to herein or which affect it or its
duties or liability hereunder, unless or until requested to do so by any party
to this Escrow Agreement and then only upon receiving full indemnity, in
character satisfactory to the Escrow Agent, against any and all claims,
liabilities and expenses, including reasonable attorneys' fees, in relation
thereto.
5.9 Upon termination of this Escrow Agreement, the Escrow Agent may
request from Buyer and Seller such additional assurances, certificates,
satisfactions, releases and/or other documents as it may deem appropriate to
evidence the termination of this Escrow Agreement.
5.10 The Escrow Agent shall be entitled to receive a fee for serving
as the Escrow Agent hereunder equal to $500 per year and $25.00 per
transaction, to be shared equally by Buyer and Seller.
-3-
<PAGE> 4
5.11 Buyer and Seller acknowledge that it may be necessary, for
federal income tax or other purposes, for the Escrow Agent to know the employer
identification numbers ("EIN") of Buyer and Seller. Buyer represents that its
EIN is 63-1110400. Seller represents that its EIN is 72-125-0855.
6. Notices.
6.1 All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given or delivered when
delivered (i) personally, (ii) by registered or certified mail, (iii) by
legible facsimile transmission or (iv) by overnight courier (fare prepaid), in
all cases addressed as follows:
<TABLE>
<CAPTION>
If to Buyer, to: with a copy to:
<S> <C>
Masada Security, Inc. Buchanan Ingersoll Professional
Attention: Charles F. Armstrong Corporation
950 22nd Street North, Ste. 800 Attention: Thomas G. Buchanan, Esq.
Birmingham, AL 35203 58th Floor, 600 Grant Street
Telecopy: 800-531-3293 Pittsburgh, PA 15219
Telecopy: 412-562-9316
If to Seller, to: with a copy to:
Alvin C. Beaudeau William J. Dutel
President Suite 2960, Energy Centre
The 593 Corporation 1100 Poydras Street
3231 North I-10 Service Road New Orleans, Louisiana 70163-2960
Metairie, Louisiana 70002
Telecopy: 504-831-8740 Telecopy: 504-582-2422
</TABLE>
If to the Escrow Agent, to:
SouthTrust Bank of Alabama, N.A.
420 North 20th Street
Birmingham, Alabama 35203
Attention: Robert W. Wilkerson
Telecopy: 205-254-5989
or to such address as such party may indicate by a notice delivered to the
other parties. Notice shall be deemed received the same day (when delivered
personally), five (5) days after mailing
-4-
<PAGE> 5
(when sent by registered or certified mail), or the next business day (when
sent by facsimile transmission or when delivered by overnight courier). Any
party to this Escrow Agreement may change its address to which all
communications and notices may be sent hereunder by addressing notices of such
change in the manner provided.
7. Miscellaneous.
7.1 This Escrow Agreement and the rights and the obligations of the
parties shall be governed by and construed and enforced in accordance with the
laws of the State of Alabama without regard to its conflicts of law provisions.
7.2 The parties: (i) agree that any legal action concerning any
and all claims, disputes, or controversies arising out of or relating to this
Escrow Agreement shall only be commenced in New Orleans, Louisiana; (ii)
consent to the jurisdiction of the arbitrators selected pursuant to the Purchase
Agreement; and (iii) agree to accept service of any pleadings (and such service
shall be valid), if made by certified or registered mail, return receipt
requested, to the respective parties at the addresses set forth in Section 6 of
this Escrow Agreement. IN THE EVENT OF ANY COURT PROCEEDING HEREUNDER, THE
PARTIES WAIVE THEIR RIGHT TO A TRIAL BY JURY.
7.3 The parties agree to execute and deliver any and all documents
and to take such further action as shall be reasonably required to effectuate
the provisions of this Escrow Agreement.
7.4 This Escrow Agreement contains the entire understandings of the
parties with respect to the subject matter herein contained and shall not be
modified except by a writing signed by all the parties.
7.5 This Escrow Agreement shall inure to the benefit of and be
binding upon the parties and their respective successors and assigns. Seller
and the Escrow Agent cannot assign this Escrow Agreement, but Buyer shall be
permitted to assign this Escrow Agreement and its rights and obligations
hereunder to its affiliates, successors and assigns.
7.6 There shall be no presumption against any party on the ground
that such party was responsible for preparing this Escrow Agreement or any
part hereof. The word "including" means "including without limitation."
7.7 This Escrow Agreement may be executed in one or more counter-
parts, each of which when taken together shall comprise one instrument.
Delivery of executed signature pages by facsimile transmission shall constitute
effective and binding execution and delivery.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be
executed and delivered as of the day and year first above written.
THE 593 CORPORATION
By: /s/ Alvin C. Beaudean
-----------------------------------
Alvin C. Beaudean
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-----------------------------------
Charles F. Armstrong
SOUTHTRUST BANK OF ALABAMA, N.A.
By: /s/ Robert W. Wilkerson
-----------------------------------
Robert W. Wilkerson
Sr. Vice President
-6-
<PAGE> 1
NONSOLICITATION AGREEMENT
This Agreement made as of this 2nd day of November, 1995, by and among
Masada Security, Inc., a Delaware corporation ("Buyer"), The 593 Corporation,
d/b/a Classic Alarms, a Louisiana corporation ("Seller"), and Anthony T.
Mandina, an individual ("Mandina"), Edgar Casey, an individual ("Casey") and
Alvin C. Beaudean, an individual ("Beaudean"). ("Mandina", "Casey" and
"Beaudean" are collectively called the "Principals").
STATEMENT OF FACTS
A. All capitalized terms used in this Agreement and not otherwise defined
have the meanings given to them in that certain Agreement of Purchase and Sale
dated as of the date hereof (the "Purchase Agreement")
B. The Principals are the principal officers, directors and shareholders
of Seller.
C. Buyer intends to continue the operation of the Security Business, and
Seller and the Principals are willing to enter into this Agreement as an
inducement to Buyer to purchase the Security Business.
NOW, THEREFORE, in consideration of the premises and for good and valuable
consideration, receipt of which is acknowledged, the parties, intending to be
legally bound, covenant and agree as follows:
1. Nonsolicitation. Seller and the Principals agree not to solicit or
accept, for a period of two (2) years from the date hereof, any of the
customers or accounts sold to Buyer under the Purchase Agreement for the
purpose of providing electronic security, intercom, central vacuum, home
automation, audio systems or related services.
2. Nondisclosure.
(a) Seller and the Principals acknowledge that they possess certain
confidential, proprietary and trade secret information relating to the
customers and accounts sold to Buyer under the Purchase Agreement, including
information regarding customer lists and files (including any notes or
compilations which contain the names, addresses, telephone numbers or any
contract information for or relating to such customers) and copies of
contracts, agreements and related documents between Seller and such customers
and accounts (collectively, the "Proprietary Information").
<PAGE> 2
6. Severability. If any provisions of this Agreement as applied to any
party or to any circumstances will be adjudged by a court to be invalid or
unenforceable, the same will in no way affect any other provision of this
Agreement, the application of such provision in any other circumstances, or the
validity or enforceability of this Agreement. Buyer, Seller and the Principals
intend this Agreement to be enforced as written. If any provision or any part
thereof is held to be invalid or unenforceable because of the duration thereof,
all parties agree that the court making such determination will have the power
to reduce the duration of such provision, and/or to delete specific words or
phrases and in its modified form such provision will then be enforceable.
7. Consent to Jurisdiction, Service and Venue. For the purpose of any
suit, action or proceeding arising out of or relating to this Agreement, Seller
and the Principals hereby irrevocably consent and submit to the jurisdiction
and venue of any of the courts of the State of Alabama or of any federal court
located in Alabama. Seller appoints and constitutes the Secretary of State of
the State of Louisiana as its agent to accept and acknowledge on its behalf all
service of process in connection with any such matter, copies of which process
will be immediately mailed or delivered to Seller. Seller and the Principals
hereby irrevocably waive any objection which they may now or hereafter have to
the venue of any such suit, action or proceeding brought in such court and any
claim that such suit, action or proceeding brought in such court has been
brought in an inconvenient forum and agree that service of process in
accordance with the foregoing sentence will be deemed in every respect
effective and valid personal service of process upon Seller and the Principals.
The provisions of this Section will not limit or otherwise affect the right of
Buyer to institute and conduct an action in any other appropriate manner,
jurisdiction or court.
8. WAIVER OF JURY TRIAL. BUYER, SELLER AND THE PRINCIPALS WAIVE ALL RIGHT
TO A TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT.
9. Notices. All notices or other communications required or permitted
hereunder will be in writing and will be deemed given or delivered when
delivered (i) personally, (ii) by registered or certified mail, (iii) by
legible facsimile transmission or (iv) by overnight courier (fare prepaid), in
all cases addressed as follows:
-3-
<PAGE> 3
If to Buyer, to:
Charles F. Armstrong
Vice President of Corporate Development
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Telecopy: 800-531-3293
If to Seller, to:
Alvin C. Beaudean
President
The 593 Corporation
3231 North I-10 Service Road
Metairie, Louisiana 70002
If to the Principals, to:
c/o William J. Dutel, Esquire
325 N. New Hampshire Street
Covington, Louisiana 70433
Telecopy: 504-582-2422
or to such address as such party may indicate by a notice delivered to the
other parties hereto. Notice will be deemed received the same day (when
delivered personally), five (5) days after mailing (when sent by registered or
certified mail), or the next business day (when sent by facsimile transmission
or when delivered by overnight courier). Any party to this Agreement may
change its address to which all communications and notices may be sent by
addressing notices of such change in the manner provided.
10. Entire Agreement. This Agreement is an integrated document, contains
the entire agreement between the parties, and wholly cancels, terminates and
supersedes any and all previous and/or contemporaneous oral agreements,
negotiations, commitments and writings between the parties with respect to such
subject matter, except for the Purchase Agreement. No change, modification,
extension, termination, discharge, abandonment or waiver of this Agreement or
any of its provisions, nor any representation, promise or condition relating to
this Agreement, will be binding upon the parties unless made in writing and
signed by the parties.
11. Interpretation. The descriptive headings of the Sections are for ease
of reference only and will in no way affect or be used to construe or interpret
this Agreement. All references to Sections and subsections contained in this
Agreement are references to the Sections
-4-
<PAGE> 4
and subsections of this Agreement. The terms and conditions of this Agreement
will not be construed against its drafter. The word "including" means
"including without limitation."
12. Remedies Cumulative. It is agreed that the rights and remedies herein
provided in case of any default or breach by Seller and the Principals of this
Agreement are cumulative and will not affect in any manner any other remedies
that Buyer may have by reason of such default or breach by Seller or the
Principals. The exercise of any right or remedy will be without prejudice to
the right to exercise any other right or remedy provided herein, by law or by
equity.
13. Waiver. No waiver of any right or remedy allowed hereunder will be
implied by the failure to enforce any such right or remedy. No express waiver
will affect any such right or remedy other than that to which the waiver is
applicable and only for that occurrence.
14. Parties in Interest. This Agreement will be binding upon and will
inure to the benefit of Buyer and its successors and assigns and the permitted
heirs, successors and assigns of Seller and the Principals.
15. Assignment. Buyer has the right to assign this Agreement to any third
party without the consent of Seller or the Principals. Seller and the
Principals will have no right to assign this Agreement.
16. Governing Law. This Agreement and the rights and the obligations of
the parties is governed by and construed and enforced in accordance with the
laws of the State of Alabama without regard to any jurisdiction's conflicts of
law provisions.
17. Joint and Several Obligations. Seller and the Principals acknowledge
that all of their agreements and covenants contained in this Agreement are made
on a joint and several basis.
18. Incorporation by Reference. Any and all Schedules, Exhibits,
recitals, statements (including the Statement of Facts), reports, certificates
or other documents or instruments referred to or attached to this Agreement are
incorporated by reference into this Agreement.
19. Expenses. Buyer, Seller and the Principals each agree to pay all of
their respective costs and expenses incident to the negotiation and preparation
of this Agreement and to the performance and compliance with all agreements and
conditions contained herein on their part to be performed or complied with,
including the fees and costs of their counsel and accountants; provided,
however, that Seller agrees to pay Buyer's legal fees and costs in the event
Buyer must go to court to enforce this Agreement.
-5-
<PAGE> 5
20. Counterparts; Telecopy. This Agreement may be executed in one or more
counterparts, each of which when taken together will comprise one instrument.
Delivery of executed signature pages hereof by facsimile transmission will
constitute effective and binding execution and delivery.
21. Consultation. Seller and the Principals acknowledge that they have:
(a) carefully read and fully understood all of the provisions of this
Agreement, and (b) had an opportunity to consult with their respective
attorneys prior to executing this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
---------------------------------
THE 593 CORPORATION
By: /s/ Alvin C. Beaudean
---------------------------------
/s/ Anthony T. Mandina,
------------------------------------
Anthony T. Mandina, an individual
/s/ Edgar Casey
------------------------------------
Edgar Casey, an individual
/s/ Alvin c. Beaudean
------------------------------------
Alvin C. Beaudean, an individual
-6-
<PAGE> 1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of January
8, 1996 by and between MASADA SECURITY, INC., a Delaware corporation
("Buyer"); PAUL KRISTYNIK, an individual residing in Austin, Texas ("Paul");
and MARY KRISTYNIK, an individual residing in Austin, Texas ("Mary" and,
collectively with Paul, "Sellers").
RECITALS
Sellers own 1,000 shares (the "Shares") of the common stock, no par
value, of Kristynik Security Systems, Inc., a Texas corporation (the
"Company"), which constitutes all of the issued and outstanding shares of
capital stock of the Company. Sellers desire to sell, and Buyer desires to
purchase, the Shares for the consideration and on the terms set forth in this
Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"ACCOUNTS RECEIVABLE" OR "A/R" -- as defined in Section 3.9.
"ADJUSTMENT AMOUNT" -- as defined in Section 2.6.
"ALARM ACCOUNT" -- as defined in Section 3.18.
"ASSUMED LIABILITIES" -- as defined in Section 2.3.
"APPLICABLE CONTRACT" -- any Contract excluding Alarm Accounts (a)
under which Company has or may acquire any rights, (b) under which Company has
or may become subject to any obligation or liability, or (c) by which Company
or any of the assets owned or used by Company is or may become bound.
"BALANCE SHEET" -- as defined in Section 3.4.
"BREACH" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision.
<PAGE> 2
"BUILDER INSTALLATION" -- arrangement in which Company contracts with
residential single family home builders to install an alarm system in a new
home during construction. Builder Installations are typically completed in the
following two phases: (i) "pre-wire" phase in which wires necessary for alarm
system operation are pulled before sheetrock installation; (ii) "trim-out"
phases in which devices necessary for alarm system monitoring (panels,
contacts, motion detectors, etc.) are installed.
"BUYER" -- as defined in the first paragraph of this Agreement.
"CLOSING" -- as defined in Section 2.4.
"CLOSING DATE" -- the date and time as of which the Closing actually
takes place.
"CODE" -- the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"COMPANY" -- as defined in the second paragraph of this Agreement.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONSULTING AGREEMENT" -- as defined in Section 2.5.
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the
Consulting Agreement, the Noncompetition Agreement,
and the Escrow Agreement.
(c) the performance by Buyer and Sellers of their
respective covenants and obligations under this
Agreement; and
(d) Buyer's acquisition and ownership of the Shares and
exercise of control over the Company.
"CONTRACT" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES" -- as defined in Section 10.2.
"ENCUMBRANCE" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right
of first refusal, or restriction of any kind,
2
<PAGE> 3
including any restriction on use, voting (in the case of any security),
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENTAL REQUIREMENT" -- any Legal Requirement designed:
(a) to advise appropriate authorities, employees, and the
public of intended or actual Releases of pollutants
or hazardous substances or Hazardous Materials,
violations or discharge limits, or other prohibitions
and of the commencements of activities, such as
resource extraction or construction, that could have
significant impact on the environment;
(b) to prevent or acceptably minimize the Release of
pollutants or hazardous substances or materials into
the environment;
(c) to reduce the quantities, prevent the Release, and
minimize the hazardous characteristics of wastes that
are generated;
(d) to assure that products are designed, formulated,
packaged, or used so that they do not present
unreasonable risks to human health or the environment
when used or disposed of;
(e) to protect resources, species, or ecological
amenities;
(f) to acceptably minimize the risks inherent in
transportation of hazardous substances, pollutants,
oil, or other potentially harmful substances;
(g) to clean up pollutants that have been Released,
prevent the threat of Release, or pay the costs of
such clean up or prevention; or
"ESCROW AGREEMENT" -- as defined in Section 2.5.
"ESCROWED OVER 60 RMR" -- means the sum of the purchase price
associated with the Over 60 RMR Alarm Accounts.
"EXCLUDED ASSETS" -- means (a) any life insurance policies on Sellers
which are owned by the Company; (b) the guard patrol service business and any
related Contracts and assets owned by the Company; (d) the 1995 Ford Explorer
which is listed on the Company's December 1995 depreciation; (e) the 1992 Isuzu
pick up truck which is listed on the Company's December depreciation
schedule as number 10; (f) the 1993 Isuzu pick up truck which is listed on the
Company's December 1995 depreciation schedule as number 8; (g) the 1995
Chevrolet S-10 truck which is listed on the Company's December 1995
depreciation schedule as number 13; (h) the tradename "Texas Protection
Specialist, Inc."; (i) the license issued by the Texas Board of Investigation
and Private Security
3
<PAGE> 4
Agency numbered B-04481; (j) any property not owned by the Company; (k) any
accounts receivable from Employees or officers of the Company as listed on the
Interim Balance Sheet; and (l) any other asset mutually agreed to in writing by
the Sellers and the Buyer.
"FACILITIES" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company (or any predecessor
Person) and any buildings, plants, structures, or equipment currently or
formerly owned, leased, or operated by the Company (or any predecessor Person).
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise
made available by or under the authority of any Governmental Body or pursuant
to any Legal Requirement.
"GOVERNMENTAL BODY" -- any federal, state, local, municipal, foreign,
or other government.
"GROSS RMR ATTRITION" -- means the RMR of former monitoring customers
of the Company for a specified time period which have cancelled the monitoring
services provided by the Company divided by the beginning RMR of all monitoring
customers of the Company for the same period of time and at the same locations.
"HAZARDOUS MATERIALS" -- any substance that is listed, defined,
designated, or classified as, or otherwise determined to be hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Legal Requirement, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"HOLDBACK PERIOD I" -- the six months following the Closing Date.
"HOLDBACK PERIOD II" -- the twelve months following the Closing Date.
"INDEMNIFIED PERSONS" -- as defined in Section 10.2.
"INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 3.23.
"INTERIM BALANCE SHEET" -- as defined in Section 3.4.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"KNOWLEDGE" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
4
<PAGE> 5
(a) such individual is actually aware of such or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in
the course of conducting a reasonably comprehensive
investigation concerning the existence of such fact or
other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, knowledge of such
fact or other matter.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal, foreign,
international, multinational, or other constitution, law, ordinance, principle
of common law, regulation, statute, or treaty.
"LOST RMR" -- means as of the end of the Holdback Period II, the Alarm
Account customers which were included in RMR (a) whose accounts receivable
balances (whether attributable to RMR or otherwise) are more than 60 days past
due from the invoice due date; (b) who have cancelled or failed to renew their
Contract for any reason; or (c) who have been reasonably cancelled or
terminated by Buyer for excessive false alarms or other customer abuses.
"LOST RMR OFFSET" -- means the sum of the following:
(a) the RMR associated with properly executed security
monitoring Contracts which Sellers have presented to
Buyer during the Holdback Period II on a form of
Contract approved by Buyer in its sole discretion;
and
(b) total payments received by the Company or Buyer after
Closing from Alarm Accounts included in Lost RMR
multiplied by 8%.
"NONCOMPETITION AGREEMENT" -- as defined in Section 2.5.
"NET ASSET VALUE" -- means the sum of the following amounts as of the
Closing Date:
(a) cash or cash equivalents acceptable to Buyer in its
sole discretion, valued at one hundred percent (100%);
(b) A/R existing as of the Closing which relates to
monitoring, installation and other non-security guard
related services provided on or before Closing. The
purchase price for A/R will be based upon the most
delinquent A/R amount included in the various aging
categories for each of the respective Alarm Accounts.
The total amount paid for A/R will
5
<PAGE> 6
equal the sum of products resulting from the
individual A/R amounts for each of the Alarm Accounts
multiplied by the following discount factors:
(i) the total A/R balance related to Alarm
Accounts for which the oldest applicable A/R
balance is 30 days or less past due from the
invoice due date: 95% of the face value;
(ii) the total A/R balance related to Alarm
Accounts for which the oldest applicable A/R
balance is 31 days to 60 days past due from
the invoice due date: 85% of the face value;
(iii) the total A/R balance related to Alarm
Accounts for which the oldest applicable A/R
balance is 61 days to 90 days past due from
the invoice due date: 60% of the face value.
(iv) the total A/R balance related to Alarm
Accounts for which the oldest applicable A/R
balance is over 91 days past due from the
invoice due date is being transferred to
Buyer at no charge.
the total of (i) - (iii) shall not exceed $200,000.
(c) inventory, valued at book value, subject to a maximum
value of $50,000.00;
(d) prepaid expenses which arise in the Ordinary Course
of Business, valued at one hundred percent (100%);
(e) furniture, fixtures, vehicles, leasehold improvements,
machinery and equipment, valued at book value, subject
to a maximum value of $100,000.00;
(f) any Contract listed on Schedule 3.18(a) for the
providing of security monitoring services that does
not include an evergreen renewal provision or that
expires within 36 months of the Closing Date and that
is not included in RMR, valued at a mutually agreed
upon value (at the time of the execution of this
Agreement there was no such Contract and no such
Contract is expected to exist at Closing);
(g) rental revenue that relates to "lease-to-own"
Contracts listed on Schedule 3.18(b) providing for
nominal buy-out of an alarm system upon lease
expiration and that is not included in RMR, at a
mutually agreed upon value.
6
<PAGE> 7
The following will be excluded from the calculation of Net Asset Value: (a)
receivables from employees, officers and directors; (b) intercompany
transactions involving other entities owned, fully or partially, by Sellers; and
(c) other assets - security systems.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of
the normal day-to-day operations of such Person;
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person
or group of Persons exercising similar authority) and
does not require any other separate or special
authorization of any nature; and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any separate or
special authorization, in the ordinary course of the
normal day-to-day operations of other Persons that
are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" -- the articles of incorporation, the
bylaws and any amendment thereto.
"OVER 60 RMR" -- RMR which otherwise meets the definition of RMR set
forth in Section 1 except that the accounts receivable balance associated with
the Alarm Account is over 60 days past due from the oldest outstanding invoice
due date but does not represent more than 3 delinquent payments related to RMR.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or other entity or
Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PURCHASE PRICE DEDUCT" -- means 35 multiplied by the difference
between the Lost RMR and the Lost RMR Offset.
7
<PAGE> 8
"QUALIFYING OVER 60 RMR" -- with respect to each Over 60 RMR Alarm
Account acquired as of the Closing, each such Alarm Account that does not have
an Accounts Receivable balance upon the expiration of Holdback Period I of (i)
over 60 days past due from the oldest applicable invoice due date and (ii) that
represents more than 3 delinquent payments.
"RMR" means the amount of the Company's recurring monthly revenue (net
of any finance, communication, utility company or third party pass-through
charges, assessments, taxes or customer discounts) from Alarm Account customers
as of the day immediately preceding the Closing Date and which is derived
solely from open/close, perpetual lease, maintenance and repair service
agreements acceptable to Buyer. RMR shall not include any revenue: (i) from
customers whose accounts receivable balances (whether attributable to RMR or
otherwise) are more than 60 days past due from the oldest applicable invoice
due date; (ii) that is not periodic in nature but relates to installation
purchase payments or one-time assessments or charges; (iii) from Alarm Account
customers of which Sellers or the Company have received notice of a pending
termination (iv) from third-party monitoring agreements; (v) from Alarm Account
customers who were recently added as a result of extraordinary marketing
efforts or an amnesty program; (vi) that pertains to any security monitoring
services Contract that does not include an evergreen renewal provision or that
expires within 36 months of the Closing Date; (vii) from lease-to-buy Contracts
that provide the customer with the option of buying the security system for a
nominal amount; or (viii) that relate to guard patrol services.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the environment.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" -- the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
"SELLERS" -- as defined in the first paragraph of this Agreement.
"SHARES" -- as defined in the second paragraph of this Agreement.
"SUBSIDIARY" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct
the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person, "Subsidiary"
means a Subsidiary of the Company.
8
<PAGE> 9
"TAX" -- any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other
fee, and any related charge or amount (including any fine, penalty, interest,
or addition to tax), imposed assessed, or collected by or under the authority
of any Governmental Body.
"TAIL END INSURANCE POLICY" -- as defined in Section 7.4.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES. Subject to the terms and conditions of this
Agreement, at the Closing, Sellers will sell and transfer to Buyer, and Buyer
will purchase from Sellers, the Shares free and clear from any encumbrance.
2.2 PURCHASE PRICE. The purchase price for the Shares will be:
(a) thirty-five times RMR (the "RMR Purchase Price"); (b) plus thirty-five
times Over 60 RMR ("Over 60 RMR Purchase Price") (a and b collectively the
"Total RMR Purchase Price") (provided, however that no additional consideration
shall be paid in the event that RMR plus Over 60 RMR exceeds $90,000.00); (c)
plus or minus, as appropriate, the Adjustment Amount; (d) plus or minus, as
appropriate, other liabilities or credits, prepaid items and deferred charges
relating to the Company existing on the Closing Date prorated in accordance
with generally accepted accounting principles (a, b, c and d collectively the
"Purchase Price").
2.3 ASSUMED LIABILITIES. Except as set forth on Schedule 2.3 (the
"Assumed Liabilities") Buyer shall not assume, take subject to, pay, discharge
or in any manner be obligated for, any debts, liabilities or obligations of the
Company or the Sellers incurred prior to Closing, whether such liabilities
become due and payable prior to or subsequent to Closing. In the event the
Company does not pay and fully satisfy at or before Closing, any liabilities
not specifically assumed by Buyer, then Sellers shall assume personal
responsibility for payment of such liabilities and Buyer shall be able: (a) to
set off such unpaid liability against the Holdback; or (b) to proceed directly
against the Sellers.
2.4 CLOSING. The purchase and sale (the "Closing") provided for
in this Agreement will take place at a mutually agreed upon location in Austin,
Texas on January 8, 1996, or at such other time and place as the parties may
mutually agree. Subject to the provisions of Section 9, failure to consummate
the purchase and sale provided for in this Agreement on the date and time and
at the place determined pursuant to this Section 2.4 will not result in the
termination of this Agreement and will not relieve any party of any obligation
under this Agreement.
2.5 CLOSING OBLIGATIONS. At the Closing:
9
<PAGE> 10
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed
(or accompanied by duly executed stock powers), for
transfer to Buyer;
(ii) consulting agreement in the form of Exhibit
2.5(a)(ii), executed by Paul (the "Consulting
Agreement");
(iii) noncompetition agreement in the form of Exhibit
2.5(a)(iii), executed by Sellers (the "Noncompetition
Agreement"), and
(iv) a certificate executed by Sellers representing and
warranting to Buyer that each of Sellers'
representations and warranties in this Agreement was
accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the
Closing Date as if made on the Closing Date; and
(b) Buyer will deliver to Sellers:
(i) 95 percent (95%) of the RMR Purchase Price plus or
minus, as appropriate, the Adjustment Amount by wire
transfer to the joint account specified by Paul and
Mary;
(ii) the Over 60 RMR Purchase Price and the remainder of
the RMR Purchase Price after taking into account the
amount paid in accordance with Section 2.5(b)(i) (the
"Holdback") to the escrow agent referred to in the
Escrow Agreement by wire transfer;
(iii) a certificate executed by Buyer to the effect that,
except as otherwise stated in such certificate, each
of Buyer's representations and warranties in this
Agreement was accurate in all respects as of the date
of this Agreement and is accurate in all respects as
of the Closing Date as if made on the Closing Date;
and
(iv) the Consulting Agreement, executed by Buyer.
(c) Buyer and Sellers will enter into an escrow agreement in the
form of Exhibit 2.4(c) (the "Escrow Agreement").
2.6 ADJUSTMENT AMOUNT. The "Adjustment Amount" shall equal the
difference between the Net Asset Value as of the Closing Date and the Assumed
Liabilities as of the Closing Date. If the Net Asset Value exceeds the Assumed
Liabilities, the Purchase Price will be increased by the amount of such excess,
subject to a maximum increase of Three Hundred
10
<PAGE> 11
Thousand Dollars ($300,000.00). If the Net Asset Value is less than the
Assumed Liabilities, the Purchase Price will be decreased by the amount of such
difference.
2.7 HOLDBACK.
(a) Within 30 days after the end of the Holdback Period I, Buyer
shall submit to Sellers substantially in the form attached hereto as Exhibit
2.7(a) along with all appropriate supporting documentation, a report reflecting:
(i) the Escrowed Over 60 RMR; (ii) the liabilities of the Company accruing on or
before the Closing which are not Assumed Liabilities but which have been paid by
the Buyer or the Company after the Closing, if any; (iii) the Non-Qualifying
Over 60 RMR and; (iv) the resulting difference between the Escrowed Over 60 RMR
plus the amount associated with Section 2.7(a)(ii) less the Non-Qualifying Over
60 RMR. If Sellers do not notify Buyer of a dispute regarding such report
within ten business days from the date such report is submitted by Buyer to
Sellers or if Sellers notify Buyer of its acceptance of such report, such report
shall be deemed complete and accurate and Sellers and Buyer shall notify Escrow
Agent to pay the sums computed below to Seller or Buyer, as the case may be. The
amount disbursed from the Escrow Account at the end of Holdback Period I shall
be the amount of the Escrowed Over 60 RMR and the interest earned on that
amount. If the amount associated with (iv) is a positive amount then Sellers
and Buyer shall instruct the Escrow Agent to first pay Sellers such amount and
the remainder of the Escrowed Over 60 RMR shall be paid by Escrow Agent to
Buyer. If the amount associated with (iv) is equal to zero or is a negative
amount, then Sellers and Buyer shall instruct the Escrow Agent to pay Buyer the
entire Escrowed Over 60 RMR amount.
(b) Within 30 days after the end of the Holdback Period II, Buyer
shall submit to Sellers substantially in the form attached hereto as Exhibit
2.7(b) along with all appropriate supporting documentation, a report
reflecting: (i) the Holdback; (ii) the amount disbursed in accordance with
Section 2.7(a); (iii) the Purchase Price Deduct; (iv) the liabilities of the
Company accruing on or before the Closing which are not Assumed Liabilities but
which have been paid by the Buyer or the Company after the Closing Date and
which were not paid out of the proceeds of the Escrowed Over 60 RMR, if any;
and (v) the resulting difference between the Holdback less the credits
associated with Section 2.7(b)(ii), (iii) and (iv) (the "Resulting
Difference"). If Sellers do not notify Buyer of a dispute regarding such
report within ten business days from the date such report is submitted by Buyer
to Sellers or if Sellers notify Buyer of its acceptance of such report, such
report shall be deemed complete and accurate and Sellers and Buyer shall notify
Escrow Agent to pay the sums computed below to Sellers or Buyer, as the case
may be, and the Escrow Account shall then be closed after payment by the Escrow
Agent of all funds held by it in the Escrow Account. If the Resulting
Difference is a positive amount then Sellers and Buyer shall instruct the
Escrow Agent to first pay the Sellers the Resulting Difference and the
remainder of the Escrow Amount shall be paid by Escrow Agent to Buyer. If the
Resulting Difference is equal to zero or is a negative amount, then Sellers and
Buyer shall instruct the Escrow Agent to pay Buyer the entire Escrow Amount and
Sellers shall owe no further amount to Purchaser.
11
<PAGE> 12
(c) All disputes and differences with respect to the Escrow
Account shall be determined by binding arbitration under the rules then in
effect of the American Arbitration Association, such arbitration hearing to be
held in Birmingham, Alabama. The arbitration proceedings shall be heard by one
arbitrator selected from the proposed panel of arbitrators issued by the
American Arbitration Association, Sellers, on the one hand, and Buyer, on the
other hand, shall attempt to select a mutually acceptable arbitrator. If the
parties are unable to select a mutually acceptable arbitrator within five
business days following the issuance of the list of potential arbitrators by
the American Arbitration Association, Sellers, on the one hand, and Buyer, on
the other hand, shall each select on person from the list, and those two
persons selected shall appoint a third person from the list, which person shall
be the arbitrator for the dispute. All arbitration awards shall include an
award of expenses including, but not limited to, legal and accounting fees.
3. REPRESENTATIONS AND WARRANTIES TO SELLERS
Sellers represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the state of Texas, with full corporate
power and authority to conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own or use, and to perform
all its obligations under the Alarm Accounts and the Applicable Contracts. The
Company is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdictions in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) Sellers have delivered to Buyer copies of the Organizational
Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms.
Upon the execution and delivery by Sellers of the Escrow Agreement, the
Consulting Agreement and the Noncompetition Agreement (collectively, the
"Sellers' Closing Documents"), the Sellers' Closing Documents will constitute
the legal, valid, and binding obligations of Sellers, enforceable against
Sellers in accordance with their respective terms. Sellers have the absolute
and unrestricted right, power, authority, and capacity to execute and deliver
this Agreement and the Sellers' Closing Documents and to perform their
obligations under this Agreement and the Sellers' Closing Documents.
12
<PAGE> 13
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational Documents
of the Company, or (B) any resolution adopted by the
board of directors or the stockholders of the
Company;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the
right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any
relief under, any Legal Requirement or any Order to
which any the Company or either Seller, or any of the
assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the Company
or that otherwise relates to the business of, or any
of the assets owned or used by, the Company;
(iv) cause Buyer or the Company to become subject to, or to
become liable for the payment of, any Tax;
(v) cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or
other Governmental Body;
(vi) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the
right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any Alarm
Account or any Applicable Contract; or
(vii) Result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets
owned or used by the Company.
Except as set forth in Schedule 3.2, neither the Sellers or the Company is or
will be required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION. The authorized equity securities of the
Company consists of 100,000 shares of common stock, no par value, of which 1,000
shares are issued and outstanding and constitute the Shares. There are no
outstanding stock options or rights to
13
<PAGE> 14
purchase shares of stock of the Company. Sellers are and will be on the Closing
Date the recorded and beneficial owners and holders of the Shares, free and
clear of all Encumbrances. Paul and Mary, collectively own 1,000 of the Shares.
No legend or other reference to any purported Encumbrance appears upon any
certificate representing equity securities of the Company. All of the
outstanding equity securities of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of the Company. None of the outstanding equity securities or other
securities of the Company was issued in violation of the Securities Act or any
other Legal Requirement. The Company does not own, or have any Contract to
acquire, any equity securities or other securities of any Person or any direct
or indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS. Sellers have delivered to Buyer: (a)
the unaudited balance sheet of the Company as at December 31, 1994 (the "Balance
Sheet"); (b) the unaudited balance sheets of the Company as at December 31 in
each of the years 1992 through 1994, and the related statements of income,
changes in stockholders' equity, and cash flow for each of the fiscal years then
ended which were used in the preparation of the Company's federal and state
employment, income and sales and use tax returns, and (b) an unaudited balance
sheet of the Company as at November 30, 1995 (the "Interim Balance Sheet") and
the related unaudited statements of income, changes in stockholders' equity, and
cash flow for the eleven (11) months then ended, (the "Interim Financial
Statements"). Such financial statements fairly present the financial condition
and the results of operations, changes in stockholders' equity, and cash flow of
the Company as at the respective dates of and for the periods referred to in
such financial statements, subject, in the case of Interim Financial Statements,
to normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse); the financial
statements referred to in this Section 3.4 reflect the consistent application of
accounting principles which are acceptable to federal and state taxing
authorities throughout the periods involved.
3.5 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices. The minutes books of the Company
contain accurate and complete records of all meetings held by, and corporate
action taken by, the stockholders, the Boards of Directors, and committees of
the Boards of Directors of the Company, and no meeting of any such stockholders,
Board of Directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of the Company.
3.6 REAL PROPERTY. The Company does not own and has never owned
any real property. Schedule 3.6 contains a complete and accurate list of all
parcels of real property together with all buildings, structures, improvements
and fixtures thereon and all hereditaments appurtenant thereto, which are leased
by the Company. Sellers have delivered or made available to Buyer copies of the
instruments by which the Company acquired such interests.
14
<PAGE> 15
3.7 TITLE TO PROPERTIES. The Company owns all the properties and
assets (whether real, personal, or mixed and whether tangible or intangible)
that it purports to own, including (a) all of the properties and assets
reflected in the Interim Balance Sheet (except for personal property sold since
the date of the Interim Balance Sheet, as the case may be, in the Ordinary
Course of Business), and (b) all of the properties and assets purchased or
otherwise acquired by the Company since the date of the Interim Balance Sheet
(except for personal property acquired and sold since the date of the Interim
Balance Sheet in the Ordinary Course of Business and consistent with past
practice). The properties and assets purchased or otherwise acquired by the
Company since the date of the Interim Balance Sheet (other than inventory
purchased in the Ordinary Course of Business) are listed in Schedule 3.7. The
properties and assets (a) owned by the Company which are reflected in the
Interim Balance Sheet and Schedule 3.7 and (b) leased by the Company pursuant
to a Contract listed in Schedules 3.6 and 3.18(b) comprise all of the assets
and properties used by the Company in the operation of its business as it is
currently being conducted
3.8 CONDITION AND SUFFICIENCY OF ASSETS. The equipment of the
Company is in good operating condition and repair, and is adequate for the uses
to which they are being put, and none of such equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs
that are not material in nature or cost. The equipment of the Company is
sufficient for the continued conduct of the Company's business after the
Closing in substantially the same manner as conducted prior to the Closing.
3.9 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
that are reflected on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date (collectively, the
"Accounts Receivable" or "A/R") represent or will represent valid obligations
arising from sales actually made or services actually performed in the Ordinary
Course of Business. Sellers shall not themselves nor shall Sellers permit any
of the Company's Employees or agents to pay any of the Accounts Receivable
outstanding on the date of this Agreement or generated between the date of this
Agreement and the Closing Date. There is no contest, claim, or right of
set-off, other than returns in the Ordinary Course of Business, under any
Contract with any maker of an Accounts Receivable relating to the amount or
validity of such Accounts Receivable. Schedule 3.9 contains a complete and
accurate list of all Accounts Receivable which relate to services provided on
or prior to the Closing Date which list sets forth the aging of such Accounts
Receivable in the following categories ("Current" and for Alarm Accounts that
have A/R balances that are delinquent ("0-30 days past due from the oldest
applicable invoice due date"; "31-60 days past due from the oldest applicable
invoice due date"; "61-90 days past due from the oldest applicable due date";
"Over 90 days past due from the oldest applicable invoice due date")).
3.10 INVENTORY. All inventory of the Company, whether or not
reflected in the Balance Sheet or the Interim Balance Sheet, consists of
equipment which is of a quality usable and salable in the Ordinary Course of
Business, except for obsolete items and items of below-standard quality, all of
which have been written off or written down to net realizable value in the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Company as
15
<PAGE> 16
of the Closing Date, as the case may be. The quantities of each item of
inventory are not excessive, but are reasonable in the present circumstances of
the Company. The inventory of the Company as of January 1, 1996 is listed on
Schedule 3.10. Sellers shall update Schedule 3.10 to reflect all inventory of
the Company as of the day before Closing.
3.11 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule
3.11, the Company has no liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent, or otherwise)
except for liabilities or obligations reflected or reserved against in the
Balance Sheet or the Interim Balance Sheet and current liabilities incurred in
the Ordinary Course of Business since the respective date thereof.
3.12 TAXES.
(a) The Company has filed or caused to be filed all tax returns
that are or were required to be filed by or with respect to it, pursuant to
applicable Legal Requirements. Sellers have delivered or made available to
Buyer copies of, and Schedule 3.12 contains a complete and accurate list of,
all such tax returns relating to income or franchise taxes filed since December
31, 1994. The Company has paid, or made provision for the payment of, all
Taxes that have or may have become due pursuant to those tax returns or
otherwise, or pursuant to any assessment received by Sellers or any Company,
except such Taxes, if any, as are listed in Schedule 3.12 and are being
contested in good faith and as to which adequate reserves have been provided in
the Balance Sheet and the Interim Balance Sheet.
(b) Schedule 3.12 contains a complete and accurate list of all
audits of all tax returns of the Company, including a reasonably detailed
description of the nature and outcome of each audit. All deficiencies proposed
as a result of such audits have been paid, reserved against, settled, or as
described in Schedule 3.12 are being contested in good faith by appropriate
proceedings. Except as described in Schedule 3.12, neither the Sellers or
Company has given or been requested to give waivers or extensions (or is or
would be subject to a waiver or extension given by any other Person) of any
statute of limitations relating to the payment of Taxes of the Company or for
which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on
the respective books of the Company are adequate and are at least equal to the
Company's liability for Taxes. There exists no proposed tax assessment against
any Company except as disclosed in the Balance Sheet or in Schedule 3.12. All
Taxes that the Company is or was required by Legal Requirements to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Body or other Person.
(d) All tax returns filed by the Company are true, correct, and
complete. The Company is not, or has not within the five-year period preceding
the Closing Date been, an "S" corporation.
16
<PAGE> 17
3.13 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance
Sheet, there has not been any material adverse change (which for the purposes
of this Section 3.13 shall be defined as greater a than 5% change) in the
business, operations, properties, prospects, assets, or condition of the
Company, and no event has occurred or circumstance exists that may result in
such a material adverse change.
3.14 EMPLOYEE BENEFITS. Except as set forth in Schedule 3.14
attached hereto, the Company does not maintain, contribute to, sponsor or
participate in, and no past or present Employee of the Company participates in
or is benefited by any employee pension benefit or welfare plan as defined in
the Employee Retirement Income Security Act of 1974 ("ERISA"), or any other
plan, arrangement or commitment, whether oral or written, formal or informal,
relating to severance, sick pay, vacation, bonus, retirement, pension, profit
sharing, option, deferred compensation, life, medical or dental insurance or
other benefits (collectively "Employee Plan") covering any Employee or former
Employee of the Company, nor has the Company taken any action to institute any
such Employee Plan. Sellers have provided Buyer with a copy of the current
handbook given to each Employee which handbook describes the Employee Plans.
3.15 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in Schedule 3.15:
(i) the Company is, and at all times since its inception
has been, in full compliance with each Legal Requirement that is or
was applicable to it or to the conduct or operation of its business or
the ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may constitute or result
in a violation by the Company of, or a failure on the part of the
Company to comply with, any Legal Requirement, or (B) may give rise to
any obligation on the part of the Company to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature; and
(iii) the Company has not received, at any time any notice
or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged, possible,
or potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or potential
obligation on the part of the Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature.
(b) Schedule 3.15 contains a complete and accurate list of each
Governmental Authorization that is held by the Company or that otherwise
relates to the business of, or to any of the assets owned or used by the
Company. Each Governmental Authorization listed or required to be listed in
Schedule 3.15 is valid and in full force and effect. Except as set forth in
Schedule 3.15:
17
<PAGE> 18
(i) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Schedule
3.15;
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with
any term or requirement of any Governmental Authorization listed or
required to be listed in Schedule 3.15 or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any Governmental Authorization
listed or required to be listed in Schedule 3.15;
(iii) the Company has not received, at any time any notice
or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged, possible,
or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual,
proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental
Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be
listed in Schedule 3.15 have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to
have been made with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate Governmental
Bodies.
The Governmental Authorizations listed in Schedule 3.15 collectively constitute
all of the Governmental Authorizations necessary to permit the Company to
lawfully conduct and operate its business in the manner it currently conducts
and operates such business and to permit the Company to own and use its assets
in the manner in which it currently owns and uses such assets.
3.16 LEGAL PROCEEDINGS, ORDERS
(a) Except as set forth in Schedule 3.16, there is no pending
Proceeding:
(i) that has been commenced by or against the Company or
that otherwise relates to or may affect the business of, or any of the
assets owned or used by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions.
To the Knowledge of Sellers and the Company, (1) no such Proceeding has been
threatened, and (2) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the
18
<PAGE> 19
commencement of any such Proceeding. Sellers have delivered to Buyer copies of
all pleadings, correspondence, and other documents relating to each Proceeding
listed in Schedule 3.16;
The Proceedings listed in Schedule 3.16 will not have a material
adverse effect on the business, operations, assets, condition, or prospects of
the Company.
(b) Except as set forth in Schedule 3.16;
(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject;
(ii) neither Seller is subject to any Order that relates
to the business of, or any of the assets owned or used by, the
Company; and
(iii) no officer, director, agent, or employee of the
Company is subject to any Order that prohibits such officer, director,
agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of the Company.
(c) Except as set forth in Schedule 3.16:
(i) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Order to
which it, or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any
Order to which the Company, or any of the assets owned or used by the
Company, is subject; and
(iii) the Company has received, at any time since any
notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged,
possible, or potential violation of, or failure to comply with, any
term or requirement of any Order to which the Company, or any of the
assets owned or used by the Company, is or has been subject.
3.17 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 3.17, since the date of the Interim Balance Sheet, the Company has
conducted its businesses only in the Ordinary Course of Business and there has
not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase
shares of capital stock of the Company; issuance of
any security convertible into such capital stock;
grant of any registration rights; purchase,
redemption, retirement, or other acquisition by the
Company of any shares of any such capital stock; or
declaration or
19
<PAGE> 20
payment of any dividend or other distribution or
payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of the
Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any stockholder,
director, officer, or (except in the Ordinary Court
of Business) employee or entry into any employment,
severance, or similar Contract with any director,
officer, or employee;
(d) adoption of, or increase in the payments to or
benefits under, any Employee Plan;
(e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by
insurance, materially and adversely affecting the
properties, assets, business, financial condition, or
prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship,
dealer, sales representative, joint venture, credit,
or similar agreement, or (ii) any Contract or
transaction involving a total remaining commitment by
the Company of greater than $2,000.00;
(g) sale (other than sales of inventory in the Ordinary
Course of Business), lease, or other disposition of
any asset or property of the Company or mortgage,
pledge, or imposition of any lien or other encumbrance
on any material asset or property of the Company,
including the sale, lease, or other disposition of any
of the Intellectual Property Assets;
(h) material change in the accounting methods used by the
Company; or
(i) agreement, whether oral or written, by the Company to
do any of the foregoing.
3.18 CONTRACTS; NO DEFAULTS
(a) Schedule 3.18(a) contains a complete and accurate list of each
Contract for the rendering of security monitoring services to existing customers
(the "Alarm Accounts") which list is broken down according to those Contracts
which meet the definition of RMR and those Contracts that do not meet the
definition of RMR and such list indicates the Contracts which are oral
agreements. Sellers have delivered to Buyer true and complete copies of all
such written Contracts.
20
<PAGE> 21
(b) Schedule 3.18(b) contains a complete and accurate list, and
Sellers have delivered to Buyer true and complete copies of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials to the
Company of an amount or value in excess of $1,000.00;
(ii) each Applicable Contract that was not entered into in
the Ordinary Course of Business;
(iii) each lease, rental agreement, license, installment
and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest
in, any personal property;
(iv) each collective bargaining agreement and other
Applicable Contract to or with any labor union or
other employee representative of a group of employees
relating to wages, hours, and other conditions of
employment;
(c) Except as set forth in Schedule 3.18(c):
(i) each Contract identified or required to be identified
in Schedules 3.18(a) and 3.18(b) is in full force and effect and is
valid and enforceable in accordance with its terms; and
(ii) no Contract identified or required to be identified
in Schedules 3.18(a) and 3.18(b) contains any term or requirement that
is not in the Ordinary Course of Business.
(d) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person having the
contractual or statutory right to demand or require such renegotiation and no
such Person has made written demand for such renegotiation.
3.19 INSURANCE.
(a) Sellers have delivered to Buyer: true and complete copies of
all policies of insurance to which the Company is a party or under which the
Company is or has been covered at any time within the three (3) years
preceding the date of this Agreement.
(b) Schedule 3.19 sets forth, by year, for the current policy year
and each of the two (2) preceding policy years;
(i) a summary of the loss experience under each policy;
21
<PAGE> 22
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $100.00, which sets
forth;
(A) the name of the claimant;
(B) a description of the policy by
insurer, type of insurance, and
period of coverage; and
(C) the amount and a brief description of
the claim; and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number
and aggregate cost of such claims.
(c) Except as set forth in Schedule 3.19:
(i) All policies to which the Company is a party or that
provide coverage to the Company;
(A) are valid, outstanding, and
enforceable;
(B) are issued by Monticello Insurance
Company, an insurance underwriter
which has an A-Excellent rating by
A. M. Best insurance rating agency;
(C) taken together, provide
"occurrence-based" general liability
insurance coverage of at least
$500,000.00 per single occurrence.
For purposes of this Agreement,
"occurrence-based" means if a claim
arose after the Closing Date for an
event which occurred prior to the
Closing Date, the Company's
applicable insurance policy in
existence on the date such event
occurred would cover such claim;
(D) are sufficient for compliance with
all Legal Requirements and Contracts
to which the Company is a party or
by which it is bound; and
(E) will continue in full force and
effect following the consummation of
the Contemplated Transactions.
(ii) The Sellers and the Company has not received (A) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or
effect or that the issuer of any policy is not willing or able to
perform its obligations thereunder.
22
<PAGE> 23
(iii) The Company has paid all premiums due, and have
otherwise performed all of its respective obligations,under each
policy to which the Company is a party or that provides coverage to
the Company.
(iv) The Company has given notice to the insurer of all
claims that may be insured thereby.
3.20 ENVIRONMENTAL MATTERS. The Company has at all times been in
full compliance with all Environmental Requirements. Sellers and the Company
have not at any time placed, located, disposed of, buried, stored or accumulated
any Hazardous Materials in, on or under the Facilities or any part thereof. To
the Knowledge of Sellers, no Person has at any time placed, located, disposed
of, buried, stored or accumulated any Hazardous Material in, on or under the
Facilities. To the Knowledge of Sellers no portion of the Facilities has been
designated, listed or identified in any manner by any Government Body or under
or pursuant to Environmental Requirements as a Hazardous Materials disposal or
removal site, superfund or clean-up site or candidate for removal or closure
pursuant to any Environmental Requirement. No lien arising under or in
connection with any Environmental Requirements as attached to any revenues or to
the Facilities. Neither the Sellers or the Company has received a summons,
citation, notice, directive, letter or other communication, written or oral,
from any Governmental Body pursuant to any Environmental Requirement concerning
any act or omission by the Company resulting in a Release of Hazardous
Materials. Neither Sellers or the Company has received notice of any
nonconforming condition of the Facilities. If such notice or citation is
received or any such condition is found to exist which existed prior to Closing,
Sellers shall be obligated to correct such conditions even if such conditions
are discovered after the Closing Date.
3.21 EMPLOYEES.
(a) Schedule 3.21 contains a complete and accurate list of the
following information for each employee or director of the Company, including
each employee on leave of absence or layoff status; name; job title; employment
date; current compensation paid or payable and any change in compensation since
January 1, 1995; most recent and next anticipated salary review date; vacation
accrued; and service credited for purposes of vesting and eligibility to
participate under the Employee Plans.
(b) No former or current employee or current or former director of
the Company is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, non-competition, or proprietary
rights agreement, between such employee or director and any other entity or
person that in any way adversely affected, affects, or will affect (v) the
performance of his or her duties as an employee or director of the Company, or
(vi) the ability of the Company to conduct its business. To Sellers' current
Knowledge, no employee of the Company intends to terminate his or her employment
with such Acquired Company.
(c) Schedule 3.21 also contains a complete and accurate list of the
following information for each retired employee or director of the Company, or
their dependents, receiving
23
<PAGE> 24
benefits or scheduled to receive benefits in the future, name, pension benefit,
pension option election, retiree medical insurance coverage, retiree life
insurance coverage, and other benefits.
(d) No employee of the Company has a written employment agreement
with the Company.
3.22 LABOR DISPUTES; COMPLIANCE. The Company has not been or is not
a party to any collective bargaining or other labor Contract. The Company has
complied in all respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health, and plant closing. The Company is liable
for the payment of any taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.23 INTELLECTUAL PROPERTY.
(a) The term "Intellectual Property Assets" includes:
(i) the Company's name, all fictional business names,
trading names, registered and unregistered trademarks,
service marks, and applications (collectively,
"Marks");
(ii) all patents and patent applications (collectively,
"Patents");
(iii) all copyrights in both published works and unpublished
works that are material to the Company' businesses
(collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential information,
software, technical information, process technology,
plans, drawings, and blue prints (collectively, "Trade
Secrets");
(b) Schedule 3.23 contains a complete and accurate list and
summary description, of all Intellectual Property Assets.
(c) Sellers and the Company have taken all reasonable precautions
to protect the secrecy, confidentiality, and value of their Trade Secrets. The
Trade Secrets are not part of the public knowledge or literature, and, to
Sellers' Knowledge, have not been used, divulged, or appropriated either for
the benefit of any Person or to the detriment of the Company. No Trade Secret
is subject to any adverse claim or has been challenged or threatened in any
way.
3.24 PRODUCT WARRANTIES AND MEDICAL INFORMATION. Except for the
standard warranties on installations detailed in Schedule 3.24, there are no
written warranties or oral warranties given by the Company applicable to any of
the Alarm Accounts. The Company has not entered into any Contract with any of
its customers which would require Buyer to provide
24
<PAGE> 25
any medical or health information on its customers to any third party and the
Company is not obligated to keep or obtain medical or health information on any
or all of its customers.
3.25 BUSINESS POSITION.
(a) the RMR of the Alarm Accounts is approximately $80,000.00;
(b) the Company monitors approximately 3,800 Alarm Account
customers;
(c) the Company does not have more than 15 customers that have
Contracts which require video monitoring;
(d) Gross RMR Attrition has not exceeded 7.5% during each of the
last three calendar years;
(e) as of the Closing Date there is no Legal Requirement that
would preclude monitoring of the Alarm Accounts outside of the city limits of
Austin, Texas or outside of the State of Texas;
(f) as of the Closing Date, all of the Alarm Account customers can
be remote call forwarded to Buyer's central monitoring station without the
requirement of either a site visit for alarm panel dialer number reprogramming
or remote reprogramming of the alarm panel dialer;
(g) the Company does not have more than 300 customers that require
"long range radio" monitoring; and
(h) Sellers and the Company have not increased or decreased the
recurring monitoring rates during the previous six month period.
(i) Revenues reasonably anticipated to be received by the Company
for work required to complete any Builder Installations will exceed all
liabilities associated with completion of such installations. Schedule 3.25(i)
sets forth a list of builders who provide Builder Installations.
3.26 CERTAIN PAYMENTS. The Company or director, officer, agent, or
employee of the Company, or to Sellers' Knowledge any other Person associated
with or acting for or on behalf of the Company, has directly or indirectly (a)
made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public, regardless of
form, whether in money, property, or services (i) to obtain favorable treatment
in securing business, (ii) to pay for favorable treatment for business secured,
or (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company, or (b) established or maintained
any fund or asset that has not been recorded in the books and records of the
Company.
25
<PAGE> 26
3.27 DISCLOSURE.
(a) No representation or warranty of Sellers in this Agreement or
attachments thereto omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
(c) There is no fact known to either Seller that has specific
application to either the Sellers or the Company (other than general economic or
industry conditions) and that materially adversely affects or, as far as either
Seller can reasonably foresee, materially threatens, the assets, business,
prospects, financial condition, or results of operations of the Company that has
not been set forth in this Agreement or the attachments thereto.
3.28 BROKERS OR FINDERS. Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Delaware.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Escrow Agreement, and the
Consulting Agreements, (collectively, the "Buyer's Closing Documents"), the
Buyer's Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's
Closing Documents.
(b) Neither the execution and delivery of this Agreement by Buyer
nor the consummation or performance of any of the Contemplated Transactions by
Buyer will give any Person the right to prevent, delay, or otherwise interfere
with any of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
26
<PAGE> 27
(ii) any resolution adopted by the stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which Buyer is a party or by which
Buyer may be bound.
Buyer is not and will not be required to obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
4.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2.11 of the Securities Act.
4.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that has
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.5 BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement
and the Closing Date, Sellers after 24 hours advance notice will, and will
cause the Company and its Representatives to, (a) afford Buyer and its
Representatives full and free access to the Company's personnel, properties,
contracts, books and records, and other documents and data, (b) furnish Buyer
and its Representatives with copies of all such contracts, books and records,
and other existing documents and data as Buyer may reasonably request, and (c)
furnish Buyer and its Representatives with such additional financial,
operating, and other data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY. Between the date
of this Agreement and the Closing Date, Sellers will, and will cause the
Company to:
(a) conduct the business of the Company only in the Ordinary
Course of Business except that Sellers may cause the Company
to distribute or otherwise transfer the Excluded Assets to
Sellers or any other Person designated by Sellers;
(b) use their Best Efforts to preserve intact the current business
organization of the Company, keep available the services of
the current officers, employees, and agents of the Company,
and maintain the relations and good will with suppliers,
27
<PAGE> 28
customers, landlords, creditors, employees, agents, and others
having business relationships with the Company;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the status
of the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date,
Sellers will not, and will cause the Company not to, without the prior consent
of Buyer, take any affirmative action, or fail to take any reasonable action
within their or its control, as a result of which any of the changes or events
listed in Section 3.17 is likely to occur.
5.4 NOTIFICATION. Between the date of this Agreement and the
Closing Date, each Seller will promptly notify Buyer in writing if such Seller
or the Company becomes aware of any fact or condition that causes or
constitutes a Breach as of the date of this Agreement, or if such Seller or the
Company becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any representation or warranty had
such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in any schedule to this Agreement, if such schedule were dated the
date of the occurrence or discovery of any such fact or condition, Sellers will
promptly deliver to Buyer a supplement to the appropriate schedule specifying
such change. During the same period, each Seller will promptly notify Buyer of
any event that may make the satisfaction of the conditions in Section 7
impossible or unlikely.
5.5 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Sellers will not, and will cause the Company
and its Representatives not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of the Company, or any of the capital stock of the
Company, or any merger, consolidation, business combination, or similar
transaction involving the Company.
5.6 BEST EFFORTS. Between the date of this Agreement and the
Closing Date, Sellers will use their Best Efforts to cause the conditions in
Sections 7 and 8 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 BEST EFFORTS. Between the date of this Agreement and the
Closing Date, Buyer will use its Best Efforts to cause the conditions in
Sections 7 and 8 to be satisfied.
28
<PAGE> 29
6.2 NOTIFICATION. Between the date of this Agreement and the
Closing Date, Buyer will promptly notify Sellers in writing if Buyer becomes
aware of any fact or condition that causes or constitutes a Breach as of the
date of this Agreement, or if Buyer becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. During the same
period Buyer will promptly notify Sellers of any event that may make the
satisfaction of the conditions in Section 8 impossible or unlikely.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other
actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Sellers' representations
and warranties in this Agreement must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, without giving
effect to any supplement to the Schedules.
7.2 SELLERS' PERFORMANCE.
(a) All of the covenants and obligations that Sellers are required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing must have been duly performed and complied with in all material
respects.
(b) Each Seller must have delivered each of the documents required
to be delivered by such Seller pursuant to Section 2.5, and each of the other
covenants and obligations in this Agreement must have been performed and
complied with in all respects.
7.3 CONSENTS. Each of the Consents identified on Schedule 3.2
must have been obtained and must be in full force and effect.
7.4 ADDITIONAL INSURANCE. In the event that the Company has not
maintained general liability insurance coverage of at least $1,000,000.00 per
single occurrence and workers compensation insurance equal to or greater than
that required by any Legal Requirement, in addition to and separate and apart
from the Holdback, Sellers shall purchase a $1,000,000.00 "tail end" liability
insurance policy reasonably satisfactory to Buyer (the "Tail End Insurance
Policy"). The Tail End Insurance Policy will name Buyer as beneficiary and
coverage will be prepaid for a period ending 42 months after the Closing Date.
The Tail End Insurance Policy will provide one source, but not the only source,
for the payment of any claims that Buyer may have.
29
<PAGE> 30
7.5 THIRD PARTY MONITORING AGREEMENT. The Company shall continue
to have a contract with Austin Central Monitoring, Inc., a Texas corporation
wholly owned by Paul, which provides for the monitoring of the Alarm Accounts at
rates and subject to terms reasonably acceptable to Buyer.
7.6 LEGAL OPINION. Sellers must have caused an opinion of Sellers'
counsel, dated the Closing Date, in the form of Exhibit 7.6 to be delivered to
Buyer.
7.7 NO PROCEEDINGS. Since the date of this Agreement, there must
not have been commenced or threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.8 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There
must not have been made or threatened by any Person any claim asserting that
such Person (c) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, the Company, or (d) is entitled to
all or any portion of the Purchase Price payable for the Shares.
7.9 NO PROHIBITION. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse or time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person affiliated with
Buyer to suffer any material adverse consequence under, (a) any applicable
Legal Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental
Body.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part).
8.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations
and warrants in this Agreement, must have been accurate in all material respects
as of the date of this Agreement and must be accurate in all material respects
as of the Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE.
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing,
must have been performed and complied with in all material respects.
30
<PAGE> 31
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.5 and must have made the cash payments
required to be made by Buyer pursuant to Sections 2.5(b)(i) and 2.5(b)(ii).
8.3 CONSENTS. Each of the Consents identified on Schedule 3.2
must have been obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS. Buyer must have caused an opinion of
Buyer's counsel, dated the Closing Date, in the form of Exhibit 8.4 to be
delivered to the Sellers.
8.5 NO INJUNCTION. There must not be in effect any Legal
Requirement or any injunction or other Order that (a) prohibits the sale of the
Shares by Sellers to Buyer, and (b) has been adopted or issued, or has
otherwise become effective, since the date of this Agreement.
9. TERMINATION
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior
to or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material Breach of any
provision of this Agreement has been committed by the other
party and such Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has
not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes
impossible (other than through the failure of Buyer
to comply with its obligations under this Agreement)
and Buyer has not waived such condition on or before
the Closing Date; or
(ii) by Sellers, if any of the conditions in Section 8 has
not been satisfied of the Closing Date or if
satisfaction of such a condition is or becomes
impossible (other than through the failure of Sellers
to comply with their obligations under this Agreement)
and Sellers have not waived such condition on or
before the Closing Date;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations
under this Agreement) on or before February 29, 1996, or such
later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION. Each party's right of termination
under Section 9.1 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise
31
<PAGE> 32
of a right of termination will not be an election of remedies. If this
Agreement is terminated pursuant to Section 9.1, all further obligations of the
parties under this Agreement will terminate, except that the obligations in
Sections 11.1 and 11.3, will survive; provided, however, that if this Agreement
is terminated by a party because of the Breach of the Agreement by the other
party, or because on or more of the conditions to the terminating party's
obligations under this Agreement is not satisfied as a result of the other
party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL. All representations, warranties, covenants, and
obligations in this Agreement, the attachments thereto, and any other document
delivered pursuant to this Agreement will survive the Closing; the right to
indemnification, reimbursement, or other remedy based on such representations,
warranties, covenants, and obligations will not be affected by any investigation
conducted with respect to, or any Knowledge acquired (or capable of being
acquired) about the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, reimbursement, or other remedy based on such representations,
warranties, covenants, and obligations.
10.2 INDEMNIFICATION AND REIMBURSEMENT BY SELLERS. Sellers, jointly
and severally, will indemnify and hold harmless Buyer, the Company, and their
respective Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons"), and will reimburse the Indemnified
Persons, for any loss, liability, claim, damage, expense (including costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising from or in connection with:
(a) any Breach of any representation or warranty made by Sellers
in this Agreement and attachments thereto, or any other
document delivered by Sellers pursuant to this Agreement;
(b) any Breach by either Seller of any covenant or obligation of
such Seller in this Agreement;
(c) any service provided by or any omission in a service which was
required to be provided by the Company prior to the Closing
Date; provided, however any service required to be provided by
the Company related to a warranty (that is listed on Schedule
3.24) on an installation of security monitoring equipment
which arises after the Closing Date shall be the
responsibility of the Buyer; or
32
<PAGE> 33
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person
with either Seller or the Company (or any Person acting on
their behalf) in connection with any of the Contemplated
Transactions.
10.3 INDEMNIFICATIONS AND REIMBURSEMENT BY SELLERS - ENVIRONMENTAL
MATTERS. In addition to the provisions of Section 10.2, Sellers, jointly and
severally, will indemnify and hold harmless Buyer, the Company, and the other
Indemnified Persons, and will reimburse Buyer, the Company, and any other
Indemnified Person, for any Damages related to an Environmental Requirement
(including costs of cleanup, containment, or other remediation) arising from or
in connection with:
(a) any liability or claim arising out of or relating to: (i)(A)
the ownership, operation, or condition at any time on or prior
to the Closing Date of any properties and assets (whether
real, personal, or mixed and whether tangible or intangible)
in which Sellers or the Company has or had an interest, or (B)
any Hazardous Materials or other contaminants that were
present on the properties and assets at any time on or prior
to the Closing Date; or (ii) any Hazardous Materials or other
contaminants, wherever located, that were, or were allegedly,
generated, transported, stored, treated, Released, or
otherwise handled by Sellers or the Company or by any other
Person for whose conduct they are or may be held responsible
at any time on or prior to the Closing Date.
(b) any bodily injury (including illness, disability, and death,
and regardless of when any such bodily injury occurred, was
incurred, or manifested itself), personal injury, property
damage (including trespass, nuisance, wrongful eviction, and
deprivation of the use of real property), or other damage of
or to any Person, including any employee or former employee of
Sellers or the Company or any other Person for whose conduct
they are or may be held responsible, in any way arising from
or allegedly arising from any Hazardous Material that was
Released or allegedly Released by Sellers or the Company or
any other Person for whose conduct they are or may be held
responsible, at any time on or prior to the Closing Date.
Buyer will be entitled to control any cleanup, any related Proceeding, and,
except as provided in the following sentence, any other Proceeding with respect
to which indemnity may be sought under this Section 10.3. The procedure
described in Section 10.5 will apply to any claim solely for monetary damages
relating to a matter covered by this Section 10.3.
10.4 INDEMNIFICATION AND REIMBURSEMENT OF BUYER. Buyer will
indemnify and hold harmless Sellers, and will reimburse Sellers, for any
Damages arising from or in connection with (a) any Breach of any representation
or warranty made by Buyer in this Agreement or in any document delivered by
Buyer pursuant to this Agreement, (b) any Breach by Buyer of any
33
<PAGE> 34
covenant or obligation of Buyer in this Agreement, or (c) any claim by any
Person for brokerage or finder's fees or commissions or similar payments based
upon any agreement or understanding alleged to have been made by such Person
with Buyer (or any Person acting on its behalf) in connection with any of the
Contemplated Transactions, (d) any service provided by or any omission in a
service which was initially required to be provided by the Company or the Buyer
after the Closing Date.
10.5 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
(a) Within 10 days after receipt by an indemnified party of notice
of the commencement of any Proceeding against it, such indemnified party will,
if a claim is to be made against an indemnifying party under this Section 10,
give notice to the indemnifying party of the commencement of such claim, but
the failure to notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party, except to the
extent that the indemnifying party demonstrates that the defense of such action
is prejudiced by the indemnifying party's failure to give such notice.
(b) If any Proceeding is brought against an indemnified party and
it gives notice to the indemnifying party of the commencement of such
Proceedings, the indemnifying party will, be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the
indemnifying party fails to provide reasonable assurance to the indemnified
party of its financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), assume the defense of such
Proceeding with counsel satisfactory to the indemnified party and, after notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the
defense of a Proceeding, (i) it will be conclusively established for purposes
of this Agreement that the claims made in the Proceeding are within the scope
or and subject to indemnification; (ii) no compromise or settlement of such
claims may be effected by the indemnifying party without the indemnified
party's consent unless (A) there is no finding or admission of any violation of
Legal Requirements or any violation of the rights of any Person and no effect
on any other claims that may be made against the indemnified party, and (B) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the indemnifying party will have no liability
with respect to any compromise or settlement of such claims effected without
its consent. If notice is given to an indemnifying party of the commencement
of any Proceeding and the indemnifying party does not, within ten days after
the indemnified party's notice is given, give notice to the indemnified party
of its election to assume the defense of such Proceeding, the indemnifying
party will be bound by any determination made in such Proceeding or any
compromise or settlement effected by the indemnified party.
34
<PAGE> 35
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is reasonable probability that a Proceeding
may adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the indemnified party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle such Proceeding, but the
indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which
may be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of
any court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on Sellers with respect to such a claim anywhere in the
world.
11. GENERAL PROVISIONS
11.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
11.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as shall be mutually
agreeable to Buyer and Seller. Unless consented to by the other party in
advance prior to the Closing Buyer and Seller shall, and shall cause the
Company to, keep this Agreement strictly confidential and may not make any
disclosure of this Agreement to any Person. Sellers and Buyer will consult
with each other concerning the means by which the Company' employees,
customers, and suppliers and others having dealings with the Company will be
informed of the transactions contemplated by this Agreement, and Buyer will
have the right to be present for any such communication.
11.3 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer and Seller will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company
to maintain in confidence, any written, oral or other information obtained in
confidence from another party or the Company in connection with this Agreement
or the Contemplated Transactions, unless (a) such information is already known
to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is
required by legal proceedings.
35
<PAGE> 36
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
11.4 NOTICES. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
IF TO MASADA AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLERS AT:
1305 Silver Hill Drive
Austin, Texas 78746
Attention: Paul and Mary Kristynik
FACSIMILE: (512)328-0593
36
<PAGE> 37
WITH COPY TO:
Minter, Joseph & Thornhill, P. C.
811 Barton Springs Road
Suite 800
Austin, Texas 78704
Attention: W. Routt Thornhill, Jr., Esq.
FACSIMILE: (512) 478-5838
or at such address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
11.5 FURTHER ASSURANCES. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such documents, and (c) to do such other acts and things, all as the
other party may reasonably request for the purpose of carrying out the intent
of this Agreement and the documents referred to in this Agreement including,
without limitation cooperating with each other if it is necessary to obtain a
new Federal Communications Commission Radio License as a result of the
transactions resulting from this Agreement.
11.6 WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power, or privilege under this
Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power, privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power,
or privilege. To the maximum extent permitted by applicable law, (a) no claim
or right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter
(including the letter of intent between Buyer and Sellers dated November 14,
1995) and constitutes (along with the documents referred to in this Agreement)
a complete and exclusive statement of the terms of the agreement
37
<PAGE> 38
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
11.8 SCHEDULES.
(a) The disclosures in the Schedules to this Agreement, and those
in any supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in
the body of this Agreement and those in the Schedules (other than an exception
expressly set forth as such in the Disclosure Letter with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
11.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties except that Buyer may assign any of its rights
under this Agreement to any Subsidiary or affiliate of Buyer. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed
to give any Person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
11.10 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.
11.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Sections" refer to the
corresponding Sections of this Agreement. All words used in this Agreement
will be construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit the
preceding words or terms.
11.12 GOVERNING LAW. This Agreement will be governed by and
construed under the laws of the State of Texas without regard to conflicts of
laws principles.
11.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
38
<PAGE> 39
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Buyer: Sellers:
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong /s/ Paul Kristynik
--------------------------- -------------------------------------
Paul Kristynik
/s/ Mary Kristynik
-------------------------------------
Mary Kristynik
39
<PAGE> 40
LIST OF EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit 2.5(a)(ii) Consulting Agreement
Exhibit 2.5(a)(iii) Noncompetition Agreement
Exhibit 2.5(c) Escrow Agreement
Exhibit 2.7(a) Holdback Period I Calculation
Exhibit 2.7(b) Holdback Period II Calculation
Exhibit 7.5 Third Party Monitoring Agreement
Exhibit 7.6 Seller's Legal Opinion
Exhibit 8.4 Buyer's Legal Opinion
</TABLE>
LIST OF SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 2.3 Assumed Liabilities
Schedule 3.2 Required Consents
Schedule 3.6 Real Property Leases
Schedule 3.7 Title to Property
Schedule 3.9 Accounts Receivable
Schedule 3.10 Inventory
Schedule 3.11 Undisclosed Liabilities
Schedule 3.12(a) Tax Returns Relating to income or franchise taxes filed since December 31, 1994
Schedule 3.12(b) All Audits of tax return
Schedule 3.12(c) Proposed Assessments
Schedule 3.14 Employee Benefits
Schedule 3.15(a) Compliance with Legal Requirements
Schedule 3.15(b) Governmental Authorizations
Schedule 3.16 Legal Proceedings
Schedule 3.17 Absence of Changes
Schedule 3.18(a) Contracts (Alarm Accounts)
Schedule 3.18(b) Applicable Contracts
Schedule 3.18(c) Contracts - Miscellaneous Issues
Schedule 3.19 Insurance
Schedule 3.21 Employees
Schedule 3.23 Intellectual Property
Schedule 3.24 Product Warranties
Schedule 3.25(i) Builder Installations
</TABLE>
40
<PAGE> 1
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made effective as of the 9th
day of January, 1996, by and among MASADA SECURITY, INC., a Delaware
corporation ("Purchaser"); PAUL KRISTYNIK and MARY KRISTYNIK, husband and wife
residing in Austin, Texas (collectively the "Seller"); and SOUTHTRUST BANK OF
ALABAMA, N.A. ("Escrow Agent").
RECITALS
WHEREAS, Seller and Purchaser have entered into a Stock Purchase
Agreement dated January 8, 1996 (the "Purchase Agreement"), pursuant to which
the Seller agrees to sell and Purchaser agrees to purchase all of the stock in
Kristynik Security Systems, Inc., a Texas corporation, as more fully described
therein;
WHEREAS, the Purchase Agreement requires Escrow Agent to hold
$74,177.25 of the purchase price in escrow for approximately six months pending
certain possible adjustments in accordance with the Purchase Agreement and
$203,023.64 of the purchase price in escrow for approximately one year pending
certain possible adjustments in accordance with the Purchase Agreement;
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. ESCROW AGENT: Purchaser and Seller hereby designate and
appoint the Escrow Agent as the Escrow Agent for the purposes herein set forth.
The Escrow Agent hereby accepts such appointment on the terms and conditions
herein set forth. Escrow Agent is not a party to and is not bound by any
agreement between Purchaser and Seller except this Agreement.
2. DEPOSIT IN ESCROW:
(a) Escrow Agent hereby acknowledges the receipt from
Purchaser of ________________________ ($74,177.25) Dollars (the "Six Months
Escrowed Funds") and of ________________________ ($203,023.64) Dollars (the
"One Year Escrowed Funds") (the Six Months Escrowed Funds and the One Year
Escrowed Funds are collectively referred to as the "Escrowed Funds"). Escrow
Agent agrees to hold and dispose of said sum, and all interest and gains earned
thereon, in accordance with all the terms, conditions and provisions of this
Agreement. Escrow Agent acts hereunder as a depository. All deposits are
warranted by Purchaser to be valid deposits.
<PAGE> 2
(b) Escrow Agent shall invest the Escrowed Funds as
directed by the joint written instructions of Seller and Purchaser. All
earnings received by Escrow Agent as a result of such investment shall be added
to the Escrowed Funds. In the absence of any joint direction by Seller and
Purchaser to the contrary, Escrow Agent, in its discretion, shall invest all
portions of the Escrowed Funds in certificates of deposit (90 day), and/or
money market funds.
3. DISTRIBUTIONS:
(a) On or after July 8, 1996, Purchaser and Seller shall
jointly give signed written notice ("Payment Notice") to Escrow Agent which
Payment Notice shall list the parties entitled to the Six Months Escrowed Funds
and a breakdown of the amounts each party is entitled to. Upon receipt of the
Payment Notice, the Escrow Agent shall pay to the appropriate parties the Six
Months Escrowed Funds within ten days after the receipt of such Payment Notice.
The Payment Notice shall set forth a brief description of the basis entitling
such parties to be paid the Six Months Escrowed Funds.
(b) On or after Januay 8, 1997, Purchaser and Seller
shall jointly give a Payment Notice to Escrow Agent which Payment Notice shall
list the parties entitled to the One Year Escrowed Funds and a breakdown of the
amounts each party is entitled to. Upon receipt of the Payment Notice, the
Escrow Agent shall pay to the appropriate parties the One Year Escrowed Funds
within ten days after the receipt of such Payment Notice. The Payment Notice
shall set forth a brief description of the basis entitling such parties to be
paid the One Year Escrowed Funds.
(c) If the Escrow Agent receives a Payment Notice
pursuant to Paragraph 3(a) or 3(b) which is (i) signed by Purchaser but not by
Seller, or (ii) signed by Seller but not by Purchaser, the Escrow Agent shall
give notice, along with a copy of such Payment Notice, to the other party (the
"Non-Signing Party"). If the Non-Signing Party gives notice to the Escrow
Agent of its agreement with the Payment Notice, or fails to respond to the
notice from the Escrow Agent, within seven days after the date of such notice,
then the Escrow Agent shall pay to Seller (or its designee) the Escrowed Funds,
within ten days after the expiration of such seven day period. If the
Non-Signing Party gives notice to the Escrow Agent of its disagreement with the
Payment Notice, within such seven day period, then the Escrow Agent shall pay
the undisputed portion, if any, of the Escrowed Funds, but shall not pay any
portion of the Escrowed Funds subject to dispute, which disputed funds shall
continue to be held by the Escrow Agent pending resolution of such dispute and
further direction from Purchaser and Seller, or from an authorized arbitrator.
(d) In the event of any disagreement resulting in adverse
claims or demands being made in connection with the subject matter of this
Agreement, or in the event that the Escrow Agent is in doubt as to what action
it should take hereunder, the Escrow Agent may, at its option, refuse to comply
with any claim or demand on it, or refuse to take any other action hereunder,
so long as such disagreement continues or such doubt exists, and in any such
event,
2
<PAGE> 3
the Escrow Agent shall not be or become liable in any way or to any person for
its failure or refusal to act, and the Escrow Agent shall be entitled to
continue to so refrain from acting until (i) the rights of all parties have
been fully and finally decided by an arbitrator selected in accordance with
Section 2.7(c) of the Purchase Agreement, which is incorporated herein by this
reference, or (ii) all differences shall have been decided and all doubt
resolved by agreement between Purchaser and Seller, and the Escrow Agent shall
have been notified thereof in a writing signed by Purchaser and Seller. In
addition to the foregoing remedies, the Escrow Agent is hereby authorized in
the event of any doubt as to the course of action it should take under this
Agreement, to petition the United States District Court for the Northern
District of Alabama and/or the Circuit Court in and for Jefferson County,
Alabama for instructions or to interplead the funds or assets so held into such
court. For purposes of this Agreement the parties agree to the jurisdiction of
either of said courts over their persons as well as the Escrowed Funds and
agree that service of process by certified mail, return receipt requested, to
the address set forth in Paragraph 9 below shall constitute adequate service.
Purchaser and Seller hereby agree to indemnify and hold the Escrow Agent
harmless from any liability or losses occasioned thereby and to pay any and all
of its costs, expenses, and reasonable attorney's fees incurred in any such
action and agree that on such petition or interpleader action that the Escrow
Agent, its servants, agents, attorneys, employees and officers will be relieved
of further liability. Escrow Agent is hereby given a lien upon, security
interest in, and right of setoff against, the Escrowed Funds to secure Escrow
Agent's rights to payment or reimbursement for any and all costs, expenses, and
fees incurred by it hereunder.
(e) If a Non-Signing Party shall be determined by (i) a
court of competent jurisdiction, (ii) an arbitrator's binding award, or (iii) a
written release between the parties, to have acted in a frivolous manner and in
bad faith, the other party shall be entitled to reimbursement of all its
reasonable costs incurred in connection with the Payment Notice (including,
without limitation, reasonable attorney's fees).
4. TERMINATION: This Agreement shall terminate on the date that
no Escrowed Funds continue to be held by the Escrow Agent.
5. LIMITATIONS ON LIABILITY OF ESCROW AGENT: In order to induce
the Escrow Agent to act as the escrow agent under this Agreement, Seller and
Purchaser agree as follows:
(a) The Escrow Agent may rely upon and shall be protected
in acting or refraining from acting upon any written notice, instruction or
request received by the Escrow Agent and believed by the Escrow Agent in good
faith to be genuine and signed by Seller and Purchaser. The Escrow Agent shall
not be responsible for the sufficiency, correctness, genuineness or validity of
any notice or instructions delivered to the Escrow Agent. The Escrow Agent
shall not be liable for any error of judgment, or any act or omission under
this Agreement taken in good faith, except for the Escrow Agent's own gross
negligence or willful misconduct.
3
<PAGE> 4
(b) Seller and Purchaser shall jointly and severally
indemnify and hold harmless the Escrow Agent from and against any claims,
costs, damages, reasonable attorney's fees, expenses, obligations or charges
made against the Escrow Agent by reason of its action or failure to act in
connection with any of the transactions contemplated by this Agreement, unless
caused by the Escrow Agent's gross negligence or willful misconduct.
(c) In the event the Escrow Agent receives or becomes
aware of conflicting instructions, demands or claims with respect to this
Agreement or the sums deposited hereunder, the Escrow Agent shall have the
right to discontinue any and all further acts until such conflict is resolved
to the Escrow Agent's satisfaction. The Escrow Agent shall have the further
right to commence or defend any action or proceeding for the termination of
such conflict. Seller and Purchaser jointly and severally agree to pay all
costs, damages, judgments and expenses, including reasonable attorneys' fees,
suffered or incurred by the Escrow Agent in connection with such action or
proceeding. In the event the Escrow Agent files a suit in interpleader, the
Escrow Agent shall thereupon be fully released and discharged from all further
obligations imposed by this Agreement with respect to sums deposited with a
court of competent jurisdiction pursuant to such suit in interpleader.
6. ESCROW FEES: The Escrow Agent shall not be entitled to
receive a fee for serving as the Escrow Agent; provided, however, that the
Escrowed Funds shall be subject to the Escrow Agent's standard fees and service
charges as provided in the Escrow Agent's Rules and Regulations Governing
Deposit Accounts.
7. RESIGNATION: The Escrow Agent may resign at any time upon
giving the parties hereto 30 days advance written notice to that effect. In
such event, the successor escrow agent shall be mutually selected by Seller and
Purchaser. However, in no instance shall the Escrow Agent's resignation be
effective until a successor escrow agent has agreed to act but, Escrow Agent
shall have the right to discontinue any and all future acts until such
successor escrow agent has agreed to act.
8. INTEREST INFORMATION: Unless otherwise agreed to in writing
by both parties: (i) the Escrow Agent shall list the social security number of
the Seller for one-half of the Escrowed Funds for federal, state and local tax
purposes and for other necessary purposes; (ii) the Escrow Agent shall list the
employer tax identification number of Purchaser for one-half of the Escrowed
Funds for federal, state and local tax purposes and for other necessary
purposes; and (iii) any and all of Escrow Agent's fees and charges as provided
for in Paragraph (6) of this Agreement shall first be charged against interest
earned and then charged against principal.
9. NOTICE: Any notice or other communication hereunder shall be
in writing and shall be (i) delivered by hand, (ii) delivered by an overnight
courier service with guaranteed next day delivery, (iii) sent by telecopy, or
(iv) mailed by certified mail, postage prepaid, return receipt requested, and
addressed as follows:
4
<PAGE> 5
IF TO PURCHASER AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLER AT:
1305 Silver Hill Drive
Austin, Texas 78746
Attention: Paul and Mary Kristynik
FACSIMILE: (512) 328-0593
WITH COPY TO:
Minter, Joseph & Thornhill, P. C.
811 Barton Springs Road
Suite 800
Austin, Texas 78704
Attention: W. Routt Thornhill, Jr., Esq.
FACSIMILE: (512) 478-5838
5
<PAGE> 6
IF TO ESCROW AGENT:
SouthTrust Bank of Alabama, N.A.
420 North 20th Street
Birmingham, Alabama 35203
Attention: Mr. Robert W. Wilkerson
FACSIMILE: (205) 254-5989
or to such other address as may have been furnished to the party giving notice
by the party to whom notice is to be given. Notice shall be deemed given upon
the earlier of (i) three days after deposit in the U.S. Mail by certified mail,
or (ii) actual receipt thereof.
10. MISCELLANEOUS:
(a) SUCCESSORS AND ASSIGNS: This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
(b) COUNTERPARTS: This Agreement may be executed in any
number of counterparts, each of which shall be an original, but which together
shall constitute one and the same instrument.
(c) GOVERNING LAW: This Agreement shall be governed by
and construed and interpreted in accordance with the laws of the State of
Alabama.
(d) AMENDMENT: This Agreement may not be modified,
changed, waived or terminated, in whole or in part, except by a supplemental
agreement signed by all of the parties hereto.
(e) HEADINGS: The headings assigned to Paragraphs of
this Agreement are for convenience only and shall be disregarded in construing
this Agreement.
(f) NO ASSIGNMENT: Neither Seller nor Purchaser shall
pledge, hypothecate or otherwise transfer or attempt to transfer any right,
title or interest hereunder without the prior written consent to the other
party hereto.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the day and year first above written.
MASADA SECURITY, INC.
By: /s/
--------------------------------
Its: VP Corp Development
---------------------------
Tax I.D. No.: 63 111 0400
/s/ Paul Kristynik
-----------------------------------
Paul Kristynik
Tax I.D. No.: ###-##-####
/s/ Mary Kristynik
-----------------------------------
Mary Kristynik
Tax I.D. No.: ###-##-####
SOUTHTRUST BANK OF ALABAMA, N.A.
By: Robert W. Wilkerson
----------------------------------
Its: Senior Vice President
-------------------------------
7
<PAGE> 1
NONCOMPETITION, NONSOLICITATION
AND NONDISCLOSURE AGREEMENT
This Agreement made as of this 8th day of January, 1996, by and among
MASADA SECURITY, INC., a Delaware corporation ("Masada"), and PAUL KRISTYNIK
and MARY KRISTYNIK, husband and wife residing in Austin, Texas, (collectively
the "Sellers").
STATEMENT OF FACTS
A. Masada is purchasing all of the stock in Kristynik Security
Systems, Inc., a Texas corporation (the "Company") pursuant to the Stock
Purchase Agreement dated January 8, 1996 between Masada and Sellers ("Stock
Purchase Agreement") which is incorporated herein by this reference. The
Company owns certain security monitoring accounts as listed on Schedule 3.18(a)
of the Stock Purchase Agreement (the "Accounts"). This Agreement applies to
the customer who is related to the Account, as well as the Account's location.
B. Sellers are also the owners of Austin Central Monitoring,
Inc., a Texas corporation ("Austin Central"). Austin Central provides
monitoring services to the Accounts and also monitors other security monitoring
accounts.
C. In consideration of the payment of $50,000.00 to Sellers, the
Sellers are willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and for good and
valuable consideration, receipt of which is acknowledged, the parties,
intending to be legally bound, covenant and agree as follows:
1. Nonsolicitation and Nonacceptance. The Sellers agree that
following the Closing Date as defined in the Stock Purchase Agreement, they
will not, directly or indirectly through affiliates, solicit nor accept (if the
Accounts contact them) any business from any of the Accounts, including
business for the purpose of providing electronic security, intercom, central
vacuum, home automation, audio systems or related services (collectively, the
"Services"); provided, however that Sellers will be allowed to (i) provide
guard services to the Accounts, (ii) monitor the Accounts through Austin
Central pursuant to the terms of a monitoring agreement entered into between
Masada and Austin Central, (iii) monitor the Accounts which have been rejected
in writing by Masada, and (iv) monitor the Accounts which terminate their
relationship with the Company and enter into security monitoring agreements
with business entities which have third party monitoring agreements with Austin
Central; provided, however, that beginning with the expiration of the Holdback
Period II (as defined in the Stock Purchase Agreement) and
<PAGE> 2
continuing as long as Sellers own a controlling interest in Austin Central,
Sellers will cause Austin Central to provide Masada with a monthly report which
lists the Accounts who were customers of the Company at the Closing (as defined
in the Stock Purchase Agreement) and who are then monitored by Austin Central.
If contacted by the Accounts, the Sellers will inform them that the Seller can
no longer provide the Services to the Accounts and that the Company is now
owned by Masada who operates a U.L. certified monitoring station in Birmingham,
Alabama.
2. Noncompetition. The Sellers also agree that, for a period of
three (3) years following the date of this Agreement, they will not, directly
or indirectly through affiliates, take any action in competition with Masada in
connection with the Accounts. Without limiting the generality of the
foregoing, the Sellers will not, directly or indirectly through affiliates:
(a) manage, operate, join, control, participate or become
interested in or be connected with, as an employee, partner, officer, director,
stockholder, investor or otherwise, any business providing any of the Services
to the Accounts except as provided in Section 1 of this Agreement;
(b) lend their credit or money for the purpose of
establishing or operating any business providing any of the Services to the
Accounts;
(c) furnish consultation or advice to any business
providing any of the Services to the Accounts except for Services provided by
Austin Central;
(d) permit their names to be used in connection with any
business providing any of the Services to the Accounts; or
(e) sell or rent any equipment ancillary or necessary to
any business providing any of the Services to the Accounts except for Services
provided by Austin Central.
3. Nondisclosure.
(a) The Sellers acknowledge that they possess certain
confidential, proprietary and trade secret information, materials and business
concepts with respect to the Accounts, including information regarding sales,
maintenance, service and marketing, customer lists and files, accounting data
and methods, operating procedures, pricing policies, strategic plans,
intellectual property, contracts and manufacturer's warranties (collectively,
the "Proprietary Information"). In fact, the Sellers acknowledge that the
Accounts' information included on Schedule 3.18(a) of the Stock Purchase
Agreement constitutes proprietary information.
(b) The Sellers agree without Masada's prior written
consent (i) never to publish, copy, disclose, allow to be disclosed, or use for
their own benefit or for the benefit of any other person, firm, corporation or
entity the Proprietary Information and (ii) to maintain strictly the
confidentiality of the Proprietary Information at all times. The Sellers agree
to take
2
<PAGE> 3
all necessary precautions to protect the Proprietary Information from
unauthorized disclosure or use.
(c) The Sellers agree not to disclose financial and/or
other terms of the Stock Purchase Agreement transaction except to their
attorneys, accountants or other professional advisors or as required by law.
4. Acknowledgment. The Sellers acknowledge and recognize that:
(a) this Agreement is necessary for the protection of the
legitimate business interests of Masada in purchasing the stock of the Company;
(b) the execution and delivery of this Agreement is a
mandatory condition precedent to Masada's closing its purchase of all of the
stock in the Company from Sellers, without which such transactions will not
close;
(c) the scope of this Agreement regarding duration and
the level of activities restricted is reasonable;
(d) none of the Sellers, individually or jointly, has any
intention of violating this Agreement during the time period set forth above;
and
(e) the breach of this Agreement will be such that Masada
will not have an adequate remedy at law because of the unique nature of the
assets of the Company and the confusion to the Accounts that a breach would
create.
5. Remedy. The Sellers and Masada agree that the amount of
damages resulting to Masada from the breach of this Agreement by the Sellers is
difficult to ascertain. In the event that Masada in its sole discretion,
elects to pursue a damage award the Sellers agree that Masada is entitled to
liquidated damages from the Sellers of 48 times the monthly recurring revenue
from the affected Accounts ("Liquidated Damages Multiple"). It is understood
that the Liquidated Damages Multiple reflects not only the Purchase Price
multiple paid for the Alarm Accounts pursuant to the Stock Purchase Agreement
but also includes other factors including, but not limited to Masada's: (i)
loss of operating cash flow; (ii) transition expenses; and (iii) costs
(including opportunity costs) associated with enforcing this Agreement. The
Sellers acknowledge and agree that the rights of Masada under this Agreement
are of a specialized and unique character and that immediate and irreparable
damage will result to Masada if the Sellers fail to or refuse to perform their
obligations under this Agreement and, notwithstanding any election by Masada to
claim damages from the Sellers as a result of any such failure or refusal,
Masada may, in addition to any other remedies and damages available, seek an
injunction in a court of competent jurisdiction,without the need to post a bond
or other security to restrain any such failure or refusal. The Sellers
represent and warrant that their expertise and capabilities are such that their
obligations under this Agreement (and the enforcement thereof by injunction or
otherwise) will not prevent them from earning a livelihood. The Sellers also
agree that
3
<PAGE> 4
Masada's remedy for a breach by the Sellers of this Agreement will not be
limited to the payment made from Masada to the Sellers.
6. Severability. If any provisions of this Agreement as applied
to any part or to any circumstances shall be adjudged to be invalid or
unenforceable, the same will in no way affect any other provision of this
Agreement, the application of such provision in any other circumstances, or the
validity or enforceability of this Agreement. Masada, and the Sellers intend
this Agreement to be enforced as written. If any provision or any part thereof
is held to be invalid or unenforceable because of the duration thereof or the
level of restrictions, all parties agree that the person making such
determination will have the power to reduce the duration and/or restrictions of
such provision, and/or to delete specific words or phrases and in its modified
form such provision will then be enforceable.
7. Resolution of Disputes.
(a) Any dispute arising out of or relating to this
Agreement or the breach, termination or validity hereof shall be settled by
arbitration conducted expeditiously by binding arbitration under the rules then
in effect of the American Arbitration Association, such arbitration hearing to
be held in Austin, Texas. The arbitration proceedings shall be heard by one
arbitrator selected from the proposed panel of arbitrators issued by the
American Arbitration Association. Masada and Sellers shall attempt to select a
mutually acceptable arbitrator. If the parties are unable to select a mutually
acceptable arbitrator within five business days following the issuance of the
list of potential arbitrators by the American Arbitration Association, Sellers,
on the one hand, and Masada, on the other hand, shall each select one person
from the list, and those two persons shall appoint a third person from the
list, which person shall be the arbitrator for the dispute. All arbitration
awards shall include an award of expenses, including, but not limited to, legal
and accounting fees.
(b) The arbitration provisions of Section 7(a) shall be
the sole and exclusive procedure for the resolution of disputes between the
parties arising out of or relating to this Agreement; provided, however, that a
party may seek a preliminary injunction or other provisional judicial relief if
in its judgment such action is necessary to avoid irreparable damage or to
preserve the status quo.
8. Notices. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
4
<PAGE> 5
IF TO MASADA AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
IF TO SELLERS AT:
1305 Silver Hill Drive
Austin, Texas 78746
Attention: Paul and Mary Kristynik
FACSIMILE: (512) 328-0593
5
<PAGE> 6
WITH COPY TO:
Minter, Joseph & Thornhill, P. C.
811 Barton Springs Road
Suite 800
Austin, Texas 78704
Attention: W. Routt Thornhill, Jr., Esq.
FACSIMILE: (512) 478-5838
or at such address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
9. Entire Agreement. This Agreement is an integrated document,
contains the entire agreement between the parties, and wholly cancels,
terminates and supersedes any and all previous and/or contemporaneous oral
agreements, negotiations, commitments and writings between Masada and the
Sellers with respect to such subject matter. No change, modification,
extension, termination, discharge, abandonment or waiver of this Agreement or
any of its provisions, nor any representation, promise or condition relating to
this Agreement, will be binding upon the parties unless made in writing and
signed by the parties.
10. Interpretation. The descriptive headings of the Sections are
for ease of reference only and will in no way affect or be used to construe or
interpret this Agreement. All references to Sections and subsections contained
in this Agreement are references to the Sections and subsections of this
Agreement. The terms and conditions of this Agreement will not be construed
against this drafter. The word "including" means "including without
limitation."
11. Remedies Cumulative. It is agreed that the rights and
remedies herein provided in case of any default or breach by the Sellers of
this Agreement are cumulative and will not affect in any manner any other
remedies that Masada may have by reason of such default or breach by the
Sellers. The exercise of any right or remedy will be without prejudice to the
right to exercise any other right or remedy provided herein, by law or by
equity.
12. Waiver. No waiver of any right or remedy allowed hereunder
will be implied by the failure to enforce any such right or remedy. No express
waiver will affect any such right or remedy other than that to which the waiver
is applicable and only for that occurrence.
13. Parties in Interest. This Agreement is binding upon and
inures to the benefit of Masada and its successors and assigns and the
permitted heirs, successors and assigns of the Sellers.
6
<PAGE> 7
14. Assignment. Masada has the right to assign this Agreement to
any third party without the consent of the Sellers. The Sellers have no right
to assign this Agreement.
15. Governing Law. This Agreement and the rights and the
obligations of the parties are governed by and construed and enforced in
accordance with the laws of the State of Texas without regard to its conflicts
of law provisions.
16. Joint and Several Obligations. The Sellers acknowledge that
all of their agreements and covenants contained in this Agreement are made on a
joint and several basis.
17. Expenses. Masada and the Sellers each agree to pay all of
their respective costs and expenses incident to the negotiation and preparation
of this Agreement and to the performance and compliance with all agreements and
conditions contained herein on their part to be performed or complied with,
including the fees and costs of their counsel and accountants; provided,
however, that the Sellers agree to pay all of Masada's reasonable legal fees
and costs in this event Masada must go to court to enforce this Agreement and
is successful in the court proceeding.
18. Counterparts; Telecopy. This Agreement may be executed in one
or more counterparts, each of which when taken together all comprise one
instrument. Delivery of executed signature pages hereof by facsimile
transmission will constitute effective and binding execution and delivery.
19. Consultation. The Sellers acknowledge that they have: (a)
carefully read and fully understand all of the provisions of this Agreement,
and (b) had an opportunity to consult with their respective attorneys prior to
executing this Agreement.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
------------------------------------
Title: VP Corp. Development
------------------------------
/s/ Paul Kristynik
---------------------------------------
Paul Kristynik
/s/ Mary Kristynik
---------------------------------------
Mary Kristynik
8
<PAGE> 1
CONSULTING AGREEMENT
THIS AGREEMENT dated as of this 8th day of January, 1996, by and
between MASADA SECURITY, INC., a Delaware corporation ("Masada") and PAUL
KRISTYNIK, an individual residing in the State of Texas ("Kristynik").
WITNESSETH
WHEREAS, Masada is purchasing the stock of Kristynik Security Systems,
Inc. (the "Company") from Kristynik and his wife, Mary Kristynik pursuant to a
Stock Purchase Agreement dated January 8, 1996 ("Stock Purchase Agreement");
WHEREAS, Kristynik is receiving a payment for the sale of the stock of
the Company and in further consideration of such payment has agreed to be a
consultant to the Company;
NOW, THEREFORE, the parties do hereby mutually agree as follows:
1. Consultation Services. Masada hereby engages Kristynik to
perform and furnish such services to Masada relating to (i) the assimilation of
security alarm monitoring accounts into Masada's monitoring and accounting
systems; and (ii) any ongoing service-related issues with respect to specific
security alarm monitoring accounts previously owned by the Company as may be
periodically requested from time to time by Masada.
2. Term of Agreement. This Agreement will begin on January 9,
1996 and shall terminate six months after such date.
3. Time Devoted by Kristynik. It is anticipated that Kristynik
will be available during normal business hours when needed in fulfilling his
obligations under this contract. The particular amount of time may vary from
day to day or week to week.
4. Covenants of Kristynik. Kristynik hereby covenants and agrees
that, during the term of this Agreement, he will:
(a) Devote time, energy, skill, attention and effort to
the performance of his services as itemized in Paragraph 1 above; and
(b) Use his best efforts to maintain for the benefit of
Masada the quality and quantity of security monitoring accounts which were a
part of the assets of the Company as of the date that Kristynik sold his stock
in the Company to Masada.
5. Non-Disclosure and Non-Use of Confidential Information.
Kristynik warrants and agrees that:
<PAGE> 2
(a) All notes, memoranda, and records made by Kristynik,
or to which he may have or have had access in connection with his engagement
hereunder, and all property, papers and documents of any nature whatsoever,
together with all copies of reproductions of any of the foregoing, are the
exclusive, confidential property of Masada, and that, upon termination of his
services hereunder, whether voluntary or involuntary, Kristynik will promptly
deliver to or place in the possession of Masada, all such notes, memoranda,
records, property, papers, and documents; and
(b) Without Masada's prior written consent, Kristynik
shall not disclose or make available to others, or use outside of his
employment with Masada, directly or indirectly, either during such employment
or at any time thereafter, any records, data, information, processes, plans,
designs, drawings or compositions of Masada to which Kristynik may have or has
had access, or of which Kristynik has acquired or may acquire knowledge, or
which Kristynik may have prepared by reason of his services rendered hereunder.
6. Severability. Kristynik and Masada agree that the covenants
and agreements contained in Sections 4 and 5 of this Agreement, or any of the
paragraphs of those Sections, are severable and separate and the
unenforceability of any specific covenant therein shall not affect the validity
of any other covenant set forth therein.
7. Waiver of Breach. The waiver by either party of any term or
provision or of any breach of any provision of this Agreement by the other
shall not operate or be construed as a waiver of any other term, provision or
subsequent breach nor shall any such waiver be deemed or construed as a
continuing waiver of any such term, provision or breach. The failure of either
party to require strict performance of any provision shall not diminish such
party's right thereafter to require strict performances of any provision.
8. Headings. Section headings herein are for convenience only
and shall in no case be considered in construing this Agreement.
9. Entire Agreement, Etc. This Agreement embodies the entire
agreement of the parties hereto relating to the subject matter hereof. No
amendment or modification of this Agreement shall be valid or binding upon
Masada unless made in writing, and signed by a duly authorized officer of
Masada or upon Kristynik unless made in writing and signed by him.
10. Miscellaneous.
(a) This Agreement may not be amended, transferred or
assigned by any party hereto without the written consent of the other parties
hereto.
(b) This Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective heirs, executors,
administrators, successors and permitted assigns.
2
<PAGE> 3
(c) This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one instrument.
(d) This Agreement shall be governed and interpreted in
accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-------------------------------------
Its: VP Corp Development
----------------------------------
/s/ Paul Kristynik
-----------------------------------------
Paul Kristynik
3
<PAGE> 1
ASSET PURCHASE AND SALE AGREEMENT
by and between
MASADA SECURITY, INC.
and
HARVEY SENDER, AS TRUSTEE
dated
MARCH 27, 1996
<PAGE> 2
ASSET PURCHASE AND SALE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 - PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Acquired Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l
1.3 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 [Intentionally Left Blank] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Closing Preparations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Closing Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 Adjustments to Purchase Price; Escrow Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.8 Retransfer of Certain Alarm Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.9 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.10 Nonsolicitation of Acquired Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.11 Allocation of Final Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Representations and Warranties of Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Representations and Warranties of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 3 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Acquired Accounts Information" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Bankruptcy Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Bankruptcy Court Approval" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Bankruptcy Proceeding" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"CD Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Customer Accounts" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Customer Contract" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-
"Deferred Revenue" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Download Information" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Escrow Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
"Excluded Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Inventory" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Material Adverse Effect" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Net RMR" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Net RMR Adjustment Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Nonperforming Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"Ordinary Course of Business" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
"RMR" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Security Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Security Services" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
"Valuation Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 4 - ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.1 Full Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 General Obligation to Close. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
4.3 Covenants Regarding Pre-Closing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6 Assigned Leases adn Contractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.6 [Intentionally Left Blank] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Pre-Closing and Post-Closing Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.8 Reprogramming Alarm Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.9 Purchase of Certain Items of of Equipment . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 17
4.10 Commingled Telephone Lines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.11 Billing Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 5 - CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Conditions Precedent to Obligations of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Conditions Precedent to Obligation of Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 Purchase of Third Party Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 6 - CERTAIN POST CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1 Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2 Field Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3 Buyer's Representatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 Billing by Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Access to Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 7 - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 8 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1 Survival of Representations and Warranties of Seller. . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Survival of Representations and Warranties of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 9 - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Indemnification by the Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.2 ndemnification by Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.3 Matters Involving Third Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.4 Determination of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.5 Limitation of Seller's Indemnification Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 10 - ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.2 American Arbitration Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.3 Selection of Arbitrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.4 Decision of Arbitrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.5 Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.6 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.7 Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.8 Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 11 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.1 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.2 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.3 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.6 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.8 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.15 No Personal Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.16 Return of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
LIST OF SCHEDULES AND EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
iii
<PAGE> 5
ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (this "Agreement") is made and
entered into as of March 27, 1996 by and between Masada Security, Inc., a
Delaware corporation ("Buyer"), and Harvey Sender ("Trustee"), as trustee for
the bankruptcy estates of InterCap Funds Joint Venture, a Colorado general
partnership ("Venture"), Security Data Group of California, Inc., a California
corporation ("SDG"), IMIF IV-C Service Corp., a Colorado corporation
("Service") (the bankruptcy estates of Venture, SDG, and Service are
collectively referred to as "Seller"). Buyer and Seller are sometimes referred
to individually herein as a "Party" and collectively herein as the "Parties."
WHEREAS, each of Venture, Service and SDG was a debtor-in-possession
in Chapter 11 bankruptcy proceedings pending in the United States Bankruptcy
Court for the District of Colorado (the "Bankruptcy Court") until March 4,
1996, when the Bankruptcy Court ordered the appointment of a trustee for each
of Venture, Service and SDG (collectively, the "Debtor");
WHEREAS, Trustee was appointed by the Bankruptcy Court on March 5,
1996 as the Chapter 11 Trustee for each of Venture, Service and SDG;
WHEREAS, subject to the terms and conditions set forth herein, Buyer
desires to acquire from Seller, and Seller desires to sell and assign to Buyer,
certain of Seller's assets associated with Seller's business of providing
Security Services in the States of Florida, Texas, Georgia, Maryland, Virginia,
and Louisiana and the District of Columbia (collectively, the "Masada
Territory"), and Buyer and Seller desire to make certain other arrangements
between them relating to the purchase and sale of such assets, all upon the
terms and conditions hereinafter set forth;
WHEREAS, concurrently herewith Seller is entering into a substantially
similar asset purchase agreement (the "Protection One Agreement") with
Protection One Alarm Monitoring, Inc. ("Protection One") and Protection One,
pursuant to the Protection One Agreement, is purchasing from Seller certain
other assets of Seller;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties hereby agree as set forth below.
Defined terms not otherwise defined herein have the meanings assigned such
terms in Article 3 hereof.
ARTICLE 1 - PURCHASE AND SALE
1.1 Acquired Assets. On and subject to the terms and conditions
of this Agreement, Buyer shall purchase from Seller, and Seller shall sell,
transfer, convey and deliver to Buyer, all of Seller's right, title and
interest in and to the following assets (collectively referred to as the
"Acquired Assets"); provided, however, that the Acquired Assets will not
include any Excluded Assets:
(a) Acquired Accounts. All right, title and interest of
Seller in and to the Customer Accounts all of which are specifically listed on
Schedule 1.1(a) hereto (the "Acquired Accounts") including, without limitation,
all accounts receivable for Security Services provided after Closing regardless
of when such Security Services are billed;
<PAGE> 6
(b) Acquired Account Equipment. All right, title and
interest of Seller in and to the alarm equipment and other equipment used at
customer premises to provide Security Services to the Acquired Accounts (the
"Acquired Account Equipment");
(c) Operating Assets. All right, title and interest of
Seller in and to the vehicles specifically listed on Schedule 1.1(c) hereto and
all branch assets, monitoring equipment, and other operating assets used in
providing Security Services in the Masada Territory, including, without
limitation, those items specifically listed on Schedule 1.1(c) hereto
(collectively, the "Operating Assets");
(d) Intangible Personal Property. All right, title and
interest of Seller in and to all tradenames, trademarks, servicemarks,
applications for same, and other intangible personal property listed on
Schedule 1.1(d) hereto (the "Intangible Personal Property");
(e) Assumed Contracts. All right, title and interest of
Seller in and to the leases, contracts and other agreements listed on Schedule
1.1(e) hereto (the "Assumed Contracts");
(f) Telephone Lines. All right, title and interest of
Seller in and to the telephone lines and telephone numbers used or otherwise
required for monitoring, maintenance, administration, marketing and/or sales
related to the Acquired Accounts, including those listed on Schedule 1.1(f)
hereto (the "Telephone Lines");
(g) Selected Inventory. All right, title and interest of
Seller in and to the Inventory used in providing Security Services and selected
by Buyer in accordance with Section 1.5(a) hereto (the "Selected Inventory");
(h) Acquired Accounts Information. All right, title and
interest of Seller in and to the Acquired Accounts Information; and
(i) Westinghouse Agreements. All right, title and
interest of Seller in and to all non-solicitation, non-disturbance and/or
non-competition agreements with Westinghouse Electric Corporation or its
affiliates (such agreements to be conveyed to Buyer and Protection One as
tenants-in-common) (exclusive of claims that Seller or Trustee has against
Westinghouse).
1.2 Assumed Liabilities. Upon consummation of the transactions
contemplated herein, Buyer shall assume and be liable for the Assumed
Liabilities, as defined below. Buyer shall not be obligated to assume, and
shall not assume, any of the liabilities and obligations of Seller (absolute,
accrued, contingent or otherwise) other than the Assumed Liabilities, whether
existing prior to or as of the Closing Date or asserted after the Closing Date
and relating to events that occurred before the Closing Date or otherwise
except Buyer shall assume and agrees to pay, perform and discharge, in
accordance with their respective terms the following (collectively referred to
as the "Assumed Liabilities"):
(a) all obligations of Seller arising on or after the
Closing Date, or otherwise required to be performed after the Closing Date,
under the Customer Contracts; and
(b) all obligations of Seller arising on or after the
Closing Date, or otherwise required to be performed after the Closing Date,
under the Assumed Contracts.
2
<PAGE> 7
1.3 Purchase Price. The aggregate purchase price for the Acquired
Assets will be the sum of the following (the "Final Purchase Price"):
(a) 39.5 multiplied by the aggregate Net RMR listed on
Schedule 1.1(a) attributed to the Acquired Accounts
(the "Preliminary Net RMR");
plus (b) an amount equal to the sum of the average wholesale
value of each vehicle listed in Schedule 1.1(c), as
listed in the NADA "Black Book Official Used Truck
and Van Guide," taking into account mileage, optional
equipment and other variables included in the "Black
Book" valuation methodology;
plus (c) an amount equal to Seller's documented actual cost
for the Selected Inventory;
plus (d) to the extent the Net RMR exceeds the Preliminary Net
RMR, the Net RMR Adjustment Amount;
minus (e) to the extent the Net RMR is less than the
Preliminary Net RMR, the Net RMR Adjustment Amount;
minus (f) Deferred Revenue (if any) associated with the
Acquired Accounts;
minus (g) 21.5 multiplied by that portion of Net RMR which
constitutes "Connect" charges associated with
Acquired Accounts located in the State of Florida;
minus (h) $75.00 for each Acquired Account for which in
accordance with Section 4.8 hereof the communications
link to Buyer's central monitoring station must be
manually (other than a line swing) reprogrammed at
the Acquired Account customer's premises and $25.00
for each Acquired Account for which in accordance
with Section 4.8 hereof the communications link to
Buyer's central monitoring station must be manually
(other than a line swing) reprogrammed by remotely
accessing such Acquired Account customer's alarm
system;
plus or minus (i) the proration adjustments provided for in Section
1.5(c); and
plus (j) 39.5 multiplied by the RMR associated with each
Florida 120 Day Contract that is (x) in force as of
the Valuation Date and (y) for which the associated
account receivable as of the Closing Date has been
satisfied in full by the Valuation Date.
1.4 [Intentionally Left Blank]
1.5 Closing Preparations.
(a) Inventory. Schedule 1.5(a) attached hereto
identifies and describes Seller's current Inventory at each of its branch
locations. Within five days after Bankruptcy Court Approval, Seller shall
deliver to Buyer, for each of Seller's branch locations in the Masada
Territory, an itemized list which shall provide the following information for
each Inventory item: (i) description; (ii) manufacturer; (iii) manufacturer
model number; (iv) quantity; and (v) Seller's actual cost (per unit and
aggregate). Seller shall permit one or more
3
<PAGE> 8
representatives of Buyer to inspect such Inventory prior to Closing. Seller
agrees to purchase those items of Seller's Inventory located in the Masada
Territory and that have not been used and are still sealed in their original
box. Buyer shall deliver to Seller at least two days prior to the Closing Date
a written description of the items of Inventory selected by Buyer, which shall
include the items of Inventory described in the preceding sentence. Seller
shall promptly separate those items of Inventory selected by Buyer from
Seller's remaining Inventory at each applicable location of Seller and hold
such selected Inventory items for Buyer at such location(s). Seller shall
deliver physical possession and control of such Inventory items to
representatives of Buyer on the Closing Date at such location(s).
(b) Preliminary Purchase Price. Seller has delivered to
Buyer an accounts receivable report itemized by individual account, as of March
15, 1996, which shows the aging of each individual account receivable
applicable to the Acquired Accounts (the "Preliminary Receivables Aging
Report"). Seller agrees to update manually the Preliminary Receivables Aging
Report to reflect payments received from March 15, 1996 until the Closing.
Prior to the Closing Date, Seller and Buyer will jointly prepare a revised,
updated Schedule 1.1(a) and a statement setting forth their good faith estimate
of the final Purchase Price (the "Preliminary Purchase Price"), which statement
shall set forth all of the components of a "Final Purchase Price" as set forth
in Section 1.3 and shall be based in part on an accounts receivable aging
report which reflects the invoices associated with the Customer Contracts for
April 1996 prepared and mailed by Seller pursuant to Section 6.4.
(c) Prorations. Except as otherwise provided herein, all
expenses arising from ownership and operation of the Acquired Assets and the
Assumed Contracts shall be prorated between Buyer and Seller as of 11:59:59
P.M., Denver, Colorado time, on the Closing Date. Such prorations shall
include, without limitation, all ad valorem and other property taxes (not
including any taxes described in Section 11.9), power and utility expenses, and
rent. Seller shall provide Buyer a list of proposed proratable items at least
five days before the Closing Date. The prorations and adjustments contemplated
by this Section 1.5(c), to the extent practicable, shall be made on and as of
the Closing Date. As to those prorations and adjustments not reasonably
capable of being ascertained on the Closing Date, an adjustment and proration
shall be made on or before the Valuation Date or as soon thereafter as is
practicable.
(d) Receivables. At Closing, Seller will deliver to
Buyer a list of the Receivables, itemized by individual account, as of the
close of business on the day prior to the Closing Date.
1.6 Closing Transactions.
(a) Closing Date. Subject to the conditions set forth in
this Agreement, the closing of the transactions contemplated by this Agreement,
effective as of 11:59:59 P.M. (the "Closing"), will take place at the offices
of Sherman & Howard in Denver, Colorado, commencing at 10:00 A.M. local time,
on a date that is mutually acceptable to the parties and that is subsequent to
the satisfaction or waiver of all conditions to the obligations of the parties
to consummate the transactions contemplated hereby (other than with respect to
actions the respective parties will take at the Closing itself), but in no
event later than March 31, 1996 (the "Closing Date"). The parties agree to use
their best efforts to conduct the Closing promptly following Bankruptcy Court
Approval.
(b) Deliveries. The Parties hereby agree to consummate
the following transactions:
(i) Seller shall deliver to Buyer (A) a bill of
sale and assignment, in form and substance reasonably
acceptable to Buyer, (B) an assignment document which will
allow Buyer
4
<PAGE> 9
to transfer the Telephone Lines in form and substance
reasonably acceptable to Buyer, (C) computer disks containing
Seller's accounting and billing information related to all
Acquired Accounts, necessary for Buyer to commence billing the
Acquired Accounts following the Closing, and formatted in a
manner that is acceptable to Buyer, (D) an opinion from
Doherty, Rumble & Butler, P.C., special counsel for Trustee,
addressed to Buyer and in substantially the form of Exhibit A,
and (E) such other instruments of sale, transfer, conveyance
and assignment as Buyer reasonably may request in form
reasonably satisfactory to Buyer;
(ii) Buyer shall deliver to Seller (A) in
immediately available funds to an account specified by Seller
the Preliminary Purchase Price, (x) less a portion of the
Preliminary Purchase Price equal to 30% of the product of 39.5
multiplied by the Preliminary Net RMR (the "Holdback Amount"),
and (y) less the aggregate amount to be paid by Buyer in
accordance with Section 1.6(b)(iii) below, (B) an assumption
agreement in form and substance reasonably acceptable to
Seller, and (C) such other instruments of assumption as Seller
reasonably may request in form reasonably satisfactory to
Seller;
(iii) To the extent the Acquired Accounts include
any Third Party Accounts (as hereinafter defined) owned by one
or more Third Party Owners (as hereinafter defined), Buyer
shall deliver, with respect to each Third Party Owner (subject
to Section 5.3), to an account specified by such Third Party
Owner in immediately available funds the purchase price owed
by Seller to such Third Party Owner for its Third Party
Accounts;
(iv) Buyer shall deliver the Holdback Amount in
immediately available funds to the escrow account (the "Escrow
Account") established pursuant to an escrow agreement entered
into between the parties substantially in the form of Exhibit
B attached hereto (the "Escrow Agreement");
(v) The Parties shall enter into a
nonsolicitation agreement substantially in the form of Exhibit
C attached hereto (the "Nonsolicitation Agreement"); and
(vi) To the extent the Acquired Accounts include
any Third Party Accounts owned by one or more Third Party
Owners, Seller shall deliver to Buyer Indemnification
Agreements substantially in the form of Exhibit D attached
hereto that have been completed, executed and delivered by
each Third Party Owner.
1.7 Adjustments to Purchase Price; Escrow Payments.
(a) Valuation Date Statement. Within 30 days following
the Valuation Date, Buyer will prepare and deliver to Seller for its review and
approval a statement (the "Valuation Date Statement") setting forth the Final
Purchase Price taking into account the Net RMR with respect to the Acquired
Accounts and providing reasonable detail with respect to the various components
thereof.
(b) Adjustments to Preliminary Purchase Price. Any
amounts due to either Buyer or Seller shall be paid in accordance with the
following:
(i) If the Final Purchase Price is greater than
or equal to the Preliminary Purchase Price, the Holdback
Amount less any amount paid or payable to Buyer pursuant to
Article 9,
5
<PAGE> 10
Section 1.8 or Section 1.9 (the "Adjusted Holdback Amount"),
and all interest attributable to the Adjusted Holdback Amount
shall be payable to Seller from the Escrow Account on the
180th day following the Closing Date (the "Escrow Payment
Date").
(ii) If the Final Purchase Price is greater than
the Preliminary Purchase Price, then in addition to the
payment required pursuant to (i) above, Buyer shall pay the
amount by which the Final Purchase Price exceeds the
Preliminary Purchase Price (the "Underpayment Amount"), plus
interest on the Underpayment Amount at the CD Rate from the
Closing Date through the date of payment, to Seller on the
Escrow Payment Date by wire transfer of immediately available
funds to the account specified by Seller.
(iii) If the Preliminary Purchase Price is greater
than the Final Purchase Price and the amount by which the
Preliminary Purchase Price exceeds the Final Purchase Price
(the "Over-Payment Amount") is less than the Adjusted Holdback
Amount, then the amount equal to the difference between the
Adjusted Holdback Amount and the Over-Payment Amount, plus the
pro-rata interest attributable to such difference from the
Closing Date through the date of payment, shall be paid to
Seller from the Escrow Account on the Escrow Payment Date, and
Buyer shall have the right to have the remainder of the then
outstanding balance of the Holdback Amount plus the balance of
the interest on the Holdback Amount immediately paid to it.
(iv) If the Preliminary Purchase Price is greater
than the Final Purchase Price and the Over-Payment Amount is
equal to or greater than the Adjusted Holdback Amount, Buyer
shall have the right to have the then balance of the Holdback
Amount and all interest attributable to the Holdback Amount
immediately paid to it.
(v) Subject to the immediately succeeding
sentence, if the Preliminary Purchase Price is greater than
the Final Purchase Price and the Over-Payment Amount exceeds
the Holdback Amount, Seller shall pay the amount of such
excess, plus interest thereon from the Closing Date at a rate
per annum equal to the CD Rate from the Closing Date through
the date of payment (collectively, the "Shortfall"), to Buyer
by wire transfer of immediately available funds to an account
specified by Buyer, and Buyer shall have the right to have the
then balance of the Holdback Amount immediately paid to it.
Notwithstanding anything in this Section 1.7(b)(v) to the
contrary, Seller shall not be obligated to pay the Shortfall
unless either (x) Trustee or Seller acted in bad faith in
setting the Preliminary Purchase Price or (y) there were
fraudulent or grossly negligent acts or omissions committed by
Trustee or Seller in connection with the preparation of
Schedule 1.1(a) or the Preliminary Receivables Aging Report
and/or the calculation of the Preliminary Purchase Price.
1.8 Retransfer of Certain Alarm Contracts. In the event any Net
RMR is deducted under Step (3) of the definition of Net RMR, the Nonperforming
Accounts associated with such deductions shall be conveyed by Buyer (without
any warranties or representations) back to Seller (the "Rejected Accounts").
If, and to the extent, the Preliminary Purchase Price includes any Deferred
Revenue adjustments in Buyer's favor based on accounts receivable for Security
Services provided after Closing associated with Rejected Accounts, Seller shall
be entitled to a credit equal to such Deferred Revenue adjustments net of any
monitoring fees due or paid to Seller by Buyer with respect to Rejected
Accounts pursuant to the Acquired Accounts Monitoring Agreement in the form
attached hereto as Exhibit E. With respect to the Rejected Accounts, if on the
date of such reconveyance Buyer was providing the monitoring from its central
monitoring station, Buyer shall only be obligated to continue
6
<PAGE> 11
to provide such monitoring for a period equal to the lesser of ninety (90) days
from the date of reconveyance or the date on which Seller establishes a
communications link for such Rejected Accounts with Seller's central monitoring
station or a third party's central monitoring station, in accordance with the
Rejected Accounts Monitoring Agreement in the form attached hereto as Exhibit
F, which shall be executed and delivered by the parties if requested by either
Buyer or Seller. Seller shall be responsible for all costs and expenses
incurred in switching the monitoring for the Rejected Accounts from Buyer's
central monitoring station.
1.9 Receivables. Following the Closing Date, Buyer shall assist
Seller in collecting accounts receivable in existence on the Closing Date
attributable to Security Services provided or to be provided to an Acquired
Account customer ("Pre-Closing Receivables"), but Buyer shall not be required
to incur any out-of-pocket expenses in doing so; provided, however that Buyer
may mail notices of late payment to such customers or make telephone calls to
such customers and such out-of-pocket expenses incurred by Buyer as a result
thereof shall be paid to Buyer by Seller with Buyer having recourse to the
Holdback Amount held in the Escrow Account to satisfy Seller's obligation to
make such payment (although the Holdback Amount shall not be a limitation on
Seller's liability under this Section 1.9 and Buyer shall not be required to
attempt to recover such payment from the Escrow Account before proceeding
directly against Seller). In the event payment of any Pre-Closing Receivable
is made to Buyer, Buyer shall upon receipt of any such payment remit it to
Seller. In the event that Seller receives payments attributed to Security
Services rendered after the Closing Date to Acquired Account customers (other
than payments of Pre-Closing Receivables), Seller shall upon receipt of any
such payment remit it to Buyer. Any payment made to Seller with respect to any
Acquired Account for which there is outstanding a Pre-Closing Receivable shall
be deemed to be a payment of the Pre-Closing Receivable except to the extent
indicated in writing by the account customer.
1.10 Nonsolicitation of Acquired Accounts. Seller shall not
directly or indirectly do any of the following during the period from the
Closing Date to a date which is the earlier of (x) substantial consummation of
any confirmed plan of reorganization in the Bankruptcy Proceeding or (y) the
third (3rd) anniversary of the Closing Date, but in no event shall such period
expire prior to the Escrow Payment Date: (i) except as otherwise contemplated
by the Acquired Accounts Monitoring Agreement or Section 6.2 of this Agreement,
call upon any customer for the purpose of selling Security Services to such
customer with respect to the premises that are subject to the Customer
Contracts as of the Closing Date or provide any such security services to such
customers; or (ii) otherwise directly or indirectly disrupt or interfere with
the business relationship established as of the Closing Date between Buyer and
any such customer pursuant to the sale of Customer Contracts contemplated
hereby. In the event that any Seller Agent takes any action prior to the
Escrow Payment Date that if taken by Seller would constitute a breach by Seller
of the Nonsolicitation Agreement, such action shall be deemed to be a breach by
Seller of the Nonsolicitation Agreement and any and all damages incurred by
Buyer as a result thereof shall be paid to Buyer by Seller promptly with Buyer
having recourse to the Holdback Amount held in the Escrow Account to satisfy
Seller's obligation to make such payment (although the Holdback Amount shall
not be a limitation on Seller's liability under this Section 1.10 and Buyer
shall not be required to attempt to recover such payment from the Escrow
Account before proceeding directly against Seller). The term "Seller Agent"
means (a) each third party monitoring service that provides monitoring services
to Seller with respect to Seller's accounts, (b) each subcontractor or other
party engaged by Seller to provide products or services on behalf of Seller,
(c) each person or entity that has owned any Acquired Accounts before they were
acquired by Seller, including the Third Party Owners, (d) each person or entity
controlling, controlled by or under common control with Seller, and (e) John
Walsh, Security Data Group, Inc. and InterCap Monitoring Corporation or their
respective successors and assigns (collectively, the "Walsh Parties"). Seller
represents and warrants to Buyer that Schedule 1.10 attached hereto sets forth
a complete and accurate list of all Seller Agents. In the event that any
Seller Agent described in (a) above begins providing Security Services (or
enters into a contract to do so) prior
7
<PAGE> 12
to the Escrow Payment Date for any Acquired Account customer with respect to
the premises that are subject to an Customer Contract as of the Closing Date,
such action shall be deemed to be a breach of the Nonsolicitation Agreement for
which Seller is responsible (regardless of whether such Seller Agent has used
any information of Seller or Buyer in connection therewith) unless prior to the
Escrow Payment Date, Buyer has increased the price payable by such customer for
the Security Services to be rendered by Buyer after the Closing Date, in which
case no such breach shall exist with respect to such customer even if such
Seller Agent begins to provide Security Services (or enters into a contract to
do so) prior to the Escrow Payment Date with respect to such premises. The
provisions of this Section 1.10 do not apply to Rejected Accounts after they
are reconveyed to Seller in accordance with Section 1.8. Notwithstanding
anything herein to the contrary, in the event any provision of this Section
1.10 is breached as a result of the actions or conduct of any of the Walsh
Parties prior to the Escrow Payment Date, the amount of Buyer's damages for
which it is entitled to indemnification hereunder shall be limited to Buyer's
actual damages, which shall not include attorneys' fees, consequential damages,
expert witness fees or other litigation costs. Any disputes between the
parties hereto in connection with any breach or alleged breach of this Section
1.10 by Seller, as a result of actions or alleged actions of any of the Walsh
Parties, shall be resolved by the Bankruptcy Court if it has retained
jurisdiction over the Seller and otherwise agrees to resolve such dispute. Any
such dispute not so resolved shall be resolved by arbitration in accordance
with Article 11 hereof.
1.11 Allocation of Final Purchase Price. Buyer and Seller shall
allocate the Final Purchase Price (including the Assumed Liabilities) among the
Acquired Assets as set forth in Schedule 1.11. Buyer and Seller agree for
income tax purposes to report the transactions contemplated by this Agreement
in a manner consistent with such allocation. Buyer and Seller shall work
together to agree upon Schedule 1.11 prior to the Closing and Seller shall not
unreasonably withhold its consent to any allocation proposed by Buyer. All
allocations made pursuant to this Section 1.11 shall be binding upon Buyer and
Seller and upon each of their successors and assigns.
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Seller. As a material
inducement to Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, each Seller, jointly and severally, hereby
represents and warrants to Buyer that the statements contained in this Section
2.1 are correct as of the date of this Agreement.
(a) Organization, Qualification and Power.
(i) To the best knowledge of Seller, Venture is a
joint venture or general partnership duly organized and
validly existing under the laws of the State of Colorado. To
the best knowledge of Seller, Venture has made all filings
necessary to conduct business in each other jurisdiction
wherein the nature of its Security Services business or its
ownership of property requires it to make such filings except
where the failure to so qualify would not have a Material
Adverse Effect.
(ii) To the best knowledge of Seller, SDG is duly
organized as a corporation, validly existing and in good
standing under the laws of the State of California. To the
best knowledge of Seller, Service is duly organized as a
corporation, validly existing and in good standing under the
laws of the State of Colorado. To the best knowledge of
Seller, both SDG and Service are qualified to conduct business
in each other jurisdiction wherein the nature of its
8
<PAGE> 13
Security Services business or its ownership of property
requires it to be so qualified except where the failure to so
qualify would not have a Material Adverse Effect.
(b) Authorization of Transaction. To the best knowledge
of Seller, after giving effect to the Bankruptcy Court Approval, Seller will
have full requisite power and authority and all material licenses, permits and
authorization necessary to own and operate its properties and to carry on its
business as now conducted. After giving effect to the Bankruptcy Court
Approval, the Trustee will have full requisite power and authority to execute
and deliver this Agreement and the other agreements contemplated hereby to
which it is a party and to perform its obligations hereunder and thereunder.
This Agreement and the other agreements contemplated hereby to which Seller is
a party will, after giving effect to the Bankruptcy Order, constitute valid and
legally binding obligations of Seller, enforceable against Seller in accordance
with their respective terms and conditions.
(c) Noncontravention. To the best knowledge of Seller,
except as disclosed in Schedule 2.1(c) attached hereto, after giving effect to
the Bankruptcy Order, neither the execution and the delivery of this Agreement
and the other agreements contemplated hereby, nor the consummation of the
transactions contemplated hereby or thereby will violate, conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any authorization, consent, approval, execution or other action by or
notice to any third party under, the partnership agreement and other governing
documents of Seller or Debtor, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement, instrument of
indebtedness, Security Interest, or other arrangement by which Seller is bound
or affected or to which any of the Acquired Assets is subject, or any law,
statute, rule, regulation, order, judgment, decree, stipulation, injunction,
charge or other restriction, to which Seller is subject or to which any of the
Acquired Assets is subject, except in each case where such violation, conflict,
breach, default, acceleration or creation or rights will not have a Material
Adverse Effect.
(d) Litigation. To the best knowledge of Seller, other
than the Bankruptcy Proceeding and other than as set forth in Schedule 2.1(d)
attached hereto, Seller (i) is not subject to any unsatisfied judgment, order,
decree, stipulation, injunction, or charge and (ii) is not a party or has not
been threatened to be made a party to any charge, complaint, action, suit,
proceeding, hearing, or investigation of or in any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator.
(e) Ownership of Acquired Assets. After giving effect to
the Bankruptcy Order, and upon completion of the Closing, Seller will have
conveyed to Buyer good and marketable title, free and clear of all Security
Interests, to all of the Acquired Assets (except as otherwise indicated in
Section 2.1(p) and Schedule 2.1(p)). The Acquired Accounts include all of
Seller's contracts or other agreements to provide Security Services in the
Masada Territory other than Seller's Datavision contracts or agreements.
Schedule 2.1(e) attached hereto identifies by name and principal address each
person or entity other than Seller that presently owns any of the Customer
Contracts (the "Third Party Owners"). The Acquired Account Equipment is not
owned by Seller's customers. Schedule 1.1(c) attached hereto provides a
complete and accurate list of all assets used primarily in the operation of
Seller's Security Services business in the Masada Territory, except for certain
vehicles previously identified to Buyer by Seller. An updated, revised
Schedule 1.1(f) to be delivered by Seller to Buyer prior to the Closing Date
will provide a complete and accurate list of all telephone lines used for
monitoring, maintenance, customer service, administration, sales and marketing
with respect to Seller's Security Services customers in the Masada Territory.
9
<PAGE> 14
(f) Customer Contracts. Greater than ninety-three
percent (93%) of the Customer Contracts are evidenced by valid, enforceable and
properly executed written agreements which are in compliance with all laws,
rules and regulations including, without limitation, all truth-in-lending
requirements. To the best knowledge of Seller, Seller is not in breach of or
in default in any respect under any of the terms or provisions of any Customer
Contract which would allow a customer or other contracting party to terminate
or revoke the contract or withhold payment thereunder. For purposes of this
subsection, the word "default" includes the failure of Seller to comply in a
material respect with any condition precedent to any right of Seller under the
provisions of any such Customer Contract. The updated, revised Schedule 1.1(a)
to be prepared pursuant to Section 1.5(b) shall (i) contain a complete listing
and description of each Customer Contract (written or oral), including the
billing account number, monitoring account number, and associated RMR, (ii)
identify each Customer Contract that will require a chip change, (iii) list
separately by Third Party Owner the Third Party Accounts, and (iv) include an
aged accounts receivable trial balance for all Acquired Accounts.
(g) Compliance with the Law. To the best knowledge of
Seller, except as disclosed in Schedule 2.1(g) attached hereto, the business of
providing Security Services to the Acquired Accounts has been and is being
conducted in compliance with all applicable laws, regulations and requirements
of each jurisdiction in which it is carried on including, without limitation,
the timely payment of all required taxes and Seller is not in breach of any
such laws, regulations or requirements, except where the failure to comply
would not have a material adverse effect on the Acquired Assets or Buyer's
business after the Closing.
(h) Agreements with Employees.
(i) To the best knowledge of Seller, Seller is
not a party to any employment agreement, written or oral, in connection with
the business of providing Security Services which cannot be terminated at will
by Seller, except for severance compensation arrangements with Elizabeth
Geiger, Phillip Darley, James Bain and Janice Garber-Bingham and except for any
obligation imposed upon Seller by the WARN Act (as defined in Section 4.4).
(ii) To the best knowledge of Seller, except as
set forth in Schedule 2.1(h)(ii) attached hereto, Seller does not have any
pension, profit sharing or other employee benefit plan, or any health care,
life insurance or other employee welfare plan for Seller's employees.
(iii) To the best knowledge of Seller, the names,
titles, location and rates of compensation of all of the employees of Seller
are listed in Schedule 2.1(h)(iii) attached hereto (the "Employees"). To the
best knowledge of Seller, none of the Employees has indicated to Seller any
intention to terminate his or her employment with Seller.
(i) Agreements with Subcontractors. Except as listed in
Schedule 2.1(i) attached hereto, to the best knowledge of Seller, Seller has
entered into a nonsolicitation/nondisclosure agreement with each subcontractor
of Security Services, and such agreements are fully assignable to Buyer without
the consent of the subcontractor and such agreements will be enforceable by
Buyer in accordance with their terms. In addition, except as listed in
Schedule 2.1(i) attached hereto, to the best knowledge of Seller, Seller has
written agreements with each subcontractor (copies of which have been provided
to Buyer) which establish service charges and which may be canceled upon thirty
(30) days' notice.
10
<PAGE> 15
(j) Product Warranties. To the best knowledge of Seller,
except for the standard warranties on installations as detailed in the Customer
Contracts, there are no written warranties or oral warranties given by Seller
applicable to any of the Acquired Accounts.
(k) Insurance. Seller has "occurrence basis" general
liability insurance coverage covering the Acquired Assets in an amount equal to
or greater than two million dollars ($2,000,000.00) per single occurrence and
workers compensation insurance coverage equal to or greater than that required
by applicable law. To the best knowledge of Seller, attached hereto as
Schedule 2.1(k) is (i) a list of all of the insurance policies covering the
Acquired Assets, and (ii) a list of all insurance claims related to the
Acquired Assets for the three previous years. To the best knowledge of Seller,
all such policies are in full force and effect Seller has not received notice
of cancellation with respect thereto. For purposes of this Agreement,
"occurrence basis" means if a claim arose after the Closing Date for an event
which occurred prior to the Closing Date, Seller's applicable insurance policy
in existence on the date such event occurred would cover such claim.
(l) [Intentionally Left Blank.]
(m) Alarm Systems.
(i) To the best knowledge of Seller, except as
disclosed in Schedule 2.1(m) attached hereto, all of the alarm systems included
among the Acquired Assets are in good working order and condition, and have
been installed and maintained in accordance with all applicable requirements of
law and good workmanlike practices prevailing in the industry at the time of
installation and maintenance. To the best knowledge of Seller, all requests
for service or repairs in the Ordinary Course of Business have been performed
and conform in all material respects to the Customer Contracts pursuant to
which they were installed.
(ii) To the best knowledge of Seller, in no case
has any installation been made by Seller which at the time of installation was
in violation of any applicable law, code or regulation; and
(iii) Except as detailed on Schedule 1.1(a), to the
best knowledge of Seller, none of the alarm systems that correspond to the
Customer Contracts require direct wire modules, multiplex service or leased
telephone line facilities for monitoring.
(n) Increase in Rates. To the best knowledge of Seller,
except for rate increases for customers requesting additional services and rate
increases for existing customer "re-signs," there has been no general increase
in RMR affecting more than 2% of the Acquired Accounts during, or applicable
to, any portion of the twelve months preceding the Closing Date with respect to
the Acquired Accounts. To the best knowledge of Seller, there have been no
credit adjustments outside of the Ordinary Course of Business during, or
applicable to, any portion of such period with respect to the Acquired
Accounts.
(o) Third Party Monitoring. To the best knowledge of
Seller, none of the Acquired Accounts is monitored by a third party except as
detailed by third party monitoring station in Schedule 2.1 (o) attached hereto.
(p) Intangible Personal Property. Seller has at least a
non-exclusive right to use the Intangible Personal Property in the Masada
Territory.
11
<PAGE> 16
(q) Brokers' Fees. None of Debtor, Trustee or Seller has
any liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement for which Buyer or any other party could become liable or otherwise
obligated. Trustee and/or Seller has an obligation to pay a fee to Barnes
Associates, Inc. in connection with such transactions but Buyer shall have no
liability with respect thereto.
(r) Notices to Third Parties. Except as disclosed in
Schedule 2.1(r), all landlords under leases, and all persons, governmental
entities, corporations and other entities who or which (i) are identified as
creditors or equity security holders of Seller on schedules filed in the
Bankruptcy Proceeding, (ii) have filed claims or proofs of claim against Seller
in the Bankruptcy Proceeding, or (iii) are otherwise known to Seller to be a
creditor or equity security holder of Seller or to have any lien, claim, charge
or encumbrance of any kind or nature upon or against Seller or any of its
assets, including the Acquired Assets, have received notice of the Bankruptcy
Proceeding and will receive, prior to the Closing Date, proper notice of the
transactions contemplated by this Agreement and the proceedings related thereto
in the Bankruptcy Proceeding in accordance with the Bankruptcy Code and the
rules promulgated thereunder.
(s) Material Misstatements or Omissions. No
representations or warranty by Trustee or Seller contained in this Agreement
and no document or certificate furnished or to be furnished to Buyer by Seller
in connection herewith or with the transactions contemplated hereby, contains,
or on the Closing Date shall contain, an untrue statement of a material fact,
or omits, or on the Closing Date shall omit, to state a material fact necessary
to make any statement of fact contained therein not misleading. There is no
fact concerning Seller or Debtor which has not been disclosed in writing to
Buyer that materially adversely affects or, so far as Seller or Trustee now
foresees, or in the exercise of reasonable care should have foreseen, will
materially adversely affect the Acquired Assets or the ability of Trustee or
Seller to perform its obligations under this Agreement. Nothing in this
Section 2.1(s) is intended to obviate any of the "to the best knowledge of
Seller" qualifications set forth in any specific representation or warranty
contained in this Section 2.1.
As used in this Section 2.1, the term "best knowledge of Seller" shall
mean the actual knowledge of Trustee, Elizabeth Geiger, James Bain and Janice
Garber-Bingham, each of whom has read this Agreement.
2.2 Representations and Warranties of Buyer. As a material
inducement to Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Buyer hereby represents and warrants to
Seller that the statements contained in this Section 2.2 are true and correct
as of the date of this Agreement:
(a) Organization, Qualification and Corporate Power.
Buyer is a close corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
(b) Authorization of Transaction. Buyer has full
requisite corporate power and authority to execute and deliver this Agreement
and the other agreements contemplated hereby to which it is a party and to
perform its obligations hereunder and thereunder. This Agreement and the other
agreements contemplated hereby to which Buyer is a party constitute the valid
and legally binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms and conditions.
(c) Noncontravention. To the best knowledge of Buyer,
neither the execution and the delivery of this Agreement and the other
agreements contemplated hereby, nor the consummation of the transactions
contemplated hereby or thereby will violate, conflict with, result in a breach
of, constitute a default
12
<PAGE> 17
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any authorization,
consent, approval, execution or other action by or notice to any third party
under, the articles of incorporation and bylaws of Buyer, any contract, lease,
sublicense, franchise, permit, indenture, agreement, instrument of
indebtedness, security interest, or other arrangement by which Buyer is bound.
(d) Brokers' Fees. Buyer has no liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which Seller or any other
party could become liable or otherwise obligated.
(e) Hart-Scott-Rodino. Buyer is not a "person which has
total assets or annual net sales of $100,000,000 or more" as that phrase is
used in 15 U.S.C. Section 18a(a)(2).
ARTICLE 3 - DEFINITIONS
"Acquired Accounts Information" means all files, records and
incidental documentation of Seller or any Third Party Owner pertaining to the
Acquired Accounts including, with limitation, all computer lists, Customer
Contract information, accounting history, service records and information,
Download Information, credit records and information, and purchase and sales
records and information.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C.
Section Section 101, et seq.
"Bankruptcy Court Approval" has the meaning set forth in Section
5.1(f).
"Bankruptcy Proceeding" means the following bankruptcy cases pending
in the Bankruptcy Court: In Re IMIF IV-C Service Corp, Debtor, Case No.
94-20199 (CEM); In Re Security Data Group of California, Inc., Debtor, Case No.
94-20249 (PAC); and In Re InterCap Funds Joint Venture, Debtor, Case No.
94-20250 (CEM) (Jointly Administered under Case No. 94-20199 CEM).
"CD Rate" means the interest rate on six-month certificates of deposit
published under the caption "Money Rates" in The Wall Street Journal on the
first business day after the Closing Date with respect to such rate on the
Closing Date.
"Customer Accounts" mean accounts with customers for the provision of
Security Services by Seller that are subject to Customer Contracts and shall be
deemed to include (i) all such Customer Contracts and all rights and
obligations of Seller thereunder (other than rights to Pre-Closing
Receivables), and (ii) all Download Information relating to such Customer
Contracts.
"Customer Contract" means any contract, agreement, purchase order or
arrangement (written or oral) between Seller (or any predecessor or a Third
Party Owner) and any of the Acquired Account customers with respect to the
provision of Security Services in the Masada Territory.
"Deferred Revenue" means the amounts of (i) all accounts receivable
billed by Debtor or Seller for Security Services to be rendered on or after the
Closing, (ii) payments and deposits received by Debtor or Seller prior to
Closing for Security Services to be rendered on or after Closing to the
Acquired Account customers by Buyer, and (iii) all credits given Acquired
Account customers by Trustee, Debtor or Seller for services to be rendered on
or after Closing.
13
<PAGE> 18
"Download Information" means the master code for each alarm system
control panel and all applicable and necessary telephone numbers and, to the
extent they exist, all download programs necessary to connect each alarm system
to Buyer's monitoring facility.
"Escrow Agent" means SouthTrust Bank of Alabama, National Association.
"Excluded Assets" means (i) all cash, (ii) bank accounts and amounts
therein, (iii) assets primarily related to Security Services provided by video
monitoring or a Datavision type security system, (iv) records and other
partnership records of Seller, (v) insurance policies, (vi) claims against
third parties, (vii) choses in action, (viii) Pre-Closing Receivables, and (ix)
the items described in Schedule 3 attached hereto.
"Inventory" means all raw materials and supplies, manufactured and
purchased parts, goods in process and finished goods other than any of the
foregoing that is not discontinued or custom made and is readily available for
purchase by Buyer after the Closing from standard industry vendors.
"Material Adverse Effect" means any change, event or occurrence which
has or could reasonably be expected to cause a greater than 5% change in Net
RMR or to have a material adverse effect upon the value of the Acquired Assets
or the condition or prospects of the business at all of Seller's locations in
the Masada Territory.
"Net RMR" means the total RMR to the Acquired Account customers as of
the Valuation Date calculated as follows:
(1) RMR as of the Closing Date associated with the
Acquired Accounts listed on Schedule 1.1(a) not
including RMR associated with the Acquired Accounts
which cancel or terminate prior to the Closing Date;
Minus: (2) RMR as of the Closing Date associated with the
Acquired Accounts listed on Schedule 1.1(a) which
cancel or terminate on or prior to the Valuation Date
but only to the extent that Seller had notice of such
cancellation prior to the Closing Date or such
cancellation relates primarily to circumstances,
events or occurrences existing prior to the Closing
Date; and
Minus: (3) RMR associated with any Nonperforming Account (unless
Buyer, in its sole discretion, elects to include or
retain such Nonperforming Account).
"Net RMR Adjustment Amount" means the amount determined by
multiplying 39.5 times the difference between (i) the Net RMR and (ii)
the Preliminary Net RMR.
"Nonperforming Account" means (i) any Acquired Account for which there
is an outstanding account receivable due as of the Closing Date and such
Closing Date account receivable is not paid or otherwise satisfied in full by
the Valuation Date, and (ii) any Acquired Account for which any account
receivable in existence at any time from June 30, 1995 through the Closing Date
has been satisfied in whole or in part by Seller by issuing a credit exceeding
$25 for monthly monitoring service or a credit exceeding $50 for overtime
service calls (not including any credit issued by Seller for bona fide posting
errors documented to Buyer's reasonable satisfaction, or any single monthly
payment credit issued by Seller for a bona fide customer referral documented to
Buyer's reasonable satisfaction); provided, however, that no account receivable
based upon an invoice mailed by Seller
14
<PAGE> 19
pursuant to Section 6.4 on or after March 20, 1996 for Security Services to be
provided, in their entirety, after the Closing Date shall be considered in
determining whether an Acquired Account is a Nonperforming Account.
"Ordinary Course of Business" means the ordinary course of business of
Seller consistent with past custom and practice of Seller.
"RMR" means recurring regular monthly amounts billed Customer Accounts
by Seller for Security Services rendered by Seller minus the following charges
to the extent they are otherwise included in such recurring regular monthly
amounts billed: (i) all recurring monthly charges for telephone lines used to
transmit alarm signals, but not including digital line charges, (ii) all
answering service charges for receiving alarms, (iii) all taxes or fees to
governmental agencies and other alarm companies, and (iv) all amounts derived
from Florida Customer Accounts for which there exists on the Closing Date an
account receivable balance that is at least 120 days past due from the invoice
date as of the Closing Date ("Florida 120 Day Contracts"). "RMR" for Florida
120 Day Contracts, as such term is used in Section 1.3(j), shall be defined as
set forth in the preceding sentence without reference to (iv) of the preceding
sentence.
"Security Interest" means any mortgage, pledge, security interest,
lien or other "interest" (as defined in Section 363(f) of the Bankruptcy Code).
"Security Services" means burglar alarm services, fire alarm services,
closed circuit television and electronic access control services, all central
station monitoring services, maintenance services, leases, fire testing and all
other services provided to commercial, residential and other customers;
provided, however, that when used in the definition of Net RMR, Security
Services shall include the foregoing only to the extent that they result in
recurring revenue streams; and provided further, that Security Services of
Seller shall not include any services provided by video monitoring or a
Datavision type security system.
"Third Party Accounts" means a Customer Contract that is owned by a
Third Party Owner.
"Valuation Date" means the 90th day following the Closing Date.
ARTICLE 4 - ADDITIONAL COVENANTS
4.1 Full Access. Seller will permit Buyer and its employees,
accountants, legal counsel and other representatives to have full access at all
reasonable times upon reasonable notice, and in a manner so as not to interfere
with the normal business operations of Seller, to such premises, properties,
personnel, books, records, contracts, and documents of or pertaining to the
Customer Contracts as is reasonably necessary or desirable. Buyer shall have
the right to conduct surveys among a random sample of the Customer Contracts as
if on behalf of Seller. With advance written notice to Seller, Buyer shall
have the right to interview all of the Employees regarding possible employment
by Buyer within fifteen (15) business days prior to the then anticipated
Closing Date.
4.2 General Obligation to Close. Each of Buyer and Seller shall
use its respective commercially reasonable efforts to take all actions and to
do all things necessary or desirable to consummate and make effective the
transactions contemplated by this Agreement (including, without limitation,
satisfaction, but not waiver, of the closing conditions set forth in Article
5).
15
<PAGE> 20
4.3 Covenants Regarding Pre-Closing Operations. At all times
prior to the Closing Date, Seller covenants and agrees that with respect to all
its operations, it will:
(a) conduct its business and operations only in the
Ordinary Course of Business and use its commercially reasonable efforts
consistent with past practice to preserve intact its business organization,
keep available satisfactory relationships with suppliers, customers and others
having business relationships with it; and
(b) maintain its cash management practices (including,
without limitation, the collection of receivables and the payment of payables)
and its policies, practices and procedures with respect to collection of trade
accounts receivable, establishment of reserves for uncollectible accounts,
accrual of accounts receivable, inventory control, prepayment of expenses,
payment of trade accounts payable, accrual of other expenses, deferral of
revenue, and acceptance of customer deposits in accordance with past custom and
practice.
4.4 Employee Matters.
(a) Employee Compensation. Through the Closing Date,
Seller will pay to the employees all compensation due and owing, including,
without limitation, salaries, commissions, bonuses, deferred compensation,
severance, insurance, pensions, profit sharing, earned and unused vacation,
sick pay and other compensation or benefits, to which any such employee may be
entitled under Seller's policies and procedures for periods prior to the
Closing. Prior to the Closing Date, Seller will not, without the prior written
consent of Buyer, materially increase the compensation or benefits of any
Employee. In addition, before and after the Closing, Seller will be
responsible for maintenance and distribution of benefits accrued under any plan
listed in Schedule 2.1(h)(ii) and Buyer will not and does not assume any
liability for any such accrued benefits nor any fiduciary or any administrative
responsibility to account for or dispose of any such accrued benefits under any
plan listed in Schedule 2.1(h)(ii).
(b) Employee Claims. All claims and obligations under,
pursuant to or in connection with any plan list in Schedule 2.1(h)(ii) or
arising under any legal requirement affecting the employees incurred on or
before the Closing Date or resulting or arising from events or occurrences
occurring or commencing on or prior to the Closing Date will remain the
responsibility of Seller, whether or not such employees are hired by Buyer at
or after the Closing. Buyer will not and does not assume any obligation or
liability under or in connection with any plan listed in Schedule 2.1(h)(ii),
and Buyer will not and does not assume any obligation with respect to any
preexisting condition of any employee of Seller who is hired as an employee of
Buyer (except as required by applicable law).
(c) Transferred Employees.
(i) Seller shall use reasonable efforts to
encourage the Employees to continue their employment until Closing.
(ii) On or prior to the Closing Date, Buyer shall
provide Seller with a list of the employees who Buyer desires to employ
following the Closing Date; and Buyer shall make an offer of employment to such
employees, contingent upon the Closing occurring. Seller acknowledges and
agrees that Buyer is under no obligation whatsoever to offer employment to or
hire any of Seller's employees. Any such employee who accepts such offer of
employment shall be deemed a "Transferred Employee" hereunder. Following the
Closing Date, and their commencement of employment with Buyer, the Transferred
Employees
16
<PAGE> 21
shall become employees of Buyer; and Buyer shall be solely responsible for any
and all payments of wages, salaries, commissions and other employee benefit
items with respect to such employment after the Closing Date. Seller shall be
solely responsible for such liabilities and obligations with respect to
employment on or prior to the Closing Date. The employment of the Transferred
Employees by Buyer following the Closing Date shall be on terms and conditions
determined by Buyer in its sole discretion. Following the Closing, Buyer shall
be under no obligation to continue the employment of any such Transferred
Employee. Buyer shall be solely responsible for any claims brought by any such
Transferred Employee against Seller or Buyer by reason of Buyer's acts or
omissions in connection with such employment by Buyer after the Closing.
Seller shall be solely responsible for any claims brought by any of Seller's
employees, whether or not they become Transferred Employees, against Seller or
Buyer by reason of Seller's or Debtor's acts or omission in connection with
such employment by Seller or Debtor on or prior to the Closing.
Notwithstanding any other provision of this Agreement, Buyer agrees to offer
employment to Seller's employees directly involved in alarm monitoring or data
entry at Seller's central stations on or about the date on which Seller
completes its monitoring services for the Acquired Accounts in accordance with
the Monitoring Agreement.
(iii) No later than immediately prior to the
Closing, Seller shall terminate all Transferred Employees and shall pay each
such Transferred Employee any and all amounts owing for the period through the
Closing provided, however, those employees who will provide field services as
contemplated by Section 6.2 shall not be terminated until immediately after the
end of the Field Service Period (as defined in Section 6.2). Seller shall be
solely responsible for giving any employee notices required by the Worker
Adjustment and Retraining Notification Act (the "WARN Act") as well as notices
required by similar provisions of any applicable state or local laws.
4.5 Assigned Leases and Contracts. Seller will use its best
efforts to cure all defaults (if any) under or with respect to all leases,
contracts and other agreements to be assigned to Buyer pursuant to this
Agreement, and shall take all reasonable steps necessary in the Bankruptcy
Proceeding on a timely basis to assume, and to assign to Buyer at the Closing,
such leases, contracts and agreements under applicable provisions of the
Bankruptcy Code, including, without limitation, taking all reasonable steps
necessary to assure that all landlords with respect to such leases and other
parties to such contracts and other agreements have been given actual and
proper notice of such proceedings in the Bankruptcy Proceeding, in accordance
with Rule 2002 of the Federal Rules of Bankruptcy Procedure. Notwithstanding
the above, Buyer acknowledges that Seller has not sought approval from the
Bankruptcy Court under Section 365 of the Bankruptcy Code for the assumption by
Seller of the Customer Contracts.
4.6 [Intentionally Left Blank]
4.7 Pre-Closing and Post-Closing Assistance. As and when
requested by Buyer, Seller shall, for a period of not less than one hundred
eighty (180) days from and after the Closing, (i) assist Buyer in the
transition process and transferring all of the Acquired Accounts to Buyer,
including but not limited to, contacting customers, transferring the telephone
numbers to Buyer, and providing documentation and information regarding
customers, and (ii) provide to Buyer as requested by Buyer all information
required by Buyer for purposes of calculating the Final Purchase Price,
including, without limitation, accounts receivable aging reports, "lock box"
receipt reports and lists of all customers who notify Seller that they are
canceling their Customer Contracts. Seller shall use its best efforts to
deliver such assistance and information to Buyer in a prompt and effective
manner.
4.8 Reprogramming Alarm Contracts. Buyer will take all reasonably
and technically practical steps to switch promptly the communications links to
Buyer's central monitoring station for the Acquired Accounts
17
<PAGE> 22
in such a fashion as to avoid having to conduct manual reprogramming (other
than line swings) and with respect to any such Acquired Accounts for which
Buyer does not avoid manual reprogramming it shall first attempt such manual
reprogramming by remote access before reprogramming at the customer's premises.
Seller shall use its best efforts to facilitate and assist Buyer with the
switching of the communications links for the Acquired Accounts to Buyer's
central monitoring station.
4.9 Purchase of Certain Items of Equipment. As soon as reasonably
practicable after the Closing but in no event later than 90 days after the
Closing, Buyer will deliver to Seller a notice (the "Election Notice"),
advising Seller of any items of Seller's equipment located in the Masada
territory that is subject to a lease or a purchase money security interest and
is not an Acquired Asset, and which Buyer, in its sole and absolute discretion,
wishes to purchase (the "Additional Purchase Equipment"). In the event that
Buyer elects to purchase any Additional Purchase Equipment, Seller shall
deliver possession of such Additional Purchase Equipment to Buyer at the
offices of Seller at which such Additional Purchase Equipment is normally
located or garaged. The consideration for the sale of the Additional Purchase
Equipment shall be Buyer's assumption of all of Seller's obligations under any
and all lease agreements and other agreements or contracts pursuant to which
Seller is leasing or purchasing the Additional Purchase Equipment, to the
extent such obligations arise on or after the "Additional Closing Date." The
closing (the "Additional Closing") shall occur ten (10) days after Buyer's
delivery to Seller of the Election Notice (the "Additional Closing Date"). At
the Additional Closing, Seller and Buyer shall each deliver to the other such
bills of sale, assignments, vehicle registration transfer forms, assumption
agreements, and other documents as either party shall reasonably request of the
other for purposes of giving effect to such purchase and sale of the Additional
Purchase Equipment. Seller shall be responsible for all sales and/or use taxes
arising in connection with the purchase and sale of the Additional Purchase
Equipment.
4.10 Commingled Telephone Lines. Buyer and Seller understand that
Acquired Accounts and Seller's video monitoring and/or Datavision accounts
("Datavision Accounts") are commingled on some portion of the Telephone Lines
to be conveyed to Buyer (the "Commingled Lines"). Prior to and after the
Closing, Seller will use its best efforts to reprogram the Datavision Accounts
away from the Commingled Lines to telephone lines that are not part of the
Acquired Assets. If Buyer and Seller agree that it is more feasible to
reprogram Acquired Accounts away from particular Commingled Lines after the
Closing than to reprogram the Datavision Accounts away from such Commingled
Lines, Buyer and Seller agree to work together to accomplish the reprogramming
of such Acquired Accounts away from such Commingled Lines promptly following
the Closing. In such event, Buyer agrees to reconvey to Seller such Commingled
Lines for a nominal amount, but only after each and every Acquired Account is
successfully reprogrammed away from such Commingled Line to one or more
telephone lines of Buyer to Buyer's complete satisfaction.
4.11 Billing Information. Promptly following entry of the order(s)
of the Bankruptcy Court described in Section 5.1(f), Seller agrees to provide
to Buyer one or more test batches of accounting and billing information related
to at least 1,000 randomly selected Acquired Accounts so that Buyer can prepare
for the conversion of such information into Buyer's billing system in
accordance with Section 5.1(j). Seller further agrees to cooperate fully with
Buyer in delivering such information and preparing and/or manipulating such
information to facilitate Buyer's conversion of such information.
ARTICLE 5 - CLOSING CONDITIONS
5.1 Conditions Precedent to Obligations of Buyer. The obligation
of Buyer to consummate the transactions contemplated hereby is subject to
satisfaction, or waiver by Buyer, at or prior to the Closing Date of the
following conditions:
18
<PAGE> 23
(a) Seller's representations and warranties set
forth in Sections 2.1 shall be true and correct in all material respects, in
each case at and as of the Closing Date, as though the Closing Date were
substituted for the date hereof throughout such representations and warranties,
except for representations and warranties that are made by their terms as of a
specified date, which shall be true and correct in all material respects as of
a specified date and except for changes contemplated by this Agreement;
(b) Trustee and Seller shall have performed and complied
in all material respects with all of its covenants and agreements set forth in
this Agreement through the Closing Date;
(c) No suit, action or proceeding before any court or
quasi-judicial or administrative agency shall be pending, wherein any adverse
judgment, decree, order or injunction would (i) prevent the consummation of the
transactions contemplated by this Agreement or (ii) cause any of such
transactions to be rescinded following consummation of the transactions
contemplated by this Agreement;
(d) Seller shall have made the deliveries required on its
part under Section 1.6;
(e) All consents (other than those from Acquired Account
customers) to the assignment by Seller to Buyer of contracts or other
agreements, more specifically listed in Schedule 2.1(c) shall have been
obtained, or the Bankruptcy Court Approval shall have authorized the assumption
(except for Customer Contracts) and assignment to Buyer of such contracts or
other agreements, in each case, without cost or expense to Buyer for such
consent or authorization;
(f) The Bankruptcy Court shall have entered an order or
orders in the Bankruptcy Proceeding, in form and substance reasonably
satisfactory to Buyer and its counsel, approving this Agreement and all
transactions contemplated hereby, and such order or orders shall have become
final and non-appealable and shall have authorized Seller, pursuant to Sections
363 and 365 of the Bankruptcy Code, to sell, transfer and assign to Buyer the
Acquired Assets in accordance with terms and conditions of this Agreement, free
and clear of any Security Interest (the "Bankruptcy Court Approval");
(g) Seller shall have timely paid in full all
post-petition sales, use and other taxes due and payable as of the Closing Date
with respect to the Acquired Accounts;
(h) The Escrow Agreement shall have been executed and
delivered to Buyer by Seller and Escrow Agent;
(i) Seller shall have executed and delivered to Buyer the
Acquired Accounts Monitoring Agreement in the form attached hereto as Exhibit
E;
(j) Seller shall have cooperated with Buyer to convert
all of the requisite accounting and billing information related to the Acquired
Accounts into Buyer's billing system so that Buyer will be able to send out
invoices and properly maintain the Acquired Accounts' billing records as of
Buyer's next scheduled billing cut off date following the Closing Date;
(k) Less than twenty percent (20%) of the RMR associated
with each of the Acquired Accounts has accounts receivable balances that are
over sixty (60) days past due from the invoice due date;
19
<PAGE> 24
(l) Seller shall have transferred the motor vehicles
included among the Acquired Assets free and clear of any and all Security
Interest (other than the Assumed Contracts) and shall have delivered the
vehicle registrations in a form satisfactory to permit Buyer to register such
vehicles in its name;
(m) Seller shall have delivered to Buyer duly executed
forms of consent (or other applicable form) to the use by Buyer of Seller's
telephone numbers related to Seller's business of providing Security Services
in the Masada Territory by the applicable telephone utilities; and
(n) Seller shall have delivered its certificate
reaffirming and making again each and every warranty and representation made by
Seller contained in this Agreement as of the Closing and stating that Trustee
and Seller have performed all obligations, agreements, conditions and other
actions required hereunder to be performed by the Closing; and such certificate
shall further acknowledge that all such warranties and representations shall
survive the Closing.
All actions to be taken by Seller and/or Trustee in connection with
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
Buyer.
5.2 Conditions Precedent to Obligation of Seller. The obligation
of Seller to consummate the transactions contemplated hereby is subject to
satisfaction, or waiver by Seller, at or prior to the Closing Date of the
following conditions:
(a) The representations and warranties of Buyer set forth
in Section 2.2 above shall be true and correct in all material respects in each
case at and as of the Closing Date, as though the Closing Date were substituted
for the date hereof throughout such representations and warranties, except for
representations and warranties that are made by their terms as of a specified
date, which shall be true and correct in all material respects as of a
specified date and except for changes contemplated by this Agreement.
(b) Buyer shall have performed and complied in all
material respects with all of its covenants and agreements set forth in this
Agreement through the Closing Date;
(c) No suit, action or proceeding before any court or
quasi-judicial or administrative agency shall be pending, wherein any adverse
judgment, decree, order or injunction would (i) prevent the consummation of the
transactions contemplated by this Agreement or (ii) cause any of such
transactions to be rescinded following consummation of the transactions
contemplated by this Agreement;
(d) Buyer shall have made the deliveries required on its
part under Section 1.6;
(e) All consents to the assignment by Seller to Buyer of
contracts or other agreements, more specifically listed in Schedule 2.1(c)
shall have been obtained, or the Bankruptcy Court Approval shall have
authorized the assumption and assignment to Buyer of such contracts or other
agreements;
(f) The Bankruptcy Court Approval shall have been
obtained;
(g) The Escrow Agreement shall have been executed and
delivered to Seller by Buyer and Escrow Agent;
20
<PAGE> 25
(h) Buyer shall have executed and delivered to Seller the
Acquired Accounts Monitoring Agreement in the form attached hereto as Exhibit
E; and
(i) The closing of the purchase of assets contemplated by
the Protection One Agreement shall occur simultaneously with the purchase and
sale of the Acquired Assets as contemplated hereby.
All actions to be taken by Buyer in connection with consummation of
the transactions contemplated hereby and all certificates, instruments, and
other documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to Seller.
5.3 Purchase of Third Party Accounts. The obligation of Buyer to
purchase any particular Third Party Account at the Closing is subject to
satisfaction at or prior to the Closing Date of the following conditions as to
such Third Party Account:
(a) Buyer is reasonably satisfied that the Third Party
Owner can transfer the Third Party Account to Seller free and clear of all
Security Interests and that Buyer will obtain at the Closing good and
marketable title to the Third Party Account free and clear of all Security
Interest; and
(b) The Third Party Owner completes, executes and
delivers to Seller and Buyer an Indemnification Agreement substantially in the
form of Exhibit D attached hereto.
In the event these conditions are not satisfied or waived by Buyer as to any
Third Party Accounts, such Third Party Accounts will not be included in the
Acquired Accounts and the Net RMR attributable to such Third Party Accounts
will not be considered in determining either the Preliminary Purchase Price or
the Final Purchase Price.
ARTICLE 6 - CERTAIN POST CLOSING COVENANTS
6.1 Additional Documents. Seller covenants that, from time to
time after the Closing Date, Seller will, upon the request of Buyer, execute,
acknowledge and deliver or cause to be executed, acknowledged and delivered,
all such additional documents as may be reasonably required by Buyer, in order
to effectively sell, transfer, assign and convey to Buyer any of the Acquired
Assets and/or to carry out the intentions and purposes of this Agreement and
the transactions contemplated hereby and to evidence the ownership by Buyer of
the Acquired Assets on and after the Closing Date.
6.2 Field Services. To the extent requested by Buyer, Seller
agrees to provide during the first thirty (30) days after the Closing Date (the
"Field Service Period") field services to all customers, including warranty
service calls, either directly or through subcontracting arrangements in
existence prior to the Closing. Buyer will reimburse Seller for Seller's actual
costs in providing such field services.
6.3 Buyer's Representatives. From the Closing Date until Seller
completes its monitoring services for the Acquired Accounts in accordance with
the Monitoring Agreement, Seller shall permit representatives of Buyer to be
present at both of Seller's central monitoring stations at all times and to
monitor Seller's transfer and delivery to Buyer of all Acquired Account
Information and Seller's efforts to facilitate and assist with the switching of
the communications links for the Acquired Accounts to Buyer's central
monitoring station.
6.4 Billing by Seller. Seller agrees to prepare and mail, at its
expense, the monthly invoices associated with the Acquired Accounts for April
1996 at the regularly scheduled time, whether before or after
21
<PAGE> 26
Closing. Buyer anticipates mailing the monthly invoices associated with the
Acquired Accounts for May 1996 after the Closing Date. Unforeseen delays in
the conversion of Seller's billing information, however, could prevent Buyer
from mailing such invoices. If requested by Buyer in writing, Seller agrees to
mail such invoices within five days after Seller receives such written request
from Buyer and the information reasonably required by Seller to generate the
invoices and to perform the mailing. Buyer agrees to pay Seller for such
service $0.75 for each Acquired Account so invoiced.
6.5 Access to Records. For a period of nine (9) months after the
Closing Date, Seller shall retain and make available for inspection and
duplication by Buyer all files, records, books of account and logs (the
"Retained Documents") relating to (i) Seller's business of providing Security
Services in the Masada Territory, (ii) the Acquired Assets, or (iii) the
operations of Seller's business of providing Security Services in the Masada
Territory prior to the Closing Date, which Retained Documents were not included
among the Acquired Assets and delivered to Buyer. After such nine month
period, Seller shall provide not less than forty-five (45) days prior written
notice to Buyer of any proposed destruction or disposition of any such Retained
Documents. If buyer desires to obtain any of such Retained Documents, it may
do so by notifying Seller in writing at any time prior to the scheduled date
for such destruction or disposal. Seller shall then promptly arrange for the
delivery of such Retained Documents to Buyer. All out-of-pocket costs
associated with the delivery of the requested Retained Documents shall be paid
by Buyer.
ARTICLE 7 - TERMINATION
7.1 Termination. The Parties may terminate this Agreement as
provided below:
(a) Buyer and Trustee may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) (i) Buyer may terminate this Agreement by giving
written notice to Trustee at any time prior to the Closing Date in the
event Trustee or Seller is in breach of any representation, warranty,
or covenant contained in this Agreement in any material respect and
such breach has not been cured within five (5) days after such notice;
(ii) Trustee may terminate this Agreement by
giving written notice to Buyer at any time prior to the Closing Date
in the event Buyer is in breach of any representation, warranty, or
covenant contained in this Agreement in any material respect and such
breach has not been cured within five (5) days after such notice;
(c) Buyer may terminate this Agreement by giving written
notice to Trustee at any time prior to the Closing Date if the Closing shall
not have occurred on or before the close of business on March 31, 1996 (unless
the failure to close results primarily from Buyer breaching any representation,
warranty, or covenant contained in this Agreement); and
(d) Trustee may terminate this Agreement by giving
written notice to Buyer at any time prior to the Closing Date if the Closing
shall not have occurred on or before the close of business on March 31, 1996
(unless the failure to close results primarily from Trustee or Seller breaching
any representation, warranty, or covenant contained in this Agreement).
25
<PAGE> 27
7.2 Effect of Termination. If any Party terminates this
Agreement pursuant to Section 7.1, all obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party, (except
for any liability of any Party then in breach), provided, however, that
Sections 11.8 and 11.14 shall survive such termination.
ARTICLE 8 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 Survival of Representations and Warranties of Seller. The
representations, warranties and agreements of Seller made in this Agreement and
the obligations of Seller set forth or consented to herein, and any liability
for breach of any agreement by Seller or any inaccuracy of or omission from any
representation or warranty of Seller under this Agreement shall survive the
Closing for a period of 18 months; provided, however, that such survival period
shall be extended automatically to include any time period necessary to
resolve, and collect upon, a claim for indemnification which was made or
commenced before expiration of such survival period; and provided further, that
any such extension shall apply only as to claims asserted and not so resolved
within such survival period.
8.2 Survival of Representations and Warranties of Buyer. The
representations, warranties and agreements of Buyer contained in this Agreement
and the obligations of Buyer set forth or consented to herein and any liability
for breach of any agreement by Buyer or any inaccuracy of or omission from any
representation or warranty of Buyer under this Agreement shall survive the
Closing for a period of 18 months; provided, however, that such survival period
shall be extended automatically to include any time period necessary to
resolve, and collect upon, a claim for indemnification which was made or
commenced before expiration of such survival period; and provided further, that
any such extension shall apply only as to claims asserted and not so resolved
within such survival period.
ARTICLE 9 - INDEMNIFICATION
9.1 Indemnification by the Seller. Seller hereby agrees to
indemnify Buyer against and to hold Buyer harmless from any and all damage,
loss, liability, costs and expense (including, without limitation, expenses in
connection with any claim, action, suit or proceeding brought against Buyer
after the Closing Date) incurred or suffered Buyer, arising out of or related
to (a) any misrepresentation, breach of warranty or breach or nonfulfillment of
any agreement of Debtor, Trustee or Seller contained in this Agreement, or in
any certificate, schedule, agreement or instrument delivered to Buyer by or on
behalf of Debtor, Trustee or Seller pursuant to the provisions of this
Agreement, (b) all obligations and liabilities of Debtor, Trustee or Seller
other than the Assumed Liabilities, whether direct or indirect, fixed or
contingent, known or unknown, including without limitation, all obligations and
liabilities resulting from or arising out of any default, performance or
non-performance by Debtor, Trustee or Seller prior to the Closing under or with
respect to any Assumed Contract, or (c) the operation of Debtor's or Seller's
business or the Acquired Assets prior to the Closing.
9.2 Indemnification by Purchaser. Buyer hereby agrees to
indemnify Seller against and to hold it harmless from any and all damage, loss,
liability, cost and expense (including without limitation, reasonable expenses
in connection with any claim, action, suit or proceeding brought against Seller
after Closing Date), incurred or suffered by Seller, arising out of or related
to (a) any misrepresentation, breach of warranty or breach or nonfulfillment of
any agreement of Buyer contained in this Agreement, or in any certificate,
schedule, document, agreement or instrument delivered to Seller by or on behalf
of Buyer pursuant to the provisions of this Agreement, (b) the failure of Buyer
to pay, perform or discharge any of the Assumed Liabilities in accordance with
their terms, provided that Buyer shall not have any liability hereunder if they
are in good faith contesting
23
<PAGE> 28
any such Assumed Liability, or (c) Buyer's ownership or operation of the
Acquired Assets from and after the Closing.
9.3 Matters Involving Third Parties. If any third party shall
make or assert a claim against any Party (the "Indemnified Party") with respect
to any matter which may give rise to a claim for indemnification against any
other Party (the "Indemnifying Party") under Section 9.1 or 9.2, then the
Indemnified Party shall notify the Indemnifying Party thereof promptly;
provided, however, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party shall relieve the Indemnifying Party from any
liability or obligation under this Agreement unless (and then solely to the
extent) the Indemnifying Party is damaged or prejudiced thereby. In the case
of any such claim pursuant to which only the recovery of a sum of money is
being sought and the Indemnifying Party (i) enters into an agreement with the
Indemnified Party (in form and substance reasonably satisfactory to the
Indemnified Party) pursuant to which the Indemnifying Party agrees to be fully
responsible (with no reservation of any rights other than the right to be
subrogated to the rights of the Indemnified Party) for all losses relating to
such claim and unconditionally guarantees the payment and performance of any
liability which may arise with respect to such claim or the facts giving rise
to such claim for indemnification, and (ii) furnishes the Indemnified Party
with evidence that the Indemnifying Party, in the Indemnified Party's
reasonable judgment, is and will be able to satisfy any such liability, the
Indemnifying Party may, by giving written notice to the Indemnified Party,
assume the defense thereof. In such case, (A) the Indemnifying Party will
defend the Indemnified Party against such matter with counsel of its choice
satisfactory to the Indemnified Party and (B) the Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the Indemnifying
Party will be responsible for the fees and expenses of any separate counsel to
the Indemnified Party incurred prior to the date upon which the Indemnifying
Party effectively assumes control of such defense). In the event that the
Indemnifying Party is precluded from assuming control of the defense of a claim
pursuant to the terms of this Section 9.3, the Indemnifying Party may retain
separate co-counsel at its sole cost and expense to participate in such defense
and, in any event the Indemnified Party shall (i) provide the Indemnifying
Party with all material information requested by such party relating to the
defense of such claim, (ii) confer with the Indemnifying Party as to the most
cost-effective manner in which to defend such claim and (iii) use its
reasonable efforts to minimize the cost of defending such claim. The
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to such matter without the written consent of the
Indemnifying Party (not to be withheld unreasonably), and the Indemnifying
Party will not consent to the entry of any judgment or enter into any
settlement with respect to such matter without the written consent of the
Indemnified Party (not to be withheld unreasonably).
9.4 Determination of Loss. Any amounts paid by Seller under
Section 9.1 shall be treated as an adjustment to the Final Purchase Price.
With respect to any damage, loss, liability, cost or expense, the Indemnifying
Party shall indemnify the Indemnified Party against the time cost of money
(using a discount rate of 7% per annum) associated with such damage, loss,
liability, cost or expense.
9.5 Limitation of Seller's Indemnification Liabilities.
Notwithstanding any other provision of this Agreement, the maximum liability
that Seller shall have in the event of any claim by Buyer for indemnification
shall not exceed the amount then held in the Escrow Account at the time Buyer
seeks such indemnification; provided, however, that there shall be no
limitation on Seller's indemnification obligations hereunder in the event of
fraud or willful misconduct on the part of Trustee, Elizabeth Geiger, Phillip
Darley, James Bain and Janice Garber-Bingham. For purposes of calculating
Seller's maximum liability under the immediately preceding sentence, with
respect to any third-party claim, all attorneys' fees and related costs
incurred by Seller in defending Buyer against such third-party claim and all
attorneys' fees and related costs incurred by Buyer in the event Seller does
not defend Buyer against such third-party claim shall not be counted.
24
<PAGE> 29
ARTICLE 10 - ARBITRATION
10.1 Remedies. To the extent permitted by applicable law, and
except for equitable relief which Buyer is entitled to seek under Section 1.10
of this Agreement or under the Nonsolicitation Agreement, in the event any
dispute arises between the parties under this Agreement, the parties hereto
agree that arbitration shall constitute the exclusive remedy for the resolution
of any such dispute or controversy. The arbitration proceedings shall be
accomplished in accordance with the provisions of this Article 10.
10.2 American Arbitration Association. Except as expressly
provided herein to the contrary, the arbitration proceeding shall be conducted
under the Commercial Arbitration Rules of the American Arbitration Association
in effect at the time a demand for arbitration is made. To the extent that
there is any conflict between the rules of the American Arbitration Association
and this Article 10, this Article 10 shall govern and determine the rights of
the parties hereto.
10.3 Selection of Arbitrator. The arbitration will take place in
Denver, Colorado before a single arbitrator selected as described in this
Section 10.3 either party may request the American Arbitration Association to
provide a list of proposed arbitrators. Buyer, on the one hand and Seller on
the other hand, shall then take turns crossing off one name at a time from such
list with the last remaining individual being appointed the arbitrator. Buyer
and Seller shall select by lot which of them strikes the first name from the
list of proposed arbitrators. If the person selected in this method to be the
arbitrator declines or is otherwise unavailable to serve as the arbitrator of
the dispute, the arbitrator shall be selected from the same list of proposed
arbitrators selected in the reverse order to which those proposed arbitrators'
names were struck from the list until one of such individuals selected to be
the arbitrator accepts the appointment and is able to serve as the arbitrator.
10.4 Decision of Arbitrator. The arbitrator selected in the manner
set forth in Section 10.3 hereof (the "Arbitrator") shall be requested to honor
the intention of the parties hereto to resolve the disputes quickly and
inexpensively. All decisions shall be made with this intention in mind.
Except as otherwise provided by applicable law, the decision of the Arbitrator,
shall be exclusive, final and binding of all parties, their successors and
assigns as applicable.
10.5 Procedures. Except as expressly set forth in this Agreement,
the Arbitrator shall determine the manner in which the arbitration proceeding
is conducted, including the time and place of all hearings, the order of
presentation of evidence and all of the questions that arise with respect to
the arbitration proceeding.
10.6 Applicable Law. The Arbitrator shall be required to determine
all issues in accordance with Colorado law. The rules of evidence applicable
to proceedings at law in the State of Colorado will be applicable to the
arbitration proceedings.
10.7 Judgment. The Arbitrator shall issue a single judgment at the
close of the arbitration proceeding which shall dispose of all of the disputes
of the parties that are the subject of the arbitration. Any party to the
arbitration may seek a judgment from a court of competent jurisdiction to
enforce the award of the Arbitrator.
10.8 Costs. The cost of arbitration, including administrative
fees, fees for a record and a transcript, and the Arbitrator's fees shall be
borne equally by the parties to the arbitration. Each party shall bear the
costs of the fees charged such party by its own counsel; provided, however, the
Arbitrator shall have the right to award reasonable attorneys' fees to the
party determined by the arbitrator to be the prevailing party.
25
<PAGE> 30
ARTICLE 11 - MISCELLANEOUS
11.1 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties with
respect to the subject matter hereof and supersedes any prior understandings,
agreements, or representations by and among the Parties, written or oral, with
respect to such subject matter.
11.2 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.3 Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
11.4 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) when
delivered, if personally delivered, (ii) when receipt is electronically
confirmed, if faxed (with hard copy to follow via first class mail, postage
prepaid) or (iii) one day after deposit with a reputable overnight courier, in
each case addressed to the intended recipient as set forth below:
<TABLE>
<CAPTION>
If to Seller: with a copy (which shall not constitute notice) to:
<S> <C>
Harvey Sender, Trustee Holland & Hart LLP
Katch, Sender & Wasserman, P.C. 555 17th Street, Suite 3200
1999 Broadway, Suite 2305 Denver, Colorado 80202-3979
Denver, Colorado 80202 Attn: Mary Ellen Scanlan, Esq.
Telecopy #: (303) 296-7600 Telecopy #: (303) 295-8261
If to Buyer: with a copy (which shall not constitute notice) to:
Masada Security, Inc. Burr & Forman
950 22nd Street North, Suite 800 420 North 20th Street, Suite 3100
Birmingham, Alabama 35203 Birmingham, Alabama 35203
Attn: Terry W. Johnson Attn: W. Lee Thuston, Esq.
Telecopy #: (800) 531-3293 Telecopy #: (205) 458-5100
</TABLE>
Any Party may change the address and/or telecopier number to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
11.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Colorado,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Colorado or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Colorado.
11.6 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by each Party. No wavier by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to
26
<PAGE> 31
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence.
11.7 Severability. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
11.8 Expenses. Seller and Buyer will each bear its own costs and
expenses (including legal and broker fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
11.9 Transfer Taxes. All documentary, sales, use, registration and
other transfer taxes (including, but not limited to, all applicable real estate
transfer or stock transfer taxes) and filing or recording fees incurred in
connection with the transactions contemplated hereby shall be paid by Seller.
11.10 Construction. The Parties have jointly participated in the
negotiation and drafting of this Agreement. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumptions or burdens of proof
shall arise favoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
11.11 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
11.12 Number and Gender. Each defined term used in this Agreement
has a comparable meaning when used in its plural or singular form. Each
gender-specific term used herein has a comparable meaning whether used in a
masculine, feminine or gender-neutral form.
11.13 Succession and Assignment. Except as otherwise expressly
provided herein to the contrary, this Agreement shall be binding upon and inure
to the benefit of the Parties named herein and their respective successors and
permitted assigns. Prior to the Closing, no Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Parties hereto.
11.14 Confidentiality. After the Closing, no Seller will, except as
may be required by law, disclose to any third party or use for any purpose,
other than as contemplated by this Agreement, any information respecting the
Seller's business of providing Security Services in the Masada Territory or any
Acquired Assets. Seller agrees to maintain as secret and confidential all
"Confidential Information," as defined herein, and agrees not to use, disclose,
transfer, sell, or make such information available to any third parties, except
as authorized in advance and in writing by Buyer. The term "Confidential
Information" means any trade secrets, proprietary or other information of the
Debtor or Seller which is either designated or treated as confidential by
Debtor or Seller or reasonably known by Debtor or Seller to be confidential
relating to the Acquired Assets, including, without limitation, all of the
following information relating to Seller's customers, which is hereby
acknowledged by Seller to have been designated and treated by Debtor and Seller
as confidential and to be trade secrets: any customer
27
<PAGE> 32
lists; any lists, notes or compilations which contain the names, addresses,
telephone numbers, or any contract information for or relating to the
customers; and copies of contracts, agreements, and related documents between
the Seller and the customers. Without limiting the generality of the
foregoing, Seller acknowledges and agrees for itself and its affiliates that
all of the Confidential Information derives independent economic value, actual
or potential, from not being known generally to the public or to other
individuals, corporations, partnerships, limited liability companies, trusts,
associations and other entities who or which can obtain economic value from its
disclosure or use, and is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy, the applicable provisions of this
Agreement being an example of such efforts. Seller acknowledges and agrees
that money damages would not be a sufficient remedy for any breach by Seller of
this Section 11.14 and that Buyer shall be entitled to specific performance and
other equitable relief (including, without limitation, temporary and permanent
injunctions) as remedies for any such breach. Such remedies shall not be
deemed to be exclusive remedies for any such breach of this Section 11.14 but
shall be in addition to all other remedies available at law or in equity to
Buyer.
11.15 No Personal Liability. Notwithstanding anything herein to the
contrary, in the event of any breach or default by Seller under this Agreement,
or any other agreement executed pursuant hereto, Buyer shall only have recourse
against Seller and/or the Holdback Amount and shall not have any claim against
the Trustee or any surety of the Trustee. In the absence of fraud or wilful
misconduct, none of Elizabeth Geiger, Phillip Darley, James Bain or Janice
Garber- Bingham shall have any personal liability arising out of, in connection
with or pursuant to this Agreement or its contents, the execution and delivery
of this Agreement, the execution and delivery of certificates and other
documents at the Closing, any breach of this Agreement, or any default by
either party of its obligations under this Agreement.
11.16 Return of Payments. In the event that Buyer delivers to
Trustee and/or the Escrow Agent any of the sums set forth herein which are to
be applied to the Preliminary Purchase Price and Trustee takes the position
that the closing has not occurred because the conditions set forth in Section
5.2(i) hereof were not satisfied, Trustee will immediately return to Buyer any
monies received by Trustee from Buyer and will immediately instruct Escrow
Agent to return to Buyer any of the sums delivered to Escrow Agent by Buyer
pursuant to this Agreement.
28
<PAGE> 33
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-----------------------------------------
Title: Vice President
--------------------------------------
/s/ Harvey Sender
--------------------------------------------
HARVEY SENDER, AS TRUSTEE for the Bankruptcy
Estates of (i) InterCap Funds Joint Venture,
(ii) Security Data Group of California, Inc.
and (iii) IMIF IV-C Service Corp.
29
<PAGE> 34
LIST OF SCHEDULES AND EXHIBITS
<TABLE>
<S> <C>
Schedule 1.1(a) Acquired Accounts
Schedule 1.1(c) Operating Assets
Schedule 1.1(d) Intangible Personal Property
Schedule 1.1(e) Assumed Contracts
Schedule 1.1(f) Telephone Lines
Schedule 1.5(a) Inventory
Schedule 1.10 Seller Agents
Schedule 1.11 Final Purchase Price Allocation
Schedule 2.1(c) Required Consents
Schedule 2.1(d) Litigation
Schedule 2.1(e) Third Party Owners
Schedule 2.1(g) Compliance with Laws
Schedule 2.1(h)(ii) Employee Benefit Plans
Schedule 2.1(h)(iii) Employees
Schedule 2.1(i) Subcontractors
Schedule 2.1(k) Insurance
Schedule 2.1(m) Alarm Systems
Schedule 2.1(o) Third Party Monitoring
Schedule 2.1(r) Unnotified Parties
Schedule 3 Excluded Assets
Exhibit A Legal Opinion of Doherty, Rumble & Butler, P.C.
Exhibit B Escrow Agreement
Exhibit C Nonsolicitation Agreement
Exhibit D Indemnification Agreement
Exhibit E Acquired Accounts Monitoring Agreement
Exhibit F Rejected Accounts Monitoring Agreement
</TABLE>
30
<PAGE> 1
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made effective as of the 28th
day of March, 1996, by and among MASADA SECURITY, INC., a Delaware corporation
("Purchaser"); HARVEY SENDER, AS TRUSTEE (the "Trustee") for the bankruptcy
estates of InterCap Funds Joint Venture, a Colorado general partnership
("Venture"), Security Data Group of California, Inc., a California corporation
("SDG"), IMIF IV-C Service Corp., a Colorado corporation ("Service") (the
bankruptcy estates of Venture, SDG, and Service are collectively referred to as
"Sellers"), and SOUTHTRUST BANK OF ALABAMA, N.A. ("Escrow Agent").
RECITALS
WHEREAS, Trustee and Purchaser have entered into an Asset Purchase and
Sale Agreement dated on or about March 27, 1996 (the "Purchase Agreement"),
pursuant to which the Trustee agrees to sell and Purchaser agrees to purchase,
subject to the approval from the United States Bankruptcy Court for the
District of Colorado ("Bankruptcy Court"), the customer accounts and certain
other assets of Sellers related to the monitoring of security alarm systems, as
more fully described therein;
WHEREAS, Section 1.6(b)(iv) of the Purchase Agreement provides that
the Purchaser shall deposit into escrow a "Holdback Amount" associated with the
purchase of Sellers' "Acquired Assets," which deposit shall be held by Escrow
Agent pursuant to this Agreement;
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. ESCROW AGENT: Purchaser and Trustee hereby designate and
appoint the Escrow Agent as the escrow agent for the purposes herein set forth.
The Escrow Agent hereby accepts such appointment on the terms and conditions
herein set forth. Escrow Agent is not a party to and is not bound by any
agreement between Purchaser and Trustee except this Agreement.
2. DEPOSIT IN ESCROW:
(a) Escrow Agent hereby acknowledges the receipt from
Purchaser of the sum of the Holdback Amount which equals $4,946,599.01
Dollars (the "Escrowed Funds"). Escrow Agent agrees to hold and dispose of
said sum, and all interest and gains earned thereon, in accordance with all the
terms, conditions and provisions of this Agreement. Escrow Agent acts
hereunder as a depository. All deposits are warranted by Purchaser to be valid
deposits.
(b) Escrow Agent shall invest the Escrowed Funds in U.S.
Treasury Bills or other direct obligations issued by or guaranteed by, as to
principal and interest, the United States of America in each case with a
maturity equal to or less than thirty (30) days. All investment and
reinvestment of the Escrowed Funds in said U.S. Treasury Bills or other direct
obligation shall be done to the nearest $1,000; any balance of the Escrowed
Funds not so invested shall be held in a money market account. All earnings
received by Escrow Agent as a result of such investment shall be added to the
Escrowed Funds.
<PAGE> 2
3. DISTRIBUTIONS:
(a) At any time and from time to time, Purchaser and
Trustee shall jointly give signed written notice ("Payment Notice") to Escrow
Agent which Payment Notice shall list the parties entitled to all or a portion
of the Escrowed Funds and a breakdown of the amounts each party is entitled to.
Upon receipt of the Payment Notice, the Escrow Agent shall pay to the
appropriate parties the indicated amount of the Escrowed Funds within three
days after the receipt of such Payment Notice. The Payment Notice shall set
forth a brief description of the basis entitling such parties to be paid the
Escrowed Funds.
(b) If the Escrow Agent receives a Payment Notice which
is (i) signed by Purchaser but not by Trustee, or (ii) signed by Trustee but
not by Purchaser, the Escrow Agent shall give notice, along with a copy of such
Payment Notice, to the other party (the "Non-Signing Party"). If the
Non-Signing Party gives notice to the Escrow Agent of its agreement with the
Payment Notice, or fails to respond to the notice from the Escrow Agent, within
seven days after the date of such notice, then the Escrow Agent shall pay to
the parties indicated on the Payment Notice the indicated amount of the
Escrowed Funds, within ten days after the expiration of such seven day period.
If the Non-Signing Party gives notice to the Escrow Agent of its disagreement
with the Payment Notice, within such seven day period, then the Escrow Agent
shall pay the undisputed portion, if any, of the Escrowed Funds, but shall not
pay any portion of the Escrowed Funds subject to dispute, which disputed funds
shall continue to be held by the Escrow Agent pending resolution of such
dispute and further direction from Purchaser and Trustee, or from the
Bankruptcy Court.
(c) In the event of any disagreement resulting in adverse
claims or demands being made in connection with the subject matter of this
Agreement, or in the event that the Escrow Agent is in doubt as to what action
it should take hereunder, the Escrow Agent may, at its option, refuse to comply
with any claim or demand on it, or refuse to take any other action hereunder,
so long as such disagreement continues or such doubt exists, and in any such
event, the Escrow Agent shall not be or become liable in any way or to any
person for its failure or refusal to act, and the Escrow Agent shall be
entitled to continue to so refrain from acting until (i) the rights of all
parties have been fully and finally decided through arbitration, as
contemplated by the Purchase Agreement, by a court of competent jurisdiction,
or by the Bankruptcy Court, or (ii) all differences shall have been decided and
all doubt resolved by agreement between Purchaser and Trustee, and the Escrow
Agent shall have been notified thereof in a writing signed by Purchaser and
Trustee. In addition to the foregoing remedies, the Escrow Agent is hereby
authorized in the event of any doubt as to the course of action it should take
under this Agreement, to petition the United States District Court for the
Northern District of Alabama and/or the Circuit Court in and for Jefferson
County, Alabama for instructions or to interplead the funds or assets so held
into such court. For purposes of this Agreement the parties agree to the
jurisdiction of either of said courts over their persons as well as the
Escrowed Funds and agree that service of process by certified mail, return
receipt requested, to the address set forth in Paragraph 9 below shall
constitute adequate service. Purchaser and Trustee hereby agree to indemnify
and hold the Escrow Agent harmless from any liability or losses occasioned
thereby and to pay any and all of its costs, expenses, and reasonable
attorney's fees incurred in any such action and agree that on such petition or
interpleader action that the Escrow Agent, its servants, agents, attorneys,
employees and officers will be relieved of further liability. Escrow Agent is
hereby given a lien upon, security interest in, and right of setoff against,
the Escrowed Funds to secure Escrow Agent's rights to payment or reimbursement
for any and all costs, expenses, and fees incurred by it hereunder.
(d) If a Non-Signing Party shall be determined by (i) a
court of competent jurisdiction, (ii) the Bankruptcy Court, or (iii) a written
release between the parties, to have acted in a frivolous manner and in bad
2
<PAGE> 3
faith, the other party shall be entitled to reimbursement of all its reasonable
costs incurred in connection with the Payment Notice (including, without
limitation, reasonable attorney's fees).
4. TERMINATION: This Agreement shall terminate on the date that
no Escrowed Funds continue to be held by the Escrow Agent.
5. LIMITATIONS ON LIABILITY OF ESCROW AGENT: In order to induce
the Escrow Agent to act as the escrow agent under this Agreement, Trustee and
Purchaser agree as follows:
(a) The Escrow Agent may rely upon and shall be protected
in acting or refraining from acting upon any written notice, instruction or
request received by the Escrow Agent and believed by the Escrow Agent in good
faith to be genuine and signed by Trustee and Purchaser. The Escrow Agent
shall not be responsible for the sufficiency, correctness, genuineness or
validity of any notice or instructions delivered to the Escrow Agent. The
Escrow Agent shall not be liable for any error of judgment, or any act or
omission under this Agreement taken in good faith, except for the Escrow
Agent's own gross negligence or willful misconduct.
(b) Trustee and Purchaser shall jointly and severally
indemnify and hold harmless the Escrow Agent from and against any claims,
costs, damages, reasonable attorney's fees, expenses, obligations or charges
made against the Escrow Agent by reason of its action or failure to act in
connection with any of the transactions contemplated by this Agreement, unless
caused by the Escrow Agent's gross negligence or willful misconduct.
(c) In the event the Escrow Agent receives or becomes
aware of conflicting instructions, demands or claims with respect to this
Agreement or the sums deposited hereunder, the Escrow Agent shall have the
right to discontinue any and all further acts until such conflict is resolved
to the Escrow Agent's satisfaction. The Escrow Agent shall have the further
right to commence or defend any action or proceeding for the termination of
such conflict. Trustee and Purchaser jointly and severally agree to pay all
costs, damages, judgments and expenses, including reasonable attorneys' fees,
suffered or incurred by the Escrow Agent in connection with such action or
proceeding. In the event the Escrow Agent files a suit in interpleader, the
Escrow Agent shall thereupon be fully released and discharged from all further
obligations imposed by this Agreement with respect to sums deposited with a
court of competent jurisdiction pursuant to such suit in interpleader.
6. ESCROW FEES: The Escrow Agent shall not be entitled to
receive a fee for serving as the Escrow Agent; provided, however, that the
Escrowed Funds shall be subject to the Escrow Agent's standard fees and service
charges as provided in the Escrow Agent's Rules and Regulations Governing
Deposit Accounts.
7. RESIGNATION: The Escrow Agent may resign at any time upon
giving the parties hereto thirty days advance written notice to that effect.
In such event, the successor escrow agent shall be mutually selected by Trustee
and Purchaser. However, in no instance shall the Escrow Agent's resignation be
effective until a successor escrow agent has agreed to act but, Escrow Agent
shall have the right to discontinue any and all future acts until such
successor escrow agent has agreed to act.
8. INTEREST INFORMATION: Unless otherwise agreed to in writing
by both parties: (i) the Escrow Agent shall list the employer tax
identification number of Venture for federal, state and local tax purposes and
for other necessary purposes; and (ii) any and all of Escrow Agent's fees and
charges as provided for in Paragraph 6 of this Agreement shall first be charged
against interest earned and then charged against principal.
3
<PAGE> 4
9. NOTICE: Any notice or other communication hereunder shall be
in writing and shall be (i) delivered by hand, (ii) delivered by an overnight
courier service with guaranteed next day delivery, (iii) sent by telecopy, or
(iv) mailed by certified mail, postage prepaid, return receipt requested, and
addressed as follows:
<TABLE>
<S> <C>
IF TO PURCHASER AT: WITH COPY TO:
Masada Security, Inc. Burr & Forman
950 22nd Street North, Suite 800 420 North 20th Street, Suite 3100
Birmingham, Alabama 35203 Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson Attention: W. Lee Thuston, Esq.
FACSIMILE: (800) 531-3293 FACSIMILE: (205) 458-5100
IF TO SELLERS AT: WITH COPY TO:
Harvey Sender, Trustee Holland & Hart LLP
Katch, Sender & Wasserman, P.C. 555 17th Street, Suite 3200
1999 Broadway, Suite 2305 Denver, Colorado 80202-3979
Denver, Colorado 80202 Attention: Mary Ellen Scanlan, Esq.
FACSIMILE: (303) 296-7600 FACSIMILE: (303) 295-8261
IF TO ESCROW AGENT:
SouthTrust Bank of Alabama, N.A.
420 North 20th Street
Birmingham, AL 35203
Attention: Mr. Robert W. Wilkerson
FACSIMILE: (205) 254-5989
</TABLE>
or to such other address as may have been furnished to the party giving notice
by the party to whom notice is to be given. Notice shall be deemed given upon
the earlier of (i) three days after deposit in the U.S. Mail by certified mail,
or (ii) actual receipt thereof.
10. MISCELLANEOUS:
(a) SUCCESSORS AND ASSIGNS: This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
(b) COUNTERPARTS: This Agreement may be executed in any
number of counterparts, each of which shall be an original, but which together
shall constitute one and the same instrument.
(c) GOVERNING LAW: This Agreement shall be governed by
and construed and interpreted in accordance with the laws of the State of
Alabama.
(d) AMENDMENT: This Agreement may not be modified,
changed, waived or terminated, in whole or in part, except by a supplemental
agreement signed by all of the parties hereto.
4
<PAGE> 5
(e) HEADINGS: The headings assigned to Paragraphs of
this Agreement are for convenience only and shall be disregarded in construing
this Agreement.
(f) NO ASSIGNMENT: Neither Trustee nor Purchaser shall
pledge, hypothecate or otherwise transfer or attempt to transfer any right,
title or interest hereunder without the prior written consent to the other
party hereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
----------------------------------------------
Charles F. Armstrong, Vice President
/s/ Harvey Sender
-------------------------------------------------
HARVEY SENDER, AS TRUSTEE for the Bankruptcy
Estates of (i) InterCap Funds Joint Venture, (ii)
Security Data Group of California, Inc. and (iii)
IMIF IV-C Service Corp.
SOUTHTRUST BANK OF ALABAMA, N.A.
By: /s/ Mark Wesson
----------------------------------------------
Its: Vice President
---------------------------------------------
5
<PAGE> 1
NONCOMPETITION, NONSOLICITATION
AND NONDISCLOSURE AGREEMENT
This Agreement made as of this 28th day of March, 1996, by and among
MASADA SECURITY, INC., a Delaware corporation ("Masada"), and HARVEY SENDER, AS
TRUSTEE ("Trustee") for the bankruptcy estates of InterCap Funds Joint Venture,
a Colorado general partnership ("Venture"), Security Data Group of California,
Inc., a California corporation ("SDG"), IMIF IV-C Service Corp., a Colorado
corporation ("Service") (the bankruptcy estates of Venture, SDG, and Service
are collectively referred to as "Sellers").
STATEMENT OF FACTS
A. Masada is purchasing certain security monitoring accounts (the
"Accounts") from the Sellers pursuant to the Asset Purchase and Sale Agreement
dated on or about March 27, 1996 (the "Asset Purchase Agreement"). This
Agreement applies to the customer who is the Account, as well as the Account's
location.
B. In consideration of the execution and delivery of the Asset
Purchase and Sale Agreement and other valuable consideration, the Sellers are
willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and for good and
valuable consideration, receipt of which is acknowledged, the parties,
intending to be legally bound, covenant and agree as follows:
1. Nonsolicitation and Nonacceptance. The Sellers agree that
they will not, directly or indirectly through affiliates, solicit nor accept
(if the Accounts contact them) any business from any of the Accounts, including
business for the purpose of providing electronic security, intercom, central
vacuum, home automation, audio systems or related services (collectively, the
"Services"), during a period from the date hereof to a date which is the
earlier of (i) substantial consummation of any confirmed plan of reorganization
in the Bankruptcy Proceeding (as defined in the Asset Purchase Agreement), or
(ii) three years following the date hereof, but in no event shall such period
expire prior to six months following the date hereof. If contacted by the
Accounts, the Sellers will inform them that the Sellers can no longer provide
the Services to the Accounts. The Sellers agree to do so in a polite manner,
and to refer the Accounts to Masada with a positive recommendation.
2. Noncompetition. The Sellers also agree that for a period of
three (3) years following the date of this Agreement, they will not, directly
or indirectly through affiliates, take any action in competition with Masada in
connection with the Accounts. Without limiting the generality of the
foregoing, the Sellers will not, directly or indirectly through affiliates:
(a) manage, operate, join, control, participate or become
interested in or be connected with, as an employee, partner, officer, director,
stockholder, investor or otherwise, any business providing any of the Services
to the Accounts;
(b) lend their credit or money for the purpose of
establishing or operating any business providing any of the Services to the
Accounts;
<PAGE> 2
(c) furnish consultation or advice to any business except
for Masada providing any of the Services to the Accounts;
(d) permit their names to be used in connection with any
business providing any of the Services to the Accounts; or
(e) sell or rent any equipment ancillary or necessary to
any business providing any of the Services to the Accounts.
3. Nondisclosure.
(a) The Sellers acknowledge that they possess certain
confidential, proprietary and trade secret information, materials and business
concepts with respect to the Accounts, including information regarding sales,
maintenance, service and marketing, customer lists and files, accounting data
and methods, operating procedures, pricing policies, strategic plans,
intellectual property, contracts and manufacturer's warranties (collectively,
the "Proprietary Information"). In fact, the Sellers acknowledge that the
Accounts information included on the Schedule 1.1(a) to the Asset Purchase
Agreement (preliminary and final versions) and the Acquired Accounts
Information (as defined in the Asset Purchase Agreement) constitutes
proprietary information. Without limiting the generality of the foregoing,
Sellers acknowledge and agree for themselves and their affiliates that all of
the Proprietary Information is a trade secret and derives independent economic
value, actual or potential, from not being known to the public or other
individuals, corporations, partnerships, limited liability companies, trusts,
associations and other entities who or which can obtain economic value from its
disclosure or use, and is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy, the applicable provisions of this
Agreement being an example of such efforts.
(b) The Sellers agree (i) never to publish, copy,
disclose, allow to be disclosed, or use for their own benefit or for the
benefit of any other person, firm, corporation or entity the Proprietary
Information and (ii) to maintain strictly the confidentiality of the
Proprietary Information at all times. The Sellers agree to take all necessary
precautions to protect the Proprietary Information from unauthorized disclosure
or use.
(c) In addition, the Sellers agree to deliver to Masada
on the date of this Agreement all of the Proprietary Information in their
possession.
4. Acknowledgment. The Sellers acknowledge and recognize that:
(a) this Agreement is necessary for the protection of the
legitimate business interests of Masada in purchasing the Accounts;
(b) the execution and delivery of this Agreement is a
mandatory condition precedent to Masada's closing its purchase of the Accounts
from the Sellers, without which such transactions will not close;
(c) the scope of this Agreement regarding duration and
the level of activities restricted is reasonable;
2
<PAGE> 3
(d) none of the Sellers, individually or jointly, has any
intention of violating this Agreement during the time period set forth above;
and
(e) the breach of this Agreement will be such that Masada
will not have an adequate remedy at law because of the unique nature of the
assets being conveyed and the confusion to the Accounts that a breach would
create.
5. Remedy. The Sellers and Masada agree that the amount of
damages resulting to Masada from the breach of this Agreement by the Sellers is
difficult to ascertain. In the event that Masada in its sole discretion,
elects to pursue a damage award the Sellers agree that Masada is entitled to
liquidated damages from the Sellers of 48 times the RMR (as defined in the
Asset Purchase Agreement) from the affected Accounts. The Sellers acknowledge
and agree that the rights of Masada under this Agreement are of a specialized
and unique character and that immediate and irreparable damage will result to
Masada if the Sellers fail to or refuse to perform their obligations under this
Agreement and, notwithstanding any election by Masada to claim damages from the
Sellers as a result of any such failure or refusal, Masada may, in addition to
any other remedies and damages available, seek an injunction in a court of
competent jurisdiction, without the need to post a bond or other security to
restrain any such failure or refusal. The Sellers also agree that Masada's
remedy for a breach by the Sellers of this Agreement will not be limited to the
payment made from Masada to the Sellers.
6. Severability. If any provisions of this Agreement as applied
to any part or to any circumstances will be adjudged by a court to be invalid
or unenforceable, the same will in no way affect any other provision of this
Agreement, the application of such provision in any other circumstances, or the
validity or enforceability of this Agreement. Masada and the Sellers intend
this Agreement to be enforced as written. If any provision or any part thereof
is held to be invalid or unenforceable because of the duration thereof or the
level of restrictions, all parties agree that the court making such
determination will have the power to reduce the duration and/or restrictions of
such provision, and/or to delete specific words or phrases and in its modified
form such provision will then be enforceable.
7. Consent to Jurisdiction, Service and Venue. For the purpose
of any suit, action or proceeding arising out of or relating to this Agreement,
the Sellers hereby irrevocably consent and submit to the jurisdiction and venue
of any of the courts of the State of Colorado or of any federal court located
in Colorado. The Sellers hereby irrevocably waive any objection which they may
now or hereafter have to the venue of any such suit, action or proceeding
brought in such court and any claim that such suit, action or proceeding
brought in such court has been brought in an inconvenient forum and agree that
service of process in accordance with the foregoing sentence will be deemed in
every respect effective and valid personal service of process upon the Sellers.
The provisions of this Section will not limit or otherwise affect the right of
Masada to institute and conduct an action in any other appropriate manner,
jurisdiction or court.
8. WAIVER OF JURY TRIAL. MASADA AND THE SELLERS WAIVE ALL RIGHT
TO A TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT.
9. Notices. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
3
<PAGE> 4
<TABLE>
<S> <C>
IF TO MASADA AT: WITH COPY TO:
Masada Security, Inc. Burr & Forman
950 22nd Street North, Suite 800 420 North 20th Street, Suite 3100
Birmingham, Alabama 35203 Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson Attention: W. Lee Thuston, Esq.
FACSIMILE: 1-800-531-3293 FACSIMILE: (205) 458-5100
IF TO SELLERS AT: WITH COPY TO:
Harvey Sender, Trustee Holland & Hart, LLP
Katch, Sender & Wasserman, P.C. 555 17th Street, Suite 3200
1999 Broadway, Suite 2305 Denver, Colorado 80202-3979
Denver, Colorado 80202 Attention: Mary Ellen Scanlan, Esq.
FACSIMILE: (303) 296-7600 FACSIMILE: (303) 295-8261
</TABLE>
or at such address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
10. Entire Agreement. This Agreement is an integrated document,
contains the entire agreement between the parties, and wholly cancels,
terminates and supersedes any and all previous and/or contemporaneous oral
agreements, negotiations, commitments and writings between Masada and the
Sellers with respect to such subject matter. No change, modification,
extension, termination, discharge, abandonment or waiver of this Agreement or
any of its provisions, nor any representation, promise or condition relating to
this Agreement, will be binding upon the parties unless made in writing and
signed by the parties.
11. Interpretation. The descriptive headings of the Sections are
for ease of reference only and will in no way affect or be used to construe or
interpret this Agreement. All references to Sections and subsections contained
in this Agreement are references to the Sections and subsections of this
Agreement. The terms and conditions of this Agreement will not be construed
against this drafter. The word "including" means "including without
limitation."
12. Remedies Cumulative. It is agreed that the rights and
remedies herein provided in case of any default or breach by the Sellers of
this Agreement are cumulative and will not affect in any manner any other
remedies that Masada may have by reason of such default or breach by the
Sellers. The exercise of any right or remedy will be without prejudice to the
right to exercise any other right or remedy provided herein, by law or by
equity.
13. Waiver. No waiver of any right or remedy allowed hereunder
will be implied by the failure to enforce any such right or remedy. No express
waiver will affect any such right or remedy other than that to which the waiver
is applicable and only for that occurrence.
14. Parties in Interest. This Agreement is binding upon and
inures to the benefit of Masada and its successors and assigns and the
permitted successors and assigns of the Sellers.
4
<PAGE> 5
15. Assignment. Masada has the right to assign this Agreement to
any third party without the consent of the Sellers. The Sellers have no right
to assign this Agreement.
16. Governing Law. This Agreement and the rights and the
obligations of the parties are governed by and construed and enforced in
accordance with the laws of the State of Colorado without regard to its
conflicts of law provisions.
17. Joint and Several Obligations. The Sellers acknowledge that
all of their agreements and covenants contained in this Agreement are made on a
joint and several basis.
18. Expenses. Masada and the Sellers each agree to pay all of
their respective costs and expenses incident to the negotiation and preparation
of this Agreement and to the performance and compliance with all agreements and
conditions contained herein on their part to be performed or complied with,
including the fees and costs of their counsel and accountants; provided,
however, that the Sellers agree to pay all of Masada's reasonable legal fees
and costs in this event Masada must go to court to enforce this Agreement.
19. Counterparts; Telecopy. This Agreement may be executed in one
or more counterparts, each of which when taken together all comprise one
instrument. Delivery of executed signature pages hereof by facsimile
transmission will constitute effective and binding execution and delivery.
20. Consultation. The Sellers acknowledge that they have: (a)
carefully read and fully understand all of the provisions of this Agreement,
and (b) had an opportunity to consult with their respective attorneys prior to
executing this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-----------------------------------------
Its: Vice President
----------------------------------------
/s/ Harvey Sender
--------------------------------------------
HARVEY SENDER, AS TRUSTEE for the Bankruptcy
Estates of (i) InterCap Funds Joint Venture,
(ii) Security Data Group of California, Inc.
and (iii) IMIF IV-C Service Corp.
5
<PAGE> 1
ACQUIRED ACCOUNTS MONITORING AGREEMENT
THIS MONITORING AGREEMENT, dated as of March 28th, 1996, is entered
into between Masada Security, Inc., a Delaware corporation ("Masada"), and
Harvey Sender, as Trustee ("Trustee") for the bankruptcy estates of InterCap
Funds Joint Venture, a Colorado general partnership ("Venture"), Security Data
Group of California, Inc., a California corporation ("SDG"), IMIF IV-C Service
Corp., a Colorado corporation ("Service") (the bankruptcy estates of Venture,
SDG, and Service are collectively referred to as "Seller").
Recitals
A. Masada is purchasing certain security alarm accounts
described in Exhibit A attached hereto (the "Alarm Accounts") from Seller
pursuant to that certain Asset Purchase and Sale Agreement, dated on or about
March 27, 1996 (the "Purchase Agreement"), and will own the rights under
customer contracts (the "Contracts") pursuant to which it will furnish certain
services to subscribers related to the Alarm Accounts (the "Account
Subscribers").
B. Seller is in the business of owning and operating
alarm accounts and is experienced in monitoring and servicing security alarm
systems and billing and collecting monitoring and servicing fees.
C. Masada desires that Seller furnish certain monitoring
services for Masada in accordance with the terms of this Agreement.
THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Appointment of Seller. Masada hereby
appoints and authorizes Seller, and Seller hereby accepts such appointment, to
perform Monitoring Services (as hereinafter defined) for and in connection with
the Alarm Accounts upon the terms and conditions set forth herein.
2. Consideration. During the Term (as defined in
Paragraph 8) of this Agreement, Seller shall be entitled to charge Masada $4.75
for each Alarm Account for which Seller provides the Monitoring Services. Such
fees shall be paid in arrears and shall be prorated for any period which is
less than thirty (30) days during which such Monitoring Services are provided.
Notwithstanding anything herein to the contrary, the minimum fee for which
Masada shall pay to Seller hereunder shall be $12.00 per Alarm Account (other
than Alarm Accounts with Florida customers for which Seller provides Monitoring
Services at its Jacksonville central station) for which Seller provides
Monitoring Services at any time during the Term of this Agreement.
3. Maintenance of Facilities. Seller shall use
all reasonable and necessary efforts, consistent with its past custom and
practice, to (a) use and maintain its present monitoring facilities (the
"Facilities") in conformity and compliance with this Agreement and all
applicable governmental laws, ordinances, regulations and rules; and, (b) pay
for and continue in full force and effect all necessary federal, state and
<PAGE> 2
city licenses, permits, certificates and other authorizations of any kind
required for the use and operation of the Facilities and/or the performance of
its obligations hereunder.
4. Ownership of Contracts and Accounts.
Notwithstanding the authority conferred by Masada on Seller under this
Agreement, from and after the closing under the Purchase Agreement, Masada
shall continue to own the Contracts and the Alarm Accounts, including the
proceeds thereof.
5. Relationship of Masada and Seller. The
relationship of Masada and Seller is one of principal and independent
contractor, respectively; neither Masada nor its personnel, agents, employees,
officers or directors shall be deemed employees or agents of Seller and neither
Seller nor its personnel, agents, employees, officers or directors shall be
deemed employees or agents of Masada. Seller shall hire and employ, in its
sole discretion and at its sole expense, all personnel (including independent
contractors) reasonably necessary for the proper performance of its duties
under this Agreement.
6. Scope of Seller's Limited Authority. Except
as specifically set forth in this Agreement, Seller shall have no right or
authority to incur any liability, debt or obligation of any kind, in the name
of, on behalf of, or as agent for Masada, or to make any commitment of any kind
or in any manner in the name of, on behalf of, or as agent for Masada.
7. Notices. Any notice or other communication
hereunder shall be in writing and shall be (i) delivered by hand, (ii)
delivered by an overnight courier service with guaranteed next day delivery,
(iii) sent by telecopy, or (iv) mailed by certified mail, postage prepaid,
return receipt requested, and addressed as follows:
<TABLE>
<CAPTION>
IF TO MASADA AT: WITH COPY TO:
<S> <C>
Masada Security, Inc. Burr & Forman
950 22nd Street North, Suite 800 420 North 20th Street, Suite 3100
Birmingham, Alabama 35203 Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson Attention: W. Lee Thuston, Esq.
FACSIMILE: 1-800-531-3293 FACSIMILE: (205) 458-5100
IF TO SELLER AT: WITH COPY TO:
Harvey Sender, Trustee Holland & Hart LLP
Katch, Sender & Wasserman, P.C. 555 17th Street, Suite 3200
1999 Broadway, Suite 2305 Denver, Colorado 80202-3979
Denver, Colorado 80202 Attn: Mary Ellen Scanlan, Esq.
FACSIMILE: (303) 296-7600 FACSIMILE: (303) 295-8261
</TABLE>
or to such other address as may have been furnished to the party giving notice
by the party to whom notice is to be given. Notice shall be deemed given upon
the earlier of (i) three days after deposit in the U.S. Mail by certified mail,
or (ii) actual receipt thereof.
8. Term. This Agreement shall be effective as
of the date hereof and shall continue for a period of ninety (90) days unless:
(i) Masada elects to renew this Agreement for additional thirty (30) day
2
<PAGE> 3
periods by giving Seller five (5) days advance written notice prior to
termination or (ii) sooner terminated as provided in Paragraph 12 hereof (the
"Term" herein), at which time this Agreement shall terminate in its entirety
(other than Paragraph 13 through 18, inclusive, which shall survive any such
termination).
9. Non-Interference. Seller, its agents,
employees and affiliates shall not in any manner, directly or indirectly,
interfere with Masada's business or take any other action that is designed,
intended, or might reasonably be anticipated to have the effect of adversely
affecting Masada's interest in any of the Alarm Accounts or the Contracts or
discourage Account Subscribers from maintaining the same business relationships
with Masada after the termination of this Agreement as were maintained with
Masada prior to the termination of this Agreement.
10. Insurance. Seller warrants and represents to
Masada that as of the date of this Agreement it has the benefits of and shall
maintain in full force and effect during the Term of this Agreement (i)
"occurrence basis" public liability insurance coverage in an amount equal to at
least $1,000,000 per occurrence; (ii) "occurrence basis" errors and omissions
insurance coverage in an amount equal to at least $1,000,000; and (iii) one or
more insurance policies covering the Facilities and including workmen's
compensation, public liability, property damage and fire and casualty insurance
and such insurance coverage shall remain in full force and effect during the
Term of this Agreement. In the event that during the term of this Agreement
any such insurance is canceled or notice of possible cancellation thereof is
given to Seller or its representatives, Seller shall promptly notify Masada
thereof.
11. Monitoring Services. During the Term, Seller
shall be responsible for all costs and expenses of operating the Facilities.
Except as otherwise indicated herein, for purposes of this Agreement, the term
"Monitoring Services" shall mean and include, without limitation: (i) at all
times promptly and diligently performing Masada's obligations under the
Contracts to provide monitoring services; and (ii) responding promptly to all
alarms and calls generated by equipment installed or operated pursuant to any
of the Contracts; transmitting notification of alarms promptly to the police,
fire or other appropriate authorities and/or person or persons whose name and
telephone numbers are set forth in instructions received by Seller from time to
time (unless there is reason to reasonably believe that an emergency condition
does not exist); responding to incoming calls from Account Subscribers to
cancel alarms; recording updates to the monitoring databases, maintaining hard
copies of customer information; coordinating subscriber system testing and
providing opening and closing reports to the extent required.
The parties recognize that the Alarm Accounts listed on Exhibit B
attached hereto are currently monitored by third parties on behalf of Seller
(the "Third Party Accounts"). All of Seller's obligations hereunder with
respect to the Alarm Accounts shall extend to the Third Party Accounts and
Seller shall continue to be solely responsible for all costs and charges
incurred as a result of third parties providing monitoring or other services
with respect to the Third Party Accounts. Seller represents and warrants that
no other person or entity has an ownership interest in the Third Party Accounts
and that no other person or entity has a right to continue monitoring the Third
Party Accounts or other right that could interfere with Masada's ability to own
and monitor the Third Party Accounts.
12. Termination. This Agreement shall terminate
upon the earliest to occur of any of the following:
(a) Upon the mutual consent in
writing of the parties;
3
<PAGE> 4
(b) At the election of Masada,
in its sole and absolute discretion, upon five (5) days advance written notice
to Seller; or
(c) Termination of this
Agreement as provided in Paragraph 8 hereof.
13. Covenants.
(a) In the event this Agreement
is terminated for any reason, Seller shall cause all information relating to
the Alarm Accounts to be delivered forthwith to Masada, in electronically
readable format on magnetic tape.
(b) Seller shall permit Masada,
or its duly designated representatives, to be present at the Facilities at all
times and to monitor Seller's transfer and delivery to Masada of all
information related to the Alarm Accounts and Seller's efforts to facilitate
and assist with the switching of the communications links for the Alarm
Accounts to Masada's central monitoring station.
(c) From time to time, upon the
written request of Masada, Seller shall deliver to Masada such additional
information as it may reasonably request to be informed of the status of the
Account Subscribers and the adequacy of the services being provided by Seller
hereunder.
(d) At least once each day,
Seller shall record (back up) all Account Subscriber data and monitoring
information pertaining to all Contracts and Alarm Accounts subject to the terms
of this Agreement, in electronically readable format on magnetic tape.
14. Attorneys Fees. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
15. Arbitration. Any controversy or claim
arising out of or relating to this Agreement, the construction thereof, or
breach thereof, shall be settled by the arbitration provisions as set forth in
Article 10 of the Purchase Agreement.
16. No Third-Party Beneficiary. This Agreement
is made and entered into by the parties for their sole purpose and benefit.
There is no third-party beneficiary to this Agreement, and nothing contained
herein shall be deemed, directly or indirectly, expressly or impliedly, to
create any third-party beneficiary to this Agreement.
17. Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns; provided,
however, that, neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by either party without the prior written
consent of the other party.
4
<PAGE> 5
18. General Provisions.
(a) This Agreement may not be
amended nor may any provision of this Agreement be waived, unless such
amendment or waiver is set forth in writing and executed by the party to be
bound thereby. This Agreement embodies the entire understanding and agreement
of the parties with regard to the subject matter hereof, and supersedes any and
all negotiations, understandings or agreements with respect thereto; provided,
however, that the Purchase Agreement remains in full force and effect except as
expressly modified by the terms of this Agreement;
(b) No prior course of dealing
between or among any persons having any interest in this Agreement and no
course of performance of this Agreement shall be deemed effective to modify,
amend or discharge any part of this Agreement or any rights or obligations of
any person under or by reason of this Agreement;
(c) Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
agreement is held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement;
(d) This Agreement was
collectively prepared by each of the parties hereto. No ambiguity with respect
to any provision of this Agreement shall be construed against any party, and no
provision of this Agreement shall be interpreted against any party, because
such party or its legal representation may have drafted such provision; and
(e) The laws of the State of
Colorado, without regard to any conflict of laws provisions thereof, shall
govern all questions concerning the construction, validity and interpretation
of this Agreement and the performance of the obligations imposed hereby.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-----------------------------------------
Its: Vice President
----------------------------------------
/s/ Harvey Sender
--------------------------------------------
HARVEY SENDER, AS TRUSTEE for the Bankruptcy
Estates of (i) InterCap Funds Joint Venture,
(ii) Security Data Group of California, Inc.
and (iii) IMIF IV-C Service Corp.
5
<PAGE> 1
REJECTED ACCOUNTS MONITORING AGREEMENT
THIS MONITORING AGREEMENT, dated as of March 28, 1996, is entered
into between Masada Security, Inc., a Delaware corporation ("Masada"), and
Harvey Sender, as Trustee for the bankruptcy estates of InterCap Funds Joint
Venture, a Colorado general partnership ("Venture"), Security Data Group of
California, Inc., a California corporation ("SDG"), IMIF IV-C Service Corp., a
Colorado corporation ("Service") (the bankruptcy estates of Venture, SDG, and
Service are collectively referred to as "Seller").
Recitals
A. Masada purchased certain security alarm accounts from Seller
pursuant to that certain Asset Purchase and Sale Agreement, dated on or about
March 27, 1996 (the "Purchase Agreement").
B. Section 1.8 of the Purchase Agreement provides that certain
nonperforming security alarm accounts described in Exhibit A attached hereto
(the "Alarm Accounts") shall be reconveyed by Masada to Seller.
C. Seller desires that Masada furnish certain monitoring services for
Seller in accordance with the terms of this Agreement.
THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Appointment of Masada. Seller hereby appoints and authorizes
Masada, and Masada hereby accepts such appointment, to perform Monitoring
Services (as hereinafter defined) for and in connection with the Alarm Accounts
upon the terms and conditions set forth herein.
2. Consideration. Masada is agreeing to perform its obligations
hereunder in consideration of a flat fee of $5.00 for each Alarm Account for
each thirty (30) day period, which amount is subject to proration based upon the
actual number of days that Monitoring Services are provided.
3. Maintenance of Facilities. Masada shall use all reasonable and
necessary efforts, consistent with its past custom and practice, to (a) use and
maintain its present Birmingham, Alabama monitoring facilities (the
"Facilities") in conformity and compliance with this Agreement and all
applicable governmental laws, ordinances, regulations and rules; and, (b) pay
for and continue in full force and effect all necessary federal, state and city
licenses, permits, certificates and other authorizations of any kind required
for the use and operation of the Facilities and/or the performance of its
obligations hereunder.
4. Ownership of Contracts and Accounts. Notwithstanding the
authority conferred by Seller on Masada under this Agreement, from and after the
reconveyance of the Alarm Accounts from Masada to Seller, Seller shall continue
to own the Alarm Accounts and the related contracts, including the proceeds
thereof.
<PAGE> 2
5. Relationship of Seller and Masada. The relationship of Seller and
Masada is one of principal and independent contractor, respectively; neither
Seller nor its personnel, agents, employees, officers or directors shall be
deemed employees or agents of Masada and neither Masada nor its personnel,
agents, employees, officers or directors shall be deemed employees or agents of
Seller. Masada shall hire and employ, in its sole discretion and at its sole
expense, all personnel (including independent contractors) reasonably necessary
for the proper performance of its duties under this Agreement.
6. Scope of Masada's Limited Authority. Except as specifically set
forth in this Agreement, Masada shall have no right or authority to incur any
liability, debt or obligation of any kind, in the name of, on behalf of, or as
agent for Seller, or to make any commitment of any kind or in any manner in the
name of, on behalf of, or as agent for Seller.
7. Notices. Any notice or other communication hereunder shall be in
writing and shall be (i) delivered by hand, (ii) delivered by an overnight
courier service with guaranteed next day delivery, (iii) sent by telecopy, or
(iv) mailed by certified mail, postage prepaid, return receipt requested, and
addressed as follows:
<TABLE>
<S> <C>
IF TO MASADA AT: WITH COPY TO:
Masada Security, Inc. Burr & Forman
950 22nd Street North, Suite 800 420 North 20th Street, Suite 3100
Birmingham, Alabama 35203 Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson Attention: W. Lee Thuston, Esq.
FACSIMILE: 1-800-531-3293 FACSIMILE: (205) 458-5100
IF TO SELLER AT: WITH COPY TO:
Harvey Sender, Trustee Holland & Hart LLP
Katch, Sender & Wasserman, P.C. 555 17th Street, Suite 3200
1999 Broadway, Suite 2305 Denver, Colorado 80202-3979
Denver, Colorado 80202 Attn: Mary Ellen Scanlan, Esq.
FACSIMILE: (303) 296-7600 FACSIMILE: (303) 295-8261
</TABLE>
or to such other address as may have been furnished to the party giving notice
by the party to whom notice is to be given. Notice shall be deemed given upon
the earlier of (i) three days after deposit in the U.S. Mail by certified mail,
or (ii) actual receipt thereof.
8. Term. This Agreement shall be effective as of the date hereof and
shall continue for a period of three (3) thirty (30) day periods unless sooner
terminated as provided in Paragraph 12 hereof (the "Term"), at which time this
Agreement shall terminate in its entirety (other than Paragraph 13 through 18,
inclusive, which shall survive any such termination).
9. Non-Interference. Masada, its agents, employees and affiliates
shall not in any manner, directly or indirectly, interfere with Seller's
business or take any other action that is designed, intended, or might
reasonably be anticipated to have the effect of adversely affecting Seller's
interest in any of the
2
<PAGE> 3
Alarm Accounts or the related contracts or discourage the Alarm Account
customers from maintaining the same business relationships with Seller after
the termination of this Agreement as were maintained with Seller prior to the
termination of this Agreement.
10. Insurance.
Masada warrants and represents to Seller that as of the date of
this Agreement it has the benefits of and shall maintain in full force and
effect during the Term of this Agreement (i) public liability insurance coverage
in an amount equal to at least $1,000,000 per occurrence; (ii) errors and
omissions insurance coverage in an amount equal to at least $1,000,000; and
(iii) one or more insurance policies covering the Facilities and including
workmen's compensation, public liability, property damage and fire and casualty
insurance and such insurance coverage shall remain in full force and effect
during the Term of this Agreement. In the event that during the term of this
Agreement any such insurance is canceled or notice of possible cancellation
thereof is given to Masada or its representatives, Masada shall promptly notify
Seller thereof.
11. Monitoring Services. Except as otherwise indicated herein, for
purposes of this Agreement, the term "Monitoring Services" shall mean and
include, without limitation: (i) at all times promptly and diligently performing
Seller's obligations under the contracts to provide monitoring services; and
(ii) responding promptly to all alarms and calls generated by equipment
installed or operated pursuant to any of the contracts; transmitting
notification of alarms promptly to the police, fire or other appropriate
authorities and/or person or persons whose name and telephone numbers are set
forth in instructions received by Masada from time to time (unless there is
reason to reasonably believe that an emergency condition does not exist);
responding to incoming calls from Alarm Account customers to cancel alarms;
recording updates to the monitoring databases, maintaining hard copies of
customer information; coordinating subscriber system testing and providing
opening and closing reports to the extent required.
12. Termination. This Agreement shall terminate upon the earliest to
occur of any of the following:
(a) Upon the mutual consent in writing of the parties;
(b) At the election of Seller, in its sole and absolute
discretion, upon five (5) days advance written notice to Masada; or
(c) Termination of this Agreement as provided in Paragraph 8
hereof.
13. Covenants.
(a) In the event this Agreement is terminated for any reason,
Masada shall cause all information relating to the Alarm Accounts to be
delivered forthwith to Seller, in electronically readable format on magnetic
tape.
(b) Masada shall permit Seller, or its duly designated
representative, upon reasonable notice, the right during normal business hours
to review Masada's records regarding the Alarm Accounts from time to time, for
the purpose of determining the status of the Alarm Account customers.
3
<PAGE> 4
(c) From time to time, upon the written request of Seller,
Masada shall deliver to Seller such additional information as it may reasonably
request to be informed of the status of the Alarm Account customers and the
adequacy of the services being provided by Masada hereunder.
(d) At least once each day, Masada shall record (back up) all
Alarm Account customer data and monitoring information pertaining to all
contracts and Alarm Accounts subject to the terms of this Agreement, in
electronically readable format on magnetic tape.
14. Attorneys Fees. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
15. Arbitration. Any controversy or claim arising out of or relating
to this Agreement, the construction thereof, or breach thereof, shall be settled
by the arbitration provisions as set forth in Article 10 of the Purchase
Agreement.
16. No Third-Party Beneficiary. This Agreement is made and entered
into by the parties for their sole purpose and benefit. There is no third-party
beneficiary to this Agreement, and nothing contained herein shall be deemed,
directly or indirectly, expressly or impliedly, to create any third-party
beneficiary to this Agreement.
17. Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that, neither
this Agreement nor any of the rights, interests or obligations hereunder may be
assigned by either party without the prior written consent of the other party.
18. General Provisions.
(a) This Agreement may not be amended nor may any provision of
this Agreement be waived, unless such amendment or waiver is set forth in
writing and executed by the party to be bound thereby. This Agreement embodies
the entire understanding and agreement of the parties with regard to the subject
matter hereof, and supersedes any and all negotiations, understandings or
agreements with respect thereto; provided, however, that the Purchase Agreement
remains in full force and effect except as expressly modified by the terms of
this Agreement;
(b) No prior course of dealing between or among any persons
having any interest in this Agreement and no course of performance of this
Agreement shall be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any person under or by reason of
this Agreement;
(c) Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
4
<PAGE> 5
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement;
(d) This Agreement was collectively prepared by each of the
parties hereto. No ambiguity with respect to any provision of this Agreement
shall be construed against any party, and no provision of this Agreement shall
be interpreted against any party, because such party or its legal representation
may have drafted such provision; and
(e) The laws of the State of Colorado, without regard to any
conflict of laws provisions thereof, shall govern all questions concerning the
construction, validity and interpretation of this Agreement and the performance
of the obligations imposed hereby.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first set forth above.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-----------------------------------
Its: Vice President
-----------------------------------
/s/ Harvey Sender
--------------------------------------
HARVEY SENDER, AS TRUSTEE for the
Bankruptcy Estates of (i) InterCap Funds
Joint Venture, (ii) Security Data Group of
California, Inc. and (iii) IMIF IV-C
Service Corp.
5
<PAGE> 1
CREDIT AGREEMENT
AGREEMENT dated as of March 28, 1996 by and among CIBC INC. ("CIBC"),
SUNTRUST BANK, CENTRAL FLORIDA, N.A. ("SunTrust") and the various other
financial institutions which are now, or in accordance with ARTICLE XII
hereafter become, parties hereto by execution of the signature pages to this
Agreement or otherwise (collectively with CIBC and SunTrust, the "Lenders", and
each individually as a "Lender"); CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK
AGENCY ("Canadian Imperial-New York"), in its capacity as administrative agent
for the Lenders (in such capacity. together with its successors and assigns in
such capacity, the "Administrative Agent"); SunTrust, in its capacity as
co-agent for the Lenders(in such capacity, the "Co-Agent", and, together with
the Administrative Agent, the "Agents"); MASADA SECURITY, INC., a Delaware
corporation (the "Borrower"); and, by joinder hereto solely in connection with
the provisions of SECTION 1.17, CANADIAN IMPERIAL BANK OF COMMERCE (the
"Issuing Bank"). Capitalized terms used in this Agreement without definition
have the meanings assigned to them in ARTICLE XIII.
RECITALS
1. The Borrower and Kristynik Security Systems, Inc., a Texas corporation
which is the Borrower's sole Subsidiary (the "Austin Subsidiary"), own and
operate certain security monitoring assets in markets located in the States of
Alabama, California, Florida, Georgia, Louisiana, Maryland, Oklahoma, Texas and
Virginia, and the District of Columbia.
2. The Borrower desires to obtain funds from the Lenders which are to be
applied: (a) to repay in full existing indebtedness of the Borrower in the
aggregate amount of up to $16,000,000; (b) to finance the acquisition of
certain security monitoring assets from InterCap Funds Joint Venture and its
Affiliates (the InterCap Acquisition") and Secure America, Inc. (the "Secure
America Acquisition"); (c) to pay Closing Costs in connection with such
Acquisitions and the transactions contemplated by this Agreement; (d) to make
certain additional Acquisitions as permitted by the terms of this Agreement;
(e) to make Capital Expenditures; and (f) for working capital purposes.
3. The Lenders require that the Borrower secure its obligations to the
Lenders hereunder by granting to the Administrative Agent on behalf of the
Lenders a valid, perfected, first priority lien on and security interest in all
of the assets of the Borrower.
4. The Lenders desire that each of Masada Security Holdings, Inc., a
Delaware corporation which wholly owns the outstanding capital stock of the
Borrower (the "Parent"), and the Austin Subsidiary each guarantee the
Borrower's obligations to the Lenders hereunder and secure such guaranties
with, in the case of the Parent, a pledge of such capital stock of the Borrower
and, in the case of the Austin Subsidiary, a pledge of the outstanding capital
stock of the Austin Subsidiary and
<PAGE> 2
a valid, perfected, first priority lien on and security interest in all of the
assets of the Austin Subsidiary.
5. The Lenders are willing to provide such funds, subject to the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of:
I. GENERAL TERMS
SECTION 1.01. REVOLVING CREDIT LOANS.
(A) REVOLVING LOANS; LENDERS' COMMITMENTS. Each Lender, severally and not
jointly, agrees that, at the request of the Borrower and upon the terms and
subject to the conditions hereafter set forth, it will, from time to time from
the date hereof to the Expiration Date (as hereinafter defined) make revolving
loans to the Borrower (each a "Revolving Loan" or an "Advance" and together the
"Revolving Loans" or the "Advances") in the maximum principal amount at any one
time outstanding set forth opposite each Lender's name on SCHEDULE 1.01(A)
hereto (each of such amounts, as reduced from time to time pursuant to the
terms of this Agreement, being such Lender's "Commitment" and together for all
of the Lenders, the aggregate "Commitments"). The Revolving Loans shall be
made to the Borrower pro rata by each Lender in accordance with each
Commitment.
(B) REPAYMENT AT EXPIRATION DATE. During any time prior to September 30,
1997 (the "Expiration Date"), the Borrower may from time to time hereunder,
borrow, repay and reborrow ratably from each Lender up to the amount of such
Lender's Commitment (as from time to time reduced or restricted by the terms of
this Agreement). The outstanding balance of the Revolving Loans shall be due
and payable in full on the Expiration Date. The period from the date of this
Agreement to the Expiration Date shall be referred to herein as the "Revolving
Credit Period".
(C) LIMITATIONS ON ADVANCES. Notwithstanding any provision of this
Agreement to the contrary, the availability of the Revolving Loans hereunder
shall be subject to the following limitations:
(i) The aggregate principal amount of the Revolving Loans
outstanding and the face amount of all outstanding Letters of Credit (as
hereinafter defined) shall not at any time exceed an amount equal to the
product of the Borrower's Recurring Monthly Revenue for the month
immediately preceding the date of any proposed borrowing hereunder (after
giving effect for the purposes of such calculation to the Recurring
Monthly Revenue of any Permitted Acquisition proposed to be effected by
the proceeds of such Revolving Loans) multiplied by the number 22 (with
such product referred to herein as the "RMR Borrowing Ceiling"). Each
Request for Advance shall certify that the conditions of this SECTION
1.01(C)(I) have been complied with and shall demonstrate such compliance
in reasonable detail.
2
<PAGE> 3
(ii) All Advances which are to be applied to any proposed
acquisition by the Borrower (each an "Acquisition Advance") of the assets
or ownership interests in any Person in the Security Alarm Services
Business (each an "Acquisition") shall be subject to the following
limitations and shall be in compliance with the following conditions: (A)
the proceeds of each Acquisition Advance shall be used solely for the
purpose of effecting a Permitted Acquisition; and (B) after giving effect
to the proposed Acquisition, the Aggregate Purchase Prices shall not
exceed $25,000,000.
SECTION 1.02. REVOLVING CREDIT NOTES. The borrowings under SECTION 1.01
shall be evidenced by the Borrower's Revolving Credit Notes in the forms
attached hereto as SCHEDULES 1.02(A) AND 1.02(B), respectively (each a
"Revolving Credit Note" or a "Note" and, collectively with all replacements
thereof and substitutions therefor, the "Notes"), payable to the order of each
Lender, respectively.
SECTION 1.03. INTEREST ON THE NOTES.
(A) INTEREST RATE. Subject to the terms and conditions set forth in this
SECTION 1.03, the Borrower may elect an interest rate for the outstanding
principal balance from time to time of the Notes, or any portion thereof, based
on either the Base Rate or the applicable LIBOR Rate and determined as follows:
(i) the rate for any Base Rate Loan shall be the Base Rate plus 2.25%;
and
(ii) the rate for any LIBOR Loan shall be the applicable LIBOR Rate
plus 3.25%.
(B) INTEREST PAYMENT DATES. Interest on the Loans shall be payable in
arrears, without setoff, deduction or counterclaim, as follows:
(i) Subject to the provisions of SECTION 1.12, interest on each Base
Rate Loan shall be due and payable on the last Business Day of each
month, commencing March 31, 1996, and at maturity, whether by reason of
acceleration, prepayment, payment or otherwise, provided that interest
accrued on any Base Rate Loan which is converted to a LIBOR Loan shall be
paid on the last Business Day of the month following the date of such
conversion (or, if accrued on a Base Rate Loan which is so converted on
the last Business Day of a month, on such Business Day). The interest
rate on Base Rate Loans shall change on the date of any change in the
applicable Base Rate.
(ii) Interest on each LIBOR Loan shall be due and payable on the
last day of the Interest Period applicable to such Loan and, if such
Interest Period exceeds three (3) months, on the last day of every third
month following the first day of such Interest Period until and at
maturity, whether by reason of acceleration, prepayment, payment or
otherwise.
3
<PAGE> 4
(C) COMPUTATIONS. Interest on Base Rate Loans shall be computed on the
basis of the actual number of days elapsed over a 365-day year. Interest on
LIBOR Loans shall be computed on the basis of the actual number of days elapsed
over a 360-day year.
(D) EFFECT OF DEFAULTS, ETC.
(i) During the existence of any Event of Default, the outstanding
principal under the Notes and, to the extent permitted by applicable law,
overdue interest, fees or other amounts payable hereunder or under the
other Transaction Documents shall bear interest, from and including the
date such Event of Default occurred until such Event of Default is
waived, at a rate per annum (computed on the basis of the actual number
of days elapsed over a 365-day year) equal to (a) 4.25% above the Base
Rate, with respect to Base Rate Loans and overdue interest, fees and
other expenses, or (b) 5.25% above the applicable LIBOR Rate, with
respect to LIBOR Loans.
(ii) Nothing in this SECTION 1.03(D) shall affect the rights of the
Agents or the Lenders to exercise any rights or remedies under the
Transaction Documents or applicable law arising upon the occurrence of an
Event of Default.
SECTION 1.04. REQUESTS FOR ADVANCES; TYPES OF LOANS.
(A) REQUESTS FOR ADVANCES. The Borrower shall provide to the
Administrative Agent a written Request for Advances in connection with the
disbursement of the proceeds of any Loans hereunder not later than 11:00 A.M.
(New York time) on the Business Day (or, if any portion of such Loans are LIBOR
Loans, not later than 11:00 A.M. (New York time) on the third Business Day)
prior to the date such Loans are to be made, by a written Request for Advances,
in the form of SCHEDULE 1.04(A) (each, a " Request for Advances"), signed by a
duly authorized representative of the Borrower and indicating (i) the date of
such Advances, (ii) whether such Advances shall be Base Rate Loans or LIBOR
Loans and, if so, the Interest Period therefor, and (iii) the use of proceeds
thereof, to the extent any such proceeds are not being applied to working
capital. The Administrative Agent shall promptly notify the Lenders of such
Request for Advances and the information contained therein. Such Request for
Advances shall be irrevocable and binding on the Borrower.
(B) CONVERSION TO A DIFFERENT TYPE OF LOAN. The Borrower may elect from
time to time to convert any outstanding Advances to Base Rate Loans or LIBOR
Loans, as the case may be, provided that (i) with respect to any such
conversion of LIBOR Loans to Base Rate Loans, the Borrower shall provide the
appropriate Interest Rate Option Notice by 11:00 A.M. (New York time) on the
date of such proposed conversion; (ii) with respect to any such conversion of
Base Rate Loans to LIBOR Loans, the Borrower shall provide the appropriate
Interest Rate Option Notice by 11:00 A.M. (New York time ) at least three
Business Days' prior to the date of such proposed conversion; (iii) with
respect to any such conversion of LIBOR Loans into Base Rate Loans, such
conversion shall only be made on the last day of the related Interest Period;
(iv) no Loans may be converted into LIBOR Loans when any Default has occurred
and is continuing; (v) the Borrower shall have no more than five LIBOR Loans
outstanding at any time, (vi) any
4
<PAGE> 5
conversion of less than all of the outstanding Base Rate Loans into LIBOR Loans
shall be in a minimum aggregate principal amount of $500,000 and, if greater,
an integral multiple of $100,000; and (vii) any conversion of less than all of
the outstanding LIBOR Loans into Base Rate Loans shall be in a minimum
aggregate principal amount of $250,000 and, if greater, an integral multiple of
$100,000. The Administrative Agent shall promptly notify the Lenders of such
Interest Rate Option Notice and the information contained therein.
(C) CONTINUANCE OF AN INTEREST RATE OPTION. The Borrower may continue any
LIBOR Loans as such upon the expiration of the related Interest Period by
providing to the Agent (i) an Interest Rate Option Notice in compliance with
the notice provisions set forth in SECTION 1.04(B) or (ii) standard written
instructions authorizing the automatic continuation of such Loans, which
instructions shall be effective until notice to the Administrative Agent by the
Borrower revoking the same (such notice to take effect no sooner than three
Business Days after receipt by the Administrative Agent); provided that no
LIBOR Loans may be continued when any Default has occurred and is continuing,
but shall be automatically converted to Base Rate Loans on the last day of the
first applicable Interest Period which ends during the continuance of such
Default. Base Rate Loans shall be deemed to continue as such until receipt of
an Interest Rate Option Notice requesting conversion thereof to LIBOR Loans.
(D) FORM OF NOTICE. Each Interest Rate Option Notice shall be
substantially in the form of SCHEDULE 1.04(D) and shall specify: (i) the
aggregate principal amount of Loans to be continued or converted; (ii) the
proposed date thereof; (iii) the Interest Period for such LIBOR Loans; and (iv)
whether such Loans shall be LIBOR Loans or Base Rate Loans.
SECTION 1.05. LOAN DISBURSEMENTS. The Loans shall be made by the Lenders
pro rata as provided in SECTION 1.15. Not later than 12:00 noon (New York
time), in the case of LIBOR Loans, or 2:00 P.M. (New York time), in the case of
Base Rate Loans, on the date specified for any Loans, each Lender shall make
available to the Administrative Agent the portion of the Loans to be made by it
on such date, in immediately available funds, for the account of the Borrower.
The amount so received by the Administrative Agent shall, subject to the terms
and conditions of this Agreement, be made available to the Borrower by
depositing the same in immediately available funds in the appropriate account
or accounts of the Borrower and by disbursing such funds as indicated in
writing in the related Request for Advances.
SECTION 1.06. PREPAYMENTS.
(A) VOLUNTARY PREPAYMENTS OF LOANS. The Borrower may prepay the Loans at
any time in whole or in part, from time to time, subject to the requirements of
SECTION 1.06(B), including any indemnification payments due in accordance with
SECTION 1.12 in respect of LIBOR Loans so prepaid.
(B) PREPAYMENT REQUIREMENTS. All voluntary prepayments of the Loans
hereunder shall be made upon not less than two (2) Business Days' prior written
notice to the Administrative Agent, provided that (i) any such prepayment shall
be in an aggregate principal amount equal to either (A) the then outstanding
principal amount of the Loans or (B) an amount
5
<PAGE> 6
that is $500,000 or a greater amount which is an integral multiple thereof, and
(ii) any such payment shall be accompanied by any indemnification payments due
in accordance with SECTION 1.12 in respect of any Loans so prepaid. Each
notice of prepayment shall specify the prepayment date and the aggregate
principal amount of the Loans to be prepaid.
(C) APPLICATIONS OF PREPAYMENTS. All prepayments of the Notes under this
SECTION 1.06 shall be made without set-off, deduction or counterclaim, shall
(unless otherwise determined by the Lenders) be applied to the Lenders' Notes
pro rata as provided in SECTION 1.15 and, unless otherwise specified in this
SECTION 1.06, shall be applied first to unpaid fees and interest due and
payable under this Agreement or the Notes and then to pay principal of the
Notes, provided that applications of prepayments to principal shall be made
first to Base Rate Loans and then to LIBOR Loans.
SECTION 1.07. TERMINATION OR REDUCTION OF COMMITMENT BY BORROWER. At any
time and from time to time prior to the Expiration Date, upon at least three
(3) Business Days written notice to the Administrative Agent and without
premium or penalty, the Borrower may permanently terminate or permanently
reduce the Commitments. Any such reduction shall be in an amount of not less
than $100,000 or such lesser amount as equals the then unused aggregate amount
of the Commitments. Simultaneously with any such termination or reduction of
the Commitment, the Borrower shall (a) prepay the outstanding principal balance
of the Notes in full or in such amount, if any, as is necessary to bring the
principal amount thereof within the limits of the aggregate Commitments, as so
reduced, and (b) pay to the Administrative Agent, for the ratable benefit of
the Lenders, any then accrued but unpaid Commitment Fee on the terminated
Commitments or on the portion of the Commitments terminated pursuant to any
reduction thereof, together with any indemnification payments due in accordance
with SECTION 1.12.
SECTION 1.08. FEES.
(A) COMMITMENT FEE. The Borrower shall pay to the Administrative Agent,
for the ratable account of each Lender, a non-refundable fee (the "Commitment
Fee") on the aggregate daily unused portion of the aggregate Commitments
(whether or not available under SECTION 1.01(C)) from the Closing Date to and
including the Expiration Date, at the rate of one-half of one percent (1/2%)
(computed on the basis of the actual number of days elapsed over a 365-day
year), payable quarterly on each March 31, June 30, September 30 and December
31 (the "Quarterly Dates") of each year, without setoff, deduction or
counterclaim, with a final payment on the earliest to occur of (i) the
Expiration Date, (ii) the termination of the Commitments or (iii) the maturity
of the Notes, whether by payment, prepayment, acceleration or otherwise (such
earliest date being referred to as the "Maturity Date").
(B) FACILITY FEES. The Borrower shall pay each of the Lenders a
non-refundable facility fee in the respective amount specified in the
applicable Facility Fee Letter (together, the "Facility Fees").
(C) FINANCING FEE. If the Commitments shall not have been terminated and
all amounts outstanding under the Notes, this Agreement and the other
Transaction Documents paid in
6
<PAGE> 7
full in cash (the date as of which such events shall have occurred being
referred to herein as the "Payment Date") by September 30, 1996, then the
Borrower shall pay the Administrative Agent, for the ratable benefit of the
Lenders, a non-refundable financing fee (the "Financing Fee" and, together with
the Commitment Fee and the Facility Fees, the "Fees") equal to (i) the number
of days following the Closing Date through and including the Payment Date, (ii)
minus 180, (iii) multiplied by .0275%, (iv) multiplied by the average aggregate
Commitments since the Closing Date, payable on the Maturity Date, with respect
to the Financing Fee accrued through such date, and, if applicable, on the
Payment Date.
(D) AGENCY FEE. The Borrower shall pay the Administrative Agent a
non-refundable agency fee in the amount specified in the Fee Letter to which it
is a party.
SECTION 1.09. REQUIREMENTS OF LAW.
(a) In the event that any Regulatory Change shall:
(i) change the basis of taxation of any amounts payable to any Lender
under this Agreement or the Notes in respect of any Loans, including
without limitation LIBOR Loans (other than taxes imposed on the overall net
income of such Lender);
(ii) impose or modify any reserve, compulsory loan assessment, special
deposit or similar requirement relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, any office
of such Lender (including any of such Loans or any deposits referred to in
the definition of "LIBOR Base Rate" in ARTICLE XIII); or
(iii) impose any other conditions affecting this Agreement in respect
of Loans, including without limitation LIBOR Loans (or any of such
extensions of credit, assets, deposits or liabilities);
and the result of any of the foregoing shall be to increase such Lender's costs
of making or maintaining any Loans, including without limitation LIBOR Loans or
any Commitment, or to reduce any amount receivable by such Lender hereunder in
respect of any of its LIBOR Loans or any Commitment, in each case only to the
extent that such additional amounts are not included in the LIBOR Base Rate or
Base Rate applicable to such Loans, then the Borrower shall pay on demand to
such Lender, through the Administrative Agent, and from time to time as
specified by such Lender, such additional amounts as such Lender shall
reasonably determine are sufficient to compensate such Lender for such
increased cost or reduced amount receivable.
(b) If at any time after the date of this Agreement any Lender shall have
determined that the applicability of any law, rule, regulation or guideline
adopted pursuant to or arising out of the July 1988 report of the Basle
Committee on Lending Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or
the adoption or implementation of any Regulatory Change regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or
comparable agency charged with the interpretation or
7
<PAGE> 8
administration thereof (whether or not having the force of law), has or will
have the effect of reducing the rate of return on such Lender's capital or on
the capital of such Lender's holding company, if any, as a consequence of the
existence of its obligations hereunder to a level below that which such Lender
or its holding company could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's policies with respect to
capital adequacy) by an amount reasonably deemed by such Lender to be material,
then from time to time following written notice by such Lender to the Borrower
as provided in paragraph (b) of this subsection, within fifteen (15) days after
demand by such Lender, the Borrower shall pay to such Lender, through the
Administrative Agent, such additional amount or amounts as such Lender shall
reasonably determine will compensate such Lender or such corporation, as the
case may be, for such reduction, provided that to the extent that any or all of
the Borrower's liability under this Section arises following the date of the
adoption of any such Regulatory Change (the "Effective Date"), such
compensation shall be payable only with respect to that portion of such
liability arising after notice of such Regulatory Change is given by such
Lender to the Borrower (unless such notice is given within sixty (60) days
after the Effective Date, in which case such compensation shall be payable in
full).
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this Section, it shall promptly notify the Borrower of the event by
reason of which it has become so entitled. A certificate setting forth in
reasonable detail the computation of any additional amounts payable pursuant to
this Section submitted by such Lender to the Borrower shall be delivered to the
Borrower and the other Lenders promptly after the initial incurrence of such
additional amounts and shall be conclusive in the absence of manifest error.
The covenants contained in this Section shall survive the termination of this
Agreement and the payment of the outstanding Notes. No failure on the part of
any Lender to demand compensation under paragraph (a) or (b) above on any one
occasion shall constitute a waiver of its rights to demand compensation on any
other occasion. The protection of this Section shall be available to each
Lender regardless of any possible contention of the invalidity or
inapplicability of any law, regulation or other condition which shall give rise
to any demand by such Lender for compensation thereunder.
SECTION 1.10. LIMITATIONS ON LIBOR LOANS; ILLEGALITY.
(a) Anything herein to the contrary notwithstanding, if, on or prior to
the determination of an interest rate for any LIBOR Loans for any applicable
Interest Period, the Administrative Agent shall determine (which determination
shall be conclusive absent manifest error) that:
(i) by reason of any event affecting United States money markets or
the London interbank market, quotations of interest rates for the relevant
deposits are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining the rate of interest for such Loans
under this Agreement; or
(ii) the rates of interest referred to in the definition of "LIBOR
Base Rate" in ARTICLE X, on the basis of which the rate of interest on any
LIBOR Loans for such period is
8
<PAGE> 9
determined, do not accurately reflect the cost to the Lenders of making or
maintaining such LIBOR Loans for such period;
then the Administrative Agent shall give the Borrower prompt notice thereof
(and shall thereafter give the Borrower prompt notice of the cessation, if any,
of such condition), and so long as such condition remains in effect, the
Lenders shall be under no obligation to make LIBOR Loans or to convert Base
Rate Loans into LIBOR Loans and the Borrower shall, on the last day(s) of the
then current Interest Period(s) for any outstanding LIBOR Loans, either prepay
such LIBOR Loans in accordance with SECTION 1.01 or convert such Loans into
Base Rate Loans in accordance with SECTION 1.04.
(b) Notwithstanding any other provision herein, if for any reason a Lender
shall be unable to make or maintain LIBOR Loans as contemplated by this
Agreement, such Lender shall provide prompt written notice to the Borrower and
(i) such Lender's commitment hereunder to make LIBOR Loans, continue LIBOR
Loans as such and convert Base Rate Loans to LIBOR Loans shall thereupon
terminate and (ii) such Lender's Loans then outstanding as LIBOR Loans, if any,
shall be converted automatically to Base Rate Loans on the respective last days
of the then current Interest Periods with respect to such Loans or within such
earlier period as required by law. If any such conversion of a LIBOR Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, and if the reason for such Lender's inability to make or
maintain LIBOR Loans as contemplated by this Agreement is a Regulatory Change,
then the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to SECTION 1.12.
SECTION 1.11. TAXES.
(a) All payments made by the Borrower under this Agreement and the Notes
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority
(all such taxes, levies, imposts, duties, charges, fees, deductions and
withholdings being hereinafter called "Taxes"); provided, however, that the
term "Taxes" shall not include net income taxes, franchise taxes (imposed in
lieu of net income taxes) and general intangibles taxes (such as those imposed
by the State of Florida) imposed on the Agents or any Lender, as the case may
be, as a result of a present or former connection or nexus between the
jurisdiction of the government or taxing authority imposing such tax (or any
political subdivision or taxing authority thereof or therein) and either Agent
or such Lender other than that arising solely from such Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement, the Notes or any of the Collateral
Documents. If any Taxes are required to be withheld from any amounts payable
to either Agent or any Lender hereunder or under the Notes, the amounts so
payable to such Agent or such Lender shall be increased to the extent necessary
to yield to such Agent or such Lender (after payment of all Taxes) interest or
any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the Notes. Whenever any Taxes are payable by
the Borrower in respect of this Agreement or the Notes, as promptly as possible
thereafter the
9
<PAGE> 10
Borrower shall send to the Administrative Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original
official receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Taxes when due to the appropriate taxing authority or
fails to remit to the Administrative Agent the required receipts or other
required documentary evidence, the Borrower shall indemnify the Agents and the
Lenders for any incremental taxes, interest or penalties that may become
payable by either Agent or any Lender as a result of any such failure. If,
after any payment of Taxes by the Borrower under this Section, any part of any
Tax paid by either Agent or any Lender is subsequently recovered by such Agent
or such Lender, such Agent or such Lender shall reimburse the Borrower to the
extent of the amount so recovered. A certificate of an officer of such Agent
or such Lender setting forth the amount of such recovery and the basis therefor
shall, in the absence of manifest error, be conclusive. The Agents and the
Lenders shall use reasonable efforts to notify the Borrower of their attempts,
if any, to obtain abatements of any such Taxes and the receipt by the Agents or
the Lenders of any funds in connection therewith. The agreements in this
subsection shall survive the termination of this Agreement and the payment of
the Notes and all other amounts payable hereunder.
(b) Each Lender, if any, that is not incorporated under the laws of the
United States or a state thereof agrees that prior to the date any payment is
required to be made to it hereunder it will deliver to the Borrower and the
Administrative Agent (i) two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 or successor applicable form, as the case may
be, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor
applicable form. Each such Lender also agrees to deliver to the Borrower and
the Administrative Agent two further copies of the said Form 1001 or 4224 and
Form W-8 or W-9, or successor applicable forms or other manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower, and
such extensions or renewals thereof as may reasonably be requested by the
Borrower or the Administrative Agent, unless in any such case an event
(including, without limitation, any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender so advises the Borrower and the Administrative Agent. Such Lender
shall certify (x) in the case of a Form 1001 or 4224, that it is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes and (y) in the case of a Form W-8 or W-9,
that it is entitled to an exemption from United States backup withholding tax.
SECTION 1.12. INDEMNIFICATION. The Borrower shall pay to the
Administrative Agent, for the account of each Lender, upon the request of such
Lender delivered to the Administrative Agent and thereafter delivered by the
Administrative Agent to the Borrower, such amount or amounts as shall
compensate such Lender for any loss (including, in the case of LIBOR Loans,
loss of profit), cost or expense incurred by such Lender (as reasonably
determined by such Lender) as a result of:
10
<PAGE> 11
(a) any payment or prepayment or conversion of any LIBOR Loan held by such
Lender on a date other than the last day of the Interest Period for such LIBOR
Loan (including without limitation any such payment, prepayment or conversion
required under SECTION 1.04 or 1.06, but excluding any such conversion
necessitated other than by a Regulatory Change as contemplated by SECTION
1.10); or
(b) any failure by the Borrower to borrow, convert into or continue a
LIBOR Loan on the date for such borrowing specified in the relevant Request for
Advances or Interest Rate Option Notice under SECTION 1.04 or otherwise; such
compensation to include, without limitation, an amount equal to: (i) any loss
or expense suffered by such Lender during the period from the date of receipt
of such early payment or prepayment or the date of such conversion or failure
to borrow, convert or continue to the last day of such Interest Period, if the
rate of interest obtainable by such Lender upon the redeployment of an amount
of funds equal to the LIBOR Loans so paid, prepaid or converted or as to which
such failure to borrow, convert or continue applies is less than the rate of
interest applicable to such LIBOR Loans for such Interest Period and (ii) any
loss or expense suffered by such Lender in liquidating LIBOR deposits prior to
maturity which such Lender is unable to redeploy and which correspond to the
LIBOR Loans so paid, prepaid or converted or as to which such failure to
borrow, convert or continue applies. The determination by each such Lender of
the amount of any such loss or expense, when set forth in a written notice
delivered to the Administrative Agent (and thereafter delivered by the
Administrative Agent to the Borrower), containing such Lender's calculation
thereof in reasonable detail, shall be presumed correct in the absence of
manifest error.
SECTION 1.13. PAYMENTS UNDER THE NOTES. All payments and prepayments made
by the Borrower of principal of, and interest on, the Notes and other sums and
charges payable under this Agreement, including without limitation the
Commitment Fee and any payments under SECTIONS 1.09, 1.11 and 1.12, shall be
made in immediately available funds to the Administrative Agent (as specified
in SECTION 13.03) for the accounts of the Lenders as provided in SECTION 1.15
and otherwise herein, not later than 2:00 P.M. (New York Time), on the date on
which such payment shall become due. The failure by the Borrower to make any
such payment by such hour shall not constitute a default hereunder so long as
payment is received later that day, provided that any such payment made after
2:00 P.M. (New York Time), on such due date shall be deemed to have been made
on the next Business Day for the purpose of calculating interest on amounts
outstanding on the Notes. The Borrower shall, at the time of making each
payment under this Agreement or the Notes, specify to the Administrative Agent
the Notes or amounts payable by the Borrower hereunder to which such payment is
to be applied (and in the event that it fails to so specify, or if an Event of
Default has occurred and is continuing, the Administrative Agent may distribute
such payments in such manner as the Required Lenders may direct or, absent such
direction, as it determines to be appropriate, subject to the provisions of
SECTION 1.15). Except as otherwise provided in the definition of "Interest
Period" with respect to LIBOR Loans, if any payment hereunder or under the
Notes shall be due and payable on a day which is not a Business Day, such
payment shall be deemed due on the next following Business Day and interest
shall be payable at the applicable rate specified herein through such extension
period. The Administrative Agent, or any Lender for whose account any such
payment is made, may (but shall not be obligated to) debit the amount of any
such payment which is not made by such time
11
<PAGE> 12
to any deposit account of the Borrower with the Administrative Agent or such
Lender, as the case may be. Each payment received by the Administrative Agent
under this Agreement or any Note for the account of a Lender shall be paid
promptly to such Lender, in immediately available funds, for the account of
such Lender for the Note in respect to which such payment is made.
SECTION 1.14. SET-OFF, ETC. The Borrower agrees that, in addition to (and
without limitation of) any right of set-off, bankers' lien or counterclaim a
Lender may otherwise have, each Lender shall be entitled, at its option, to
offset balances held by it for the account of the Borrower at any of its
offices, in Dollars or in any other currency, against any principal of or
interest on the Notes held by such Lender or other fees or charges owed to such
Lender hereunder which are not paid when due (regardless of whether such
balances are then due to the Borrower), in which case it shall promptly notify
the Borrower and the Administrative Agent thereof, provided that such Lender's
failure to give such notice shall not affect the validity thereof and (as
security for any Indebtedness hereunder) The Borrower hereby grants to the
Administrative Agent and the Lenders a continuing security interest in any and
all balances, credit, deposits, accounts or moneys of the Borrower maintained
with the Agent and any Lender now or hereafter. If a Lender shall obtain
payment of any principal, interest or other amounts payable under this
Agreement through the exercise of any right of set-off, banker's lien or
counterclaim or otherwise, it shall promptly purchase from the other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Note(s) held by the other Lenders in such amounts, and make
such other adjustments from time to time as shall be equitable, to the end that
all the Lenders shall share the benefit of such payment (net of any expenses
which may be incurred by such Lender in obtaining or preserving such benefit)
pro rata in accordance with the unpaid principal amounts of and interest on the
Note(s) held by each of them. To such end, the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or
otherwise) if such payment is rescinded or must otherwise be restored. The
Borrower agrees that any Lender or any other Person which purchases a
participation (or direct interest) in the Note(s) held by any or all of the
Lenders (each being hereinafter referred to as a "Participant") may exercise
all rights of set-off, bankers' lien, counterclaim or similar rights with
respect to such participation as fully as if such Participant were a direct
holder of Notes in the amount of such participation, provided that the Borrower
was notified of such purchase. Nothing contained herein shall be deemed to
require any Participant to exercise any such right or shall affect the right of
any Participant to exercise, and retain the benefits of exercising, any such
right with respect to any indebtedness or obligation of the Borrower, other
than the Borrower's indebtedness and obligations under this Agreement.
SECTION 1.15. PRO RATA TREATMENT; SHARING.
(a) Except to the extent otherwise provided herein: (i) each borrowing
from the Lenders under the Commitments shall be made from the Lenders, each
payment of the Commitment Fee and the Letter of Credit Fee under SECTIONS 1.08
and 1.18(B), respectively, shall be made to the Lenders and each participation
acquired by the Lenders under SECTION 1.18(D) shall be made by the Lenders pro
rata according to the amounts of their respective unused Commitments; (ii) the
principal amount of LIBOR Loans made by each Lender shall be determined on a
pro rata basis in accordance with its respective Commitment (when making
12
<PAGE> 13
Loans) or the outstanding principal amounts of the Loans owed to such Lender,
(in the case of conversions to or continuations of Loans as LIBOR Loans); (iii)
each payment and prepayment of principal of the Notes shall be made to the
Lenders pro rata in accordance with the respective unpaid principal amounts of
the respective Notes held by the Lenders; (iv) each payment of interest on the
Notes shall be made for the accounts of the Lenders and each payment of the
Financing Fee and any other sums and charges payable under this Agreement
(except for the Facility Fees, which are payable in accordance with the
Facility Fee Letters) shall be made to the Lenders pro rata in accordance with
the respective unpaid principal amounts of and interest on the Loans made by
each of them; (v) each payment under SECTION 1.09, 1.11 or 1.12 shall be made
to each Lender in the amount required to be paid to such Lender to adequately
indemnify or compensate such Lender for losses suffered or costs incurred by
such Lender as provided in such Section; and (vi) each distribution of cash,
property, securities or other value received by any Lender, directly or
indirectly, in respect of the Borrower's Indebtedness hereunder, whether
pursuant to any attachment, garnishment, execution or other proceedings for the
collection thereof or pursuant to any bankruptcy, reorganization, liquidation
or other similar proceeding, after payment of collection and other expenses as
provided herein and in the Collateral Documents (as hereinafter defined), shall
be apportioned among the Lenders pro rata in accordance with the respective
unpaid principal amounts of and interest on the Notes held by each of them.
(b) Notwithstanding the foregoing, if any Lender (a "Recovering Party")
shall receive any such distribution (a "Recovery") in respect thereof, such
Recovering Party shall pay to the Agent for distribution to the Lenders as set
forth herein their respective pro rata shares of such Recovery, as set forth
herein, unless the Recovering Party is legally required to return any Recovery,
in which case each party receiving a portion of such Recovery shall return to
the Recovering Party its pro rata share of the sum required to be returned
without interest. For purposes of this Agreement, calculations of the amount
of the pro rata share of each Lender shall be rounded to the nearest whole
dollar.
(c) The Borrower acknowledges and agrees that, if any Recovering Party
shall be obligated to pay to the other Lenders a portion of any Recovery
pursuant to SECTION 1.14(B) and shall make such recovery payment, the Borrower
shall be deemed to have satisfied their obligations in respect of Indebtedness
held by such Recovering Party only to the extent of the Recovery actually
retained by such Recovering Party after giving effect to the pro rata payments
by such Recovering Party to the other Lenders. The obligations of the Borrower
in respect of Indebtedness held by each other Lender shall be deemed to have
been satisfied to the extent of the amount of the Recovery distributed to each
such other Lender by the Recovering Party.
SECTION 1.16. NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless
the Administrative Agent shall have been notified in writing by a Lender or the
Borrower prior to the date on which such Lender or the Borrower is scheduled to
make payment to the Administrative Agent of (in the case of a Lender) the
proceeds of a Loan to be made by it hereunder or (in the case of the Borrower)
a payment to the Administrative Agent for the account of any or all of the
Lenders hereunder (such payment being herein referred to as a "Required
Payment"), which notice shall be effective upon actual receipt, that it does
not intend to make such Required
13
<PAGE> 14
Payment to the Administrative Agent, the Administrative Agent may (but shall
not be required to) assume that the Required Payment has been made and may (but
shall not be required to), in reliance upon such assumption, make the amount
thereof available to the intended recipient(s) on such date and, if such Lender
or the Borrower (as the case may be) has or has not in fact made the Required
Payment to the Administrative Agent, the recipient(s) of such payment shall, on
demand, or with respect to payment received by the Borrower, within three (3)
Business Days after such receipt repay to the Administrative Agent for the
Administrative Agent's own account the amount so made available together with
interest thereon in respect of each day during the period commencing on the
date such amount was so made available by the Administrative Agent until the
date the Administrative Agent recovers such amount at a rate per annum equal to
(a) the Federal Funds Rate for such day, with respect to interest paid by such
Lender, or (b) the applicable rate provided under SECTION 1.03, with respect to
interest paid by the Borrower.
SECTION 1.17. REPLACEMENT OF NOTES. Upon receipt of evidence reasonably
satisfactory to the Borrower of the loss, theft, destruction or mutilation of
any Note and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory to the Borrower, or in the
case of any such mutilation, upon the surrender of such Note for cancellation,
the Borrower will execute and deliver, in lieu of such lost, stolen, destroyed,
or mutilated Note, a new Note of like tenor.
SECTION 1.18. LETTERS OF CREDIT. From time to time during the Revolving
Credit Period and on the terms and subject to the conditions contained in this
Agreement, the Administrative Agent shall cause the Issuing Bank to issue
stand-by letters of credit for the account of the Borrower (each a "Letter of
Credit" and collectively, the "Letters of Credit") as follows:
(A) ISSUANCE OF LETTERS OF CREDIT. The obligation of the Issuing Bank to
issue any Letter of Credit requested by the Borrower is subject to the
following conditions:
(i) Upon the issuance by the Issuing Bank of a Letter of Credit, the
aggregate Commitments shall be reduced by the face amount of such Letter
of Credit (with a corresponding ratable reduction of each Lender's
Commitment).
(ii) The Issuing Bank shall have no obligation to issue any Letter
of Credit if, after giving effect to the issuance thereof, (A) the
Revolving Loans would exceed the aggregate Commitments, (B) the aggregate
exposure under all Letters of Credit issued pursuant to this Agreement or
otherwise issued by the Issuing Bank for the account of the Borrower
would exceed $500,000, or (C) any condition or event exists which, after
notice or lapse of time or both, would constitute an Event of Default.
(iii) Each Letter of Credit and any related documentation shall be
in a form and scope and upon terms acceptable to the Issuing Bank, in its
sole discretion (collectively with the Letters(s) of Credit issued
pursuant hereto, the "Letter of Credit Documents"). The Borrower will
furnish to the Issuing Bank on its standard written application (which
shall be received by the Issuing Bank not less than three (3) Business
Days and not more than ten (10) Business Days prior to the proposed issue
date of such Letter of Credit) such
14
<PAGE> 15
information as is required thereby, including the following: (A) the
proposed issue date (which must be a Business Day), (B) the expiration
date, (C) the name and address of the beneficiary, (D) the face amount of
such Letter of Credit, and (E) the purpose and proposed form of such
Letter of Credit.
(iv) Each Letter of Credit must expire on or prior to the earlier to
occur of (A) the Expiration Date, or (B) the first anniversary of the
date of its issuance.
(B) LETTER OF CREDIT FEES. The Borrower shall pay the Administrative
Agent, for the Issuing Bank's account, a non-refundable letter of credit fee
(the "Letter of Credit Fee") in an amount equal to three percent (3%) per annum
of the aggregate face amount of all outstanding Letters of Credit. The Letter
of Credit Fee shall be payable in advance upon issuance of each Letter of
Credit and, thereafter, on each Quarterly Date until the expiration of such
Letter of Credit, on which date any pre-paid portion of the Letter of Credit
Fee will be refunded to the Borrower. The Administrative Agent will promptly
remit to each Lender its share of all payments received by the Issuing Bank or
the Administrative Agent in respect of the Letter of Credit Fee. Upon the
issuance, or any amendment of, each Letter of Credit, the Borrower shall also
pay the Issuing Bank's customary issuance and amendment fees for stand-by
letters of credit.
(C) OBLIGATION OF BORROWER TO REPAY LETTER OF CREDIT DISBURSEMENTS, ETC.
The Borrower assumes all risks in connection with the Letters of Credit and the
Borrower's obligation to repay any payments made by the Issuing Bank on a draft
presented under any Letter of Credit (each a "Letter of Credit Disbursement")
shall be absolute, unconditional and irrevocable under any and all
circumstances and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower or any other person may at any time have against the
beneficiary under any Letter of Credit, the Agents, the Issuing Bank, any
Lender or any other Person, whether in connection with this Agreement or
otherwise;
(iii) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect,
provided that payment by the Issuing Bank under such Letter of Credit
against presentation of such draft or document shall not have been the
result of the gross negligence or willful misconduct of the Issuing Bank;
and
(iv) any other circumstance or event whatsoever, whether or not
similar to any of the foregoing, provided that such circumstance or event
shall not have been the result of the gross negligence or willful
misconduct of the Issuing Bank.
(D) PARTICIPATION BY LENDERS. The Issuing Bank shall give each Lender
prompt notice of its receipt of each application for the issuance of a Letter
of Credit and the proposed face amount, beneficiary, purpose and expiration
date thereof. By the issuance of a Letter of Credit and
15
<PAGE> 16
without any further action, the Issuing Bank hereby grants to each Lender, and
each Lender hereby agrees to acquire from the Issuing Bank, a participation in
such Letter of Credit equal to such Lender's pro rata share of the face amount
thereof, determined as provided in SECTION 1.15, effective upon the date of
issuance. In furtherance of the foregoing, each Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of
the Issuing Bank, the amount of such Lender's pro rata share of each Letter of
Credit Disbursement. Each Lender acknowledges and agrees that its obligation
to acquire participations pursuant to this SECTION 1.18(D) is absolute and
unconditional and shall not be affected by any circumstances whatsoever, and
that each payment obligation arising from a Letter of Credit Disbursement shall
be made promptly by each Lender to the Administrative Agent without any offset,
abatement, withholding or reduction whatsoever.
(E) PAYMENTS BY LENDERS TO ISSUING BANK; FEE SHARING. Upon notification
by the Issuing Bank to the Administrative Agent that a Letter of Credit
Disbursement has been made and that the Borrower has failed to meet its
reimbursement obligations to the Issuing Bank, the Administrative Agent shall
promptly notify the Issuing Bank and each other Lender of the amount of the
Letter of Credit Disbursement and, in the case of each Lender, its pro rata
share thereof. Each Lender shall pay to the Administrative Agent, not later
than 2:00 P.M., New York time, on such date (or, if the Issuing Bank shall
elect to defer reimbursement from the Lenders hereunder, such later date as the
Issuing Bank shall specify by notice to the Administrative Agent), such
Lender's pro rata share of such Letter of Credit Disbursement, which the
Administrative Agent shall promptly pay to the Issuing Bank. The Administrative
Agent will promptly remit to each Lender its share of any amounts subsequently
received by the Issuing Bank or the Administrative Agent from the Borrower in
respect of all Letter of Credit Disbursements.
II. SECURITY; SUBORDINATION; USE OF PROCEEDS
SECTION 2.01. SECURITY FOR THE NOTES; SUBORDINATION.
(A) SECURITY. The obligations hereunder and under the Notes shall be
secured at all times by:
(i) a first priority perfected security interest in all presently
owned and hereafter acquired tangible and intangible personal property
and fixtures of the Borrower, subject only to any prior liens expressly
permitted under this Agreement;
(ii) only to the extent requested by the Required Lenders, first
mortgages or deeds of trust on all presently owned and hereafter acquired
real property owned by the Borrower, if any, subject only to any prior
liens expressly permitted under this Agreement, together with mortgagee's
title insurance policies acceptable to the Required Lenders;
(iii) only to the extent requested by the Required Lenders, first
priority perfected collateral assignments of, or leasehold mortgages or
deeds of trust in respect of, the Borrower's lease in Birmingham, Alabama
and any other leases of real property in which the Borrower may from time
to time have an interest, subject only to any prior liens
16
<PAGE> 17
expressly permitted under this Agreement, together with such third party
consents, lien waivers and estoppel certificates as the Required Lenders
shall reasonably require and, if required by the Required Lenders,
mortgagee's title insurance policies acceptable to the Required Lenders;
(iv) first priority perfected collateral assignments of all other
contracts, leases, insurance policies (including the key-person life
insurance policies referred to in SECTION 3.01(M)), franchises,
management agreements, subscriber agreements, advertising agreements and
other licenses, permits, authorizations and agreements as the Required
Lenders shall deem necessary to protect the Lenders' interests, together
with appropriate third party consents, lien waivers and estoppel
certificates; and
(v) a first priority perfected pledge of all of the presently
outstanding and hereafter issued capital stock of the Borrower by the
holders thereof and of all capital stock or other equity interests of the
Austin Subsidiary and of any other Subsidiary of the Borrower and all
warrants, options or other rights to acquire any such interests;
(vi) the unconditional and unlimited guaranty of the Parent; and
(vii) the unconditional and unlimited guaranty of the Austin
Subsidiary, secured by a first priority perfected security interest in
all presently owned and hereafter acquired tangible and intangible
personal property and fixtures of the Austin Subsidiary and first
mortgages or deeds of trust on real property of the Austin Subsidiary, to
the same extent as provided above in connection with the assets and
properties of the Borrower.
The Lenders have agreed to waive the requirement that the Borrower grant the
security interests and liens referred to above as to its properties in
California unless the same shall not have been sold as provided in SECTION
7.03(B) on or before June 30, 1996.
(B) SUBORDINATION. All Seller Debt, and, to the extent requested by the
Required Lenders, all indebtedness of the Borrower to any Affiliate of the
Borrower, shall be subordinated to any Indebtedness of the Borrower to the
Lenders pursuant to subordination or intercreditor agreements satisfactory in
form and substance to the Required Lenders and to the Administrative Agent's
counsel.
(C) RESTRICTED ESCROWS. Unless the Required Lenders shall otherwise
consent, the Borrower shall, pursuant to irrevocable, binding and enforceable
written instructions satisfactory to the Required Lenders, cause each escrow
agent holding in excess of $250,000 in escrow on behalf of the Borrower or any
of its Subsidiaries in connection with any acquisition (each such escrow being
referred to as a "Restricted Escrow") to disburse to the Administrative Agent
all such funds as shall be payable to the Borrower or any of its Subsidiaries
from time to time from such Restricted Escrow, it being understood and agreed
that all future escrows shall be held by the Co-Agent and pledged to the
Lenders as expressed in SECTION 2.01(A). The Administrative Agent shall
promptly remit all such funds to the Borrower, provided that there shall then
exist no Event of Default arising under paragraph (b), (c) or, solely with
respect to a breach of
17
<PAGE> 18
(c) with respect to any such escrows which constitute Restricted Escrows. The
Administrative Agent shall promptly remit all such funds to the Borrower,
provided that there shall then exist no Event of Default arising under
paragraph (b), (c) or, solely with respect to a breach of SECTION 5.05, (d) of
ARTICLE VIII and no condition which would, with notice or the lapse of time or
both, result in such an Event of Default, in which case such funds shall be
applied as determined by the Required Lenders.
(D) COLLATERAL DOCUMENTS. All agreements and instruments described or
contemplated in this SECTION 2.01, together with any and all other agreements
and instruments heretofore or hereafter evidencing or securing the Borrower's
indebtedness under the Notes and/or the Borrower's obligations hereunder,
subordinating other indebtedness of the Borrower to such indebtedness, or
otherwise executed in connection with this Agreement are sometimes hereinafter
referred to collectively as the "Collateral Documents" and each individually as
a "Collateral Document". The Borrower agrees to take such action as the
Administrative Agent may request from time to time in order to cause the
Lenders to be secured at all times in the manner described in this SECTION
2.01.
SECTION 2.02. USE OF PROCEEDS. Subject to the terms and conditions of
this Agreement, the proceeds of the Revolving Loans extended hereunder shall be
applied as follows:
(A) AT CLOSING DATE. At the Closing Date (as hereinafter defined),
proceeds not in excess of $18,500,000 to:
(i) the repayment in full of all outstanding indebtedness to State
Street Bank and Trust Company and Citizens Savings Bank in the principal
amount of $15,860,353, together with any accrued but unpaid interest
thereon; and
(ii) Closing Costs and working capital of the Borrower and its
Subsidiaries in an amount not to exceed $2,500,000.
(B) ON OR AFTER THE CLOSING DATE. On or after the Closing Date, proceeds
not in excess of the aggregate available Commitments (and only to the extent
permitted by the terms of this Agreement) to:
(i) Permitted Acquisitions (including Letters of Credit) in an
aggregate amount not in excess of $25,000,000;
(ii) subject to the granting to the Lenders of prior perfected
security interests in, and first liens on, all contract rights granted to
or obtained by the Borrower with respect thereto, up to $15,000,000 of
Safe Choice Costs;
(iii) Capital Expenditures, to the extent permitted by the terms of
this Agreement;
(iv) the replacement of the existing letter of credit issued by
State Street Bank and Trust Company and described in SCHEDULE 7.02;
18
<PAGE> 19
(v) Dealer Program Purchases to the extent permitted by the terms of
this Agreement; and
(vi) working capital of the Borrower and its Subsidiaries.
III. CONDITIONS OF MAKING ADVANCES.
SECTION 3.01. ADVANCES AT CLOSING. The obligation of the Lenders to make
Advances at the closing (the "Closing") is subject to the satisfaction of all
of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties set forth in this Agreement and in the Collateral Documents shall be
true and correct on and as of the date hereof and shall be true and correct in
all material respects as of the date each such Advance is made, and the
Borrower and the other parties to the Collateral Documents shall have performed
or observed all obligations which were to have been performed or observed by it
or them hereunder or under any applicable Collateral Document, as the case may
be.
(B) CLOSING CERTIFICATE. The Lenders shall have received a certificate,
dated as of the date of the Closing (the "Closing Date") and executed by a
Financial Officer of the Borrower, satisfactory in form and content to the
Lenders, certifying as to the matters set forth in SECTIONS 3.01(A), 3.02(A)
and 3.02(B).
(C) DELIVERY OF TRANSACTION DOCUMENTS. The Lenders shall have received
this Agreement, the Notes and all of the Collateral Documents, duly executed
and delivered by all parties thereto, and all actions contemplated by the
foregoing documents shall have been accomplished to the satisfaction of the
Lenders and their counsel. Without limiting the generality of the foregoing,
the Borrower shall have executed and delivered to the Lenders and/or the
Administrative Agent, as the case may be (or shall have caused to be executed
and delivered to the Lenders and/or the Administrative Agent, as the case may
be, by the appropriate persons), the following, in each case satisfactory in
form, scope and substance to the Lenders and their counsel:
(i) this Agreement and the Notes;
(ii) a Pledge and Security Agreement of the Borrower, including the
Borrower's pledge to the Lenders of all of the outstanding capital stock
of each class and all other equity interests of the Austin Subsidiary;
(iii) a Security Agreement of the Austin Subsidiary;
(iv) appropriate UCC-1 financing statements with respect to the
security interests granted to the Lenders in all of the assets of the
Borrower and the Austin Subsidiary;
(v) Collateral Assignment of Lease or Leasehold Mortgage or Deed of
Trust as to the Borrower's leasehold interest in Birmingham, Alabama
(the "Material Lease"), duly
19
<PAGE> 20
recorded over the underlying lease, together with such landlord consents,
estoppel certificates, non-disturbance and other agreements as the
Administrative Agent shall have reasonably requested;
(vi) Collateral Assignments of Franchises as to each franchise or
dealer right of the Borrower and the Austin Subsidiary with Sonitrol and
any other Persons, to which Sonitrol and each other franchisor or
distributor granting any such franchise or dealer right shall have
consented in writing;
(vii) an Unlimited Guaranty pursuant to which the Parent shall have
guaranteed the payment of the Indebtedness of the Borrower to the
Lenders;
(viii) an Unlimited Guaranty pursuant to which the Austin Subsidiary
shall have guaranteed the payment of the Indebtedness of the Borrower to
the Lenders;
(ix) a Pledge Agreement of the Parent pursuant to which the Parent
shall have pledged to the Lenders all of the outstanding capital stock of
each class and all other equity interests of the Borrower;
(x) unless the Required Lenders shall otherwise consent, evidence
satisfactory to the Required Lenders that each escrow agent holding a
Restricted Escrow is required to disburse to the Administrative Agent all
such funds as shall be payable to the Borrower or such Subsidiary from
time to time from such escrow, subject to the Administrative Agent's
obligation to remit such funds to the Borrower to the extent required
under SECTION 2.01(C);
(xi) if the Required Lenders shall so request, a Security Agreement
granting a prior lien on, and valid first security interest in, all funds
held under any escrow arrangements to which the Borrower is a party;
(xii) to the extent requested by the Required Lenders, certificates
of title to all certificated equipment owned by the Borrower or the
Austin Subsidiary, with any Liens evidenced on such certificates of title
duly released by the Lien holders identified on such certificates of
title, together with such other documentation and signatures as are
required to have the Lien of the Lenders created pursuant to the Security
Agreement recorded thereon; and
(xiii) an Affiliate Subordination Agreement by and among the
Borrower, the Parent and the Lenders.
(D) CORPORATE MATTERS. The Lenders shall have received the following, in
each case satisfactory in form, scope and substance to the Lenders and their
counsel:
(i) a true and correct copy of the Certificate of Incorporation of
each of the Borrower, the Parent and the Austin Subsidiary, certified by
the appropriate Secretary of State;
20
<PAGE> 21
(ii) a true and correct copy of the by-laws of each of the Borrower,
the Parent and the Austin Subsidiary certified by their respective
Secretaries;
(iii) a certificate of legal existence and good standing (as to
corporate and tax matters) issued by the Secretary of State of Delaware
as to the Borrower;
(iv) a certificate of legal existence and good standing (as to
corporate and tax matters) issued by the Secretary of State of Delaware
as to the Parent;
(v) a certificate of legal existence and good standing (as to
corporate and tax matters) issued by the Secretary of State of Texas as
to the Austin Subsidiary;
(vi) a certificate of qualification of the Borrower to do business
issued by the Secretary of State of each of Alabama, California, Florida,
Georgia, Louisiana, Maryland, Oklahoma, Texas, Virginia and each other
state in which the Borrower conducts business, (and, by April 30, 1996,
by the appropriate governmental authority for the District of Columbia,
if required);
(vii) a certificate of qualification of the Austin Subsidiary in
each state in which the Austin Subsidiary does business;
(viii) certified copies of corporate resolutions of each of the
Borrower, the Parent and the Austin Subsidiary authorizing the execution
and delivery of the respective Transaction Documents to which it is a
party and all other documents and actions in connection with the Loans.
(E) AGREEMENTS, LICENSES, CONSENTS, ETC. The Lenders shall have received
true and correct copies of all material agreements, consents, contracts,
franchises, licenses, permits, instruments and documents, specified in SCHEDULE
4.08, SCHEDULE 4.11 and SCHEDULE 4.25;
(F) SOLVENCY CERTIFICATE. The Lenders shall have received a Solvency
Certificate, dated as of the Closing and executed by the chief financial
officer of the Borrower, in the form attached hereto as SCHEDULE 3.01(F).
(G) RESULTS OF SEARCHES. The Lenders shall have received written results
of searches of the records of the filing offices set forth on SCHEDULE 3.01(G),
which searches confirm that, as of a date as close to the date hereof as
practicable, except as specifically permitted by this Agreement, there are no
financing statements, assignments or notices of tax Liens on file against or
with respect to any collateral of the Borrower or the Austin Subsidiary other
than financing statements in which any of the Lenders or the Administrative
Agent is named as the secured party or secured parties, or financing statements
evidencing Liens that will be satisfied out of the proceeds of the initial
Advances made hereunder, for which the Borrower shall have delivered to the
Lenders executed termination statements relating thereto.
(H) DISCHARGE OF PRIOR INDEBTEDNESS. Simultaneously with the making of
the first Advance hereunder, all Indebtedness of the Borrower (i) to State
Street Bank and Trust Company and Citizens Savings Bank pursuant to a Revolving
Credit and Term Loan Agreement dated as of
21
<PAGE> 22
February 11, 1994, as amended from time to time, among the Borrower and such
banks, other than the existing letter of credit and cash collateral permitted
under SECTIONS 7.01(E) and 7.02(B), and (ii) to any entity listed on the
SCHEDULE 3.01(H) pursuant to any loan or credit agreement set forth on such
SCHEDULE 3.01(H) and any and all instruments executed in connection therewith
shall have been terminated, all liens and security interests in favor of any
lender set forth in SCHEDULE 3.01(H) in respect of the Collateral shall have
been discharged (or as to any security interest the discharge of which is
effected by the filing of a UCC-3 termination statement or other instrument,
the receipt of such an instrument executed by all necessary parties and in a
form suitable for recording, as necessary), and the Lenders shall have received
evidence satisfactory to the Lenders and their counsel of the termination and
discharge of all such indebtedness and security interests.
(I) FINANCIAL STATEMENTS AND PROJECTIONS. The Lenders shall have received
(i) unaudited consolidated financial statements of the Borrower and the Parent
for the fiscal year ended December 31, 1995, and (ii) the Projections.
(J) OPENING BALANCE SHEET. The Lenders shall have received the Opening
Balance Sheet which gives effect to the discharge of the Indebtedness referred
to on SCHEDULE 3.01(H), the Loans and all other transactions contemplated
hereby as of the Closing Date, and the Lenders shall have determined in their
sole discretion that the Opening Balance Sheet is satisfactory.
(K) CAPITAL STRUCTURE. The Lenders and their counsel shall have reviewed
the capital structure of the Borrower, the Parent and the Austin Subsidiary and
such capital structure shall be satisfactory in the sole discretion of the
Lenders and their counsel.
(L) NO ADVERSE CHANGE. There shall have been no change since December 31,
1994 in the Borrower's or the Austin Subsidiary's business, performance,
prospects, properties or financial condition, which has had or could reasonably
be expected to have a Material Adverse Effect, including without limitation any
material adverse litigation or claims against, or involving, the Borrower, the
Parent or the Austin Subsidiary.
(M) INSURANCE; KEY-PERSON INSURANCE. The Lenders shall have received
insurance binders or certificates of insurance coverage with respect to all
insurance policies maintained by the Borrower or the Austin Subsidiary in
respect of their respective properties and assets (including public liability
coverage), with such binders or certificates indicating, with respect to each
such policy, that the Lenders have been named as additional named insureds or
loss payees (including standard lender's loss payable endorsements to such
policies, as opposed to simple "open loss payee" certificates), that the
insurer has waived its subrogation rights against the Lenders and that such
policy may not be terminated without 30 days' prior written notice to the
Lenders and the opportunity to cure any defaults justifying such termination.
The Borrower shall have provided the Administrative Agent with evidence of the
existence of a policy of so-called "key-person" insurance satisfactory to the
Lenders on the life of Johnson in the face amount of not less $2,000,000 which
shall have been collaterally assigned to the Administrative Agent for the
benefit of the Lenders with the consent of the issuer thereof.
22
<PAGE> 23
(N) OTHER DOCUMENTS. The Lenders shall have received all such other
supporting documents, certificates and assurances which they require or which
they may reasonably request in connection with the transactions contemplated by
this Agreement, and such documents shall be certified, when appropriate, by the
proper authorities, partners or corporate officers. All such documents and all
proceedings to be taken in connection with such transactions shall be
satisfactory in form and substance to the Lenders and their counsel.
(O) FEES AND EXPENSES. At the Closing, the Borrower shall have paid to
the Administrative Agent or the Lenders, as appropriate, the Facility Fees, the
first installment of the Agency Fee and all other fees required to be paid on
the Closing Date as set forth in SECTION 1.09, together with all costs and
expenses (including legal fees) referred to in SECTION 14.02.
(P) LEGAL MATTERS. All legal matters incident to this Agreement and the
transactions contemplated hereby shall be satisfactory to Edwards & Angell,
special counsel to the Administrative Agent, and the Lenders shall have
received at the Closing the legal opinion of Burr & Forman, counsel to the
Borrower, in form, scope and substance satisfactory to the Lenders and their
counsel.
SECTION 3.02. ALL ADVANCES. The obligation of the Lenders to make any
Advance (including the first Advances), or to issue any Letter of Credit, is
subject to the satisfaction of the following conditions precedent on or before
the date of each such Advance or issuance (each a "Borrowing Date"):
(A) REPRESENTATIONS AND WARRANTIES; NO ADVERSE CHANGE. The
representations and warranties contained in ARTICLE IV and otherwise made by
the Borrower in writing in connection with the transactions contemplated by
this Agreement shall, if qualified by a reference to materiality, be true and
correct in all material respects, and if not so qualified, be true and correct
in all respects as of the date on which made and at and as of such Borrowing
Date with the same effect as if made at and as of such time, except as may have
been disclosed to the Lenders by the Borrower and to which the Lenders have
consented and to the extent that the facts upon which such representations and
warranties are based may in the ordinary course be changed by the transactions
permitted or contemplated hereby. There shall have been no change in the
Borrower's business condition, performance, prospects, properties or financial
condition that, individually or in the aggregate, has had or reasonably could
be expected to have a Material Adverse Effect.
(B) COMPLIANCE; NO DEFAULT. The Borrower shall have performed and
complied in all material respects with all terms and conditions herein required
to be performed or complied with by it prior to or on such Borrowing Date, and
on such Borrowing Date, after giving effect to the proposed Advances or the
issuance of the proposed Letter of Credit, as the case may be, on such date
and, on a pro forma basis, as of the last day of the most recently ended month
for which financial statements are available, there shall exist no Event of
Default or condition which would, with notice or the lapse of time or both,
result in an Event of Default. Each request by the Borrower for Advances or
the issuance of a Letter of Credit shall constitute certification by the
Borrower that the conditions specified in this SECTION 3.02 will be duly
satisfied on such Borrowing Date.
23
<PAGE> 24
(C) PERMITTED ACQUISITIONS. With respect to each Permitted Acquisition,
the Borrower shall have delivered such agreements, documents, certificates and
assurances which the Lenders require or which they may reasonably request in
connection therewith and the Lenders shall have been granted a prior perfected
security interest in, and first lien on, all acquired assets and interests, and
all documents and all proceedings to be taken in connection with such
transactions shall be satisfactory in form and substance to the Lenders and
their counsel.
(D) REQUEST FOR ADVANCES; LETTER OF CREDIT DOCUMENTS. With respect to any
Advances, the Lenders shall have received a properly completed Request for
Advances. With respect to any Letter of Credit, the Borrower shall have
complied with the provisions of SECTION 1.18, including without limitation the
execution and delivery of all required Letter of Credit Documents and advance
payment of the Letter of Credit Fee.
IV. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
The Borrower represents and warrants to the Lenders (which representations
and warranties (a) give effect to the consummation of all of the transactions
referred to in Article II which are conditions to the Advance made
simultaneously with the giving or reaffirming of such representations and
warranties and (b) shall survive the execution and delivery of the Notes) as
follows:
SECTION 4.01. ORGANIZATION. Each of the Borrower and the Parent is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Austin Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. Each of the Borrower, the Parent and the Austin Subsidiary has the
power and authority to own its properties and, except to the extent that the
failure thereof would result in a Material Adverse Effect, to carry on its
businesses now being conducted and as presently contemplated to be conducted.
Each of the Borrower, the Parent and the Austin Subsidiary is duly qualified to
transact business in each jurisdiction where the nature of its activities
requires such qualification. Each of the Borrower, the Parent and the Austin
Subsidiary has the power and authority to execute and deliver, and to perform
its obligations under the Transaction Documents to which it is a party.
SECTION 4.02. AUTHORITY. The execution, delivery and performance by each
of the Borrower, the Parent and the Austin Subsidiary of the Transaction
Documents to which it is a party have been duly authorized by all necessary
corporate action and do not contravene any provision of their respective
charter or by-laws; do not violate any provision of any law, rule or regulation
(including without limitation Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System) or any determination or award of any
court, governmental body or arbitrator; do not and will not result in a breach
or constitute a default under any agreement to which the Borrower, the Parent
or the Austin Subsidiary is a party or by which any of their respective
properties are bound (except to the extent that such breach or default would
not result in a Material Adverse Effect), including, without limitation, any
indenture, loan or credit agreement, lease, debt
24
<PAGE> 25
instrument or mortgage; or result in or require the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature upon or with respect to any of their respective
properties, except the security interests and Liens granted to the Lenders
under the Transaction Documents; neither of the Borrower, the Parent, nor the
Austin Subsidiary (a) is in material default under any law, rule or regulation,
order, writ, judgment, injunction, decree, determination, award, indenture,
loan or credit agreement, lease, debt instrument or mortgage referred to above
or (b) will be in any such material default by virtue of the transactions to be
entered into at the Closing.
SECTION 4.03. PRINCIPAL EXECUTIVE OFFICE; OTHER LOCATIONS. The
Borrower's and the Austin Subsidiary's principal executive office, principal
place of business and the place where either of them maintains and will
maintain all of its business records, including, without limitation, records
relating to the Loans and the Collateral is at the address or addresses set
forth on SCHEDULE 4.03 attached hereto. The other offices and/or locations
where the Borrower or the Austin Subsidiary keeps Collateral or conducts any
business are listed on SCHEDULE 4.03.
SECTION 4.04. REAL ESTATE. Neither of the Borrower nor the Austin
Subsidiary owns any real property. The real property set forth on SCHEDULE
4.04 attached hereto (the "Leased Properties") are leased by the Borrower or by
the Austin Subsidiary, as indicated thereon. The Leased Properties and the
operation of the Borrower's and the Austin Subsidiary's business at such
locations do not, to the Borrower's knowledge after reasonable inquiry, violate
any applicable zoning or use statutes, ordinance, building code, rule,
regulation, covenant, easement or agreement of record in any manner which,
individually or in the aggregate, would have a Material Adverse Effect, and all
taxes required to be paid with respect to the Leased Properties have been paid
when due and are current through the date of this Agreement.
SECTION 4.05. TITLE TO PROPERTIES; LEASES. Each of the Borrower and the
Austin Subsidiary has good title to all of its properties and assets free and
clear of all mortgages, security interests, restrictions, liens and
encumbrances of any kind, including without limitation liens or encumbrances in
respect of unpaid taxes, except liens and encumbrances permitted under this
Agreement. All leases to which either of the Borrower or the Austin Subsidiary
is a party as lessee (including without limitation the leases for the Leased
Properties) are listed on SCHEDULE 4.05 attached hereto. Except as set forth
on SCHEDULE 4.05, the Borrower or the Austin Subsidiary, as the case may be,
enjoys quiet possession under all such leases and all of such leases are valid,
subsisting and in full force and effect, except to the extent that the failure
thereof would not result in a Material Adverse Effect. None of such leases
contains any provision restricting the incurrence of indebtedness by the
lessee.
SECTION 4.06. INVESTMENTS. Except as set forth on SCHEDULE 4.06 attached
hereto, neither the Borrower nor the Parent is engaged in any joint venture or
partnership with any other person, firm or corporation, and neither the
Borrower nor the Parent holds or owns any of the issued outstanding capital
stock, partnership interest, or similar equity interests or any rights to
acquire the
same, of any corporation, partnership, firm or entity.
25
<PAGE> 26
SECTION 4.07. CAPITALIZATION AND EQUITY STRUCTURE. The Borrower owns all
of the issued and outstanding capital stock of the Austin Subsidiary as set
forth on SCHEDULE 4.07 attached hereto. The Parent owns all of the issued and
outstanding capital stock of the Borrower as set forth on SCHEDULE 4.07. The
issued and outstanding capital stock of the Parent is owned of record as set
forth on SCHEDULE 4.07. The equity structure of the Borrower, the Parent and
the Austin Subsidiary, including the holders of each class of securities and
the principal amount and/or number of shares owned by each such holder, is set
forth on SCHEDULE 4.07. All such outstanding shares of capital stock have been
duly authorized and validly issued and are outstanding, fully paid and
non-assessable. None of such outstanding shares of capital stock have been or
will be reserved for any purpose during the term of this Agreement, except as
set forth on SCHEDULE 4.07. Except as set forth on SCHEDULE 4.07, there are no
outstanding securities convertible into or exchangeable for, and no outstanding
options, warrants or other rights to purchase or to subscribe for any equity
interests and/or shares of capital stock of the Borrower or of the Austin
Subsidiary. Except as set forth on SCHEDULE 4.07, there are no outstanding
agreements, arrangements, commitments or understandings of any kind affecting
or relating to the voting, issuance, purchase, redemption, repurchase or
transfer of equity interests and/or shares of capital stock of the Borrower or
of the Austin Subsidiary.
SECTION 4.08. LICENSES. Except as set forth on SCHEDULE 4.08 attached
hereto, no authorization, consent, approval, license or exemption of, or filing
a registration with, any court or governmental department or commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for the valid execution, delivery or performance by the Borrower, the Parent or
the Austin Subsidiary of the Transaction Documents to which any of them is a
party, except filings required to perfect under applicable law the Liens
granted to the Lenders pursuant to the Transaction Documents. Set forth on
SCHEDULE 4.08 is a list of all material licenses, permits, certificates and
other governmental authorizations required for the conduct of the Borrower's
and the Austin Subsidiary's business (the "Licenses"). Except as set forth on
SCHEDULE 4.08, each of the Borrower and the Austin Subsidiary is the lawful
holder of the licenses, permits, certificates and governmental authorizations
set forth on SCHEDULE 4.08. Except as set forth on SCHEDULE 4.08, no such
license, permit, certificate or other governmental authorization has been
revoked, canceled, rescinded, modified, denied or lost and not reissued or
reinstated, and the Borrower has no reason to believe that any such license,
permit, certificate or other governmental authorization will be revoked,
canceled, rescinded, modified or lost.
SECTION 4.09. VALID OBLIGATIONS. The Transaction Documents to which each
of the Borrower, the Parent and the Austin Subsidiary is a party have been duly
executed and delivered by it and constitute its legal, valid and binding
obligation, enforceable against it in accordance with their respective terms.
SECTION 4.10. SECURITY INTERESTS. The Lenders' Liens in the collateral
covered by the Collateral Documents have been duly perfected and no security
interest shall exist at the Closing with respect to such Collateral, other
than the Liens granted to the Lender, the Permitted Encumbrances set
forth on SCHEDULE 4.10 attached hereto and such other Liens listed on SCHEDULE
4.10 as to which all appropriate forms of discharge and termination statement
will have been signed and delivered to the Lenders for filing simultaneously
with or promptly after the Closing.
26
<PAGE> 27
SECTION 4.11. AGREEMENTS. Set forth on SCHEDULE 4.11 attached hereto is a
list of all material agreements (including all amendments thereto), oral or
written, (i) to which the Borrower or the Austin Subsidiary is a party, or (ii)
by which the Borrower or the Austin Subsidiary or any of their respective
properties is bound, including without limitation, all franchise and dealer
rights agreements and all leases and consulting, employment, management,
maintenance, brokerage, supply and service contracts and any contract,
agreement or other arrangement providing for the employment of, furnishing of
security monitoring or other services to or by, rental of real or personal
property to or from or otherwise requiring payments to or by the Borrower or
any Affiliate of the Borrower. True, correct and complete copies of all of the
agreements (including all amendments, exhibits and schedules thereto) set forth
on SCHEDULE 4.11 have previously been furnished to the Lenders or their
counsel. Neither the Borrower, the Parent nor the Austin Subsidiary, nor any
officer, director, shareholder, partner or Affiliate or agent, nor, to the best
knowledge of the Borrower, any other party thereto, is in default under any
such material agreement, and neither the Borrower, the Parent nor the Austin
Subsidiary is in default under or with respect to any other contractual
obligation in any respect which could reasonably be expected to be materially
adverse to the business, operations, property or financial condition of the
Borrower, the Parent or the Austin Subsidiary, or which could materially
adversely affect the ability of the Borrower, the Parent or the Austin
Subsidiary to perform its obligations under any Transaction Document to which
it is a party.
SECTION 4.12. INSURANCE. Set forth on SCHEDULE 4.12 attached hereto is a
complete and accurate list of all insurance policies covering the properties
and assets of the Borrower and the Austin Subsidiary as of the date hereof, as
well as a complete and accurate list of all insurance agencies arranging for
the issuance of each of the foregoing policies. The Borrower has previously
delivered or on the Closing Date shall deliver certificates of insurance for
all insurance policies listed on SCHEDULE 4.12. All insurance policies listed
on SCHEDULE 4.12 are in full force and effect, with the premiums due thereon
paid, and neither the Borrower nor the Austin Subsidiary is in default with
respect to any such policy. All such policies satisfy the requirements of
SECTION 6.03 hereof and the requirements of any of the Collateral Documents
requiring the Borrower to maintain insurance.
SECTION 4.13. CLAIMS; LITIGATION. Except as set forth on SCHEDULE 4.13
attached hereto, there are no actions, suits or proceedings pending or, to the
best knowledge of the Borrower, threatened against the Borrower, the Parent or
the Austin Subsidiary before any court or any governmental department,
commission, board, bureau, agency or instrumentality and none of the actions,
suits or proceedings listed on SCHEDULE 4.13 is material, either individually
or in the aggregate, to the business, financial condition or prospects of the
Borrower or the Austin Subsidiary or could, if adversely decided, have a
Material Adverse Effect.
SECTION 4.14. LABOR MATTERS. The Borrower is not a party to any collective
bargaining or similar agreement, and the Borrower has complied in all material
respects with all applicable state and federal laws respecting employment and
employment practices, terms and conditions of employment, wages and hours and
other laws related to employment of employees of the Borrower or its agents,
and there are no arrears in the payment of wages, withholding or social
security taxes,
27
<PAGE> 28
unemployment insurance premiums or other similar obligations of the
Borrower other than in the ordinary course of business.
SECTION 4.15. ERISA. The Borrower is in material compliance with the
requirements of ERISA. Without limiting the generality of the foregoing,
neither the Borrower nor any Person who is a member of the Borrower's
controlled group for federal income tax purposes has, directly or indirectly:
(i) restated or amended or caused or permitted the restatement or amendment of
any pension, profit-sharing, savings, stock bonus, or other deferred
compensation plan established and maintained by it which are intended to be
qualified under SECTION 401(A) of the Internal Revenue Code of 1986, as amended
(the "Code") in a manner designed to disqualify or which disqualifies the
Borrower's or other Person's plans and their related trusts under the
applicable requirements of the Code; (ii) caused or permitted any of its
officers to materially, adversely affect the qualified tax-exempt status of the
Borrower's or the other Person's pension, profit-sharing, savings, stock bonus
or other deferred compensation plans and trusts under the Code; (iii) engaged
or caused or permitted any officer to engage in any "prohibited transaction" as
defined in SECTION 406 of ERISA or SECTION 4975 of the Code; (iv) incurred or
permitted the incurrence of any "accumulated funding deficiency" as defined in
SECTION 302 of ERISA or SECTION 412(A) of the Code, whether or not waived in
connection with any pension plan; (v) taken or failed to take any action which
caused or may cause a termination of any plan in any manner which could result
in the imposition of a Lien on any of the Borrower's property pursuant to
SECTION 4068 of ERISA; (vi) failed to notify the Lenders that there has been
received a notice of a "termination" (as defined in ERISA) of any
"multi-employer plan" (as defined in SECTION 4001(A)(3) of ERISA; hereafter a
"Multi-employer Plan") to which the Borrower has an obligation to contribute;
(vii) incurred or permitted the incurrence of a "complete withdrawal" (as
defined in ERISA) from any multi-employer plan to which the Borrower has an
obligation to contribute; (viii) incurred or permitted the incurrence of a
withdrawal liability under SECTION 4201 of ERISA with respect to a
Multi-employer Plan to which the Borrower or any subsidiary contributes or
contributed on behalf of its employees; (ix) suffered a Multi-employer Plan to
be placed in reorganization (as defined in SECTION 4241 of ERISA); (x) suffered
the termination of any such Multi-employer Plan under SECTION 4041A of ERISA;
or (xi) received any notice from a governmental agency to the effect that the
Borrower is not in full compliance with the requirements of ERISA, the Code,
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") or any
regulations promulgated under any of the foregoing. All group health and
accident plans maintained by the Borrower are in compliance with the
continuation coverage requirements of COBRA.
SECTION 4.16. FINANCIAL STATEMENTS. Set forth on SCHEDULE 4.16 attached
hereto are (a) the Parent's audited consolidated balance sheet, statement of
income and retained earnings and statements of cash flows, for the fiscal year
ended December 31, 1994 and (b) the Parent's unaudited consolidated financial
statements, including balance sheets, statements of income and retained
earnings and statements of cash flows, for its fiscal quarter ended December
31, 1995 and its fiscal period ended January 31, 1996 (collectively, the
"Financial Statements"). The Financial Statements fairly present the financial
performance and condition of the Borrower through and as of December 31, 1994,
December 31, 1995 and January 31, 1996. Since December 31, 1994, (i) the
physical assets and properties owned or leased by the Borrower have not
suffered any material destruction or damage, regardless of whether or not any
such loss was insured, (ii) the Borrower has
28
<PAGE> 29
not incurred any Indebtedness or liabilities, fixed, contingent or
otherwise, other than in the ordinary course of business and (iii) there has
not been a material adverse change in the business, operations, condition or
prospects of the Borrower.
SECTION 4.17. PROJECTIONS. Set forth on SCHEDULE 4.17 attached hereto
are pro forma financial information and projections (the "Projections") of the
Borrower, including (a) a pro forma balance sheet of the Borrower immediately
after the Closing and (b) pro forma and projected results of operations of the
Borrower, including projected profit and loss statements for each fiscal year
through the fiscal year ending December 31, 2000. The pro forma financial
information has been prepared in accordance with GAAP. The pro forma balance
sheet referred to in clause (i) above fairly reflects the financial position of
the Borrower as of the Closing, after giving effect to the Loans and all other
transactions contemplated by this Agreement (the "Opening Balance Sheet"). The
Projections have been prepared using assumptions believed by the Borrower in
good faith to be reasonable as of the Closing Date and having a reasonable
factual basis and represent the good faith judgment of the management of the
Borrower as of the Closing Date as to the future financial results and
condition of the Borrower.
SECTION 4.18. TAXES. The Borrower has filed all federal, state and
local tax returns required to be filed as of the date of this Agreement and has
paid all taxes shown on such returns and on all assessments received by it, to
the extent that such taxes have become due and not delinquent. All of such tax
returns are accurate and complete. All other taxes and assessments of any
nature with respect to which the Borrower is obligated and which have become
due (other than such taxes with respect to which the failure to pay would not
result in a Material Adverse Effect) are being paid or are being contested in
good faith and adequate accruals and reserves have been established therefor.
SECTION 4.19. INVESTMENT COMPANY ACT. The Borrower does not own, and is
not contemplating the acquisition of any "margin stock" within the meaning of
Regulation U (12 CFR Part 22) of the Board of Governors of the Federal Reserve
System ("Margin Stock"), nor are proceeds of the Loans being used to repay
loans used to purchase Margin Stock. The Borrower is not an "investment
company" or a company "controlled" by an "investment company" (as each of the
quoted terms is defined or used in the Investment Company Act of 1940, as
amended).
SECTION 4.20. USE OF PROCEEDS. The proceeds of the Loans are to be used
for the purposes specified in SECTION 2.02 of this Agreement. Such uses of the
proceeds of the Loans will at all times be for legal and proper corporate
purposes (duly authorized by the Borrower), and such uses will be consistent
with all applicable laws and statutes.
SECTION 4.21. COMPLIANCE WITH LAWS. The Borrower and its Affiliates have
complied, and are now in compliance in all material respects, with all material
laws, statutes, rules, regulations, ordinances, decrees, judgments and orders
applicable to their assets and the operation of their businesses, including,
without limitation, those with respect to occupational safety and health,
environmental protection and control and equal employment opportunity.
29
<PAGE> 30
SECTION 4.22. ENVIRONMENTAL MATTERS. Each of the Borrower, the Parent
and the Austin Subsidiary have obtained all environmental, health and safety
permits, licenses and other authorizations required under all Environmental
Laws to carry on their respective businesses as now being conducted or as
proposed to be conducted, except to the extent failure to have obtained any
such permit, license or authorization would not reasonably be expected to have
a Material Adverse Effect. Each of such permits, licenses and authorizations
is in full force and effect and each of the Borrower, the Parent and the Austin
Subsidiary is in compliance with the terms and conditions thereof and is also
in compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and time tables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply
therewith would not reasonably be expected to have a Material Adverse Effect.
There has never been any event (an "Environmental Event") which would be deemed
an improper release of any Hazardous Material at, on or in connection with any
of the Real Estate as defined in any Environmental Laws. In addition, (i) the
Borrower has not generated or transported any Hazardous Material and is not
currently generating, transporting or disposing of any Hazardous Material, and
(ii) none of the business operations of the Borrower has contaminated lands or
waters of others with any Hazardous Material. Notwithstanding anything to the
contrary set forth above, to the extent that the foregoing representations
contained in this SECTION 4.22 apply to events or conduct of parties other than
the Borrower occurring prior to the date of this Agreement, such
representations are made to the best knowledge of the Borrower.
SECTION 4.23. SOLVENCY. The Borrower, after giving effect to the
completion of the transactions contemplated hereby, is Solvent and has adequate
capital to conduct the business in which it is engaged and all businesses in
which it is about to engage. Neither the Borrower, the Parent nor the Austin
Subsidiary will be rendered Insolvent by the execution and delivery of this
Agreement or the other Transaction Documents or the transactions contemplated
thereunder. Neither the Borrower, the Parent nor the Austin Subsidiary is
contemplating either the filing of a petition by it under any state or federal
bankruptcy or insolvency laws or the liquidating of all or a substantial
portion of its property, and the Borrower has no knowledge of any person
contemplating the filing of any such petition against either of the Borrower,
the Parent or the Austin Subsidiary.
SECTION 4.24. NO BROKER'S FEE. Neither the Borrower nor the Parent is in
any way obligated to any person, firm or corporation in respect of any finder's
or brokerage fee or similar commission in connection with the transactions
contemplated by this Agreement.
SECTION 4.25. CONSENTS. Except as set forth on SCHEDULE 4.25 attached
hereto, neither of the Borrower, the Parent or the Austin Subsidiary is
required to obtain any consent, approval or authorization from, or to file any
declaration or statement with, any governmental instrumentality or other
agency, or any other person, in connection with or as a condition to the
execution, delivery or performance of any of the Transaction Documents. All
consents, approvals and authorizations have been duly granted and are in full
force and effect on the date hereof and all filings described in such Schedule
have been properly and timely made.
30
<PAGE> 31
SECTION 4.26. FULL DISCLOSURE. No representation, warranty or other
statement of fact made by or on behalf of the Borrower in this Agreement or any
of the other Transaction Documents or in any certificate or schedule furnished
to the Lenders pursuant hereto or thereto contains any untrue statement of a
material fact or omits to state any material fact necessary to make statements
contained therein or herein not misleading; and the Borrower has no knowledge
that any statement of fact made by or on behalf of any person other than the
Lenders in any such document, certificate or schedule contains any untrue
statement of a material fact or omits to state any material fact necessary to
make statements therein not misleading. There is no fact presently known to
the Borrower which has not been disclosed to the Lenders in writing which
materially adversely affects, or, as far as the Borrower reasonably foresees,
will materially adversely affect the business, operations, properties, assets
or condition, financial or otherwise, of the Borrower.
V. FINANCIAL COVENANTS.
The Borrower covenants and agrees that, for so long as the Lenders have
any obligation to extend credit to the Borrower hereunder or there remains
outstanding any portion of the principal of, or interest on, the Notes or any
other Indebtedness of the Borrower to the Lenders, whether now existing or
arising hereafter, the Borrower will:
SECTION 5.01. DEBT SERVICE COVERAGE. For each period of three consecutive
months ending after the date hereof, maintain a ratio of Adjusted Net Operating
Income to Total Debt Service of not less than 2.00:1.00.
SECTION 5.02. LEVERAGE. As of any date, maintain a ratio of Total Debt
on such date to Annualized Adjusted Net Operating Income for the most recently
ended period of three consecutive months as follows: (a) from the Closing Date
through and including October 30, 1996, a maximum ratio of 6.50:1.00; and (b)
thereafter, a maximum ratio of 5.50:1.00.
SECTION 5.03. CAPITAL EXPENDITURES. Not make or incur Capital
Expenditures in any fiscal year (or portion thereof) in excess of (a) a maximum
aggregate amount of $700,000 in Permitted Capital Expenditures from January 1,
1996 through the Expiration Date and (b) with respect to Safe Choice Capital
Expenditures, (i) a maximum amount of $2,000,000 in any month, (ii) a maximum
cumulative amount for the period commencing April 1, 1996 through and including
the last day of any month not exceeding $1,000,000 multiplied by the number of
months completed during such period and (iii) a maximum aggregate amount of
$15,000,000 during the term of this Agreement.
SECTION 5.04. RESTRICTED PAYMENTS.
(a) Not directly or indirectly declare, order, pay or make any Restricted
Payment or set aside any sum or property thereof (i) if at the time of such
proposed action or immediately after giving effect thereto, any condition or
event shall exist which constitutes, or which after notice or lapse of time or
both would constitute, an Event of Default, and (ii) unless expressly permitted
by this SECTION 5.04.
31
<PAGE> 32
(b) Subject to subsection (a) above, the Borrower may pay $100,000 in each
fiscal year to the Parent for the costs of legal and accounting fees,
directors' fees and expenses and other administrative costs (the "Parent
Transfers").
SECTION 5.05. RATIO OF LENDER DEBT TO RMR. Not permit the aggregate
principal amount of the Revolving Loans outstanding and the face amount of all
outstanding Letters of Credit at any time to exceed an amount equal to the
product of the Borrower's Recurring Monthly Revenue for the month immediately
preceding the date of determination multiplied by the number 22.
VI. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that for so long as the Lenders have any
obligation to extend credit to the Borrower hereunder, or so long as there
remains outstanding any of the principal of, or interest on, the Notes or any
other Indebtedness of the Borrower to the Lenders, whether now existing or
arising hereafter, the Borrower will, and will cause each of its Subsidiaries
to:
SECTION 6.01. PAYMENTS. Duly and punctually make all payments required
under this Agreement, the Notes and the Collateral Documents to which it is a
party and perform and observe, and cause the Parent to perform and observe, all
of its respective obligations under the foregoing documents.
SECTION 6.02. PRESERVATION OF ASSETS; MAINTENANCE OF RIGHTS. Do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect its legal existence, all material rights, licenses, permits and
franchises; comply in every material respect with all laws and regulations
applicable to it and all material agreements to which it is a party, including
any and all agreements with its directors, officers, employees and/or agents,
the violation of which could have a material adverse effect upon the Borrower;
at all times maintain, preserve and protect all material trade names and
preserve all the remainder of its material property used or useful in the
conduct of its business and keep the same in good repair, working order and
condition (reasonable wear and tear and damage by fire or other casualty
excepted); and from time to time, make or cause to be made all needful and
proper repairs, renewals, replacements, betterments and improvements thereto,
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
SECTION 6.03. INSURANCE.
(A) MAINTENANCE OF INSURANCE. Keep all of its insurable properties now or
hereafter owned adequately insured at all times against loss or damage by fire
or other casualty to the extent customary with respect to like properties of
companies conducting similar businesses; maintain workmen's compensation
insurance, a policy of comprehensive public liability insurance, and a policy
of errors and omissions insurance insuring the Borrower in an amount of not
less than $5,000,000 or such greater amount as may be or become customary with
respect to companies in the Security Alarm Services Business, but which provide
a minimum coverage of at least $2,000,000 per occurrence of bodily injury and
property damage, all by financially sound and
32
<PAGE> 33
reputable insurers and, upon request of the Administrative Agent or of the
Lenders, furnish to the Lenders satisfactory evidence of the same; notify the
Administrative Agent of any material change in the insurance maintained on its
properties after the date hereof and furnish the Administrative Agent
satisfactory evidence of any such change; provide that each insurance policy
pertaining to its insurable properties shall: (i) as appropriate, name the
Administrative Agent as additional insured (as to liability coverage) and loss
payee (as to property coverage, pursuant to a so-called "standard mortgagee
clause" or "lender's loss payable" endorsement, as required by the
Administrative Agent), (ii) provide that no action of the Borrower or any
Subsidiary or of any tenant or sub-tenant shall void such policy as to the
Lenders, and (iii) provide that the Administrative Agent shall be notified of
any proposed cancellation of such policy at least thirty (30) days in advance
thereof and will have the opportunity to correct any deficiencies justifying
such proposed cancellation.
(B) CASUALTY LOSS, ETC. In the event of a casualty loss, the Lenders will
deliver to the Borrower the proceeds of any insurance thereon, provided that
(i) the Borrower shall use such proceeds for the restoration or replacement of
the property or asset which was the subject of such loss, (ii) the Borrower
shall have demonstrated to the satisfaction of the Lenders that such property
or asset will be restored to substantially its previous condition or will be
replaced by substantially identical property or assets, and (iii) if the
Lenders have a security interest in and lien upon the property or asset which
was the subject of such loss, the Lenders shall have received, if requested by
them, a favorable opinion from the Borrower's counsel, in form and substance
satisfactory to the Lender, as to the perfection and at least the same level of
priority, of the Lender's security interests in and liens upon such restored or
replaced property or asset. Notwithstanding the foregoing, in lieu of
delivering such proceeds to the Borrower, the Lenders shall have the right to
retain such proceeds for the purpose of making disbursement thereof jointly to
the Borrower and any contractors, subcontractors and materialmen to whom
payment is owed in connection with such restoration.
SECTION 6.04. BORROWER'S TAXES, ETC. Pay and discharge or cause to be
paid and discharged all taxes, assessments and governmental charges or levies
imposed upon it or upon its income and profits or upon any of its property,
real, personal or mixed, or upon any part thereof, as well as all lawful claims
for labor, materials and supplies or otherwise, which, if unpaid, might become
a lien or charge upon such properties or any part thereof in each case before
the same shall become in default, provided that neither the Borrower nor any
Subsidiary shall be required to pay and discharge or cause to be paid and
discharged any such tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith by appropriate
proceedings and it shall have set aside on its books adequate reserves with
respect to any such tax, assessment, charge, levy or claim, so contested; and
provided, further that, in any event, payment of any such tax, assessment,
charge, levy or claim shall be made before any of its property shall be seized
or sold in satisfaction thereof.
SECTION 6.05. NOTICE OF PROCEEDINGS, DEFAULTS, ADVERSE CHANGE, ETC.
Promptly (and in any event within five (5) Business Days after the Borrower's
discovery thereof) give written notice to the Lenders of (a) any proceedings
instituted or threatened against it by or in any federal, state or local court
or before any commission or other regulatory body, whether federal, state or
local, which, if adversely determined, could reasonably be expected to have a
Material Adverse Effect;
33
<PAGE> 34
(b) any notices of default received by the Borrower or any Subsidiary (together
with copies thereof, if requested by the Lenders) with respect to (i) any
alleged defaults under or violations of any of its material licenses, permits
or franchises or any other material agreements to which it is a party, or (ii)
any alleged default with respect to, or acceleration or other action under, any
evidence of material Indebtedness of the Borrower or any Subsidiary or any
mortgage, indenture or other agreement relating thereto; (c) any material
adverse change in the condition, financial or otherwise, of the Borrower or any
Subsidiary; or (d) the occurrence of any Event of Default or the occurrence of
any event which, upon notice or lapse of time or both, would constitute such an
Event of Default.
SECTION 6.06. FINANCIAL STATEMENTS AND REPORTS. Furnish to the Lenders:
(A) AUDITED FINANCIAL STATEMENTS, ETC. Within one hundred twenty (120)
days after the end of each fiscal year, commencing with the fiscal year ending
December 31, 1995, (i) the consolidated balance sheet and statements of income
and cash flows of the Parent and its Subsidiaries, together with supporting
schedules and the Accountant's letter to the management of the Borrower
discussing matters arising in the course of its audit for such fiscal year,
prepared in accordance with GAAP and setting forth, in the case of the balance
sheet, the corresponding figures in comparative form for the preceding fiscal
year, audited by independent certified public accountants of nationally
recognized standing selected by the Borrower and reasonably acceptable to the
Lenders (the "Accountants"), the form of opinion to be unqualified, showing the
financial condition of the Borrower and the Parent at the close of such fiscal
year and the results of operations during such year, and containing a statement
to the effect that such Accountants have examined the provisions of this
Agreement (or such predecessor agreement then in effect) and that, to the best
of their knowledge, no Event of Default, nor any event which upon notice or
lapse of time or both would constitute an Event of Default, has occurred (or,
if such an event has occurred, a statement explaining its nature and extent),
provided however, that in issuing such statement, the Accountants shall not be
required to exceed the scope of normal auditing procedures conducted in
connection with their opinion referred to above, (ii) the unaudited
consolidated balance sheet and statements of income and cash flow of the
Borrower and its Subsidiaries for such fiscal year, prepared by the Borrower in
accordance with GAAP, and (iii) the unaudited balance sheet and statements of
income and cash flow of the Parent for such fiscal year, prepared by the Parent
in accordance with GAAP;
(B) QUARTERLY FINANCIAL STATEMENTS. Within forty (40) days after the end
of each quarter in each fiscal year, the consolidated balance sheet and
statements of income and cash flow of the Borrower and its Subsidiaries for
such fiscal quarter, prepared by the Borrower in accordance with GAAP and
setting forth, in the case of the balance sheet, the corresponding figures in
comparative form for the preceding fiscal quarter, and (iii) the balance sheet
and statements of income and cash flow of the Parent for such fiscal quarter,
prepared by the Parent in accordance with GAAP;
(C) MONTHLY FINANCIAL STATEMENTS, ETC. Within forty (40) days after the
end of each month in each fiscal year, the Parent's consolidated balance sheet
and statements of income and cash flows, together with supporting schedules
and, if requested by the Required Lenders, the Borrower's accounts receivable
aging, prepared by the Parent in accordance with GAAP, for the
34
<PAGE> 35
month then ended and the period from the beginning of the then current fiscal
year to the end of such month (in each case subject to normal audit and
year-end adjustments) and certified by a Financial Officer of the Parent and to
include comparison of actual results to those set forth in the Parent's Budget;
(D) BRANCH INCOME STATEMENTS. Within forty (40) days after the end of
each quarter in each fiscal year, the Borrower's so-called branch income
statements and a schedule of each branch's operating losses, in the form of
SCHEDULE 6.06(D) attached hereto, or in such form as may, from time to time, be
otherwise required by the Lenders, signed by a Financial Officer of the
Borrower;
(E) COMPLIANCE CERTIFICATE; BORROWING BASE, ETC. Concurrently with the
delivery of the annual financial statements required by SECTION 6.06(A) and the
monthly financial statements required by SECTION 6.06(C), a compliance
certificate in the form of SCHEDULE 6.06(E) attached hereto, or in such form as
may, from time to time, be otherwise required by the Lenders, signed by the
chief financial officer of the Borrower, setting forth the calculations
demonstrating compliance with the financial covenants set forth in ARTICLE V
(including, without limitation, showing the calculation of Adjusted Net
Operating Income, Safe Choice Capital Expenditures, Safe Choice Excess
Expenses, New Safe Choice Installations, Safe Choice New RMR, the applicable
Safe Choice Multiple, the Safe Choice Expenses Restoration Amount, the
Acquisition Expenses Restoration Amount and Pro Forma Acquired Net Operating
Income for each month and for the year-to-date and a calculation of the
Aggregate Purchase Prices as at such date), and certifying as to the fact that
such person has examined the provisions of this Agreement and that no Event of
Default nor any event which upon notice or lapse of time or both, would
constitute such an Event of Default, has occurred (or, if such an event has
occurred, a statement explaining its nature and extent);
(F) SUBSCRIBER AND ATTRITION REPORT. Within forty (40) days after the end
of each month, account summary statements containing a subscriber and attrition
report for the preceding month and setting forth the aggregate number and
nature (i.e., whether Sonitrol or other type), of all installations operating
as at the beginning and the end of each month, together with Recurring Monthly
Revenue at the beginning and the end of each month and for the year to date;
(G) BUDGET. On or before the last day of the eleventh month of each
fiscal year, commencing on November 30, 1996, an updated proposed budget,
prepared on a monthly basis, and updated financial projections (together, the
"Budget") for the next fiscal year, setting forth, in detail reasonably
satisfactory to the Required Lenders, the projected results of operations of
the Parent and its Subsidiaries, including without limitation, projected
revenues and expenses and Capital Expenditures, stating underlying assumptions;
(H) INTERIM OR SPECIAL AUDIT. Promptly upon (and in any event within five
(5) Business Days of) receipt thereof, copies of all audit reports submitted to
the Parent or the Borrower by the Accountants in connection with each interim
or special audit of the books of the Parent and its Subsidiaries made by the
Accountants;
35
<PAGE> 36
(I) TAX RETURNS. Promptly upon the request of the Administrative Agent,
copies of all tax returns of the Parent and its Subsidiaries; and
(J) OTHER INFORMATION. As soon as reasonably possible and in any event
within ten (10) days after request therefor, such other information regarding
the operations, assets, business, affairs and financial condition of the
Parent, the Borrower and the Borrower's Subsidiaries as the Lenders may
reasonably request.
SECTION 6.07. INSPECTION. Permit employees, agents and representatives of
the Lenders to inspect, during normal business hours, all premises where the
Borrower's business is conducted and the Borrower's books and records and to
make abstracts or reproductions thereof.
SECTION 6.08. ACCOUNTING SYSTEM. Maintain a system of accounting in
accordance with GAAP.
SECTION 6.09. NOTICE OF PURCHASE OF REAL ESTATE AND LEASES; CENTRAL
STATION. Promptly and in any event within five (5) Business Days thereof,
notify the Lenders in the event that the Borrower shall purchase any real
estate or enter into any lease of real estate or of equipment material to the
operation of the Borrower's business, supply the Lenders with a copy of any
related purchase documentation requested by the Required Lenders and, if
reasonably requested by the Required Lenders, (a) execute and deliver, or cause
to be executed and delivered, to the Lenders a deed of trust or mortgage or
assignment, together with landlord consents, in the case of leased property,
satisfactory in form and substance to the Lenders, granting a valid first lien
on such real property or leasehold as security for the Notes, (b) deliver to
the Lenders such title insurance policies as the Required Lenders shall
reasonably require and (c) .deliver to the Lenders such legal opinions in
connection therewith as the Required Lenders shall reasonably required, in form
and substance satisfactory to the Required Lenders. Not less than sixty (60)
Business Days prior thereto, notify the Lenders in the event that the Borrower
shall change the location of any central station, specifying such central
station and the address of the proposed new location.
SECTION 6.10. ADDITIONAL ASSURANCES. From time to time hereafter, execute
and deliver or cause to be executed and delivered, such additional instruments,
certificates and documents, and take all such actions, as the Lenders shall
reasonably request for the purpose of implementing or effectuating the
provisions of this Agreement, the Notes or the Collateral Documents, and upon
the exercise by the Lenders and/or the Agents of any power, right, privilege or
remedy pursuant to this Agreement or the Collateral Documents which requires
any consent, approval, registration, qualification or authorization of any
governmental authority or instrumentality, exercise and deliver all
applications, certifications, instruments and other documents and papers that
the Lenders and/or the Agents may be so required to obtain.
VII. NEGATIVE COVENANTS.
The Borrower covenants and agrees that, so long as the Lenders have any
obligation to extend credit to the Borrower hereunder or there remains
outstanding any portion of the principal of, or interest on, the Notes or any
other Indebtedness of the Borrower to any Lender, whether now
36
<PAGE> 37
existing or arising hereafter, unless the Required Lenders shall otherwise
consent in writing, the Borrower will not, and will not permit any Subsidiary
to, directly or indirectly:
SECTION 7.01. INDEBTEDNESS. Incur, create, assume, become or be liable in
any manner with respect to, or permit to exist, any Indebtedness or liability,
except:
(A) TO LENDERS. Indebtedness to the Lenders hereunder and otherwise;
(B) TRADE OBLIGATIONS, ETC. Indebtedness with respect to trade
obligations and other normal accruals in the ordinary course of business not
yet due and payable or not more than ninety (90) days in arrears measured from
the date such payment is due, or with respect to which it is contesting in good
faith the amount or validity thereof by appropriate proceedings, and then only
to the extent it has set aside on its books adequate reserves therefor;
(C) SELLER DEBT. Seller Debt in the aggregate principal amount of not
more than $500,000 at any time, in each case on an unsecured basis and
subordinated to the Indebtedness of the Borrower to the Lenders in a manner
satisfactory to the Lenders and their counsel;
(D) CAPITAL LEASES, ETC. Indebtedness under Capital Leases and otherwise
relating to the purchase price of real estate and equipment to be used in the
business of the Borrower in the aggregate principal amount of not more than
$1,200,000 at any time;
(E) EXISTING LETTER OF CREDIT. Indebtedness in respect of the existing
letter of credit described on SCHEDULE 7.01 attached hereto, provided that such
letter of credit shall be replaced by a Letter of Credit issued by the Issuing
Bank under SECTION 1.17 within 15 days after the Closing Date; and
(F) NEGOTIABLE INSTRUMENTS. Indebtedness in respect of endorsements of
negotiable instruments for collection in the ordinary course of business.
SECTION 7.02. LIENS AND ENCUMBRANCES. Create, incur, assume, suffer or
permit to exist any mortgage, pledge, lien, charge or other encumbrance of any
nature whatsoever on any of its assets or ownership interests, now or hereafter
owned, other than as follows with such liens and encumbrances being referred to
herein as "Permitted Encumbrances"):
(A) LENDERS' LIENS. Liens in favor of the Lenders;
(B) EXISTING LIENS. Liens existing on the date hereof and described in
SCHEDULE 7.02 attached hereto;
(C) TAX LIENS. Liens securing the payment of taxes, either not yet due or
the validity or amount of which is being contested in good faith by appropriate
proceedings, and as to which it shall have set aside on its books adequate
reserves;
37
<PAGE> 38
(D) WORKERS' COMPENSATION, ETC. Deposits under worker's compensation,
unemployment insurance and social security laws, or to secure the performance
of bids, tenders, contracts (other than for the repayment of borrowed money) or
leases, or to secure statutory obligations or surety or appeal bonds, or to
secure indemnity, performance or other similar bonds arising in the ordinary
course of business;
(E) STATUTORY LIENS, ETC. Liens imposed by law, such as carriers',
warehouse or mechanics' liens, incurred by it in good faith in the ordinary
course of business, and Liens arising out of a prejudgment attachment, a
judgment or award against it with respect to which it shall currently be
prosecuting an appeal, a stay of execution pending such appeal having been
secured;
(F) DEFECTS IN TITLE, ETC. Restrictions, easements and minor
irregularities in title which do not and will not interfere materially with the
occupation, use and enjoyment by the Borrower of such properties and assets in
the normal course of its business as presently conducted or materially impair
the value of such properties and assets for the purpose of such business; and
(G) CAPITAL LEASES, ETC. Capital Leases and liens or mortgages securing
purchase money Indebtedness described in SECTION 7.01(D) provided that each
such lien or mortgage shall at all times be limited solely to the item or items
of property so acquired, provided that the aggregate amount of all mortgages,
pledges, liens, charges or other encumbrances permitted under this SECTION
7.02, other than those in favor of the Lenders, shall in no event exceed
$1,200,000 at any time.
SECTION 7.03. DISPOSITION OF ASSETS. Sell, lease, transfer or otherwise
dispose of its properties, assets, rights, licenses and franchises to any
person, (a) except in the ordinary course of its business (which dispositions
may be made free from the liens of the Collateral Documents), including the
replacement of equipment with other equipment of at least equal utility and
value (provided that the Lenders' liens upon such newly acquired equipment has
the same priority as the Lenders' liens upon the replaced equipment) and the
disposition without replacement of assets not material, individually or in the
aggregate, to the operation of its business; and (b) except for the sale of all
of the Borrower's accounts in the State of California for an aggregate cash
purchase price of at least $500,000, provided that such sale shall occur on or
before June 30, 1996.
SECTION 7.04. MANAGEMENT. Permit Johnson to cease serving as the chief
executive officer of the Borrower and the Parent, or, in the event that Johnson
shall cease as chief executive officer, fail to identify a replacement of at
least equal capacity and experience, who shall have become chief executive
officer within sixty (60) days of the date of such cessation.
SECTION 7.05. SALE AND LEASEBACK. Enter into any arrangements, directly
or indirectly, with any person whereby it shall sell or transfer any property,
real, personal or mixed, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property.
SECTION 7.06. INVESTMENTS. Except for Permitted Investments, purchase,
invest in or otherwise acquire or hold securities (including, without
limitation, capital stock and interests in
38
<PAGE> 39
general or limited partnerships, either as a general or limited partner or
otherwise) and evidences of indebtedness of, or make loans or advances to, or
enter into any arrangement for the purpose of providing funds or credit to, any
other person.
SECTION 7.07. FUNDAMENTAL CHANGES. Form any Subsidiary; amend its
Articles of Organization in any way that could have a Material Adverse Effect
upon the Borrower (including without limitation its ability to perform its
obligations hereunder) or upon the Lenders' rights hereunder or under the
Collateral Documents (it being expressly agreed that the inclusion of any
provision similar to those set forth in section 102 (b)(2) of Title 8 of the
Delaware Code is prohibited under this section); dissolve, liquidate,
consolidate with or merge with, or otherwise acquire any additional business
units or all or any substantial portion of the assets, properties of, or
ownership interests in, any corporation, partnership or other entity other than
pursuant to a Permitted Acquisition, a Dealer Program Purchase or the merger of
any Subsidiary into and with the Borrower, with the Borrower being the
surviving corporation; or redeem any of its capital stock and/or other equity
interests or issue any additional capital stock and/or other equity interests
without the prior written consent of the Required Lenders.
SECTION 7.08. CHANGE IN BUSINESS. Engage, directly or indirectly, in any
business other than the acquisition, operation, and installation of security
alarm and monitoring systems.
SECTION 7.09. ACCOUNTS RECEIVABLE. Sell, assign, discount or dispose in
any way of any accounts receivable, promissory notes or trade acceptances held
by it (other than to the Lenders), with or without recourse, except for
collection (including endorsements) in the ordinary course of business or
maintain an account receivable balance due from CSI in excess of $300,000 at
any time after the date of this Agreement.
SECTION 7.10. TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including without limitation the purchase, sale or exchange of property or
assets or the rendering or accepting of any service with or to any of its
Affiliates except in the ordinary course of business and pursuant to the
reasonable requirements of its business and upon terms not less favorable to
the Borrower or any Subsidiary than it could obtain in a transaction with a
third party other than such Affiliate, which shall be deemed to include the
Borrower's delivery of monitoring services to CSI under its existing contract
therefor.
SECTION 7.11. AMENDMENT OF CERTAIN AGREEMENTS. Except with the prior
written consent of the Required Lenders, amend or modify in any material
respect any material agreement to which the Borrower or any Subsidiary is a
party in any way that could have a Material Adverse Effect upon the business of
the Borrower or any Subsidiary or upon the Lenders' right hereunder or under
the Collateral Documents.
SECTION 7.12. ERISA. Fail to comply with the requirements of ERISA with
respect to any Employee Benefit Plans, as defined in SECTION 3(3) of ERISA,
which are maintained by it; permit any such plan which is a qualified pension,
profit sharing or stock bonus plan under SECTION 401 of the Code to lose its
qualified status; fail to meet the minimum funding standards of SECTION 302 of
ERISA and SECTION 412 of the Code; or fail to discharge any obligations to the
Pension Benefit
39
<PAGE> 40
Guaranty Corporation with respect to the termination of an Employee Pension
Benefit Plan, as defined in ERISA, maintained by it or to any Multiemployer
Plan, as defined in SECTION 4001(A)(3) of ERISA, on account of its withdrawal
therefrom.
SECTION 7.13. MARGIN STOCK. Use any of the proceeds of the Notes,
directly or indirectly, for the purpose of purchasing or carrying, or for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry, any Margin Stock or for any other purpose which might
constitute the transactions contemplated hereby a "purpose credit" within the
meaning of Regulation U, or cause this Agreement to violate any other
regulation of the Board of Governors of the Federal Reserve System or the
Securities Exchange Act of 1934, as amended, or any rules or regulations
promulgated under such statutes.
SECTION 7.14. BRANCH OPERATIONS. Without the prior written consent of the
Required Lenders, initiate new branch operations in any location other than
those set forth on SCHEDULE 7.14 attached.
VIII. DEFAULTS; ACCELERATION
In each case of the happening of any of the following events (each of
which is herein sometimes called an "Event of Default"):
(a) Any representation or warranty made in (or incorporated by reference
in) this Agreement, in the Collateral Documents, or in any report, certificate,
financial statement or other instrument furnished in connection with this
Agreement, or any Loan shall prove to be (or to have been) false or misleading
in any material respect at the time made; or
(b) Default in the payment (including without limitation any mandatory
prepayment) of any installment of the principal of the Notes or the principal
of any other Indebtedness of the Borrower to the Lenders on the date when the
same shall become due and payable, whether at the due date thereof or at a date
fixed for prepayment or by acceleration or otherwise; or
(c) Default in the payment of any fee, expense, indemnity or other charge
payable by the Borrower or any Subsidiary to the Lenders or the Issuing Bank or
any installment of any interest on the Notes or on any other indebtedness of
the Borrower or any Subsidiary to the Lenders within five (5) days of the date
on which the same shall become due and payable, whether at the due date thereof
or at a date fixed for prepayment or by acceleration or otherwise; or
(d) Default by any Person other than the Agents or the Lenders in the due
observance, performance, or compliance with, any covenant, condition or
agreement contained in ARTICLE III (but only as to material conditions not
waived in writing by the Lenders), ARTICLE V, SECTION 6.07 or ARTICLE VII
(except SECTION 7.10) of this Agreement; or
(e) Default by any Person other than the Agents or the Lenders in the due
observance, performance, or compliance with, any covenant, condition or
agreement contained in SECTION 6.03, 6.04 (but only if the same involves any
seizure of property), 6.05 (except paragraph (a)
40
<PAGE> 41
thereof), 6.06 , 6.09 or 6.10 of this Agreement which default shall continue
unremedied for fifteen (15) days after the earlier to occur of (i) the
Borrower's discovery of such default, or (ii) written notice thereof from the
Administrative Agent or any Lender to the Borrower, provided, however, that (x)
such 15-day grace period shall be available with respect to SECTIONS 6.05 and
6.06 only once in any period of 12 consecutive months and only twice during the
term of this Agreement and (y) if any such default cannot be remedied, then
such default shall be deemed to be an Event of Default as of the date of the
occurrence thereof; or
(f) Default in the due observance or performance of any other covenant,
condition or agreement on the part of any Person other than the Lenders or the
Agents to be observed or performed pursuant to the terms of this Agreement and
not specified in any of paragraphs (a) through (e) above, which default shall
continue unremedied for 30 days after the earlier to occur of (i) the
Borrower's discovery of such default, or (ii) written notice thereof from the
Lenders to the Borrower, provided that if such default cannot be remedied, then
such default shall be deemed to be an Event of Default as of the date of
occurrence thereof; or
(g) Default in the due observance or performance by any Person other than
the Lenders or the Agents of any covenant, condition or agreement contained in
any Collateral Document continuing unremedied for more than the applicable
period of grace, if any, provided that if such default cannot be remedied, then
such default shall be deemed to be an Event of Default as of the date of the
occurrence thereof; or
(h) Default with respect to the obligations of the Borrower, any
Subsidiary or the Parent under any agreement if such default shall continue for
more than the period of grace, if any, specified therein and shall not have
been waived pursuant thereto and if such default might reasonably give rise to
a Material Adverse Effect; or
(i) Default with respect to any other evidence of Indebtedness of the
Borrower, any Subsidiary or the Parent (other than to the Lenders) for borrowed
money or default under any agreement giving rise to monetary remedies, which,
when aggregated with all other defaults, exceeds $100,000, if the effect of
such default is to permit the holder(s) of such Indebtedness to accelerate the
maturity of such Indebtedness; or
(j) If the Borrower, any Subsidiary or the Parent shall (i) discontinue
its business, (ii) apply for or consent to the appointment of a receiver,
trustee, custodian or liquidator of it or any of its property, (iii) admit in
writing its inability to pay its debts as they mature, (iv) make a general
assignment for the benefit of creditors, (v) be adjudicated a bankrupt or
insolvent or be the subject of an order for relief under Title 11 of the United
States Code or (vi) file a voluntary petition in bankruptcy, or a petition or
an answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any such
law or corporate action shall be taken for the purpose of effecting any of the
foregoing; or
41
<PAGE> 42
(k) There shall be filed against the Borrower, any Subsidiary or the
Parent an involuntary petition seeking reorganization of the Borrower, such
Subsidiary or the Parent, as applicable, the appointment of a receiver,
trustee, custodian or liquidator of the Borrower, such Subsidiary or the
Parent, or a substantial part of their respective assets, as applicable, or an
involuntary petition under any bankruptcy, reorganization or insolvency law of
any jurisdiction, whether now or hereafter in effect (any of the foregoing
petitions being hereinafter referred to as an "Involuntary Petition"); or
(l) A final judgment for the payment of money which, when aggregated with
all other outstanding judgments against the Borrower, its Subsidiaries or the
Parent, exceeds $150,000, shall be rendered against the Borrower, any
Subsidiary or the Parent and the same shall remain undischarged or unbonded for
a period of 30 consecutive days, during which period execution shall not be
effectively stayed; or
(m) The occurrence of any attachment of any deposits or other property of
the Borrower, any Subsidiary or the Parent in the hands or possession of any of
the Lenders and/or the Agents, or the occurrence of any attachment of any other
property of the Borrower, any Subsidiary or the Parent in an amount which, when
aggregated with all other attachments against the Borrower and its
Subsidiaries, exceeds $100,000, and which shall not be discharged or bonded
within 30 days of the date of such attachment; or
(n) For any reason, Johnson shall cease to perform his current executive
and managerial duties with the Borrower or shall cease to be actively involved
in the management and operation of the Borrower's business and Johnson is not
replaced as set forth in SECTION 7.04;
(o) For any reason, the Parent shall cease to be the beneficial and legal
owner of less than all of the issued and outstanding capital stock of the
Borrower;
(p) For any reason, Johnson or his nominee shall cease to have all voting
control, and to be the beneficial owner, of at least 5% of the issued and
outstanding capital stock of the Parent, provided that the foregoing shall not
prevent transfers of equity interests in the Parent by Johnson to minor members
of his family or to trusts for his benefit or for the benefit of members of his
family, provided that he retains sole voting control thereof; or
(q) The occurrence of any event or condition described in paragraph (j) or
(k) of this ARTICLE VIII with respect to any Surety or any partnership of which
any Surety is a general partner; or
(r) For any reason, any Collateral Document shall not be in full force and
effect in all material respects or shall not be enforceable in all material
respects in accordance with its terms, or any material security interest or
material lien granted pursuant thereto shall fail to be perfected, or any party
thereto other than the Lenders shall contest the validity of any material lien
granted under, or shall disaffirm its obligations under, any Collateral
Document; or
42
<PAGE> 43
(s) Any Equity Holder shall pledge or otherwise encumber 50% or greater of
such Person's equity interest in the Parent or shall cease to own at least 50%
of the capital stock of the Parent held by such Person as at the Closing Date
as set forth on SCHEDULE 4.07 and as adjusted from time to time for stock
splits, stock dividends and the like, provided that upon an initial public
offering of the capital stock of the Borrower or the Parent equal to or in
excess of $10,000,000, this subparagraph (s) shall be deemed inapplicable and
shall be without legal effect;
(t) Default by the Borrower, any Subsidiary or the Parent under any note,
debenture, instrument, charter or partnership term or other document issued,
executed or made by such Person which remains unwaived or uncured beyond the
expiration of any applicable grace period and not otherwise contested in good
faith by such Person and which would result in a Material Adverse Effect;
(u) Termination of the Material Lease for any reason whatsoever without
the prior written consent of the Required Lenders, which shall not be
unreasonably withheld or delayed, or expiration of the Material Lease, if the
same is which is not renewed or replaced on terms and conditions reasonably
satisfactory to the Required Lenders; or
(v) FOR ANY REASON, ON THE EARLIER OF (I) APRIL 30, 1997 OR (II) THAT DATE
OCCURRING 30 DAYS AFTER THE FIRST DATE ON WHICH THE AGGREGATE OUTSTANDING
ADVANCES HEREUNDER EXCEED $46,000,000, THE BORROWER FAILS TO DELIVER TO THE
LENDERS A PLAN REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE
LENDERS SETTING FORTH IN DETAIL (INCLUDING PRO FORMA FINANCIAL PROJECTIONS) THE
MANNER IN WHICH THE BORROWER WILL REPAY OR REFINANCE ITS INDEBTEDNESS TO THE
LENDERS PRIOR TO THE EXPIRATION DATE (THE "REPAYMENT PLAN");
then upon such Event of Default and thereafter during the continuance of such
Event of Default, at the election of the Required Lenders, the aggregate
Commitments shall terminate and the Notes and any and all other Indebtedness of
the Borrower to the Lenders shall immediately become due and payable, both as
to principal and interest, without presentment, demand, or protest, all of
which are hereby expressly waived, anything contained herein or in the Notes or
other evidence of such indebtedness to the contrary notwithstanding except in
the case of an Event of Default under paragraph (j) or (k) of this ARTICLE
VIII, in which event such Indebtedness shall automatically become due and
payable. In the event of an acceleration of the Borrower's Indebtedness
hereunder as a result of the filing of an Involuntary Petition as specified in
paragraph (k) of this ARTICLE VIII, such acceleration shall be rescinded, and
the Borrower's rights hereunder reinstated as if no Event of Default had
occurred, if, within 60 days following the filing of such Involuntary Petition,
such Involuntary Petition shall have been dismissed, and there shall exist no
other Event of Default under this Agreement.
IX. REMEDIES ON DEFAULT, ETC.
(A) LENDERS' RIGHTS. In case any one or more Events of Default shall
occur, the Administrative Agent, as instructed by the Required Lenders pursuant
to the terms of ARTICLE X,
43
<PAGE> 44
may proceed to protect and enforce the Lenders' rights by an action at law,
suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained in this Agreement, any Collateral
Document or the Notes, or for an injunction against a violation of any of the
terms hereof or thereof or in and of the exercise of any power granted hereby
or thereby or by law.
(B) CONSENT TO APPOINTMENT OF RECEIVER. Upon the condition that at least
thirty (30) days shall have elapsed following the initial occurrence of an
Event of Default arising under subparagraphs (b) or (c) of ARTICLE VIII and if
any Lender shall have applied for the employment, or taking by possession by, a
trustee, receiver, liquidator or other similar official, of the Borrower to
hold or liquidate all or any substantial part of the properties or assets of
the Borrower and its Subsidiaries, then, to the extent permitted by law, the
Borrower (with all due authority on behalf of the Austin Subsidiary) hereby
consents to such appointment and agrees to execute and deliver any and all
documents requested by the Lenders relating to the appointment of such trustee,
receiver, liquidator or other similar official (whether by joining in a
petition for the voluntary appointment of such an official, by entering no
contest to a petition for the appointment of such an official or otherwise, as
appropriate under applicable law).
(C) RIGHTS NON-EXCLUSIVE. No right conferred upon the Lenders hereby or
by the Notes or any Collateral Document (whether directly or upon the
Administrative Agent) shall be exclusive of any other right referred to herein
or therein or now or hereafter available at law, in equity, by statute or
otherwise.
X. THE AGENTS.
SECTION 10.01. APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
appoints and authorizes Canadian Imperial-New York to act as its agent
hereunder and under the other Transaction Documents with such powers as are
specifically delegated to the Administrative Agent by the terms of this
Agreement and of the other Transaction Documents, together with such other
powers as are reasonably incidental thereto. Each Lender also appoints the
Co-Agent to act as its agent under the Leasehold Mortgage solely for the
purpose of preserving and enforcing the Lender's rights and remedies with
respect to the Material Lease, all at the direction of the Administrative Agent
(which directions shall at all times be consistent with the Administrative
Agent's obligations under this Agreement) or, absent such direction, the
Required Lenders. The Administrative Agent and the Co-Agent (each of such
terms, as used herein, being deemed to include reference to such Agent's
affiliates and its own and its affiliates' officers, directors, employees and
agents):
(a) shall have no duties or responsibilities except those expressly
set forth in this Agreement and in the other Transaction Documents, and
shall not by reason of this Agreement or any other Transaction Documents
be a trustee for any Lender;
(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or
in any other Transaction Document, or in any certificate or other
document referred to or provided for in, or received
44
<PAGE> 45
by any of them under this Agreement or any other Transaction Document, or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement, any Note or any other Transaction Document
or any other documents referred to or provided for herein or therein or
for any failure by the Borrower or any other Person (other than the
Administrative Agent, with respect to its duties in such capacity, or the
Co-Agent, with respect to its duties hereunder) to perform any of its
obligations hereunder or thereunder;
(c) shall not, except to the extent expressly instructed by the
Required Lenders with respect to collateral security under (i) the
Collateral Documents, with respect to the Administrative Agent, or (ii)
the Leasehold Mortgage, with respect to the Co-Agent, be required to
initiate or conduct any litigation or collection proceedings hereunder or
under any other Transaction Document; and
(d) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under (i) any Transaction Document, with respect
to the Administrative Agent, or (ii) the Leasehold Mortgage, with respect
to the Co-Agent, or under any other document or instrument referred to or
provided for herein or therein or in connection herewith or therewith,
except for its own gross negligence or willful misconduct.
The Administrative Agent and the Co-Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith..
SECTION 10.02. RELIANCE BY AGENTS. Each Agent shall be entitled to rely
upon any certificate, notice or other communication (including, without
limitation, any thereof by telephone, telecopy, telegram, facsimile or cable)
reasonably believed by it to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by such Agent. As to any matters not expressly provided for by this Agreement
or any other Transaction Document, either Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder or thereunder in
accordance with instructions given by the Required Lenders or all of the
Lenders as is required in such circumstances, and such instructions of such
Lenders and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders. As to any matters requiring the consent of, or
other instructions of, any of the Lenders under this Agreement, any Lender
failing to respond to a request by either Agent for such consent or other
instructions with five (5) Business Days will be deemed to have concurred with
the actions taken by the Required Lenders.
SECTION 10.03. EVENTS OF DEFAULTS. Neither Agent shall be deemed to have
knowledge or notice of the occurrence of an Event of Default unless such Agent
has received notice from a Lender or the Borrower specifying such Event of
Default and stating that such notice is a "Notice of Event of Default." In the
event that the Administrative Agent receives such a notice of the occurrence of
an Event of Default, the Administrative Agent shall give prompt notice thereof
to the Lenders and the Co-Agent. (a) The Administrative Agent shall (subject
to SECTION 10.07) take such action with respect to such Event of Default as
shall be directed by the Required Lenders and (b) the Co-Agent shall (subject
TO SECTION 10.07) take such action under the Leasehold Mortgage with
45
<PAGE> 46
respect to such Event of Default as shall be directed by the Administrative
Agent (in a manner which is consistent with the performance of its obligations
as Administrative Agent under the Collateral Documents and has, to the extent
necessary or appropriate, been authorized by the Required Lenders or all of the
Lenders) or, absent such direction, the Required Lenders; provided, in each
case, that unless and until such Agent shall have received such directions,
such Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Event of Default as it shall deem
advisable in the best interest of the Lenders except to the extent that this
Agreement expressly requires that such action be taken, or not be taken, only
with the consent or upon the authorization of the Required Lenders or all of
the Lenders.
SECTION 10.04. RIGHTS AS A LENDER. With respect to its Commitment and
the Revolving Loans made by it, (a) CIBC in its capacity as an Affiliate of
Canadian Imperial-New York and (b) SunTrust, as Co-Agent, shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not (i) an Affiliate of the Administrative Agent, in the case of
CIBC, or (ii) a Lender, in the case of SunTrust. Each of (x) Canadian
Imperial-New York (and any successor acting as Administrative Agent) and its
Affiliates, including CIBC, and (y) SunTrust (and any successor acting as
Co-Agent), may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Borrower (and any of its
Subsidiaries or Affiliates) as if it were not acting as an Agent, and Canadian
Imperial-New York (and any successor acting as Administrative Agent), SunTrust
and their respective Affiliates, including CIBC, may accept fees and other
consideration from the Borrower for services in connection with this Agreement
or otherwise without having to account for the same to the Lenders.
SECTION 10.05. INDEMNIFICATION. The Lenders agree to indemnify the
Agents, pro rata in accordance with SECTION 1.14, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever that may be imposed
on, incurred by or asserted against either Agent (including by any Lender)
arising out of or by reason of any investigation in any way relating to or
arising out of this Agreement or any other Transaction Document or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including, without limitation, the costs and
expenses that the Borrower is obligated to pay under SECTION 13.02 hereof, but
excluding, unless an Event of Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or
of any such other documents, provided that no Lender shall be liable for any of
the foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified.
SECTION 10.06. NON-RELIANCE ON AGENTS AND OTHER LENDERS. Each Lender
agrees that it has, independently and without reliance on the Agents or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Borrower and decision to enter
into this Agreement and that it will, independently and without reliance upon
the Agents or any other Lender, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or under any
other Transaction Document. The Agents shall
46
<PAGE> 47
not be required to keep themselves informed as to the performance or observance
by the Borrower of this Agreement or any of the other Transaction Documents or
any other documents referred to or provided for herein or therein or to inspect
the properties or books of the Borrower. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Agents hereunder or under the Collateral Documents, neither Agent shall
have any duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Borrower (or any of its Affiliates) that may come into the possession of such
Agent or any of its Affiliates.
SECTION 10.07. FAILURE TO ACT. Except for action expressly required of
the Agents hereunder and under the other Transaction Documents, (a) each of the
Agents shall in all cases be fully justified in failing or refusing to act
hereunder and thereunder unless it shall receive further assurances to its
satisfaction from the Lenders of their indemnification obligations under
SECTION 10.05 hereof against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action and
(b) the Co-Agent shall in all cases be fully justified in failing or refusing
to act under the Leasehold Mortgage unless it shall receive assurances to its
satisfaction from the Administrative Agent that the directions it has received
from the Administrative Agent are in full compliance with the Administrative
Agent's duties and obligations under this Agreement and have, to the extent
required or appropriate, been authorized by the Required Lenders or all of the
Lenders, as the case may be.
SECTION 10.08. RESIGNATION OR REMOVAL OF AGENT. Subject to the
appointment and acceptance of a successor Agent as provided below, each of the
Agents may resign at any time by giving notice thereof to the Lenders. Upon
any such resignation, the Required Lenders shall have the right (after
consultation with the Borrower) to appoint a successor Agent. If no successor
Agent shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Agent's giving of
notice of resignation or the Required Lenders' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Lenders, appoint a successor
Agent that shall be a bank with a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative Agent
or Co-Agent hereunder by a successor Agent, such successor Administrative Agent
or Co-Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Administrative Agent or Co-Agent,
and the retiring Administrative Agent or Co-Agent shall be discharged from its
duties and obligations hereunder. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this ARTICLE X shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as an Agent.
SECTION 10.09. CONSENTS UNDER OTHER TRANSACTION DOCUMENTS. Each Agent
may, with the prior consent of the Required Lenders (but not otherwise),
consent to any modification, supplement or waiver under (a) any of the
Transaction Documents, in the case of the Administrative Agent, or (b) the
Leasehold Mortgage, or the case of the Co-Agent, provided that, without the
prior consent of each Lender, neither Agent shall (except in connection with
permitted sales of assets and as otherwise provided herein or in the Collateral
Documents) release any collateral or otherwise terminate any Lien under any
Collateral Document providing for collateral security, agree to additional
obligations being secured by such collateral security (unless permitted
47
<PAGE> 48
by the terms of this Agreement), alter the relative priorities of the
obligations entitled to the benefits of the Liens created under the Collateral
Documents or release any guarantor under any Collateral Document from its
guarantee obligations thereunder.
SECTION 10.10. THE CO-AGENT. Except as expressly provided in SECTION 10
or otherwise herein, the Co-Agent shall not have any rights or obligations
under this Agreement or any of the other Transaction Documents except in its
capacity as a Lender hereunder and thereunder. The provisions of this ARTICLE X
which relate expressly to the Co-Agent shall be deemed to apply only to the
performance of its obligations as agent for the Lenders under or in connection
with the Leasehold Mortgage.
XI. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS; SEPARATE ACTIONS BY THE
LENDERS.
(a) This Agreement (including the Schedules hereto) constitutes the entire
agreement of the parties herein and supersedes any and all prior agreements,
written or oral, as to the matters contained herein, and no modification or
waiver of any provision hereof or of the Notes or any of the Collateral
Documents, nor consent to the departure by the Borrower therefrom, shall be
effective unless the same is in writing, and then such waiver or consent shall
be effective only in the specific instance, and for the purpose, for which
given. Except as hereafter provided, the consent of the Required Lenders shall
be sufficient and required (i) to amend, with the consent of the Borrower, any
term of this Agreement, the Notes or the Collateral Documents or to waive the
observance of any such term (either generally or in a particular instance or
either retroactively or prospectively); (ii) to take or refrain from taking any
action permitted under this Agreement, the Notes, the Collateral Documents or
applicable law, including, without limitation, (A) the acceleration of the
payment of the Notes, (B) the termination of the Commitments, (C) the exercise
of the Administrative Agent's and the Lenders' remedies hereunder and under the
Collateral Documents and (D) the giving of any approvals, consents, directions
or instructions required under this Agreement or the Collateral Documents;
provided that no such amendment, waiver or consent shall, without the prior
written consent of all of the Lenders or the holders of all of the Notes at the
time outstanding, (1) extend the fixed maturity or reduce the principal amount
of, or reduce the amount or extend the time of payment of any principal of, or
interest on, any Note or any fees payable under this Agreement, (2) increase or
extend any Lender's Commitment or extend the Expiration Date (it being
understood that waivers or modifications of conditions precedent, covenants,
defaults or Events of Default shall not constitute any such increase or
extension), (3) release any guaranties or any Collateral, unless such release
of Collateral is in connection with a sale of Collateral permitted under
SECTION 7.03 or to which the Required Lenders have consented and substantially
all of the net proceeds of such sale are used to repay the Borrower's
indebtedness to the Lenders hereunder or otherwise used in a manner permitted
hereunder, (4) change the percentage referred to in the definition of "Required
Lenders" contained in ARTICLE XIII, or (5) amend the provisions of this ARTICLE
XI; and provided, further, that neither notice to, nor the consent of, the
Borrowers shall be required for any modification, amendment or waiver of the
provisions of this ARTICLE XI governing the number of Lenders required to
consent to any act or omission under the Transaction Documents or the
definition of "Required Lenders".
48
<PAGE> 49
(b) Any amendment or waiver effected in accordance with this ARTICLE XI
shall be binding upon each holder of any Note at the time outstanding, each
future holder of any Note and the Borrower. The Lenders' failure to insist
(directly or through the Administrative Agent) upon the strict performance of
any term, condition or other provision of this Agreement, any Note, or any of
the Collateral Documents, or to exercise any right or remedy hereunder or
thereunder, shall not constitute a waiver by the Lenders of any such term,
condition or other provision or default or Event of Default in connection
therewith, nor shall a single or partial exercise of any such right or remedy
preclude any other or future exercise, or the exercise of any other right or
remedy; and any waiver of any such term condition or other provision or of any
such default or Event of Default shall not affect or alter this Agreement, any
Note or any of the Collateral Documents, and each and every term, condition and
other provision of this Agreement, the Notes and the Collateral Documents
shall, in such event, continue in full force and effect and shall be operative
with respect to any other then existing or subsequent default or Event of
Default in connection therewith. An Event of Default hereunder and a default
under any Note or under any of the Collateral Documents shall be deemed to be
continuing unless and until waived in writing all of the Lenders, as provided
in paragraph (a) above.
XII. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders and the Agents and their respective successors and
assigns, and all subsequent holders of any of the Notes or any portion hereof.
(b) Each Lender may assign its rights and interests under this Agreement,
the Notes and the Collateral Documents and/or delegate its obligations
hereunder and thereunder, in whole or in part, and sell participations in the
Notes and the Collateral Documents as security therefor, provided as follows:
(i) Any such assignment made other than to a separately organized
branch, or an Affiliate of, a Lender (A) shall reflect an assignment of
such assigning Lender's Note and Commitment which is in an aggregate
principal amount of at least $5,000,000, and if greater, shall be an
integral multiple of $1,000,000 and (B) unless such assignment occurs
during the continuance of an Event of Default, shall require the approval
of each of the Agents and the Borrower, which approval shall not be
unreasonably withheld or delayed.
(ii) Notwithstanding any provision of this Agreement to the contrary,
each Lender may at any time assign all or any portion of its rights under
this Agreement and each of the other Transaction Documents, including,
without limitation, the Notes held by such Lender to any Federal Reserve
Bank (or equivalent thereof in the case of Lenders chartered outside of the
United States); provided that no such assignment shall release a Lender
from any of its obligations and liabilities under the Transaction
Documents. Any Federal Reserve Bank (or equivalent thereof) which receives
such an assignment from any Lender may make further assignments of such
rights in accordance with the provisions of this Section.
49
<PAGE> 50
(iii) Any assignments and/or delegations made hereunder shall be
pursuant to an instrument of assignment and acceptance (the "Assignment and
Acceptance") substantially in the form of SCHEDULE 12(B)(III) and the
parties to each such assignment shall execute and deliver to the Agent for
its acceptance the Assignment and Acceptance together with any Note or
Notes subject thereto. Upon such execution and delivery, from and after
the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the execution
thereof, (A) the assignee thereunder shall become a party hereto and, to
the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein
and (B) the assigning Lender thereunder shall, to the extent provided in
such assignment, be released from its obligations under this Agreement as
to that portion of its obligation being so assigned and delegated. The
Assignment and Acceptance shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of the
assignee as a Lender and the resulting adjustment of Commitments arising
from the purchase by and delegation to such assignee of all or a portion of
the rights and obligations of such assigning Lender under this Agreement.
(iv) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and the assignee together with the Note subject to such
assignment and payment by the Assignee to the Administrative Agent of a
registration and processing fee of $3,500, the Administrative Agent shall
accept such Assignment and Acceptance. Promptly upon delivering such
Assignment and Acceptance to the Agent, the Assigning Lender shall give
notice thereof to the Borrower and all of the Lenders pursuant to a Notice
of Assignment and Acceptance substantially in the form of SCHEDULE
12(B)(IV). Within five (5) Business Days after receipt of such notice, the
Borrower shall execute and deliver to the Administrative Agent in exchange
for the surrendered Note a new Note payable to the order of such assignee
in an amount equal to the portion of the Commitments assumed by such
assignee pursuant to such Assignment and Acceptance and new Note payable to
the order of the assigning Lender in an amount equal to the portion of the
Commitment retained by it hereunder. Such new Notes shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form provided in SECTION 1.02. Canceled Notes shall be
returned to the Borrower upon the execution and delivery of such new Notes.
(v) Each Lender may sell participations in all or a portion of its
rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitment and the Note held by it); provided,
however, that, (A) the selling Lender shall remain obligated under this
Agreement to the extent as it would if it had not sold such participation,
(B) the selling Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (C) the participant shall
have no rights to approve any action or inaction by the selling Lender
under the terms of its participation, other than any such action or
inaction which would require the unanimous vote of all of the Lenders under
paragraph (a) of ARTICLE XI, (D) all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such
participation and no
50
<PAGE> 51
participant shall be entitled to receive any greater amount pursuant to
this Agreement than the selling Lender would have been entitled to receive
in respect of the amount of the participation transferred by such Lender to
such participant had no such transfer occurred, and (E) the Borrower, the
Agents and the other Lenders shall continue to deal solely and directly
with the selling Lender in connection with such Lender's rights and
obligations under this Agreement.
(vi) The Borrower may not assign any of their rights or delegate any
of their duties or obligations hereunder.
(vii) Any Lender may, in connection with any assignment or
participation pursuant to this Section, disclose to the assignee or
participant any information relating to the Borrower, the Parent and the
Subsidiaries furnished to such Lender by or on behalf of the Borrower and
such assignee or participant shall treat such information as confidential.
XIII. DEFINITIONS
As used herein the following terms have the following respective meanings:
ACCOUNTANTS. See SECTION 6.06.
ACQUISITION. See SECTION 1.01(D).
ACQUISITION ADVANCES. See SECTION 1.01.
ACQUISITION EXPENSES RESTORATION AMOUNT. All salaries, benefits and other
direct expenses for the three-month period immediately preceding the date of
the determination thereof which are attributable to employees of the Borrower
whose principal function is to identify and effect the Acquisition of any
Security Alarm Services Business, provided that (i) the aggregate amount of
such expenses shall not exceed $50,000 for any such three-month period; and
(ii) none of the expenses includable in such calculation shall have been
accounted for by the Borrower as a Capital Expenditure.
ADJUSTED NET OPERATING INCOME. For any three-month period, Net Operating
Income for such period plus the Safe Choice Expenses Restoration Amount, the
Acquisition Expenses Restoration Amount and Pro Forma Acquired Net Operating
Income for such period, excluding for the purposes of such calculation any gain
or loss realized by the Borrower for such period on its equity investment in
CSI.
ADMINISTRATIVE AGENT. See the Preamble.
ADVANCE(S). See SECTION 1.01.
AFFILIATE(S). Any Person that directly or indirectly controls, or is
under common control with, or is controlled by, the Borrower and, if such
Person is an individual, any member of the
51
<PAGE> 52
immediate family (including parents, spouse, children and siblings) of such
individual and any trust whose principal beneficiary is such individual or one
or more members of such immediate family and any Person who is controlled by
any such member or trust. As used in this definition, "control", including,
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 (whether through ownership or securities or
partnership or other ownership interests, by contract or otherwise), provided
that, in any event, any Person that owns directly or indirectly securities
having five (5%) or more of the voting power for the election of directors or
other governing body of a corporation or five percent (5%) or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation or other Person. Notwithstanding the foregoing, no individual
shall be an Affiliate solely by reason of his or her being a director, officer
or employee of the Borrower or any Subsidiary.
AGENTS. See the Preamble.
AGGREGATE PURCHASE PRICES. The aggregate of all Purchase Prices for all
Acquisitions from the Closing Date to the date of the calculation thereof.
ANNUALIZED ADJUSTED NET OPERATING INCOME. For any three month period,
Adjusted Net Operating Income for such period multiplied by four (4).
AUSTIN SUBSIDIARY. See the Recitals.
BASE RATE. As of any date, the fluctuating interest rate per annum equal
to the greater of (a) the rate established by Canadian Imperial Bank of
Commerce from time to time at its office in New York City as its "Base Rate"
for commercial loans in United States Dollars, and (b) the Federal Funds Rate
plus 1.00%; in each case, including any applicable adjustments for reserves or
Federal Deposit Insurance Corporation requirements. The Base Rate is not
necessarily intended to be the lowest rate of interest determined by Canadian
Imperial Bank of Commerce in connection with extensions of credit.
BASE RATE LOANS. Loans bearing interest at a rate determined on the basis
of the Base Rate.
BORROWER. See the Preamble.
BORROWING DATE. See SECTION 3.02.
BUDGET. See SECTION 6.06.
BUSINESS DAY. (a) For all purposes other than as provided in clause (b)
below, any day other than a Saturday, Sunday or legal holiday on which banks in
New York, New York are open for the transaction of a substantial part of their
commercial banking business; and (b) with respect to all notices and
determinations in connection with, and payments of principal and
52
<PAGE> 53
interest on, LIBOR Loans, any day that is a Business Day described in clause
(a) and that is also a day for trading by and between banks in U.S. Dollar
deposits in the London interbank market.
CANADIAN IMPERIAL-NEW YORK. See the Preamble.
CAPITAL EXPENDITURE. Any payment made directly or indirectly for the
purpose of acquiring or constructing fixed assets, real property, or equipment
which, in accordance with GAAP, would be added as a debit to the fixed asset
account of the entity making such expenditure, including without limitation
amounts paid or payable for labor or under any conditional sale or other title
retention agreement or under any lease or other periodic payment arrangement
which is of such a nature that payment obligations of the lessee or obligor
thereunder would be required by GAAP to be capitalized and shown as liabilities
on the balance sheet of such lessee or obligor, excluding, however, any capital
assets acquired pursuant to a Permitted Acquisition.
CAPITAL LEASE. Any lease of property (real, personal or mixed) which, in
accordance with generally accepted accounting principles, would be capitalized
on the lessee's balance sheet or for which the amount of the asset and
liability thereunder if not so capitalized should be disclosed in a note to
such balance sheet.
CIBC. See the Preamble.
CLOSING. See SECTION 3.01.
CLOSING COSTS. For any period, nonrecurring out-of-pocket expenses,
including attorneys' fees, investment banking fees and the Facility Fees,
accrued by the Borrower during such period in connection with the closing of
the transactions under this Agreement and the closing of Permitted
Acquisitions.
CLOSING DATE. See SECTION 3.01.
CO-AGENT. See the Preamble.
COBRA. See SECTION 4.15.
CODE. See SECTION 4.15.
COLLATERAL. Collectively, any and all collateral referred to herein and
in the Collateral Documents.
COLLATERAL DOCUMENT(S). See SECTION 2.01.
COMMITMENT(S). See SECTION 1.01.
COMMITMENT FEE. See SECTION 1.08.
53
<PAGE> 54
CSI. Centennial Security, Inc., a Delaware corporation.
DEALER PROGRAM PURCHASE. Any purchase of installed accounts by the
Borrower, provided that (a) the maximum purchase price therefor shall not
exceed 30 multiplied by Recurring Monthly Revenue attributable to any such
accounts for the most recently ended month for which financial information is
available, (b) such purchase is effected in compliance with standards for the
"Dealer Program" established by the Borrower's management and governing credit
scoring, price, holdback and discount limitations, equipment purchases,
regulatory compliance and other relevant factors, and (c) the aggregate amount
paid in connection with all Dealer Program Purchases shall not exceed (i) a
cumulative amount for the period commencing on April 1, 1996 and ending on the
last day of any month of $350,000 multiplied by the number of months completed
during such period or (ii) $500,000 in any month.
ENVIRONMENTAL EVENT. See SECTION 4.22.
ENVIRONMENTAL LAWS. Any and all present and future Federal, state and
local laws, rules or regulations, and any orders or decrees, in each case as
now or hereafter in effect, relating to the regulation or protection of human
health, safety or the environment or to the emissions, discharges, releases or
threatened releases or pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes into the indoor or outdoor environment.
EQUITY HOLDER(S). The holders of capital stock of the Parent set forth on
SCHEDULE 4.07.
ERISA. Employee Retirement Income and Security Act of 1974, as from time
to time amended.
EVENT OF DEFAULT. See ARTICLE VIII .
EXPIRATION DATE. See SECTION 1.01.
FACILITY FEES. See SECTION 1.08.
FEDERAL FUNDS RATE. For any period, a fluctuating interest rate per annum
(based on a 365 or 366 day year, as the case may be) equal for each day during
such period to the average of the rates of interest charged on overnight
federal funds transactions with member banks of the Federal Reserve System
only, as published for any day which is a Business Day by the Federal Reserve
Bank of New York (or, in the absence of such publication, as reasonably
determined by the Agent).
FEE LETTERS. The letter agreements dated as of the date of this Agreement
between the Borrower and (a) SunTrust and (b) CIBC and the Administrative Agent
with respect to the payment of facility fees.
FEES. See SECTION 1.08.
54
<PAGE> 55
FINANCIAL OFFICER. The chief executive officer or the chief financial
officer of the Borrower.
FINANCIAL STATEMENTS. See SECTION 4.16.
FINANCING FEE. See SECTION 1.08.
GAAP. Generally accepted accounting principles consistently applied.
GOVERNMENTAL AUTHORITY. Any nation or government, any state or other
political subdivision thereof and any entity exercising any executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to, government.
HAZARDOUS MATERIAL. Collectively, (a) any petroleum or petroleum
products, flammable materials, explosives, radioactive materials, asbestos,
urea formaldehyde foam insulation and transformers or other equipment that
contain polychlorinated byphinals ("PCBs"); (b) any chemical or other materials
or substances that are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law; and (c) any other chemical or other
material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law.
INDEBTEDNESS OR INDEBTEDNESS. As applied to any person, (a) all items
(except items of capital stock, partnership interests, capital and capital
accounts or paid-in surplus or of retained earnings or prepaid items or
deposits) which, in accordance with GAAP, would be included in determining
total liabilities as shown on the liability side of a balance sheet of such
person as at the date as of which Indebtedness is to be determined, including
any lease which in accordance with GAAP consistently applied would constitute
indebtedness, (b) all indebtedness secured by any mortgage, pledge, lien or
conditional sale or other title retention agreement to which any property or
asset owned or held by such person is subject, whether or not the indebtedness
secured thereby shall have been assumed, and (c) all indebtedness of others
which such person has directly or indirectly guaranteed, endorsed (otherwise
than for collection or deposit in the ordinary course of business), discounted
or sold with recourse or agreed (contingently or otherwise) to purchase or
repurchase or otherwise acquire, or in respect of which such person has agreed
to supply or advance funds (whether by way of loan, stock or equity purchase,
capital contribution or otherwise) or otherwise to become directly or
indirectly liable.
INVOLUNTARY PETITION. See ARTICLE VIII.
INSOLVENT. With respect to any Person, that any of the following is true
and correct: (a) the fair market value of the Person's assets is not in excess
of the total amount of the Person's liabilities (such liabilities determined in
accordance with GAAP); (b) the Person owns property having a value, at fair
valuation or at present fair salable value, less than the amount of the
Person's liabilities (including all "claims" as defined in the U.S. Bankruptcy
Code) or (c) the Person is unable to pay
55
<PAGE> 56
his or its debts as they mature. For purposes of determining whether the
Borrower is Insolvent under clause (b) or (c) of the preceding sentence, the
Indebtedness of the Borrower to the Lenders shall be deemed not to exceed the
amount of proceeds of any Loans to be used by or for the benefit of the
Borrower as represented in a Request for Advances.
INTERCAP ACQUISITION. See the Recitals.
INTEREST EXPENSE. For any period, the aggregate amount (determined on a
consolidated basis in accordance with GAAP) of interest accrued (whether or not
paid) during such period by the Borrower and its Subsidiaries in respect of all
Indebtedness for borrowed money.
INTEREST PERIOD. With respect to each LIBOR Loan, the period commencing
on the date such Loan is made or converted from a Base Rate Loan, or the last
day of the immediately preceding Interest Period, as to LIBOR Loans being
continued as such, and ending one (1), two (2), three (3) or six (6) months
thereafter as the Borrower may elect in the applicable Request for Advances or
Interest Rate Option Notice, provided that:
(i) any Interest Period (other than an Interest Period determined
pursuant to clause (iv) below) that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in the next calendar month, in which case
such Interest Period shall end on the immediately preceding Business Day;
(ii) if the Borrower shall fail to give notice as provided in clauses
(i) and (ii) of SECTION 1.04(B), the Borrower shall be deemed to have
requested a conversion of the affected LIBOR Loan to a Base Rate Loan on
the last day of the then current Interest Period with respect thereto;
(iii) any Interest Period relating to a LIBOR Loan that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (iv) below, end on the last
Business Day of a calendar month;
(iv) any Interest Period related to a LIBOR Loan that would otherwise
end after the final maturity date of the Loans shall end on such final
maturity date;
(v) no Interest Period shall include a principal repayment date for
the Loans unless an aggregate principal amount of Loans at least equal to
the principal amount due on such principal repayment date shall be Base
Rate Loans or LIBOR Loans having Interest Periods ending on or before such
date; and
(vi) notwithstanding clauses (iv) and (v) above, no Interest Period
shall have a duration of less than one (1) month.
56
<PAGE> 57
INTEREST RATE OPTION NOTICE. A notice given by the Borrower to the
Administrative Agent of the Borrower's election to convert Loans to a different
type or continue Loans as the same type, in accordance with SECTION 1.04(B).
INVOLUNTARY PETITION. See ARTICLE VIII.
ISSUING BANK. Canadian Imperial Bank of Commerce, an Affiliate of the
Administrative Agent and CIBC.
JOHNSON. Terry W. Johnson.
LEASE(S). Any lease or other periodic payment arrangement for the use of
property (real, personal or mixed).
LEASED PROPERTIES. See SECTION 4.04.
LEASEHOLD MORTGAGE. The Leasehold Mortgage dated as of March 28, 1996
granted by the Borrower to the Co-Agent, as agent for the Lenders, with respect
to the Borrower's interest in the Material Lease, as amended, restated,
replaced, renewed, supplemented or otherwise modified from time to time.
LENDER(S). See the Preamble.
LETTER OF CREDIT. See SECTION 1.18.
LETTER OF CREDIT DISBURSEMENT. See SECTION 1.18.
LETTER OF CREDIT DOCUMENTS. See SECTION 1.18.
LETTER OF CREDIT FEE. See SECTION 1.18.
LENDERS. See the PREAMBLE.
LIBOR BASE RATE. With respect to each day during each Interest Period
pertaining to any LIBOR Loans, the interest rate per annum at which the Agent
is offered deposits in U.S. Dollars at or about 11:00 A.M. (London Time), two
(2) Business Days prior to the beginning of such Interest Period in the London
interbank market for delivery on the first day of such Interest Period, for the
number of days comprised therein and in an amount comparable to the amount of
its portion of the LIBOR Loans to be outstanding during such Interest Period.
LIBOR LOANS. Loans bearing interest at a rate determined on the basis of
the LIBOR Rate.
57
<PAGE> 58
LIBOR RATE. With respect to each day during each Interest Period
pertaining to a LIBOR Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward, if necessary, to the
nearest 1/16th of 1%):
LIBOR Base Rate
1.00 - LIBOR Reserve Requirements
LIBOR RESERVE REQUIREMENTS. For any day as applied to a LIBOR Loan, the
aggregate (without duplication) of the rates (expressed as a decimal fraction)
of reserve requirements in effect on such day (including without limitation
basic, supplemental, marginal and emergency reserves) under any regulations of
the Board of Governors of the Federal Reserve System (or other Governmental
Authority having jurisdiction with respect thereto) prescribed for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
such Board) maintained by a member bank of the Federal Reserve System;
provided, however, that LIBOR Reserve Requirements shall be calculated without
giving effect to any increase of the rate of reserve applicable to any Lender
which is specifically imposed on such Lender under a memorandum of
understanding with a Federal Reserve Bank.
LICENSES. See SECTION 4.08.
LIEN. Any mortgage, deed of trust, pledge, lien, security interest,
charge or other encumbrance or security arrangement of any nature whatsoever,
whether arising by agreement or by operation of law, including, but not limited
to, any conditional sale or title retention arrangement and any assignment,
deposit arrangement or lease intended as, or having the effect of, security.
LOANS. See SECTION 1.01.
MARGIN STOCK. See SECTION 4.19.
MATERIAL ADVERSE EFFECT. Any circumstance or event which, individually or
in the aggregate with other such circumstances or events, (i) has had, or could
reasonably be expected to have, an adverse effect on the validity or
enforceability of this Agreement or the other Transaction Documents in any
material respect, (ii) has had, or could reasonably be expected to have, an
adverse effect on the condition (financial or other), business, results of
operations, prospects or properties of the Borrower, the Parent or the Austin
Subsidiary in any material respect or (iii) has impaired, or could reasonably
be expected to impair, the ability of the Borrower, the Parent or the Austin
Subsidiary to fulfill its obligations under this Agreement or any other
Transaction Document to which it is a party in any material respect.
MATERIAL LEASE. See SECTION 3.01.
MULTI-EMPLOYER PLAN. See SECTION 4.15.
NET INCOME. For any period, the net income (or loss) of the Borrower and
its Subsidiaries, excluding any extraordinary income (or loss) of the Borrower
and its Subsidiaries for such period
58
<PAGE> 59
(taken as a cumulative whole), after deducting all operating expenses,
provisions for all taxes and reserves (including reserves for deferred income
taxes) and all other proper deductions, all determined on a consolidated basis
in accordance with GAAP.
NET OPERATING INCOME. For any fiscal period, Net Income for such period,
plus (a) depreciation; (b) amortization; (c) federal and state taxes paid by
the Borrower in respect of income and profits; and (d) Interest Expense, minus
(i) Parent Transfers and (ii) extraordinary gains; all determined on a
consolidated basis in accordance with GAAP.
NEW SAFE CHOICE INSTALLATIONS. For any period, security alarm services
installations made by the Borrower and its Subsidiaries during such period for
new customers of the Borrower's Safe Choice Program.
NOTE(S). See SECTION 1.02.
OBLIGATIONS. The Loans and the other obligations of the Borrower and its
Subsidiaries under this Agreement and the other Transaction Documents.
including, without limitation, any and all future loans, advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower and its
Subsidiaries to the Lenders, of any kind or nature, whether or not evidenced by
any note, mortgage or other instrument, whether arising by reason of an
extension of credit, loan, guarantee, indemnification or in any other manner,
whether direct or indirect (including those acquired by assignment), absolute
or contingent, due or to become due, now existing or hereafter arising and
however acquired. The term "Obligations" also includes, without limitation,
all interest, charges, expenses, fees (including attorneys', accountants',
appraisers', consultants' and other fees) and any other sum chargeable to the
Borrower or any Subsidiary under this Agreement or any other agreement with the
Lenders and/or the Agent.
OPENING BALANCE SHEET. See SECTION 4.17.
PARENT. See the Recitals.
PARENT TRANSFERS. See SECTION 5.04.
PERMITTED ACQUISITION(S). An Acquisition by the Borrower which is in
compliance with the following conditions:
(a) in the case of the InterCap Acquisition, the Purchase Price shall not
exceed $17,000,000, the terms and conditions of the transaction shall be
satisfactory to the Lenders and the documentation therefor shall be
satisfactory in form, scope and substance to the Lenders and their counsel;
(b) in the case of the Secure America Acquisition, the Purchase Price
shall not exceed $5,400,000, the terms and conditions of the transaction shall
be satisfactory to the Lenders and the documentation therefor shall be
satisfactory in form, scope and substance to the Lenders and their counsel;
59
<PAGE> 60
(c) all matters which are subject to the satisfaction of the Lenders
shall be approved by (i) all of the Lenders in their sole and absolute
discretion, if the Purchase Price of the applicable Acquisition exceeds
$5,000,000, or (ii) by the Required Lenders, in their sole and absolute
discretion, if the Purchase Price of the applicable Acquisition is greater than
$2,000,000 but less than or equal to $5,000,000;
(d) with respect to any Acquisition with a Purchase Price of $2,000,000 or
less, the transaction shall not require the prior approval or written consent
of the Lenders, provided that after giving effect to the proposed Acquisition,
(i) the aggregate of all Acquisition Advances from the Closing Date to the date
of such proposed Acquisition does not exceed $25,000,000, and (ii) the
outstanding principal amount of the Revolving Loans does not exceed
$44,000,000;
(e) with respect to all Acquisitions, the Borrower shall have delivered
such agreements, documents, certificates and assurances (including, without
limitation, subordination provisions satisfactory to the Lenders and their
counsel with respect to Indebtedness of the Borrower to any Person other than
the Lenders) which the Lenders may reasonably require and the Lenders shall
have been granted a prior security interest in, and valid first lien on, all
acquired assets; and
(f) with respect to all Acquisitions, as at the date of such proposed
Acquisition, there shall exist no event or condition which constitutes, or
which after notice or lapse of time or both would constitute, an Event of
Default.
PERMITTED CAPITAL EXPENDITURES. Capital Expenditures (other than Safe
Choice Capital Expenditures) permitted under SECTION 5.03.
PERMITTED ENCUMBRANCES. See SECTION 7.02.
PERMITTED INVESTMENTS. (a) Investments in property to be used by the
Borrower in the ordinary course of business; (b) current assets arising from
the sale of goods and services in the ordinary course of business; (c)
investments (of one year or less) in direct or guaranteed obligations of the
United States, or any agency thereof; (d) investments (of 90 days or less) in
certificates of deposit of the Agent or of national banks having capital,
surplus and undivided profits in excess of $500,000,000; (e) investments (of 90
days or less) in commercial paper given the highest rating by Standard and
Poor's Bond Rating Index or by Moody's Investor Service; (f) shares and
certificates redeemable at any time without penalty and funds invested solely
in market instruments placed through the Agent or banks within the United
States having capital, surplus and undivided profits in excess of $500,000,000;
(g) short-term personal loans to employees and loans or advances to employees
in the ordinary course of business for the payment of reasonable bona fide,
properly documented business expenses to be incurred on behalf of the Borrower,
provided that the aggregate outstanding amount of all of the foregoing shall
not exceed $20,000 at any one time; (h) investments in publicly-held Security
Alarm Services Businesses in the aggregate amount of not greater than $10,000
at any time; and (j) investments in CSI in aggregate amount not greater than
$1,200,000 at any time.
60
<PAGE> 61
PERSON OR PERSON. Any individual, corporation, partnership, joint
venture, business unit, trust or unincorporated organization or any government
or any agency or political subdivision thereof.
PRO-FORMA ACQUIRED NET OPERATING INCOME. For any three month period, the
sum of all Acquired RMR Adjustments with respect to RMR Purchases effected
during such period. As used herein, an "Acquired RMR Adjustment" shall mean
the Recurring Monthly Revenue attributable to the related RMR Purchase
multiplied by 1.5 multiplied by a fraction, (a) the numerator of which is the
number of days in such three month period minus the number of days since such
RMR Purchase and (b) the denominator of which is the number of days in such
three month period.
PROJECTIONS. See SECTION 4.17.
PURCHASE PRICE. As of the date of the determination thereof, as to any
Acquisition, the sum of aggregate consideration thereof (including, without
limitation, cash, Seller Debt, liabilities assumed, payments made and to be
made to any Person under all employment, consulting and non-competition
agreements and stock or other assets) all as determined in a manner consistent
with GAAP, minus any amounts actually returned to the Borrower from any escrow
arrangements in respect of such proposed Acquisition.
QUALIFIED FINANCIAL INSTITUTION. A bank within the United States having
capital, surplus and undivided profits in excess of $500,000,000.
QUARTERLY DATE(S). See SECTION 1.08.
RECURRING MONTHLY REVENUE. At any time, with respect to any Person, that
amount equal to:
(a) The total recurring regular amounts billable to customers of such Person
(regardless of whether billed monthly or less frequently) for security
monitoring services (excluding wholesale monitoring services, guard and
armed guard response services and all other services not related to the
Security Alarm Services Business) for the most recent one month period,
the measure of which shall include only customers with respect to which:
(i) security alarm systems have been installed;
(ii) there is a written service agreement governing the delivery
of security monitoring services in full force and effect; and
(iii) all amounts billed have been paid in full within 90 days of the
initial billing date
minus
(b) All monthly charges billable to customers (or if said charges are levied
on any other than monthly basis, the amount derived by dividing the charge
therefor by the number of months
61
<PAGE> 62
in the period for which the charge is made) for signal circuit telephone
lines used to transmit alarm signals, antennae rental charges for radio
frequency alarm systems, panel use, franchise and license fees, false
alarm charges not rebillable to customers, and charges payable, by way of
example, but not limitation, to municipalities or other institutions, law
enforcement agencies for receiving, permitting the receipt of or
responding to alarms applicable to said contracts, all calculated in a
manner consistently applied.
REGULATORY CHANGE. With respect to any Lender, any change after the date
of this Agreement in any law, rule or regulation (including without limitation
Regulation D) of the United States, any state or any other nation or political
subdivision thereof, including without limitation the issuance of any final
regulations or guidelines, or the adoption or making after the date of this
Agreement of any interpretation, directive or request, applying to a class of
banks in which such Lender is included under any such law, rule or regulation
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) by any court or governmental or monetary authority
charged with the interpretation thereof.
REGULATION D. Regulation D of the Board of Governors of the Federal
Reserve System, as the same may be amended or supplemented from time to time.
REPAYMENT PLAN. See ARTICLE VIII.
REQUEST FOR ADVANCES. See SECTION 1.04.
REQUIRED LENDERS. (a) Until there shall be more than two non-affiliated
Lenders hereunder, all of the Lenders, and (b) thereafter, Lenders having at
least sixty-six and two-thirds percent (66 2/3%) of the aggregate amount of the
Commitments at such time (or if the aggregate Commitments shall have
terminated, the aggregate amount of the Revolving Loans outstanding at such
time).
RESTRICTED ASSET(S). Any asset(s) of the Borrower or any Subsidiary of
the Borrower which are subject to a Lien or other contractual restriction
securing any obligations of the Borrower or any Subsidiary of the Borrower to
any third party other than the Lenders.
RESTRICTED ESCROW. See SECTION 2.01(C).
RESTRICTED PAYMENT. Any distribution or payment of cash or property, or
both, directly or indirectly to any stockholder, officer or employee of the
Borrower, the Parent or any of their respective Affiliates for any reason
whatsoever, including, without limitation, salaries, debt repayment, consulting
fees, bonuses, expense reimbursements and distributions and payments in respect
of equity interests, provided that Restricted Payments shall not include
reasonable compensation paid by the Borrower or its Subsidiaries to their
respective officers and employees or by the Parent to officers and employees of
the Parent or amounts paid to officers and employees of the Borrower, its
Subsidiaries or the Parent for the reimbursement of reasonable, bona fide,
properly documented business expense reimbursements.
62
<PAGE> 63
REVOLVING CREDIT PERIOD. See SECTION 1.01.
REVOLVING CREDIT NOTE(S). See SECTION 1.02.
REVOLVING LOAN(S). See SECTION 1.01.
RMR BORROWING CEILING. See SECTION 1.01.
RMR PURCHASE. Any acquisition of customer accounts under a Permitted
Acquisition or a Dealer Program Purchase.
SAFE CHOICE CAPITAL EXPENDITURES. For any month, the sum of (a) Capital
Expenditures made during such month solely attributable to the Safe Choice
Program; and (b) the Safe Choice Expenses Restoration Amount for such month.
SAFE CHOICE COSTS. All costs and expenses of the Safe Choice Program from
the Closing Date to the date of the calculation thereof.
SAFE CHOICE EXCESS EXPENSES. For any period, that amount by which Safe
Choice Marketing Expenses for such period exceeds all revenues derived from New
Safe Choice Installations for such period.
SAFE CHOICE EXPENSES RESTORATION AMOUNT. In each case calculated for the
three-month period immediately preceding the date of the determination thereof,
the lesser of: (a) Safe Choice Excess Expenses for such period; or (b) an
amount equal to the product of the Safe Choice Multiple for such period
multiplied by Safe Choice New RMR for such period minus Capital Expenditures
made during such period solely attributable to the Safe Choice Program; or (c)
$1,200,000.
SAFE CHOICE MARKETING EXPENSES. For any period, the sum of (a) branch
office sales commissions and related branch office sales expenses (including
all advertising and telemarketing expenses) for such period attributable to the
Safe Choice Program); and (b) central office sales expenses (including
advertising and telemarketing expenses) for such period attributable to the
Safe Choice Program, in each case calculated in a manner reasonably
satisfactory to the Lenders.
SAFE CHOICE MULTIPLE. From the Closing Date through June 30, 1996, the
number 27 and thereafter, the number 25.
SAFE CHOICE PROGRAM. The Borrower's economy residential security alarm
sales, installation and services program, as more fully described in the
Borrower's draft Financing Memorandum dated December 4, 1995, a true and
complete copy of which has been delivered to the Lenders.
SAFE CHOICE NEW RMR. For any period, Recurring Monthly Revenue of the
Borrower for such period derived from New Safe Choice Installations made during
such period.
63
<PAGE> 64
SECURE AMERICA ACQUISITION. See the Recitals.
SECURITY ALARM SERVICES BUSINESS. A Person engaged in the sale,
installation and monitoring of, and the provision of maintenance services to,
security alarm devices and equipment, excluding guard services or armed guard
response services.
SELLER DEBT. All indebtedness of the Borrower to any party other than the
Lenders incurred in connection with any past or future Acquisition by the
Borrower including, without limitation, financing provided by any seller,
indebtedness relating to non-competition obligations of any party, or any
deferred or contingent payment obligation whatsoever; excluding, however, any
of such indebtedness which is secured in full by any Letter of Credit for so
long as such Letter of Credit shall be outstanding for the account of the
Borrower.
SOLVENT. If used with respect to any Person, a Person as to which each of
the following is true and correct: (a) the fair market value of the Person's
assets is in excess of the total amount of the Person's liabilities (such
liabilities determined in accordance with GAAP); (b) the Person owns property
having a value, both at fair valuation and at present fair saleable value,
greater than the amount of the Person's liabilities (including all "claims" as
defined in the U.S. Bankruptcy Code) and (c) the Person is able to pay his
debts as they mature. For purposes of determining whether the Borrower is
Solvent under clause (a) or (b) of the preceding sentence, the Indebtedness of
the Borrower to the Lenders shall be deemed not to exceed the amount of
proceeds of any Loans to be used by or for the benefit of the Borrower as
represented in a Request for Advance.
SONITROL. Sonitrol Corporation, a Delaware corporation.
SUBSIDIARY/SUBSIDIARIES. Any corporation, partnership or other entity (a)
of which more than 50% of the outstanding equity securities (other than
directors' qualifying shares) is at the time owned by the Borrower or by one or
more Subsidiaries, (b) of which the Borrower is a general partner or (c)
controlled by or under common control with the Borrower. As of the Closing
Date the sole Subsidiary of the Borrower is the Austin Subsidiary and no other
Subsidiaries are permitted.
SUNTRUST. See the Preamble.
SURETY. Any person who is (or any part of whose assets are) at any time
directly or contingently liable for all or any portion of the Borrower's
obligations to the Lenders hereunder or under the Notes or the Collateral
Documents, whether pursuant to a guaranty, an assumption agreement or a pledge
agreement.
TAX. See SECTION 1.11.
TOTAL DEBT. All Indebtedness of the Borrower and its Subsidiaries for
borrowed money and Capital Leases, including (a) the face amount of any
outstanding Letters of Credit and (b) any accrued Financing Fee.
64
<PAGE> 65
TOTAL DEBT SERVICE. For any period, the aggregate amount (determined in
accordance with GAAP) of principal, premium, if any, and interest and
commitment fees paid or required to be paid by the Borrower and its
Subsidiaries during such period in respect of all Indebtedness for borrowed
money and Capital Leases.
TRANSACTION DOCUMENTS. Collectively, the Notes, the Collateral Documents
and the Letter of Credit Documents.
XIV. MISCELLANEOUS
SECTION 14.01. SURVIVAL. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto, shall survive the making by the Lenders of the Loans and shall
continue in full force and effect so long as any Note or amount is outstanding
hereunder and unpaid, or any Lender has any obligation to advance funds to the
Borrower hereunder.
SECTION 14.02. FEES AND EXPENSES; INDEMNITY; ETC. The Borrower agree s
(a) to pay or reimburse the Agents for all their reasonable out-of-pocket costs
and expenses incurred in connection with the development, preparation,
negotiation, interpretation and execution of, and any amendment, supplement or
modification to, this Agreement and the Notes and any other Transaction
Documents and the consummation and administration of the transactions
contemplated hereby, including without limitation the reasonable fees and
disbursements of (i) counsel to the Administrative Agent, and (ii) either
during the existence of an Event of Default or at the request of the Borrower,
such agents of the Administrative Agent not regularly in its employ, and
accountants, other auditing services, consultants and appraisers engaged by or
on behalf of the Administrative Agent or by the Borrower at the request of the
Administrative Agent (collectively, "Third Parties"); (b) to pay or reimburse
the Administrative Agent for all its reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the Notes and any other Transaction Documents, including, without
limitation, the reasonable fees and disbursements of (i) counsel to the
Administrative Agent and (ii) during the existence of an Event of Default,
Third Parties; (c) following the occurrence of an Event of Default hereunder,
to pay or reimburse the Lenders for the reasonable fees and disbursements of
counsel for the respective Lender reasonably engaged for the preservation or
enforcement of such Lender's rights under this Agreement or any other
Transaction Documents relating to such Event of Default; (d) to pay, indemnify,
and hold each Lender and the Agents harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the Notes and any other Transaction Documents;
and (e) to pay, indemnify, and hold each Lender and the Agents (and their
respective directors, officers, employees and agents) harmless from and against
any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of, or any
65
<PAGE> 66
transaction contemplated by, any Transaction Document or the use or proposed
use of the proceeds of the Loans or the refinancing or restructuring of the
credit arrangement provided under this Agreement in the nature of a "work-out"
or any proceedings with respect to the bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation of the Borrower or any other
party other than the Lenders or the Agents to any Transaction Document (all the
foregoing in this clause (e), collectively, the "indemnified liabilities"),
provided, that the Borrower shall have no obligation hereunder to either Agent
or any Lender with respect to indemnified liabilities arising from (i) the
gross negligence or willful misconduct of such Agent or such Lender or (ii)
legal proceedings commenced against such Agent or such Lender by any security
holder or creditor thereof arising out of and based upon rights afforded any
such security holder or creditor solely in its capacity as such. The
agreements in this Section shall survive repayment of the Notes and all other
amounts payable hereunder.
SECTION 14.03. NOTICE. All notices, requests and other communications
provided for herein and under the Collateral Documents (including, without
limitation, any modifications of, or waivers, requests or consents under, this
Agreement) shall be given or made in writing (including, without limitation, by
telecopy) delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof); or, as to any party,
at such other address as shall be designated by such party in a notice to each
other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
SECTION 14.04. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
SECTION 14.05. CONSENT TO JURISDICTION, ETC. THE BORROWER, TO THE EXTENT
THAT IT MAY LAWFULLY DO SO, HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK, AS WELL AS TO THE JURISDICTION OF ALL COURTS
TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR THE PURPOSE OF ANY SUIT,
ACTION OR OTHER PROCEEDING ARISING OUT OF ANY OF ITS OBLIGATIONS ARISING
HEREUNDER OR UNDER THE NOTES OR THE COLLATERAL DOCUMENTS OR WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS
IT MAY HAVE AS TO VENUE, INCLUDING, WITHOUT LIMITATION, THE INCONVENIENCE OF
SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION, TO THE EXTENT THAT IT MAY
LAWFULLY DO SO, THE BORROWER CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL
SERVICE OR U.S. CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
ADDRESSED TO THE BORROWER AT THE ADDRESS PROVIDED HEREIN. TO THE EXTENT THE
BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
66
<PAGE> 67
ATTACHMENT PRIOR TO JUDGMENT ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS.
SECTION 14.06. WAIVER OF JURY TRIAL. THE BORROWER HEREBY VOLUNTARILY AND
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO
THIS AGREEMENT, THE NOTES, THE COLLATERAL DOCUMENTS OR ANY OTHER AGREEMENTS
EXECUTED IN CONNECTION HEREWITH.
SECTION 14.07. SEVERABILITY. Any provision of this Agreement, the Notes
or any of the Collateral Documents which is prohibited or unenforceable in any
jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 14.08. SECTION HEADINGS, ETC. Any Article and Section headings
in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.
SECTION 14.09. SEVERAL NATURE OF LENDERS' OBLIGATIONS. Notwithstanding
anything in this Agreement, the Notes or any of the Collateral Documents to the
contrary, all obligations of the Lenders hereunder shall be several and not
joint in nature, and in the event any Lender fails to perform any of its
obligations hereunder, the Borrower shall have no recourse against any other
Lender(s) who has (have) performed its (their) obligations hereunder. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement, subject to the provisions of ARTICLE XI,
and it shall not be necessary for any other Lender to be joined as an
additional party in any proceeding for such purpose.
SECTION 14.10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute one and the same Agreement.
SECTION L4.11. KNOWLEDGE AND DISCOVERY. All references in this Agreement
to "knowledge" of, or "discovery" by, the Borrower shall be deemed to include,
without limitation, any such knowledge of, or discovery by, the Borrower or any
executive officer of the Borrower.
SECTION 14.12. AMENDMENT OF OTHER AGREEMENTS. All references in this
Agreement to other documents and agreements to which the Lenders are not
parties shall be deemed to refer to such documents and agreements as presently
constituted or, as amended and modified as expressly permitted hereunder.
67
<PAGE> 68
SECTION 14.13. DISCLAIMER OF RELIANCE. The Borrower has not relied on any
oral representations concerning any of the terms or conditions of the Loans,
the Notes, this Agreement or any of the Collateral Documents in entering into
the same. The Borrower acknowledges and agrees that none of the officers of
either Agents or any Lender has made any representations that are inconsistent
with the terms and provisions of this Agreement, the Notes and the Collateral
Documents, and neither the Borrower nor any of its Affiliates has relied on any
oral promises or representations in connection therewith.
SECTION 14.14. ENVIRONMENTAL INDEMNIFICATION. Without limiting the
generality of SECTION 14.02, in consideration of the execution and delivery of
this Agreement by the Lenders and the making of the Loans, the Borrower hereby
indemnifies, exonerates and holds the Lenders and each of their respective
officers, directors, employees and agents (collectively, the "Indemnified
Parties") free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether any such Indemnified Party is a
party to the action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a result
of, or arising out of, or relating to:
(a) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the release by the Borrower of any Hazardous
Material; or
(b) the presence on or under, or the escape, seepage, leakage, spillage,
discharge, emission, discharging or releases from, any real property owned or
operated by the Borrower of any Hazardous Material (including any losses,
liabilities, damages, injuries, costs, expense or claims asserted or arising
under any Environmental Requirement), regardless of whether caused by, or
within the control of, the Borrower; except for any such Indemnified
Liabilities arising for the account of a particular Indemnified Party by reason
of the relevant Indemnified Party's negligence or misconduct, and if and to the
extent that the foregoing undertaking may be unenforceable for any reason, the
Borrower agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Notwithstanding anything to the contrary herein contained, the
obligations and liabilities under this Section shall survive and continue in
full force and effect and shall not be terminated, discharged or released in
whole or in part irrespective of whether all the Loans and the Indebtedness
hereunder or otherwise to the Lenders have been paid in full or the Commitments
have been terminated and irrespective of any foreclosure of any mortgage, deed
of trust or collateral assignment on any real property or acceptance by any
Lender of a deed or assignment in lieu of foreclosure.
68
<PAGE> 69
IN WITNESS WHEREOF, the Agents, the Lenders and the Borrower have caused
this Agreement to be duly executed by their duly authorized representatives, as
a sealed instrument, all as of the day and year first above written.
BORROWER:
MASADA SECURITY, INC.
By: /s/ David P. Tomick
-------------------------------
David P. Tomick, Vice-President
Address for Notices to the Borrower:
Masada Security, Inc.
950 North 22nd Street, Suite 800
Birmingham, Alabama 35203
Attention: David P. Tomick, Chief Financial Officer
Telecopy No.: (800) 531-3293
With a copy to:
Burr & Forman
Suite 3100, Southtrust Tower
420 North Twentieth Street
Birmingham, Alabama 35203
Attention: David D. Dowd, III, Esq.
Telecopy No.: (205) 458-5100
<PAGE> 70
LENDER:
COMMITMENT: $35,000,000 CIBC INC.
By: /s/ Martin W. Friedman
-------------------------------------
Martin W. Friedman, Managing Director
Address for Notices to CIBC Inc.:
CIBC Inc.
425 Lexington Avenue
New York, New York 10017
Telecopy: (212) 856-3558
Attention: Martin W. Friedman, Managing Director
with a copy to :
Elizabeth H. Munnell, Esq.
Edwards & Angell
101 Federal Street
Boston, Massachusetts 02110
Telecopy No.: (617) 439-4170
70
<PAGE> 71
LENDER AND CO-AGENT:
-------------------
COMMITMENT: $15,000,000 SUNTRUST BANK, CENTRAL
FLORIDA, N.A.
By: /s/ Christopher Aguilar
---------------------------------
Title: First Vice President
---------------------------
Address for Notices to SunTrust:
SunTrust Bank, Central Florida, N.A.
200 South Orange Avenue
Orlando, Florida 32820
Telecopy: (407) 237-4076
Attention: Christopher Aguilar, Vice President
<PAGE> 72
ADMINISTRATIVE AGENT:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY
By: /s/ Martin W. Friedman
----------------------------------------
Martin W. Friedman, Authorized Signatory
Address for Notices to the Administrative Agent.:
Canadian Imperial Bank of Commerce,
New York Agency.
425 Lexington Avenue,
New York, New York 10017
Telecopy: (212) 856-3558
Attention: Martin W. Friedman
with a copy to :
Elizabeth H. Munnell, Esq.
Edwards & Angell
101 Federal Street
Boston, Massachusetts 02110
Telecopy No.: (617) 439-4170
<PAGE> 73
JOINDER TO CREDIT AGREEMENT
The undersigned, Canadian Imperial Bank of Commerce, hereby joins in the
execution of the Credit Agreement dated as of March 28, 1996 among the Lenders
named therein, Masada Security, Inc., Canadian Imperial Bank of Commerce, New
York Agency, as Administrative Agent for the Lenders, and SunTrust Bank,
Central Florida, N.A., as Co-Agent for the Lenders for the purpose of
evidencing its assumption of, and agreement to be bound by, the provisions of
SECTION 18. thereof as the "Issuing Bank" thereunder, all as of March 28, 1996.
CANADIAN IMPERIAL BANK
OF COMMERCE
By: /s/ Martin W. Friedman
----------------------------------------
Martin W. Friedman, Authorized Signatory
Address for Notices to the Issuing Bank.:
Canadian Imperial Bank of Commerce
425 Lexington Avenue,
New York, New York 10017
Telecopy: (212) 856-3558
Attention: Martin W. Friedman
with a copy to :
Elizabeth H. Munnell, Esq.
Edwards & Angell
101 Federal Street
Boston, Massachusetts 02110
Telecopy No.: (617) 439-4170
<PAGE> 74
INDEX OF EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
Schedule 1.01(a) Allocation of Commitments
Schedule 1.02(a) Form of Revolving Credit Note Issued to CIBC
Schedule 1.02(b) Form of Revolving Credit Note to SunTrust
Schedule 1.04(a) Form of Request for Advances
Schedule 1.04(d) Form of Interest Rate Option Notice
Schedule 3.01(f) Form of Solvency Certificate
Schedule 3.01(g) Results of Searches
Schedule 3.01(h) Prior Indebtedness
Schedule 3.01(j) Opening Balance Sheet
Schedule 4.03 Principal Address(es) of the Borrower and Austin Subsidiary
Schedule 4.04 Real Estate
Schedule 4.05 Leased Properties
Schedule 4.06 Interests in Other Businesses/Acquisitions
Schedule 4.07 Ownership of Borrower, Parent and Austin Subsidiary
Schedule 4.08 Licenses
Schedule 4.10 Liens and Permitted Encumbrances
Schedule 4.11 Material Agreements
Schedule 4.12 Insurance Policies
Schedule 4.13 Litigation
Schedule 4.16 Financial Statements
Schedule 4.17 Projections
Schedule 4.25 Consents
Schedule 6.06(c) Form of Branch Income Statement
Schedule 6.06(d) Form of Compliance Certificate
Schedule 7.01 Existing Letter of Credit
Schedule 7.02 Liens and Encumbrances
Schedule 7.14 Existing Branch Operations
</TABLE>
<PAGE> 1
SECURITY AND PLEDGE AGREEMENT
THIS SECURITY AND PLEDGE AGREEMENT made as of March 28, 1996, by and
between MASADA SECURITY, INC. , a Delaware corporation (the "Debtor"); and
CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Administrative Agent
(the "Agent") for CIBC Inc., SunTrust Bank, Central Florida, N.A. and the other
financial institutions who are or who become Lenders under, and as defined in,
the Credit Agreement referred to below and any Affiliates of such financial
institutions with whom the Debtor shall maintain any agreements relating to
protection against interest rate fluctuations, exchange rates or forward rates
or so-called "rate hedging" obligations (collectively, the "Secured Parties").
RECITALS
A. The Debtor, the Secured Parties, the Agent and SunTrust Bank, Central
Florida, N.A., as Co-Agent for the Secured Parties, are entering into a Credit
Agreement of even date herewith (as the same may be amended, restated, renewed,
replaced, supplemented or otherwise modified from time to time, the "Credit
Agreement") pursuant to which the Secured Parties are extending credit to the
Borrowers. Capitalized terms used herein without definition have the meanings
assigned to them in the Credit Agreement.
B. It is a condition to the Secured Parties' willingness to enter into
the Credit Agreement and provide to the Debtor the financing contemplated
thereby that the Debtor shall have granted to the Secured Parties and the
Agent, for the benefit of the Secured Parties, the liens and security interests
contemplated hereby. The Debtor wishes hereby to grant such liens and security
interests.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of the parties hereto, the
parties hereby agree as follows:
SECTION 1. THE SECURITY INTERESTS.
(A) In order to secure (i) the performance of all obligations of the
Debtor under the Credit Agreement; (ii) the due and punctual payment of the
Notes, as defined in the Credit Agreement and issued pursuant thereto, to any
of the Secured Parties, including, without limitation, all interest payable on
the Notes at the interest rates provided therein and in the Credit Agreement,
regardless of the extent allowed as a claim in any proceeding in respect of the
bankruptcy, reorganization or insolvency of the Debtor (a "Reorganization");
(iii) the due and punctual payment of any of the Debtor's notes or instruments
as may hereafter from time to time be issued in addition to, in place of or in
amendment of the Notes under the Credit Agreement, including, without
limitation, all interest payable on such notes or instruments at the interest
rates provided therein, regardless of the extent allowed as a claim in any
Reorganization; (iv) the payment and performance of all indebtedness,
liabilities and obligations of the Debtor under the other Collateral Documents
contemplated by the Credit Agreement; (v) the payment and performance of all
obligations, indebtedness and liabilities of the Debtor's affiliates to any of
the Agent, the Co-Agent or the Secured Parties under the other Collateral
Documents; (vi) the performance of all of the obligations of the Debtor to the
Agent, the Co-Agent and the Secured Parties contained herein or in any of the
other Transaction Documents contemplated by the Credit Agreement; and (vii) the
payment of all other future advances and other obligations of the Debtor to any
of the Secured Parties, including without limitation any future loans and
advances made to the Debtor by any of the Secured Parties prior to, during or
following any Reorganization, and any and all other indebtedness, liabilities
and obligations of the Debtor to any of the Secured Parties or the Agent or the
Co-Agent of every kind and description, direct, indirect or contingent,
<PAGE> 2
now or hereafter existing, due or to become due under the Credit Agreement
and each of the other Transaction Documents (all of the foregoing
hereinafter called the "Obligations"), the Debtor hereby grants to the Agent
and each of the Secured Parties a continuing security interest in the following
described fixtures and personal property (hereinafter collectively called the
"Collateral"):
All fixtures and all tangible and intangible personal property of the
Debtor, whether now owned or hereafter acquired by the Debtor, or in which
the Debtor may now have or hereafter acquire an interest, wherever located,
including without limitation, the following property: (a) all equipment
(including all machinery, tools, furniture, central station monitoring
panels and related equipment), inventory (including all merchandise, raw
materials, work in process, finished goods and supplies) and goods; (b) all
accounts, accounts receivable, other receivables, contract rights, chattel
paper, leases and general intangibles (including without limitation all
rights of the Debtor to any refund of any tax assessed against or paid by
the Debtor, loss carryback tax refunds, insurance premium refunds, unearned
premiums, insurance proceeds, choses in action, goodwill, going concern
value, trademarks, service marks, tradenames, patents, blueprints, designs,
strand maps, make-ready product lines, research and development, and all of
the Debtor's rights as a tenant under any and all leases) of the Debtor,
including, without limitation, all of the Debtor's rights under all present
and future authorizations, permits, licenses and franchises heretofore or
hereafter granted or assigned to the Debtor for the operation and ownership
of its business; (c) all instruments, documents of title, policies and
certificates of insurance, securities, bank deposits, deposit accounts,
checking accounts and cash; (d) all of the Debtor's right under all
subscriber agreements; (e) all books, records and documents relating to all
of the foregoing; (f) all other properties and assets of every type used or
useful in connection with the ownership or operation of commercial,
industrial and residential security, fire protection and other monitoring
systems, the sale of equipment, products and services relating thereto and
related businesses; (g) all accessories, additions or improvements to, all
replacements, substitutions and parts for all of the foregoing; and (h) all
proceeds and products of all of the foregoing.
(B) All Collateral consisting of accounts, contract rights, chattel paper
and general intangibles of the Debtor arising from the sale, delivery or
provision of goods and/or services are sometimes hereinafter collectively
called the "Customer Receivables".
(C) The security interests granted pursuant to this SECTION 1 (the
"Security Interests") are granted as security only and shall not subject the
Agent the Co-Agent or any of the Secured Parties to, or transfer or in any way
affect or modify, any obligation or liability of the Debtor under any of the
Collateral or any transaction which gave rise thereto.
SECTION 2. DELIVERY OF PLEDGED SECURITIES AND CHATTEL PAPER.
(a) All securities owned or held by the Debtor, including without
limitation, all shares of stock, warrants, options, notes and investment
contracts, whether now owned or hereafter acquired by the Debtor, shall be
promptly delivered to the Agent, by the Debtor pursuant hereto (which
securities, together with all other securities and shares of stock which may
hereafter be delivered to the Agent pursuant to the terms hereof, are
hereinafter called the "Pledged Securities"), shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignments in blank, and accompanied in each case by any
required transfer tax stamps, all in form and substance satisfactory to the
Agent. EXHIBIT A hereto and made a part hereof sets forth a complete
description of all securities owned by the Debtor on the date hereof.
2
<PAGE> 3
(b) The Agent and the Secured Parties may at any time or from time to
time, at its sole discretion, require the Debtor to cause any chattel paper
included in the Customer Receivables to be delivered to the Agent or any
agent or representative designated by it for the purpose of causing a legend
referring to the Security Interests to be placed on such chattel paper and
upon any ledgers or other records concerning the Customer Receivables.
SECTION 3. FILING; FURTHER ASSURANCES.
The Debtor will, at its expense, execute, deliver, file and record (in
such manner and form as the Agent may require), or permit the Agent to file
and record, any financing statements, any carbon, photographic or other
reproduction of a financing statement or this Security Agreement (which shall
be sufficient as a financing statement hereunder), any specific assignments
or other paper that may be reasonably necessary or desirable, or that the
Agent may reasonably request, in order to create, preserve, perfect or
validate any Security Interest or to enable the Agent to exercise and enforce
its rights and the rights of the Secured Parties hereunder with respect to
any of the Collateral. The Debtor hereby appoints the Agent, which
appointment is irrevocable and coupled with an interest, as the Debtor's
attorney-in-fact to execute and file in the name and behalf of the Debtor
such additional financing statements as the Agent may reasonably request.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF DEBTOR.
The Debtor hereby represents and warrants to the Agent and the Secured
Parties that (a) the Debtor is, or to the extent that certain of the
Collateral is to be acquired after the date hereof, will be, the sole legal
and beneficial owner of the Collateral free from any lien, security interest,
encumbrance or restrictions on transfer except as permitted under the Credit
Agreement; (b) except as specified in and permitted by the Credit Agreement,
no financing statement covering the Collateral is on file in any public
office, other than the financing statements filed pursuant to this Security
Agreement (and other than financing statements on file in favor of State
Street Bank and Trust Company and Citizens Savings Bank, prior lenders to
Debtor who are being paid off with the first Advances under the Credit
Agreement and who will promptly terminate all such financing statements in
connection therewith); (c) all additional information, representations and
warranties contained in EXHIBIT B hereto and made a part hereof are true,
accurate and complete on the date hereof; (d) there are no restrictions upon
the voting rights of any of the Pledged Securities and the Debtor has the
right to vote, pledge, grant a security interest in and otherwise transfer
the Pledged Securities owned by it free of any encumbrances (other than
applicable restrictions imposed by any state or local authorities, or Federal
or state securities laws or regulations); and (e) the Pledged Securities are
duly and validly issued, fully paid and nonassessable, and each certificate
or instrument evidencing the Pledged Securities is issued in the name of the
Debtor as described on EXHIBIT A.
SECTION 5. COVENANTS OF DEBTOR.
The Debtor hereby covenants and agrees with the Agent and the Secured
Parties that the Debtor (a) shall defend the Collateral against all claims
and demands of all persons at any time claiming any interest therein senior
to that of the Agent and the Secured Parties; (b) shall provide the Agent
with prompt written notice of (i) any change in the Debtor's principal office
or the office where the Debtor maintains its books and records pertaining to
the Customer Receivables, and (ii) the movement or location of any Collateral
to or at any address other than as set forth in said EXHIBIT B; (c) shall
promptly pay any and all taxes, assessments and governmental charges upon the
Collateral prior to the date penalties are attached thereto, except to the
extent permitted under the Credit Agreement; (d) shall immediately notify
the Agent of any event causing a substantial loss or diminution in the value
of all or any material part of the Collateral and the amount or an estimate
of the amount of such loss or diminution, except as
3
<PAGE> 4
otherwise permitted by the Credit Agreement; (e) shall have and maintain
insurance at all times in accordance with the provisions of the Credit
Agreement; (f) except in accordance with the Credit Agreement, shall not sell
or offer to sell or otherwise assign, transfer or dispose of the Collateral
or any interest therein, without the written consent of the Agent; (g) shall
keep the Collateral free from any adverse lien, security interest or
encumbrance other than liens, security interests or encumbrances contemplated
hereby and permitted under the Credit Agreement; (h) shall keep the
Collateral in good order and repair, reasonable wear and tear excepted, and
shall not waste, destroy or dispose of the Collateral or any part thereof,
except as otherwise permitted by the Credit Agreement; and (i) shall not use
the Collateral in violation of any statute or ordinance, the violation of
which could materially impair the value of the Collateral or the condition of
the Debtor.
SECTION 6. RECORDS RELATING TO COLLATERAL.
The Debtor will keep its records concerning the Collateral, including
the Customer Receivables and all chattel paper included in the Customer
Receivables, at its office or one or more of the other locations designated
in EXHIBIT B or at such other place or places of business of which the Agent
shall have been notified in writing upon no less than thirty (30) days in
advance. The Debtor will hold and preserve such records and chattel paper
and will permit representatives of the Agent and the Secured Parties at any
time during normal business hours to examine and inspect the Collateral and
to make abstracts from such records and chattel paper in accordance with the
terms of the Credit Agreement, and will furnish to the Agent and the Secured
Parties such information and reports regarding the Collateral as the Agent
and the Secured Parties may from time to time reasonably request.
SECTION 7. RECORD OWNERSHIP OF PLEDGED SECURITIES.
Upon the occurrence of an Event of Default (as defined in SECTION 11)
and subject to the requirements of applicable law, the Agent may cause, upon
written notification to the Debtor, any or all of the Pledged Securities to
be transferred of record into the Agent's name. The Debtor shall promptly
give to the Agent copies of any notices or other communications received by
the Debtor with respect to Pledged Securities registered in its name.
SECTION 8. RIGHT TO RECEIVE DISTRIBUTIONS ON PLEDGED SECURITIES.
(a) Unless and until an Event of Default has occurred and is continuing,
and if the Agent shall have notified the Debtor in writing of its election to
exercise the Agent's rights under SECTION 8, the Debtor shall be entitled,
from time to time, to receive for its own use any and all dividends, interest
and other payments and distributions made upon or with respect to the Pledged
Securities (subject to any restrictions thereon set forth in the Credit
Agreement or any other Transaction Document referred to therein), except:
(i) stock dividends,
(ii) dividends payable in securities or other property (except cash
dividends or distributions),
(iii) dividends or distributions on dissolution or on partial or
total liquidation or in connection with a reduction of capital, capital
surplus or paid-in surplus, and
(iv) other securities issued with respect to or in lieu of the
Pledged Securities (whether upon conversion of any convertible securities
included therein or through stock
4
<PAGE> 5
split, spin-off, split-off, reclassification, merger, consolidation, sale
of assets, combination of shares or otherwise).
All of the foregoing, together with all new, substituted or additional shares
of capital stock, warrants, options, notes or other rights, or other
securities issued in addition to or in respect of all or any of the Pledged
Securities shall be delivered to the Agent hereunder as required by SECTION 2
hereof, to be held as Collateral pursuant to the terms hereof in the same
manner as the Pledged Securities delivered to the Agent on the date hereof.
(b) Notwithstanding any provision herein to the contrary, if any Event
of Default shall have occurred and be continuing, upon the giving of written
notice referred to in subsection (a) above, then and whether or not any
holder of the Obligations exercises any available option to declare such
Obligations due and payable or seeks or pursues any other relief or remedy
available to such holder under this Agreement or any instrument or agreement
evidencing or securing any Obligations, all dividends, distributions or
interest or principal payments, as the case may be, on the Pledged Securities
shall be paid directly to the Agent on behalf of the Secured Parties, and
retained by it as part of the Pledged Securities, subject to the terms of
this Security and Pledge Agreement, and, if the Agent shall so request in
writing, the Debtor agrees to execute and deliver to the Agent appropriate
additional distributions and other orders and documents to that end.
SECTION 9. RIGHT TO VOTE PLEDGED SECURITIES.
(a) Unless and until an Event of Default has occurred and is continuing,
the Debtor shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Pledged Securities
and to exercise conversion rights with respect to any convertible securities
included therein (provided, however, that no vote shall be cast, and no
consent shall be given or shareholder action taken, which would have the
effect of impairing the position or interest of the Agent and the Secured
Parties with respect to the Pledged Securities or which would authorize or
effect any action then prohibited by the Credit Agreement or any other
Transaction Document referred to therein).
(b) Notwithstanding any provision herein to the contrary, if any Event
of Default shall have occurred and be continuing, upon notice to the Debtor
of such election, then and whether or not any holder of the Obligations
exercises any available option to declare such Obligations due and payable or
seeks or pursues any other relief or remedy available to such holder under
this Security and Pledge Agreement or any instrument or agreement evidencing
or securing any Obligations, the Agent, or its nominee, shall forthwith,
without further act on the part of any person, have the sole and exclusive
right to exercise all voting and other powers of ownership pertaining to the
Pledged Securities and shall exercise such powers in such manner as the
Agent, at the Secured Parties' direction, shall determine to be necessary,
appropriate or advisable. The Debtor hereby agrees to execute and deliver to
the Agent such additional powers, authorizations, proxies, dividends and such
other documents as the Agent may reasonably request to secure to the Agent
the rights, powers and authorities intended to be conferred upon the Agent by
this subsection (b).
SECTION 10. GENERAL AUTHORITY.
The Debtor hereby appoints the Agent as the Debtor's lawful attorney, with
full power of substitution, in the name of the Debtor, for the sole use and
benefit of the Agent on behalf of the Secured Parties, but at the Debtors'
expense, to exercise, all or any of the following powers with respect to all or
any of the Collateral during the existence of any Event of Default:
5
<PAGE> 6
(i) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due;
(ii) to receive, take, endorse, assign and deliver all checks, notes,
drafts, documents and other negotiable and non-negotiable instruments and
chattel paper taken or received by the Agent;
(iii) to settle, compromise, initiate, prosecute or defend any action
or proceeding with respect thereto;
(iv) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof or the related goods securing the
Customer Receivables, as fully and effectually as if the Agent on behalf of
the Secured Parties were the absolute owner thereof;
(v) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
(vi) to discharge any taxes, liens, security interests or other
encumbrances at any time placed thereon; and
(vii) to execute any document or form, in the name of the Debtor,
which may be necessary or desirable in connection with any sale of Pledged
Securities by the Agent, including without limitation Form 144 (or any
successor form) promulgated by the Securities and Exchange Commission;
provided that the Agent shall give the Debtor not less than ten 10 days' prior
written notice of the time and place of any sale or other intended disposition
of any of the Collateral. Such appointment as attorney is irrevocable and
coupled with an interest.
SECTION 11. EVENTS OF DEFAULT.
The Debtor shall be in default under this Security Agreement upon the
occurrence of any one of the following events (herein referred to as an "Event
of Default"):
(a) default by the Debtor in the due observance or performance of any
covenant or agreement contained herein, which default, if curable, is not cured
within 10 days of the earlier of receipt by the Debtor of notice thereof or the
Debtor's actual knowledge thereof;
(b) breach by the Debtor of any representation or warranty herein
contained; or
(c) the occurrence of any "Event of Default" under and as defined in the
Credit Agreement.
6
<PAGE> 7
SECTION 12. REMEDIES UPON EVENT OF DEFAULT.
(a) If an Event of Default shall occur, the Agent, on behalf of the
Secured Parties, may exercise all the rights and remedies of a secured party
under the Uniform Commercial Code. Without limitation of the foregoing, unless
the Obligations shall have been paid in full in cash, the Agent, at the Secured
Parties' direction, may, in the Secured Parties' sole discretion, without
further demand, advertisement or notice, except as expressly provided for in
subsection (i) of this Section, apply the cash, if any, then held by it as
Collateral hereunder, for the purposes and in the manner provided in SECTION
(B) hereof, and if there shall be no such cash or the cash so applied shall be
insufficient to make payment in full of all payments provided in SECTION 14
hereof,
(i) Sell the Collateral, or any part or component thereof, in
one or more sales, at public or private sale, conducted by any
officer or agent of the Agent, at a place of business of the Agent
or elsewhere, for cash, upon credit or future delivery, and at such
price or prices as the Agent shall, in a commercially reasonable
manner, determine, and, to the extent permitted by law, the Agent or
any Secured Party may be the purchaser of any or all of the
Collateral so sold. Upon any such sale, the Agent shall have the
right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold. Each purchaser (including the Agent or any
Secured Party) at any such sale shall hold the Collateral so sold,
absolutely free from any claim or right of whatsoever kind,
including, without limitation, any equity or right of redemption of
the Debtor which the Debtor, to the extent it may lawfully do so,
hereby specifically waives. The Agent shall give the Debtor at
least 10 days' written notice of any such public or private sale.
The Agent shall not be obligated to make any sale pursuant to any
such notice. The Agent may, without notice or publication, adjourn
any public or private sale from time to time by announcement at the
time and place fixed for such sale, or any adjournment thereof, and
any such sale may be made at any time or place to which the same may
be so adjourned without further notice or publication. In case of
any sale of all or any part of the Collateral for credit or for
future delivery, the Collateral so sold may be retained by the Agent
until the selling price is paid by the purchaser thereof, but the
Agent shall not incur any liability in case of the failure of such
purchaser to pay for the Collateral so sold, and in case of any such
failure, such Collateral may again be sold under and pursuant to the
provisions hereof; or
(ii) Proceed by a suit or suits at law or in equity to
foreclose upon this Security and Pledge Agreement and sell the
Collateral, or any portion or component thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
(b) If at any time when the Agent, at the Secured Parties' direction,
shall determine to exercise its right to sell all or any part of the Pledged
Securities pursuant to subsection (a)(i) of this Section, such Pledged
Securities or the part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under the Securities Act of 1933, as from time to
time in effect (the "Securities Act") or the securities laws of any state, the
Agent, at the Secured Parties' direction, in their sole and absolute
discretion, is hereby expressly authorized to sell such Pledged Securities or
such part thereof by private sale in such manner and under such circumstances
as the Agent and the Secured Parties may deem commercially reasonable in order
that such sale may legally be effected without such registration. The Agent
and the Secured Parties shall sell all or any part of the Pledged Securities at
a price which they deem commercially reasonable under the circumstances.
(c) The Agent as attorney-in-fact pursuant to SECTION 10 hereof may, in
the name and stead of the Debtor, make and execute all conveyances, assignments
and transfers of any
7
<PAGE> 8
Collateral sold in accordance with this Agreement. The Debtor shall, if so
reasonably requested by the Agent, ratify and confirm any sale or sales by
executing and delivering to the Agent, or to such purchaser or purchasers, all
such instruments as may, in the reasonable judgment of the Agent, be advisable
for such purpose.
(d) The receipt of the Agent of the purchase money paid at any such
sale made by it shall be a sufficient discharge therefor to any purchaser
(other than the Agent) of the Collateral, or any portion thereof, sold as
aforesaid; and no such purchaser (or his or its representatives or assigns)
(other than the Agent), after paying such purchase money and receiving such
receipt, shall be bound to see to the application of such purchase money or any
part thereof or in any manner whatsoever be answerable for any loss,
misapplication or nonapplication of any such purchase money, or any part
thereof, or be bound to inquire as to the authorization, necessity, expediency
or regularity of any such sale.
SECTION 13. APPLICATION OF COLLATERAL AND PROCEEDS.
The proceeds of any sale of, or other realization upon, all or any part of
the Collateral shall be applied in the following order of priority: (a) first,
to pay the expenses of such sale or other realization, including reasonable
attorneys' fees, and all reasonable expenses, liabilities and advances incurred
or made by the Agent or any of the Secured Parties in connection therewith, and
any other unreimbursed expenses for which the Agent or any of the Secured
Parties are to be reimbursed pursuant to SECTION 14; (b) second, to the payment
of the Obligations in such order of priority as the Secured Parties, in their
sole discretion, shall determine; and (c) finally, to pay to the Debtor, or
their successors and assigns, or as a court of competent jurisdiction may
direct, any surplus then remaining from such proceeds.
SECTION 14. EXPENSES; AGENT'S LIEN.
The Debtor will forthwith upon demand pay to the Agent: (a) the amount
the Agent or any of the Secured Parties have paid (i) in respect of taxes
arising by reason of the Security Interests (including, without limitation, any
applicable transfer, intangible, recordation and personal property taxes but
excluding taxes in respect of the Agent's and the Secured Parties' income and
profits) or (ii) in order to free any of the Collateral from any lien thereon,
and (b) the amount of any and all reasonable costs and expenses (including,
without limitation, the reasonable fees and disbursements of its counsel and of
any agents not regularly in its employ) which the Agent or any of the Secured
Parties may incur in connection with (i) the preparation and interpretation of
this Security Agreement and any amendments hereto or modifications hereof, (ii)
the collection, sale or other disposition of any of the Collateral, (iii) the
exercise by the Agent or any of the Secured Parties of any of the powers
conferred upon any of them hereunder, (iv) any Event of Default on the Debtor's
part hereunder or (v) any Reorganization.
SECTION 15. SURVIVAL OF OBLIGATIONS; TERMINATION OF SECURITY INTERESTS;
RELEASE OF COLLATERAL.
This Agreement and the warranties, representations, agreements and
covenants contained herein and in any certificates or instruments delivered
pursuant hereto shall survive the making of the Loans (as defined in the Credit
Agreement) and the execution and delivery of the Notes, regardless of any
investigation made by the Agent or the Secured Parties or any person on behalf
of the Agent or the Secured Parties, and shall continue for so long as any of
the Obligations shall remain outstanding or any of the Secured Parties shall
have any obligation to advance funds to the Debtor. Upon the repayment and
performance in full of all the Obligations and the expiration or termination of
any obligations of any of the Secured Parties to advance funds to the Debtor,
the Security Interests shall terminate and all rights to the Collateral, except
as set forth below, shall
8
<PAGE> 9
revert to the Debtor. Upon such termination of the Security Interests or
release of Collateral, the Agent will, at the Debtor's expense to the extent
permitted by law, promptly execute and deliver to the Debtor such documents as
reasonably necessary or as the Debtor shall reasonably request to evidence the
termination of the Security Interests or the release of such Collateral, as the
case may be.
SECTION 16. NOTICES.
All notices, requests, demands and other communications provided for
hereunder shall be in writing in the manner set forth in the Credit Agreement.
SECTION 17. RIGHT OF SET-OFF.
In furtherance and not in limitation of any provisions herein contained,
the Debtor hereby agrees that any and all deposits or other sums at any time
claimed by or due from the Agent or any of the Secured Parties to the Debtor
shall at all times constitute security for the Obligations and, upon the
occurrence of an Event of Default, the Agent and each of the Secured Parties
may exercise any right of set-off against such deposits or other sums as may
accrue or exist under applicable law, whether or not the Obligations are
otherwise fully secured.
SECTION 19. MISCELLANEOUS.
(a) No failure on the part of the Agent or the Secured Parties to
exercise, and no delay in exercising, and no course of dealing with respect to,
any right, power or remedy under this Security Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Agent or any of
the Secured Parties of any right, power or remedy under this Security Agreement
preclude any other right, power or remedy. The remedies in this Security
Agreement are cumulative and are not exclusive of any other remedies provided
by law. Neither this Security Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally but only by a statement in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
(B) THIS SECURITY AGREEMENT SHALL BE DEEMED A SEALED INSTRUMENT AND
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
(c) This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
Agreement.
SECTION 20. PAYMENT OF EXPENSES.
In the event this Agreement shall be enforced by suit or otherwise, the
Debtor will reimburse the Agent and the holder or holders of the Obligations,
upon demand, for all reasonable expenses incurred in connection therewith,
including, without limitation, reasonable attorneys' fees (including without
limitation all such costs, charges and expenses incurred by the Agent or any of
the Secured Parties in connection with any Reorganization).
SECTION 21. SEVERABILITY.
If any provision hereof is invalid or unenforceable in any jurisdiction,
the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Agent.
9
<PAGE> 10
SECTION 22. INCONSISTENCIES.
Any inconsistencies between the provisions of this Agreement and the Credit
Agreement shall be governed by reference to the provisions of the Credit
Agreement.
SECTION 23. CONSENT TO JURISDICTION.
THE DEBTOR, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, HEREBY CONSENTS TO
THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AS WELL AS
TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH
COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF
ANY OF ITS OBLIGATIONS ARISING HEREUNDER OR WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS
TO VENUE, INCLUDING, WITHOUT LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN
ANY OF SUCH COURTS. IN ADDITION, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, THE
DEBTOR CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR U.S. CERTIFIED
OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE DEBTOR AT THE
ADDRESS PROVIDED HEREIN. TO THE EXTENT THE DEBTOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE DEBTOR
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER
THIS AGREEMENT.
SECTION 24. WAIVER OF JURY TRIAL.
THE DEBTOR HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT OR ANY OTHER AGREEMENTS
EXECUTED IN CONNECTION HEREWITH.
SECTION 25. AGENCY.
The parties hereto, and any person not a party hereto for whose benefit
the Agent holds the Collateral hereunder, acknowledge that the Agent has been
requested to act as agent for the Secured Parties hereunder pursuant to the
terms of the Credit Agreement, and that the Agent, to the extent it may so act
hereunder, shall exercise all of the rights and remedies hereunder on behalf
of, and as agent for the benefit of, the Secured Parties and each of them.
Without limiting the generality of the foregoing, the Agent is authorized to
execute and deliver, from time to time, on behalf of the Secured Parties, any
and all amendments and modifications to this Agreement and any and all waivers
to any conditions herein or any Event of Default hereunder.
10
<PAGE> 11
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
by their duly authorized representatives all as of the day and year first above
written.
DEBTOR:
MASADA SECURITY, INC.
By: /s/ David P. Tomick, Vice President
------------------------------------
David P. Tomick, Vice President
AGENT:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY
By: /s/ Martin W. Friedman
---------------------------------------------
Martin W. Friedman, Authorized Signatory
11
<PAGE> 1
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT made as of March 28, 1996, by and among MASADA
SECURITY HOLDINGS, INC., a Delaware corporation (the "Pledgor"); and CANADIAN
IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Administrative Agent (the
"Agent") for the financial institutions who are or who become Lenders under,
and as defined in, the Credit Agreement referred to below and any Affiliates of
such Lenders with whom the Debtor shall maintain any agreements relating to
protection against interest rate fluctuations, exchange rates or forward rates
or other so-called "rate hedging" obligations (collectively, the "Secured
Parties").
RECITALS
A. The Pledgor is the owner of 100% of the issued and outstanding
securities of Masada Security, Inc., a Delaware corporation (the "Borrower").
B. The Borrower, the Secured Parties, SunTrust Bank, Central Florida,
N.A., as Co-Agent, and the Agent are entering into a Credit Agreement of even
date herewith (as the same may be amended, restated, renewed, replaced,
supplemented or otherwise modified from time to time, the "Credit Agreement")
pursuant to which the Secured Parties are extending credit to the Borrower.
(Capitalized terms used herein without definition have the meanings assigned to
them in the Credit Agreement.)
C. It is a condition to the Secured Parties' willingness to enter into
the Credit Agreement and provide to the Borrower the financing contemplated
thereby that (i) the Pledgor shall have delivered its Guaranty in favor of
Agent unconditionally guaranteeing the Obligations of the Borrower, and (ii)
that the Pledgor shall have pledged to the Secured Parties and the Agent, for
the benefit of the Secured Parties, all of the issued and outstanding capital
stock of the Borrower.
D. The Pledgor will benefit materially from the extension of credit to the
Borrower contemplated by the Credit Agreement and, as a material inducement to
Secured Parties to enter into the Credit Agreement and to extend credit to the
Borrower as contemplated thereby, wishes hereby to pledge to the Agent and the
Secured Parties all of the issued and outstanding capital stock of the
Borrower.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of the parties hereto, the
parties hereby agree as follows:
SECTION 1. PLEDGE.
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Pledgor hereby delivers, pledges, grants security
interests in and assigns to the Agent and each of the Secured Parties the
securities, shares of capital stock, warrants and options of the Borrower
standing in the Pledgor's name as more particularly described on EXHIBIT A
attached hereto (all in suitable form for transfer by delivery or accompanied
by duly executed instruments of transfer or assignments in blank, and any
required transfer tax stamps), as collateral security for (i) the payment and
performance of all obligations of the Pledgor under its Guaranty and the
payment and performance of all obligations of the Borrower under the
<PAGE> 2
Credit Agreement; (ii) the due and punctual payment of the Notes, as defined in
the Credit Agreement and issued pursuant thereto, to any of the Secured
Parties, including, without limitation, all interest payable on the Notes at
the interest rates provided therein and in the Credit Agreement, regardless of
the extent allowed as a claim in any proceeding in respect of the bankruptcy,
reorganization or insolvency of the Borrower (a "Reorganization"); (iii) the
due and punctual payment of any of the Borrower's notes or instruments as may
hereafter from time to time be issued in addition to, in place of or in
amendment of the Notes under the Credit Agreement, including, without
limitation, all interest payable on such notes or instruments at the interest
rates provided therein, regardless of the extent allowed as a claim in any
Reorganization; (iv) the payment and performance of all indebtedness,
liabilities and obligations of the Borrower under the other Collateral
Documents contemplated by the Credit Agreement; (v) the payment and performance
of all obligations, indebtedness and liabilities of the Borrower's affiliates
to any of the Agent or the Secured Parties under the other Collateral Documents
contemplated by the Credit Agreement; (vi) the performance of all of the
obligations of the Borrower to the Agent and the Secured Parties contained in
any of the Transaction Documents contemplated by the Credit Agreement; and
(vii) the payment of all other future advances and other obligations of the
Borrower to any of the Secured Parties including, without limitation any future
loans and advances made to the Borrower by any of the Secured Parties prior to,
during or following any Reorganization, and any and all other indebtedness,
liabilities and obligations of the Borrower to any of the Secured Parties or
the Agent of every kind and description, direct, indirect or contingent, now or
hereafter existing, due or to become due under the Credit Agreement and the
other Transaction Documents (all of the foregoing hereinafter called the
"Obligations").
The Pledgor shall promptly pledge and deposit hereunder with the Agent,
any stock, securities, warrants, options or other rights to acquire shares of
the capital stock of the Borrower acquired by the Pledgor in addition to the
securities referred to on EXHIBIT A attached hereto, whether by (i) new
purchase or (ii) new issuance or by declaration of a dividend or distribution
with respect to, or a split of, or conversion of, any securities now or
hereafter held in pledge (all in suitable form for transfer by delivery or
accompanied by (a) duly executed instruments of transfer or assignments in
blank, and (b) any required transfer tax stamps). Such stock, equity
securities, warrants, options, voting or other rights shall stand pledged and
assigned as collateral security for the Obligations in the same manner as the
property described in the first paragraph hereof and this paragraph. Nothing
contained in this SECTION 1 shall be deemed to permit any issuances of debt or
equity securities, exercise of rights, distributions, payments or other actions
not otherwise expressly permitted by the Credit Agreement. (All of the
property described in the first paragraph hereof and this paragraph is
hereinafter collectively called the "Pledged Securities".)
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR.
The Pledgor hereby represents, warrants and covenants as follows:
(a) Except for the security interest and pledge hereunder and
any security interest and pledge permitted under the Credit
Agreement, (i) the Pledgor is the sole legal and beneficial owner of
the Pledged Securities and holds the Pledged Securities free and
clear of any lien, security interest, encumbrance or restriction on
transfer (in the case of restrictions on transfer, except as may be
imposed by any
-2-
<PAGE> 3
state or local governmental authorities), (ii) there are no
restrictions upon the voting rights of any of the Pledged Securities
(other than as may be imposed by any state or local governmental
authorities), (iii) the Pledged Securities are duly and validly
issued, fully paid and non-assessable and (iv) the Pledgor has the
right to pledge said securities to the Agent hereunder free of any
encumbrances.
(b) The Pledgor shall promptly pay any and all taxes,
assessments and governmental charges upon the Pledged Securities
pledged by the Pledgor hereunder when due other than those contested
in good faith by appropriate proceedings for which adequate funds
for the payment thereof shall have been set aside.
(c) The Pledgor shall not sell or otherwise assign, transfer
or dispose of the Pledged Securities or any interest therein during
such time as they shall be pledged to the Secured Parties as
contemplated hereby.
(d) The Pledgor shall keep the Pledged Securities free from
any lien, security interest or encumbrance except for that which is
provided hereby and shall defend such Pledged Securities against all
claims and demands of all persons at any time claiming any interest
therein.
(e) The Pledged Securities are duly and validly issued, fully
paid and nonassessable and each certificate or instrument evidencing
the Pledged Securities is issued in the name of the Pledgor as
described on EXHIBIT A.
(f) The Pledged Securities represent, and the Pledgor is the
legal and beneficial holder of, all of the issued and outstanding
capital stock of the Borrower.
SECTION 3. RIGHT TO RECEIVE DISTRIBUTIONS ON PLEDGED SECURITIES.
(a) Unless and until an Event of Default (as defined in SECTION 5 hereof)
has occurred and is continuing, and if the Agent, at the Secured Parties'
direction, shall have notified the Pledgor in writing of its election to
exercise the Agent's rights under this SECTION 3, the Pledgor shall be entitled
to receive and retain for its own use any and all dividends, interest and other
payments and distributions made upon or with respect to the Pledged Securities
(subject to any restrictions thereon set forth in the Credit Agreement or any
other Transaction Document referred to therein), except
(i) stock dividends;
(ii) dividends payable in securities or other property (except
cash dividends or distributions);
(iii) dividends or distributions on dissolution or on partial
or total liquidation or in connection with a reduction of capital,
capital surplus or paid-in surplus; and
-3-
<PAGE> 4
(iv) any other securities issued with respect to or in lieu of
the Pledged Securities in any manner whatsoever (whether upon
conversion of any convertible securities included therein or through
stock split, spin-off, split-off, reclassification, merger,
consolidation, sale of assets, combination of shares or otherwise).
All of the foregoing, together with all new, substituted or additional shares
of capital stock, warrants, options, notes or other rights, or other securities
issued in addition to or in respect of all or any of the Pledged Securities
shall be delivered to the Agent hereunder as required by SECTION 1 hereof, to
be held as collateral pursuant to the terms hereof in the same manner as the
Pledged Securities delivered to the Agent on the date hereof. The Pledgor
shall have the right to receive and retain all dividends, distributions,
principal, interest and other payments made upon or with respect to the Pledged
Securities, except those which the Agent is specifically authorized to receive
as provided above, and the Agent at the Secured Parties' direction shall take
all such action as may be necessary or appropriate to give effect to such
right. From time to time upon receiving a written request from the Pledgor
accompanied by a certificate signed by the Pledgor stating that no Event of
Default has occurred and is continuing, the Agent shall deliver to the Pledgor
suitable assignments and orders for the payment to the Pledgor or upon its
order of all dividends, distributions, principal, interest and other payments
to which the Pledgor is entitled as aforesaid, upon or with respect to any
Pledged Securities which are registered or standing in the name of the Agent.
Nothing in this SECTION 3 shall be deemed to permit any issuance of debt or
equity securities, exercise of rights, distributions, payments or other actions
not otherwise expressly permitted by the Credit Agreement.
(b) Notwithstanding any provision herein to the contrary, if any Event of
Default shall have occurred and be continuing, upon the giving of the written
notice referred to in subsection (a) above, then and whether or not any holder
of the Obligations exercises any available option to declare such Obligations
due and payable or seeks or pursues any other relief or remedy available to
such holder under this Pledge Agreement or any instrument or agreement
evidencing or securing any Obligations, all dividends, distributions, or
interest or principal payments, as the case may be, on the Pledged Securities
shall be paid directly to the Agent on behalf of the Secured Parties, and
retained by it as part of the Pledged Securities, subject to the terms of this
Pledge Agreement, and, if the Agent shall so request in writing, the Pledgor
agrees to execute and deliver to the Agent appropriate additional distribution
and other orders and documents to that end.
SECTION 4. RIGHT TO VOTE PLEDGED SECURITIES.
(a) Unless and until an Event of Default has occurred and is continuing,
and if the Agent at the Secured Parties' direction shall have notified the
Pledgor in writing of its election to exercise the Agent's rights under this
SECTION 4, the Pledgor shall have the right, from time to time, to vote and to
give consents, ratifications and waivers with respect to the Pledged Securities
and to exercise conversion rights with respect to any convertible securities
included therein (provided, however, that no vote shall be cast, and no consent
shall be given or shareholder action taken, which would have the effect of
impairing the position or interest of the Agent and the Secured Parties with
respect to the Pledged Securities or which would authorize or effect any action
then prohibited by the Credit Agreement or any other Transaction Document
referred to therein).
-4-
<PAGE> 5
(b) Notwithstanding any provision herein to the contrary, if any Event of
Default shall have occurred and be continuing, upon the giving of the written
notice referred to in subsection (a) above, then and whether or not any holder
of the Obligations exercises any available option to declare such Obligations
due and payable or seeks or pursues any other relief or remedy available to
such holder under this Pledge Agreement or any instrument or agreement
evidencing or securing any Obligations, the Agent, or its nominee, shall
forthwith, without further action on the part of any person, have the sole and
exclusive right to exercise all voting and other powers of ownership pertaining
to the Pledged Securities and shall exercise such powers in such manner as the
Agent, at the Secured Parties' direction, shall determine to be necessary,
appropriate or advisable. The Pledgor hereby agrees to execute and deliver to
the Agent such additional powers, authorizations, proxies, dividends and such
other documents as the Agent may reasonably request to secure to the Agent the
rights, powers and authority intended to be conferred upon the Agent by this
subsection (b).
SECTION 5. EVENTS OF DEFAULT.
The Pledgor shall be in default under this Pledge Agreement upon the
occurrence of any of one of the following events (herein referred to as an
"Event of Default"):
(a) default by Pledgor in the due observance or performance of any
covenant or agreement contained herein, which default, if curable, is not cured
within 10 days of the earlier of receipt by the Pledgor of notice thereof or
the Pledgor's actual knowledge thereof;
(b) breach by the Pledgor of any representation or warranty herein
contained; or
(c) the occurrence of any "Event of Default" under (and as defined) in the
Credit Agreement.
SECTION 6. REMEDIES UPON EVENT OF DEFAULT.
(a) If any Event of Default shall occur, the Agent on behalf of the
Secured Parties may exercise all the rights and remedies of a secured party
under the Uniform Commercial Code. Without limitation of the foregoing, unless
the Obligations shall have been paid in full in cash, the Agent at the Secured
Parties' direction, may, in the Secured Parties' sole discretion, without
further demand, advertisement or notice, except as expressly provided for in
subsection (i) below, apply the cash, if any, then held by it as collateral
hereunder, for the purposes and in the manner provided in SECTION 7 hereof,
and, if there shall be no such cash or the cash so applied shall be
insufficient to make payment in full of all payments provided in SECTION 7
hereof,
(i) Sell the Pledged Securities, or any part thereof, in one
or more sales, at public or private sale, conducted by any officer
or agent of the Agent, at a place of business of the Agent or
elsewhere, for cash, upon credit or future delivery, and at such
price or prices as the Agent shall, in a commercially reasonable
manner, determine, and, to the extent permitted by law, the Agent or
any Secured Party may be the purchaser of any or all of the Pledged
Securities so sold. Upon any such sale, the Agent shall have the
right to deliver, assign and transfer to the purchaser
-5-
<PAGE> 6
thereof the Pledged Securities so sold. Each purchaser (including
the Agent or any Secured Party) at any such sale shall hold the
Pledged Securities so sold, absolutely free from any claim or right
of whatsoever kind, including, without limitation, any equity or
right of redemption of the Pledgor which the Pledgor, to the extent
it may lawfully do so, hereby specifically waives. The Agent shall
give the Pledgor at least 15 days' advance written notice of any
such public or private sale. The Agent shall not be obligated to
make any sale pursuant to any such notice. The Agent may, without
notice or publication, adjourn any public or private sale from time
to time by announcement at the time and place fixed for such sale,
or any adjournment thereof, and any such sale may be made at any
time or place to which the same may be so adjourned without further
notice or publication. In case of any sale of all or any part of
the Pledged Securities for credit or for future delivery, the
Pledged Securities so sold may be retained by the Agent until the
selling price is paid by the purchaser thereof, but the Agent shall
not incur any liability in case of the failure of such purchaser to
pay for the Pledged Securities so sold, and in case of any such
failure, such Pledged Securities may again be sold under and
pursuant to the provisions hereof; or
(ii) Proceed by a suit or suits at law or in equity to
foreclose upon this Pledge Agreement and sell the Pledged
Securities, or any portion thereof, under a judgment or decree of a
court or courts of competent jurisdiction.
(b) If at any time when the Agent at the Secured Parties' direction shall
determine to exercise its right to sell all or any part of the Pledged
Securities pursuant to subsection (a)(i) of this Section, such Pledged
Securities or the part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under the Securities Act of 1933, as from time to
time in effect (the "Securities Act") or the securities laws of any state, the
Agent, at the Secured Parties' direction, in their sole and absolute
discretion, is hereby expressly authorized to sell such Pledged Securities or
such part thereof by private sale in such manner and under such circumstances
as the Agent and the Secured Parties may deem commercially reasonable in order
that such sale may legally be effected without such registration. The Agent
and the Secured Parties shall sell all or any part of the Pledged Securities at
a price which they deem commercially reasonable under the circumstances.
(c) The Agent as attorney-in-fact pursuant to SECTION 8 hereof may, in the
name and stead of the Pledgor, make and execute all conveyances, assignments
and transfers of the Pledged Securities sold in accordance with this Agreement.
The Pledgor shall, if so reasonably requested by the Agent, ratify and confirm
any sale or sales by executing and delivering to the Agent, or to such
purchaser or purchasers, all such instruments as may, in the reasonable
judgment of the Agent, be advisable for such purpose.
(d) The receipt of the Agent of the purchase money paid at any such sale
made by it shall be a sufficient discharge therefor to any purchaser (other
than the Agent) of the Pledged Securities, or any portion thereof, sold as
aforesaid; and no such purchaser (or his or its representatives or assigns)
(other than the Agent), after paying such purchase money and receiving such
receipt, shall be bound to see to the application of such purchase money or any
part thereof or in any manner whatsoever be answerable for any loss,
misapplication or
-6-
<PAGE> 7
nonapplication of any such purchase money, or any part thereof, or be bound to
inquire as to the authorization, necessity, expediency or regularity of any
such sale.
SECTION 7. APPLICATION OF PROCEEDS.
The proceeds of any sale, or of collection, of all or any part of the
Pledged Securities shall be applied by the Agent, without any marshalling of
assets, in the following order:
(a) first, to the payment of all of the costs and expenses of such
sale, including, without limitation, reasonable legal fees, and all
other reasonable expenses, liabilities and advances made or incurred by
the Agent or the Secured Parties in connection therewith (including
reasonable costs and expenses incurred in connection with any
bankruptcy, reorganization or insolvency proceeding);
(b) second, to the payment of the Obligations in such order as the
Secured Parties, in their sole discretion, shall determine, until
payment in full thereof; and
(c) finally, to the Pledgor, its successors and assigns, or to
whomsoever may be lawfully entitled to receive the same.
SECTION 8. THE AGENT APPOINTED ATTORNEY-IN-FACT.
The Pledgor hereby appoints the Agent as the Pledgor's lawful attorney,
with full power of substitution, in the name of the Pledgor, for the sole use
and benefit of the Agent on behalf of the Secured Parties, but at the Pledgor's
expense, to take any action and execute any instruments which the Agent may
deem necessary or advisable to accomplish the purposes hereof. Such
appointment as attorney is irrevocable and coupled with an interest.
SECTION 9. RECORD OWNERSHIP OF PLEDGED SECURITIES.
Upon the occurrence of an Event of Default and subject to the requirements
of mandatory law, the Agent may cause, upon receipt of written notification to
the Pledgor, any or all of the Pledged Securities to be transferred of record
into the Agent's name. The Pledgor shall, upon request, promptly give to the
Agent copies of any notices or other communications received by the Pledgor
with respect to the Pledged Securities registered in the name of Pledgor.
SECTION 10. NO WAIVER.
No failure on the part of the Agent or the Secured Parties to exercise,
and no delay on the part of the Agent or the Secured Parties in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise by the Agent or the Secured Parties of any
right, power or remedy hereunder preclude any other or further right, power or
remedy.
-7-
<PAGE> 8
SECTION 11. SURVIVAL OF OBLIGATIONS; TERMINATION OF PLEDGE.
This Agreement and the warranties, representations, agreements and
covenants contained herein and in any certificates or instruments delivered
pursuant hereto shall survive the making of the Loans and the execution and
delivery of the Notes, regardless of any investigation made by the Agent or the
Secured Parties or any person on behalf of the Agent or the Secured Parties,
and shall continue for so long as any of the Obligations shall remain
outstanding or any of the Secured Parties shall have any obligation to advance
funds to the Borrower. Upon the repayment and performance in full of all the
Obligations and the expiration or termination of any obligations of the Secured
Parties to advance funds to the Borrower, the Agent shall forthwith assign,
transfer and deliver to the Pledgor or its assignees, without representation,
warranty or recourse, against appropriate receipts, all the Pledged Securities,
if any, then held by it in pledge hereunder and all duly executed instruments
of transfer or assignments in blank relating thereto and any other property
held by the Agent pursuant to this Agreement free and clear of the lien of this
Agreement and the other Transaction Documents, except that such liens shall
survive with respect to any payment made or received by the Secured Parties in
respect of the Obligations that is subsequently voided as a fraudulent
conveyance, preference or otherwise.
SECTION 12. JURISDICTION.
THE PLEDGOR, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, HEREBY CONSENTS TO
THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AS WELL AS
TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH
COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF
ANY OF ITS OBLIGATIONS ARISING HEREUNDER OR WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS
TO VENUE, INCLUDING, WITHOUT LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN
ANY OF SUCH COURTS. IN ADDITION, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, THE
PLEDGOR CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR U.S.
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE
PLEDGOR AT THE ADDRESS PROVIDED HEREIN. TO THE EXTENT THE PLEDGOR HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO IT OR ITS
PROPERTY, THE PLEDGOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT.
-8-
<PAGE> 9
SECTION 13. WAIVER OF JURY TRIAL.
THE PLEDGOR HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT OR ANY OTHER AGREEMENTS
EXECUTED IN CONNECTION HEREWITH.
SECTION 14. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
heirs, successors and assigns of the Pledgor, the Agent and each of the Secured
Parties, and any subsequent holder of any of the Obligations.
SECTION 15. ADDITIONAL INSTRUMENTS AND ASSURANCE.
The Pledgor hereby agrees, at the Pledgor's own expense, to execute and
deliver, from time to time, any and all further, or other, instruments, and to
perform such acts, as shall be reasonably required to effect the purposes of
this Agreement and to secure to the Agent and the Secured Parties, and to all
persons who may from time to time be the holder of any of the Obligations, the
benefits of all right, authorities and remedies conferred upon Agent and the
Secured Parties by the terms of this Agreement.
SECTION 16. NOTICES.
All notices, requests, demands and other communications provided for
hereunder shall be in writing (including telecopied communication) and mailed
or telecopied or delivered to the applicable party at the addresses indicated
below.
If to the Agent or the Secured Parties:
Canadian Imperial Bank of Commerce, New York Agency
425 Lexington Avenue
New York, New York 10017
Attention: Mr. Martin W. Friedman
Telecopy No.: (212) 856-3558
with a copy (which shall not constitute notice) to:
Elizabeth H. Munnell, Esquire
Edwards & Angell
101 Federal Street
23rd Floor
Boston, Massachusetts 02110
Telecopy No: (6l7) 439-4170
-9-
<PAGE> 10
If to the Pledgor:
Masada Security Holdings, Inc.
950 North 22nd Street, Suite 800
Birmingham, Alabama 35203
Attention: Mr. David P. Tomick
Telecopy No.: (880) 531-3293
with a copy (which shall not constitute notice) to:
David D. Dowd, III, Esquire
Burr & Forman
Suite 3100, Southtrust Tower
420 North Twentieth Street
Birmingham, Alabama 35203
Telecopy: (205) 458-5100
or, as to each party, at such other address as shall be designated by such
parties in a written notice to the other parties complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communication shall be deemed given upon receipt by the party to whom such
notice is directed.
SECTION 17. SEVERABILITY.
In case any one or more of the provisions of this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had not been included.
SECTION 18. CUMULATIVE REMEDIES.
The rights, powers and remedies provided herein in favor of the Agent and
the Secured Parties shall not be deemed exclusive, but shall be cumulative, and
shall be in addition to all other rights and remedies in favor of the Agent and
the Secured Parties existing at law or in equity, including (without
limitation) all of the rights, powers and remedies available to a secured party
under any law or regulation.
SECTION 19. GOVERNING LAW.
THIS AGREEMENT SHALL BE DEEMED EXECUTED AS A SEALED INSTRUMENT AND SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK AS A CONTRACT TO BE EXECUTED AND PERFORMED WITHIN THE STATE OF NEW YORK.
-10-
<PAGE> 11
SECTION 20. HEADINGS.
The headings of the Sections of this Agreement have been inserted for
convenience of reference only and shall in no way affect the construction or
interpretation of this Agreement.
SECTION 21. PAYMENT OF EXPENSES.
In the event this Agreement shall be enforced by suit or otherwise, the
Pledgor will reimburse the Agent and the holder or holders of the Obligations,
upon demand, for all reasonable expenses incurred in connection therewith,
including without limitation, reasonable attorneys' fees (including, without
limitation, all such costs, charges and expenses incurred by the Agent or any
of the Secured Parties in connection with any Reorganization).
SECTION 22. COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
Agreement.
SECTION 23. AGENT.
The parties hereto, and any Person not a party hereto for whose benefit
the Agent holds the Pledged Securities hereunder, acknowledge that the Agent
has been requested to act as agent for the Secured Parties hereunder pursuant
to the terms of the Credit Agreement, and that the Agent, to the extent it may
so act hereunder, shall exercise all of the rights and remedies hereunder on
behalf of, and as agent for the benefit of, the Secured Parties and each of
them. Without limiting the generality of the foregoing, the Agent is
authorized to execute and deliver, from time to time, on behalf of the Secured
Parties, any and all amendments to this Agreement and any and all waivers to
any conditions herein or any Event of Default hereunder.
-11-
<PAGE> 12
IN WITNESS WHEREOF, this Pledge Agreement has been executed as a sealed
instrument by the parties hereto by their duly authorized representatives all
as of the day and year first above written.
PLEDGOR:
MASADA SECURITY HOLDINGS, INC.
By: /s/ David P. Tomick
----------------------------------------
David P. Tomick, Vice President
AGENT:
CANADIAN IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY
By: /s/ Martin W. Friedman
----------------------------------------
Martin W. Friedman, Authorized Signatory
-12-
<PAGE> 1
AMENDMENT TO CREDIT AGREEMENT AND CERTAIN OTHER DOCUMENTS
THIS AMENDMENT is made as of June 3, 1996 by and among MASADA SECURITY,
INC., a Delaware corporation (the "Borrower"); CIBC INC. ("CIBC"), as a Lender;
SUNTRUST BANK, CENTRAL FLORIDA, N.A. ("SunTrust"), as Co-Agent and as a Lender;
and CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY as Administrative Agent
(the "Agent") for CIBC, SunTrust and other financial institutions who are or
who become Lenders under, and as defined in the Credit Agreement referred to
below.
RECITALS
A. The Borrower, CIBC, SunTrust and the Agent are parties to a Credit
Agreement dated as of March 28, 1996 (the "Credit Agreement"). Capitalized
terms used herein without definition have the meanings assigned to them in the
Credit Agreement.
B. The Borrower has requested the consent of the Agent and the Lenders to
the terms and conditions of the Secure America Acquisition pursuant to Section
7.07 of the Credit Agreement. The Borrower has informed the Agent and the
Lenders that it intends to accomplish the Secure America Acquisition as
follows: Secure America, Inc. has been merged into Alarms by HRD, Inc. with
Alarms by HRD, Inc. being the surviving corporation of such merger. The
Borrower proposes to acquire all of the issued and outstanding capital stock of
Alarms by HRD, Inc. pursuant to the terms of the Stock Purchase Agreement (as
originally executed, the "Stock Purchase Agreement") dated May 31, 1996 among
the Borrower and Russell B. Jones, Robert S. Moses, David R. Donnelly and
Ronald G. Walters (collectively, "Sellers"). Alarms by HRD, Inc. is
hereinafter referred to as the "Florida Subsidiary".
C. Subject to certain terms and conditions, the Agent and the Lenders are
willing to agree to such request, as hereinafter set forth.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
I. AMENDMENTS TO LOAN AGREEMENT.
The Loan Agreement is hereby amended as follows:
A. DEFINITIONS.
1. The definitions of "Subsidiary" or "Subsidiaries" are amended to
provide that after the consummation of the Secure America Acquisition the only
Subsidiaries of the Borrower shall be the Austin Subsidiary and the Florida
Subsidiary.
2. A new definition is added to read as follows:
Florida Subsidiary: Alarms by HRD, Inc., a
wholly-owned subsidiary of the Borrower.
<PAGE> 2
B. REPRESENTATIONS AND WARRANTIES.
1. Section 4.01 is amended by adding thereto the following sentence at
the end thereof:
The Florida Subsidiary is a corporation duly
organized, validly existing and in good standing
under the laws of the State of Florida.
2. All references in Article IV to the Austin Subsidiary (other than the
representation relating to its existence as a Texas corporation) shall
hereafter refer to each of the Austin Subsidiary and the Florida Subsidiary.
C. RESTRICTED ESCROWS.
Section 2.01(c) is amended by changing the phrase at the end of the first
sentence thereof from "it being understood and agreed that all future escrows
shall be held by the Co-Agent and pledged to the Lenders as expressed in
Section 2.01(a)" to read "it being understood and agreed that all future
escrows shall be pledged to the Lenders as expressed in Section 2.01(a) and the
Borrower shall use its best efforts to ensure that all future escrows shall be
held by the Co-Agent".
II. AMENDMENT TO SECURITY AND PLEDGE AGREEMENT. Reference is made to the
Security and Pledge Agreement dated as of March 28, 1996 (the "Security
Agreement") between the Borrower and the Agent. Pursuant thereto, the Borrower
hereby agrees that all of the issued and outstanding stock of the Florida
Subsidiary shall be included within the definition of "Pledged Securities"
under the Security Agreement, and the Borrower hereby reaffirms and grants to
Agent on behalf of Lenders a security interest in, and pledge and collateral
assignment of, all of the shares of issued and outstanding capital stock of the
Florida Subsidiary and rights relating thereto and proceeds thereof. The
Borrower is delivering to the Agent contemporaneously with the execution
hereof, certificates representing all of the issued and outstanding capital
stock of the Florida Subsidiary, in suitable form for transfer by delivery,
accompanied by duly executed stock powers relating thereto in blank.
III. AMENDMENT TO AFFILIATE SUBORDINATION AGREEMENT. Reference is made to
the Affiliate Subordination Agreement dated as of March 28, 1996 among the
Borrower, Masada Security Holdings, Inc., Kristynik Security Systems, Inc. and
the Agent (the "Subordination Agreement"). Pursuant thereto, the Borrower
hereby agrees that the Florida Subsidiary shall be included within the
definition of "Creditor" under the Subordination Agreement, and the
Subordination Agreement shall hereafter be applicable to the Florida
Subsidiary, in addition to the other Creditors thereunder, as if the Florida
Subsidiary had been an original signatory thereto. The Florida Subsidiary
agrees, by executing a joinder hereto, to be liable as a Creditor and to assume
all obligations as a Creditor under said Subordination Agreement.
IV. NO FURTHER AMENDMENTS. Except as specifically amended hereby, the
Credit Agreement, the Security Agreement and the Subordination Agreement shall
remain unmodified and in full force and effect and are hereby ratified and
affirmed in all respects, and the indebtedness of the Borrower to the Agent and
the Lenders evidenced thereby and by the Notes is hereby reaffirmed in all
respects.
V. CERTAIN REPRESENTATIONS. As a material inducement to the Agent and the
Lenders to enter into this Amendment, the Borrower hereby represents and
warrants (which
- 2 -
<PAGE> 3
representations and warranties shall survive the delivery of this Amendment),
after giving effect to this Amendment, as follows:
A. The execution and delivery of this Amendment, the Conditional
Assignment dated on or about the date hereof from the Borrower in favor of the
Agent (the "Conditional Assignment"), the Guaranty of the Florida Subsidiary
dated on or about the date hereof in favor of the Agent and the Lenders (the
"Guaranty"), the Security Agreement dated on or about the date hereof executed
by the Florida Subsidiary in favor of the Agent (the "Security Agreement"), and
the Stock Purchase Agreement and any and all agreements executed by or on
behalf of the Borrower or any of its Subsidiaries relating to the Secure
America Acquisition (collectively, the "Purchase Documents") have been duly
authorized by all requisite corporate action on the part of the Borrower and
its Subsidiaries.
B. The representations and warranties contained in the Credit Agreement,
any of the Purchase Documents or any of the other Transaction Documents are
true and correct in all material respects on and as of the date of this
Amendment as though made at and as of such date. No material adverse change
has occurred in the assets, liabilities, financial condition, business or
prospects of the Borrower or either Subsidiary from that disclosed in the
financial statements most recently furnished to the Agent. No Event of Default
or condition or event which would, with notice or the lapse of time or both,
result in an Event of Default has occurred and is continuing.
C. Neither Borrower nor either Subsidiary is required to obtain any
consent, approval or authorization from, or to file any declaration or
statement with, any governmental instrumentality or other agency or any other
person or entity, in connection with or as a condition to the execution,
delivery or performance of any of the Purchase Documents or this Amendment or
any of the other documents executed in connection herewith.
D. Each of this Amendment, the Conditional Assignment, the Security
Agreement and the Guaranty constitutes the legal, valid and binding obligation
of the Borrower and its Subsidiaries who are parties thereto, enforceable
against each of them in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the rights and remedies of creditors generally or the application of principles
of equity, whether in any action at law or proceeding in equity, and subject to
the availability of the remedy of specific performance or of any other
equitable remedy or relief to enforce any right thereunder.
VI. CONDITIONS. The willingness of the Agent and the Lenders to agree to
the foregoing is subject to the conditions:
A. The Borrower and the Subsidiaries shall have executed and delivered to
the Agent (or shall have caused to be executed and delivered to the Agent by
the appropriate persons) the following:
(1) This Amendment;
(2) The Conditional Assignment, the Guaranty and the
Security Agreement, (and the Agent shall be satisfied that it
has been granted a perfected pledge and security interest in,
and first lien on, all assets of the Florida Subsidiary and
all issued and outstanding capital stock thereof);
(3) True, complete and correct copies of the Purchase
Documents;
- 3 -
<PAGE> 4
(4) True and complete copies of any required
stockholders' and directors' consents and/or resolutions,
authorizing the execution and delivery of this Amendment, the
Conditional Assignment, the Guaranty, the Security Agreement
and the Purchase Documents, certified by the Secretary of the
appropriate company;
(5) Opinions of counsel to Borrower and its
Subsidiaries and counsel to Sellers, satisfactory to Agent,
and such other supporting documents and certificates as the
Agent or its counsel may reasonably request.
B. The transactions contemplated by the Stock Purchase Agreement shall
have been consummated, with the exception of that portion of the purchase price
thereunder being paid with proceeds of an Advance, and the Agent shall have
received an opinion of counsel to the Borrower and the Subsidiaries to such
effect, dated as of the date hereof, in form and substance satisfactory to the
Agent.
C. All legal matters incident to the transactions hereby contemplated
shall be satisfactory to the Agent's counsel.
VII. MISCELLANEOUS.
A. As provided in the Credit Agreement, the Borrower agrees to reimburse
the Agent upon demand for all reasonable fees and disbursements of counsel to
the Agent incurred in connection with the preparation of this Amendment and the
documents relating hereto.
B. This Amendment shall be governed by and construed in accordance with
the laws of the State of New York.
C. This Amendment may be executed by the parties hereto in several
counterparts hereof and by the different parties hereto on separate
counterparts hereof, all of which counterparts shall together constitute one
and the same agreement.
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the Agent, the Borrower, CIBC and SunTrust have caused
this Amendment to be duly executed as a sealed instrument by their duly
authorized representatives, all as of the day and year first above written.
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong
-------------------------------------
Title: Vice President
-----------------------------
CANADIAN IMPERIAL BANK OF COMMERCE, NEW
YORK AGENCY
By: /s/ Martin W. Friedman
-------------------------------------
Martin W. Friedman,
Authorized Signatory
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By: /s/ Christopher Aguilar
-------------------------------------
Title: First V.P.
-----------------------------
CIBC INC.
By: /s/ Martin W. Friedman
-------------------------------------
Martin W. Friedman,
Managing Director
- 5 -
<PAGE> 6
JOINDER
The undersigned, Alarms by HRD, Inc. and Kristynik Security Systems, Inc.,
hereby join in the execution of the foregoing Amendment dated as of June 3,
1996 for the purpose of agreeing and consenting thereto and agreeing to be
bound by the provisions thereof applicable to each of them, all as of June 3,
1996. The undersigned, Kristynik Security Systems, Inc., hereby also confirms
its Guaranty and Security Agreement in favor of Agent, each dated as of March
28, 1996, and agrees that each of such agreements remain in full force and
effect, enforceable in accordance with the terms thereof.
ALARMS BY HRD, INC.
By: /s/ Charles F. Armstrong
------------------------------------
Title: Vice President
----------------------------
KRISTYNIK SECURITY SYSTEMS, INC.
By: /s/ Cathy Antee
-----------------------------------
Title: President
----------------------------
- 6 -
<PAGE> 1
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS AMENDMENT is being executed August 9, 1996, and shall be effective as
of April 30, 1996, by and among MASADA SECURITY, INC., a Delaware corporation
(the "Borrower"); CIBC INC. ("CIBC"), as a Lender; and SUNTRUST BANK, CENTRAL
FLORIDA, N.A. ("SunTrust"), as Co-Agent and as a Lender; and CANADIAN IMPERIAL
BANK OF COMMERCE, NEW YORK AGENCY as Administrative Agent (the "Agent") for
CIBC, SunTrust and other financial institutions who are or who become Lenders
under, and as defined in the Credit Agreement referred to below.
RECITALS
A. The Borrower, CIBC, SunTrust and the Agent are parties to a Credit
Agreement dated as of March 28, 1996, as amended as of June 4, 1996 (as so
amended, the "Credit Agreement"). Capitalized terms used herein without
definition have the meanings assigned to them in the Credit Agreement.
B. The Borrower has requested that the Credit Agreement be amended as
hereinafter set forth.
C. Subject to certain terms and conditions, the Agent and the Lenders are
willing to agree to such request, as hereinafter set forth.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
I. AMENDMENTS TO CREDIT AGREEMENT.
The Credit Agreement is hereby amended as follows:
A. DEFINITIONS.
1. The definition of "Pro Forma Acquired Net Operating Income" is amended
to read in its entirety as follows:
PRO-FORMA ACQUIRED NET OPERATING INCOME. For any three month period, the
sum of all Acquired RMR Adjustments with respect to RMR Purchases effected
during such period. As used herein, an "Acquired RMR Adjustment" shall mean
the Recurring Monthly Revenue attributable to the related RMR Purchase
multiplied by 1.5 multiplied by a fraction, (a) the numerator of which is the
number of days in such three month period minus the number of days since the
last day of the month in which such RMR Purchase occurred and (b) the
denominator of which is the number of days in such three month period.
2. The definition of "Safe Choice Capital Expenditures" is amended to
read in its entirety as follows:
<PAGE> 2
SAFE CHOICE CAPITAL EXPENDITURES. For any month, the sum of (a) Capital
Expenditures made during such month solely attributable to the Safe Choice
Program; and (b) the Safe Choice Excess Expenses for such month.
B. LEVERAGE.
Section 5.01 is amended to read in its entirety as follows:
SECTION 5.02. LEVERAGE. As of any date, maintain a ratio of (a) Total
Debt minus the Borrower's cash on hand and cash equivalents as of such date, to
the extent the same exceeds $500,000 in the aggregate, and (b) Annualized
Adjusted Net Operating Income for the most recently ended period of three
consecutive months, as follows: (i) from the Closing Date through and including
October 30, 1996, a maximum ratio of 6.50:1.00; and (ii) thereafter, a maximum
ratio of 5.50:1.00.
C. CAPITAL EXPENDITURES.
Section 5.03 is amended to read in its entirety as follows:
SECTION 5.03. CAPITAL EXPENDITURES. Not make or incur Capital
Expenditures in any fiscal year (or portion thereof) except (a) Permitted
Capital Expenditures not exceeding $700,000 in the aggregate from January 1,
1996 through the Expiration Date; and (b) Safe Choice Capital Expenditures not
exceeding $15,000,000 during the term of this Agreement, provided that the
aggregate amount paid in connection with all Safe Choice Capital Expenditures
and all Dealer Program Purchases shall not exceed (i) a maximum cumulative
amount for the period commencing April 1, 1996 through and including the last
day of any month of $1,350,000 multiplied by the number of months completed
during such period and (ii) $2,500,000 in any month.
II. NO FURTHER AMENDMENTS. Except as specifically amended hereby, the
Credit Agreement shall remain unmodified and in full force and effect. The
Credit Agreement and all of the other Transaction Documents are hereby ratified
and affirmed in all respects, and the indebtedness of the Borrower to the Agent
and the Lenders evidenced thereby and by the Notes is hereby reaffirmed in all
respects.
III. CERTAIN REPRESENTATIONS. As a material inducement to the Agent and
the Lenders to enter into this Amendment, the Borrower hereby represents and
warrants (which representations and warranties shall survive the delivery of
this Amendment), after giving effect to this Amendment, as follows:
A. The execution and delivery of this Amendment has been duly authorized
by all requisite corporate action on the part of the Borrower and its
Subsidiaries.
B. The representations and warranties contained in the Credit Agreement
and the other Transaction Documents are true and correct in all material
respects on and as of the date of this Amendment as though made at and as of
such date. No material adverse change has occurred in
- 2 -
<PAGE> 3
the assets, liabilities, financial condition, business or prospects of the
Borrower or any Subsidiary from that disclosed in the financial statements most
recently furnished to the Agent. No Event of Default or condition or event
which would, with notice or the lapse of time or both, result in an Event of
Default has occurred and is continuing.
C. Neither the Borrower nor any of its Subsidiaries is required to obtain
any consent, approval or authorization from, or to file any declaration or
statement with, any governmental instrumentality or other agency or any other
person or entity in connection with or as a condition to the execution,
delivery or performance of this Amendment.
D. This Amendment constitutes the legal, valid and binding obligation of
the Borrower, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the rights and remedies of creditors generally or the application of principles
of equity, whether in any action at law or proceeding in equity, and subject to
the availability of the remedy of specific performance or of any other
equitable remedy or relief to enforce any right thereunder.
IV. CONDITIONS. The willingness of the Agent and the Lenders to agree to
the foregoing is subject to the following conditions:
A. The Borrower shall have executed and delivered to the Agent (or shall
have caused to be executed and delivered to the Agent by the appropriate
persons) the following:
(1) This Amendment;
(2) True and complete copies of any required
stockholders' and directors' consents and/or resolutions,
authorizing the execution and delivery of this Amendment,
certified by the Secretary of the appropriate company; and
(3) Such other supporting documents and certificates
as the Agent or its counsel may reasonably request.
B. All legal matters incident to the transactions hereby contemplated
shall be satisfactory to the Agent's counsel.
V. MISCELLANEOUS.
A. As provided in the Credit Agreement, the Borrower agrees to reimburse
the Agent upon demand for all reasonable fees and disbursements of counsel to
the Agent incurred in connection with the preparation of this Amendment and the
documents relating hereto.
B. This Amendment shall be governed by and construed in accordance with
the laws of the State of New York.
- 3 -
<PAGE> 4
C. This Amendment may be executed by the parties hereto in several
counterparts hereof and by the different parties hereto on separate
counterparts hereof, all of which counterparts shall together constitute one
and the same agreement.
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the Agent, the Borrower, CIBC and SunTrust have caused
this Amendment to be duly executed as a sealed instrument by their duly
authorized representatives, all as of the day and year first above written.
MASADA SECURITY, INC.
By: /s/ David ?
----------------------------------------
Title: Vice President
---------------------------------
CANADIAN IMPERIAL BANK OF COMMERCE, NEW
YORK AGENCY, AS AGENT FOR THE LENDERS
By: /s/ Martin W. Friedman
----------------------------------------
Martin W. Friedman
Managing Director, CIBC Wood Gundy
Securities Corp., as agent for Canadian
Imperial Bank of Commerce,
New York Agency
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By: /s/ Christopher J. Aguilar
----------------------------------------
Christopher J. Aguilar,
First Vice President
CIBC INC.
By: /s/ Martin W. Friedman
----------------------------------------
Martin W. Friedman
Managing Director, CIBC Wood Gundy
Securities Corp., as agent for CIBC
Inc.
- 5 -
<PAGE> 1
STOCK PURCHASE AGREEMENT
AMONG
MASADA SECURITY, INC.
AND
RUSSELL B. JONES, ROBERT S. MOSES, DAVID R. DONNELLY
AND RONALD G. WALTERS
DATED MAY 31, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. SALE AND TRANSFER OF SHARES; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Assumed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Closing Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 Allowances and Adjustment Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7 Over 90 RMR Purchase Price and Holdback. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3. REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Organization and Good Standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Authority; No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.6 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7 Title to Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Condition and Sufficiency of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.9 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.10 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.11 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.12 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.13 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.14 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.15 Compliance With Legal Requirements; Governmental Authorizations. . . . . . . . . . . . . . . . . . . 19
3.16 Legal Proceedings, Orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.17 Absence of Certain Changes and Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.18 Contracts; No Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.19 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.20 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.21 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.22 Labor Disputes; Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.23 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.24 Product Warranties and Medical Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.25 Business Position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.26 Certain Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.27 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.28 Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.1 Organization and Good Standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.2 Authority; No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.3 Investment Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.4 Certain Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.5 Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1 Access and Investigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.2 Operation of the Businesses of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.3 Negative Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.4 Notification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.5 No Negotiation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.6 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.2 Notification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Accuracy of Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Sellers' Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.4 Additional Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.5 Monitoring Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.7 Payoff of Bank Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.8 Payoff of Settlement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.9 No Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.10 No Claim Regarding Stock Ownership or Sale Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 33
7.11 No Prohibition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.12 Resignations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.13 Merger with Secure America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.1 Accuracy of Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.2 Buyer's Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.3 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.4 No Injunction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1 Termination Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
9.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10. INDEMNIFICATION; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.2 Indemnification and Reimbursement by Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.3 Indemnifications and Reimbursement by Sellers - Environmental Matters. . . . . . . . . . . . . . . . 36
10.4 Indemnification and Reimbursement by Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.5 Procedure for Indemnification - Third Party Claims. . . . . . . . . . . . . . . . . . . . . . . . . 37
11. ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.1 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.2 American Arbitration Association. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.3 Selection of Arbitrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.4 Decision of Arbitrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.5 Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.6 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.7 Judgment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.8 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12. POST CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.1 Collection of Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.2 Tax Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.3 Alarm Accounts Included in Lost RMR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.4 Business and Tax Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.1 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.2 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.3 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
13.5 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.6 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.7 Entire Agreement and Modification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.8 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.9 Assignments, Successors, and No Third-Party Rights. . . . . . . . . . . . . . . . . . . . . . . . . 44
13.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.11 Section Headings, Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.12 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.13 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.14 Direction of Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
iii
<PAGE> 5
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of May 31,
1996 by and between MASADA SECURITY, INC., a Delaware corporation ("Buyer");
RUSSELL B. JONES, an individual residing in Miami, Florida ("Jones"); ROBERT S.
MOSES, an individual residing in Miami Beach, Florida ("Moses"), DAVID R.
DONNELLY, an individual residing in Miami, Florida ("Donnelly"), and RONALD G.
WALTERS, an individual residing in Ft. Lauderdale, Florida ("Walters") (Jones,
Moses, Donnelly and, Walters are collectively referred to as the "Sellers").
RECITALS
Sellers own 100 shares of the common stock, $50.00 par value, of
Alarms by HRD, Inc., a Florida corporation (the "Company"), (all of such shares
in the Company are collectively referred to as the "Shares") which constitutes
all of the issued and outstanding shares of capital stock of the Company.
Sellers desire to sell, and Buyer desires to purchase, the Shares for the
consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"ACCOUNTS RECEIVABLE" OR "A/R" -- as defined in Section 3.9.
"ADJUSTMENT AMOUNT" -- as defined in Section 2.6.
"ALARM ACCOUNT" -- as defined in Section 3.18.
"ASSUMED LIABILITIES" -- as defined in Section 2.3.
"ATTRITION HOLDBACK" -- as defined in Section 2.5.
"APPLICABLE CONTRACT" -- any Contract excluding Alarm Accounts (a)
under which Company has or may acquire any rights, (b) under which Company has
or may become subject to any obligation or liability, or (c) by which Company
or any of the assets owned or used by Company is or may become bound.
"BALANCE SHEET" -- as defined in Section 3.4.
<PAGE> 6
"BEST EFFORTS" -- the obligation of a Person to take affirmative steps
in good faith and in a commercially reasonable manner while using its total
capabilities to fulfill the required act.
"BREACH" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision.
"BUYER" -- as defined in the first paragraph of this Agreement.
"CLOSING" -- as defined in Section 2.4.
"CLOSING DATE" -- the date and time as of which the Closing actually
takes place.
"CODE" -- the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"COMPANY" -- as defined in the second paragraph of this Agreement.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the
Nonsolicitation and Nonacceptance Agreement and the
Escrow Agreement.
(c) the performance by Buyer and Sellers of their
respective covenants and obligations under this
Agreement; and
(d) Buyer's acquisition and ownership of the Shares and
exercise of control over the Company.
"CONTRACT" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"CONTINGENT LIABILITIES HOLDBACK" -- as defined in Section 2.5.
"DAMAGES" -- as defined in Section 10.2.
2
<PAGE> 7
"ENCUMBRANCE" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest,
condition precedent, right of first refusal, restriction contained in an
agreement among the shareholders of the Company, or restriction of any kind,
including any restriction on use, voting (in the case of any security),
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENTAL REQUIREMENT" -- requirements pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended and any other Legal Requirement
designed:
(a) to advise appropriate authorities, employees, and the
public of intended or actual Releases of pollutants
or hazardous substances or Hazardous Materials,
violations or discharge limits, or other prohibitions
and of the commencements of activities, such as
resource extraction or construction, that could have
significant impact on the environment;
(b) to prevent or acceptably minimize the Release of
pollutants or hazardous substances or materials into
the environment;
(c) to reduce the quantities, prevent the Release, and
minimize the hazardous characteristics of wastes that
are generated;
(d) to assure that products are designed, formulated,
packaged, or used so that they do not present
unreasonable risks to human health or the environment
when used or disposed of;
(e) to protect resources, species, or ecological
amenities;
(f) to acceptably minimize the risks inherent in
transportation of hazardous substances, pollutants,
oil, or other potentially harmful substances; or
(g) to clean up pollutants that have been Released,
prevent the threat of Release, or pay the costs of
such clean up or prevention.
"ESCROW ACCOUNT" -- as defined in Exhibit 2.5(c).
"ESCROW AGENT" -- as defined in Exhibit 2.5(c)
"ESCROW AGREEMENT" -- as defined in Section 2.5.
"EXCEPTION PAYMENT" -- See Lost RMR
3
<PAGE> 8
"ESCROW AMOUNT" -- the "Deposit" as defined in Exhibit 2.5(c).
"EXCLUDED ASSETS" -- means the Accounts Receivable, as detailed on
Schedule 3.9, and the Loans Receivable.
"FACILITIES" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company (or any predecessor
Person) and any buildings, plants, structures, or equipment currently or
formerly owned, leased, or operated by the Company (or any predecessor Person).
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise
made available by or under the authority of any Governmental Body or pursuant
to any Legal Requirement.
"GOVERNMENTAL BODY" -- any federal, state, local, municipal, foreign,
or other government.
"HAZARDOUS MATERIALS" -- any substance that is listed, defined,
designated, or classified as, or otherwise determined to be hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Legal Requirement, including any admixture or solution thereof, and
specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"HOLDBACK PERIOD I" -- the nine month period immediately following the
Closing Date.
"HOLDBACK PERIOD II" -- the one year period immediately following the
Closing Date.
"INDEMNIFIED PERSONS" -- as defined in Section 10.2.
"INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 3.23.
"INTERIM BALANCE SHEET" -- as defined in Section 3.4.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"INVOICE DUE DATE" -- ten (10) days after the commencement of the
service period covered by such invoice.
"KNOWLEDGE" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
4
<PAGE> 9
(a) such individual is actually aware of such or other
matter; or
(b) assuming a reasonably comprehensive investigation has
been performed, a prudent individual could be
expected to discover or otherwise become aware of
such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, knowledge of such
fact or other matter.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal, foreign,
international, multinational, or other constitution, law, ordinance, principle
of common law, regulation, statute, or treaty.
"LOANS RECEIVABLE" -- means the amounts listed on Schedule 1.
"LOST RMR" -- means as of the end of the Holdback Period I, the Alarm
Account customers which were included in RMR (a) whose accounts receivable
balances (whether attributable to RMR or otherwise) are more than 90 days past
due from the Invoice Due Date; (b) who have canceled or failed to renew their
Contract for any reason (other than acts of God or as a direct result of
Buyer's failure to perform in accordance with the Service Policy); or (c) who
have been reasonably canceled or terminated by Buyer for excessive false alarms
or other customer abuses. The Purchase Price Deduct for (b) above shall be
subject to the following exception: if an Alarm Account (inclusive of the
location as well as the customer) that would otherwise be subject to inclusion
in Lost RMR either (i) executes a new Contract with Buyer or the Company at a
new location or (ii) a new customer executes a new Contract with Buyer or the
Company at the Alarm Account location listed on Schedule 3.18(a), then the
Purchase Price Deduct for such Alarm Account shall be $75.00 (the "Exception
Payment"). Buyer shall provide prior written notice to Sellers if the Company
or the Buyer increases the recurring monthly revenue of the Alarm Account of a
customer which was included in RMR during Holdback I. No Lost RMR shall arise
with respect to any customer whose recurring monthly revenue has been increased
by the Buyer or the Company after the Closing Date or if the Buyer fails to
give the Sellers written notice of such increase as provided above.
"LOST RMR OFFSET" -- means as of the end of Holdback Period I, the RMR
associated with properly executed security monitoring Contracts which Sellers
have presented to Buyer during the Holdback Period I on a form of Contract
substantially similar to the Contract attached hereto as Exhibit 1. In no
event shall the Lost RMR Offset exceed the Lost RMR.
"NONSOLICITATION AND NONACCEPTANCE AGREEMENT" -- as defined in
Section 2.5.
5
<PAGE> 10
"NET ASSET VALUE" -- means the sum of the following amounts as of the
Closing Date:
(a) cash or cash equivalents acceptable to Buyer, in its
sole discretion, valued at one hundred percent
(100%);
(b) prepaid expenses which arise in the Ordinary Course
of Business, valued at zero;
(c) any Contract listed on Schedule 3.18(a) for the
providing of security monitoring services that does
not include an evergreen renewal provision or that
expires within 37 months of the Closing Date and that
is not included in RMR, at 32 times the recurring
monthly revenue;
(d) rental revenue that relates to "lease-to-own"
Contracts listed on Schedule 3.18(b) providing for
nominal buy-out of an alarm system upon lease
expiration and that is not included in RMR, at a
mutually agreed upon value.
The following will be excluded from the calculation of Net Asset
Value: (a) receivables from employees, officers and directors; (b) intercompany
transactions involving other entities owned fully or partially by Sellers; and
(c) the Excluded Assets.
"NINETY DAY PERIOD" -- the ninety day period immediately following the
Closing Date.
"NONQUALIFYING OVER 90 RMR" -- means with respect to each Over 90 RMR
Alarm Account acquired as of the Closing, each such Alarm Account that has any
remaining accounts receivable balance upon the expiration of the Ninety Day
Period related to the accounts receivable balance existing as of the Closing
Date.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of
the normal day-to-day operations of such Person;
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person
or group of Persons exercising similar authority) and
does not require any other separate or special
authorization of any nature; and
6
<PAGE> 11
(c) such action is similar in nature and
magnitude to actions customarily taken,
without any separate or special
authorization, in the ordinary course of the
normal day-to-day operations of other Persons
that are in the same line of business as such
Person.
"ORGANIZATIONAL DOCUMENTS" -- the articles of incorporation, the
bylaws and any amendments thereto.
"OVER 90 RMR" -- means amounts which would qualify as RMR except that
the corresponding accounts receivable balance is more than 90 days past due
from the oldest applicable invoice due date.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or other entity or
Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"PURCHASE PRICE DEDUCT" -- means the aggregate of: (i) 37 multiplied
by the difference between the Lost RMR and the Lost RMR Offset; (ii) reduced by
5% of the RMR Purchase Price; and (iii) plus the Exception Payment.
"RMR" means the amount of the Company's recurring monthly revenue (net
of any finance, communication, utility company or third party pass-through
charges, assessments, taxes or customer discounts) from Alarm Account customers
as of the day immediately preceding the Closing Date and which is derived
solely from open/close, perpetual lease, maintenance and repair service
agreements acceptable to Buyer. RMR shall not include any revenue: (i) from
customers whose Accounts Receivable balances (whether attributable to RMR or
otherwise) are more than 90 days past due from the oldest applicable invoice
due date; (ii) that is not periodic in nature but relates to installation
purchase payments or one-time assessments or charges; (iii) from Alarm Account
customers of which Sellers or the Company have received notice of a pending
termination (iv) from third-party monitoring agreements; (v) from Alarm Account
customers who were recently added as a result of extraordinary marketing
efforts, an amnesty program or other such sales efforts not usually employed in
the Ordinary Course of Business [this provision (v) shall not include Alarm
Accounts purchased by the Company in the Ordinary Course of Business prior to
the Closing Date]; (vi) that pertains to any security monitoring services
Contract that does not include an evergreen renewal provision or that expires
within 37 months of the Closing Date; or (vii) from finance Contracts that
provide for finance installation and/or equipment charges which terminate at a
given date in the future.
7
<PAGE> 12
"RELEASE" -- any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
environment.
"REPROGRAMMING ALLOWANCE" -- as defined in Section 2.6.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" -- the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
"SELLERS" -- as defined in the first paragraph of this Agreement.
"SERVICE POLICY" --
(a) Emergency service -- (defined as situation in which
customer cannot arm the alarm system) service
technician is dispatched to customer location within
twenty-four hours and such technician reasonably
attempts to resolve the customer's alarm system
related problems.
(b) Non-emergency service (e.g., aesthetic repair
problems) service -- technician is dispatched at
mutually convenient time and such technician
reasonably attempts to resolve the customer's alarm
system related problems.
(c) Central station alarm monitoring services rendered by
an entity other than Central Alarm Control, Inc. --
provided by an entity which utilizes U.L. certified
monitoring services.
"SHARES" -- as defined in the second paragraph of this Agreement.
"SUBSIDIARY" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct
the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person, "Subsidiary"
means a Subsidiary of the Company.
"TAX" -- any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other
fee, and any related charge or amount (including any fine, penalty, interest,
8
<PAGE> 13
or addition to tax), imposed assessed, or collected by or under the authority
of any Governmental Body.
"TAIL END INSURANCE POLICY" -- as defined in Section 7.4.
"UNDISCLOSED LIABILITIES ALLOWANCE" -- as defined in Section 2.6.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES. Subject to the terms and conditions of this
Agreement, at the Closing, Sellers will sell and transfer to Buyer, and Buyer
will purchase from Sellers, the Shares free and clear from any Encumbrance.
2.2 PURCHASE PRICE. The purchase price for the Shares will be:
(a) 37 times RMR (the "RMR Purchase Price"); (b) plus, 37 times Over 90 RMR
(the "Over 90 RMR Purchase Price"); (c) plus or minus, as appropriate, the
Adjustment Amount; (d) plus or minus, as appropriate, other liabilities or
credits, prepaid items and deferred charges relating to the Company existing on
the Closing Date prorated in accordance with generally accepted accounting
principles; and (e) minus, one-half of the cost of the Escrow Agent (a, b, c,
d and e collectively the "Purchase Price").
2.3 ASSUMED LIABILITIES. Except as set forth on Schedule 2.3 (the
"Assumed Liabilities"), Buyer shall not assume, take subject to, pay, discharge
or in any manner be obligated for, any debts, liabilities or obligations of the
Company or the Sellers incurred prior to Closing, whether such liabilities
become due and payable prior to or subsequent to Closing. In the event the
Company does not pay and fully satisfy at or before Closing, any liabilities
other than as specifically set forth on Schedule 2.3, then Sellers shall assume
personal responsibility for payment of such liabilities and Buyer shall be
able: (a) to set off such unpaid liability against the Holdback or the
Undisclosed Liabilities Allowance; or (b) to proceed directly against the
Sellers.
2.4 CLOSING. The purchase and sale (the "Closing") provided for
in this Agreement will take place at Zack, Sparber, Kosnitzky, Spratt & Brooks
in Miami, Florida on May 30, 1996, or at such other time and place as the
parties may mutually agree. Subject to the provisions of Section 9, failure to
consummate the purchase and sale provided for in this Agreement on the date and
time and at the place determined pursuant to this Section 2.4 will not result
in the termination of this Agreement and will not relieve any party of any
obligation under this Agreement.
2.5 CLOSING OBLIGATIONS. At the Closing:
9
<PAGE> 14
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed
(or accompanied by duly executed stock powers), for
transfer to Buyer;
(ii) nonsolicitation agreement in the form of Exhibit
2.5(a)(iii), executed by Sellers (the
"Nonsolicitation Agreement"), and
(iii) a certificate executed by Sellers representing and
warranting to Buyer that each of Sellers'
representations and warranties in this Agreement was
accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the
Closing Date as if made on the Closing Date; and
(b) Buyer will deliver:
(i) to Sellers Seventy-seven and one-half percent (77
1/2%) of the RMR Purchase Price plus or minus, as
appropriate, (A) the Reprogramming Allowance, (B) the
Undisclosed Liabilities Allowance, (C) the Adjustment
Amount, (D) the amount specified in Section 2.2(d),
(E) the broker fees payable to Littrell & Associates
in the amount of three and one-half percent (3 1/2%)
of the RMR Purchase Price which shall be paid by the
Buyers directly to Littrell & Associates by wire
transfer of immediately available funds, and (F)
one-half of the cost of the Escrow Agent; provided
however that if there is any Encumbrance to the
Shares at Closing then Buyer, at its option, may pay
such amounts required to remove the Encumbrance
directly to the appropriate party in accordance with
Section 2.5(d);
(ii) the Over 90 RMR Purchase Price and twenty-two and
one-half percent (22 1/2%) of the RMR Purchase Price
(12 1/2% of such 22 1/2% shall be referred to as the
"Attrition Holdback" and 10% of such 22 1/2% shall be
referred to as the "Contingent Liabilities Holdback")
(the "Attrition Holdback" and the "Contingent
Liabilities Holdback" shall collectively be referred
to as the "Holdback") to the escrow agent referred to
in the Escrow Agreement by wire transfer;
(iii) a certificate executed by Buyer to the effect that,
except as otherwise stated in such certificate, each
of Buyer's representations and warranties in this
Agreement was accurate in all respects as of the date
of this Agreement and is accurate in all respects as
of the Closing Date as if made on the Closing Date;
and
(c) Buyer and Sellers will enter into an escrow agreement in the
form of Exhibit 2.5(c) (the "Escrow Agreement").
10
<PAGE> 15
(d) The funds payable by Buyer to Sellers, the Escrow Agent or
other appropriate parties shall be made by wire transfer of
immediately available funds to the Persons listed on Exhibit
2.5(d) attached hereto and incorporated herein by this
reference (the "Disbursement Letter").
2.6 ALLOWANCES AND ADJUSTMENT AMOUNT.
(a) The "Reprogramming Allowance" shall equal $62.50 per Alarm
Account that Buyer reasonably believes will require a post-closing site visit
to reprogram the customer's alarm panel to a telephone line listed on Schedule
3.8 or a telephone line otherwise owned by Buyer. Schedule 2.6 contains a list
of all of the Alarm Accounts included in the Reprogramming Allowance.
(b) The "Undisclosed Liabilities Allowance" shall equal
$100,000.00. The purpose of the Undisclosed Liabilities Allowance is to create
an allowance for liabilities of the Company paid or discovered by the Company
post- Closing which arose prior to Closing or on the Closing Date and were not
Assumed Liabilities.
(c) Within four months of Closing, Buyer shall pay Sellers by wire
transfer or other mutually agreeable means the difference resulting from (A)
the Undisclosed Liabilities Allowance and (B) the sum of all liabilities of the
Company arising prior to Closing or on the Closing Date paid or discovered by
the Company post-Closing which were not Assumed Liabilities; provided, however,
that after the closing Buyer agrees to notify Sellers promptly by telefacsimile
of any amounts subject to the Undisclosed Liabilities Allowance and Buyer
agrees to allow Sellers two weeks after such notification to settle such
liabilities prior to payment by Buyer. Buyer and Company agree not to make any
such payments during the period in which the Sellers are in good faith
disputing the amount of such liability provided that Buyer shall defer making
payment with respect to such disputed liability from the Undisclosed
Liabilities Allowance until such disputed liability is settled.
(d) The "Adjustment Amount" shall equal the difference between the
Net Asset Value as of the Closing Date and the Assumed Liabilities as of the
Closing Date. If the Net Asset Value exceeds the Assumed Liabilities, the
Purchase Price will be increased by the amount of such excess, subject to a
maximum increase of One Hundred Twenty Five Thousand and no/100 Dollars
($125,000.00). If the Net Asset Value is less than the Assumed Liabilities,
the Purchase Price will be decreased by the amount of such difference.
2.7 OVER 90 RMR PURCHASE PRICE AND HOLDBACK.
(a) Within 30 days after the end of the Ninety Day Period, Buyer
shall submit to Sellers substantially in the form attached hereto as Exhibit
2.7(a) along with all appropriate supporting documentation, a report
reflecting: (i) the Over 90 RMR Purchase Price; (ii) 37 times the Nonqualifying
Over 90 RMR; and (iii) the resulting difference between 2.7(a)(i) less the
credits associated with Section 2.7(a)(ii) (the "Resulting Difference"). If
Sellers do not notify
11
<PAGE> 16
Buyer of a dispute regarding such report within ten business days from the date
such report is submitted by Buyer to Sellers or if Sellers notify Buyer of its
acceptance of such report, such report shall be deemed complete and accurate
and Sellers and Buyer shall notify Escrow Agent to pay the sums computed above
to Sellers or Buyer, as the case may be. If the Resulting Difference is a
positive amount then Sellers and Buyer shall instruct the Escrow Agent to first
pay the Sellers the Resulting Difference and the remainder of the Over 90 RMR
Purchase Price shall be paid by Escrow Agent to Buyer. If the Resulting
Difference is equal to zero or is a negative amount, then Sellers and Buyer
shall instruct the Escrow Agent to pay Buyer the entire Over 90 RMR Purchase
Price and Sellers shall owe no further amount to Buyer due to the Over 90 RMR
Alarm Accounts.
(b) Within 30 days after the end of the Holdback Period I, Buyer
shall submit to Sellers substantially in the form attached hereto as Exhibit
2.7(b) along with all appropriate supporting documentation, a report
reflecting: (i) the Attrition Holdback;(ii) the Purchase Price Deduct; (iii)
the liabilities of the Company accruing on or before the Closing which were not
Assumed Liabilities but which have been paid or discovered by the Buyer or the
Company after the Closing Date and were not deducted from the Undisclosed
Liabilities Allowance; provided, however that Buyer agrees to notify Sellers of
any liabilities referenced in (iii) prior to payment by Buyer. Buyer agrees to
allow Sellers ninety (90) days to satisfy in full any such liabilities and if
such liability is not settled at the end of such ninety (90) day period then a
reserve shall continue to be held in the Escrow Account until Buyer and Sellers
agree in good faith that the liability has been fully satisfied; and (iv) the
resulting difference between the Attrition Holdback less the credits associated
with Section 2.7(b)(ii) and (iii) (the "Resulting Difference"). If Sellers do
not notify Buyer of a dispute regarding such report within ten business days
from the date such report is submitted by Buyer to Sellers or if Sellers notify
Buyer of its acceptance of such report, such report shall be deemed complete
and accurate and Sellers and Buyer shall notify Escrow Agent to pay the sums
computed below to Sellers or Buyer, as the case may be. If the Resulting
Difference is a positive amount then Sellers and Buyer shall instruct the
Escrow Agent to first pay the Sellers the Resulting Difference and the
remainder of the Attrition Holdback shall be paid by Escrow Agent to Buyer in
full and final satisfaction of all claims by Buyer against Sellers with respect
to the Purchase Price Deduct. If the Resulting Difference is equal to zero or
is a negative amount, then Sellers and Buyer shall instruct the Escrow Agent to
pay Buyer the entire Attrition Holdback amount in full and final satisfaction
of all claims by Buyer against Sellers with respect to the Purchase Price
Deduct.
(c) Within 30 days after the end of the Holdback Period II, Buyer
shall submit to Sellers substantially in the form attached hereto as Exhibit
2.7(c) along with all appropriate supporting documentation, a report
reflecting: (i) the Holdback; (ii) the amount disbursed to Buyer and Sellers in
accordance with Section 2.7(a) and Section 2.7(b); (iii) the liabilities of the
Company accruing on or before the Closing which were not Assumed Liabilities
but which have been paid or discovered by the Buyer or the Company after the
Closing Date and which were not deducted from the Undisclosed Liabilities
Allowance or the Attrition Holdback; provided, however that Buyer agrees to
notify Sellers of any liabilities referenced in (iii) prior to payment
12
<PAGE> 17
by Buyer. Buyer agrees to allow Sellers ninety (90) days to satisfy in full
any such liabilities and if such liability is not settled at the end of such
ninety (90) day period then a reserve shall continue to be held in the Escrow
Account until Buyer and Sellers agree in good faith that the liability has been
fully satisfied; and (iv) the resulting difference between the Holdback less
the credits associated with Section 2.7(c)(ii), (iii) and (iv) (the "Resulting
Difference"). If Sellers do not notify Buyer of a dispute regarding such
report within ten business days from the date such report is submitted by Buyer
to Sellers or if Sellers notify Buyer of its acceptance of such report, such
report shall be deemed complete and accurate and Sellers and Buyer shall notify
Escrow Agent to pay the sums computed below to Sellers or Buyer, as the case
may be, and the Escrow Account shall then be closed after payment by the Escrow
Agent of all funds held by it in the Escrow Account. If the Resulting
Difference is a positive amount then Sellers and Buyer shall instruct the
Escrow Agent to first pay the Sellers the Resulting Difference and the
remainder of the Escrow Amount shall be paid by Escrow Agent to Buyer. If the
Resulting Difference is equal to zero or is a negative amount, then Sellers and
Buyer shall instruct the Escrow Agent to pay Buyer the entire Escrow Amount and
Sellers shall owe no further amount to Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to the Buyer that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as
detailed in a schedule related to this Section 3 and delivered by the Sellers
to the Buyer on the date hereof. Nothing in any such schedules shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless such schedules identify the exception with reasonable detail.
Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
representation or warranty has to do with the existence of the document or
other item itself. Sellers represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING.
(a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Florida, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under the Alarm Accounts and the
Applicable Contracts. The Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdictions in which either the ownership or use of the properties
owned or used by it, or the nature of the activities conducted by it, requires
such qualification.
(b) Sellers have delivered to Buyer copies of the Organizational
Documents of the Company, as currently in effect.
13
<PAGE> 18
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its
terms. Upon the execution and delivery by Sellers of the Escrow Agreement and
the Nonsolicitation and Nonacceptance Agreement (collectively, the "Sellers'
Closing Documents"), the Sellers' Closing Documents will constitute the legal,
valid, and binding obligations of Sellers, enforceable against Sellers in
accordance with their respective terms. Sellers have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the Sellers' Closing Documents and to perform their obligations
under this Agreement and the Sellers' Closing Documents.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational Documents
of the Company, or (B) any resolution adopted by the
board of directors or the stockholders of the
Company;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the
right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any
relief under, any Legal Requirement or any Order to
which any of the Company or either the Sellers, or
any of the assets owned or used by the Company, may
be subject;
(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the
Company or that otherwise relates to the business of,
or any of the assets owned or used by, the Company;
(iv) cause Buyer or the Company to become subject to, or
to become liable for the payment of, any tax directly
resulting from the transfer of the Shares (excluding
State of Florida documentary stamp tax due upon the
issuance of shares of stock in the Company to Buyer);
(v) cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or
other Governmental Body;
(vi) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the
right to declare a default or exercise any remedy
14
<PAGE> 19
under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify,
any Alarm Account or any Applicable Contract; or
(vii) Result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets
owned or used by the Company.
Except as set forth in Schedule 3.2, neither the Sellers nor the Company is or
will be required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION. The authorized equity securities of the
Company consists of 25,000 shares of common stock, par value of $50.00 per
share, of which 100 shares are issued and outstanding and constitute 100% of
the Shares. There are no outstanding stock options or rights to purchase
shares of stock of the Company. Sellers are and will be on the Closing Date
the recorded and beneficial owners and holders of the Shares, free and clear of
all Encumbrances. Jones, Moses, Donnelly, and Walters, collectively own 100%
of the issued and outstanding Shares of the Company. No legend or other
reference to any purported Encumbrance appears upon any certificate
representing equity securities of the Company. All of the outstanding equity
securities of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. There are no Contracts relating to the issuance,
sale, or transfer of any equity securities or other securities of the Company.
To the Knowledge of Sellers, none of the outstanding equity securities or other
securities of the Company was issued in violation of the Securities Act or any
other Legal Requirement. The Company does not own, or have any Contract to
acquire, any equity securities or other securities of any Person or any direct
or indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS. Sellers have delivered to Buyer: (a)
the unaudited balance sheet of the Company as at December 31, 1995 (the
"Balance Sheet"); (b) the unaudited balance sheets of the Company as at
December 31 for each of the years 1993 through 1994, and the related unaudited
statements of income, changes in stockholders' equity, and cash flow for each
of the fiscal years then ended, and (c) an unaudited balance sheet of the
Company as at April 30, 1996 (the "Interim Balance Sheet") and the related
unaudited statements of income, changes in stockholders' equity, and cash flow
for the four (4) months then ended, (the "Interim Financial Statements"). Such
financial statements referred to in (a)-(c) above fairly present the financial
condition and the results of operations, changes in stockholders' equity, and
cash flow of the Company as at the respective dates of and for the periods
referred to in such financial statements and were prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
that of preceding years, subject, in the case of Interim Financial Statements,
to normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse).
15
<PAGE> 20
3.5 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices and all Legal Requirements. The
minute books of the Company contain accurate and complete records of all
meetings held by, and corporate action taken by the stockholders, the Boards of
Directors, and committees of the Boards of Directors of the Company, and no
meeting of any such stockholders, Board of Directors, or committee has been
held for which minutes have not been prepared and are not contained in such
minute books. At the Closing, all of those books and records including but not
limited to all of the Company's tax returns, will be in the possession of the
Company.
3.6 REAL PROPERTY. The Company does not own and has never owned
any real property. Schedule 3.6 contains a complete and accurate list of all
parcels of real property together with all buildings, structures, improvements
and fixtures thereon and all hereditaments appurtenant thereto, which are
leased by the Company. Sellers have delivered or made available to Buyer
copies of the instruments by which the Company acquired such interests.
Sellers will cause all leases to which the Company is bound to be canceled no
later than the Closing. However, Sellers will arrange for Buyer to continue to
lease the inventory storage facility of the Company on a month to month basis
at a monthly rent of $500.00 per month plus monthly association dues of $56.01
per month plus electricity, insurance and taxes.
3.7 TITLE TO PROPERTIES. The Company owns all the properties and
assets (whether real, personal, or mixed and whether tangible or intangible)
that it purports to own, including (a) all of the properties and assets
reflected in the Interim Balance Sheet (except for personal property sold since
the date of the Interim Balance Sheet, as the case may be, in the Ordinary
Course of Business), and (b) all of the properties and assets purchased or
otherwise acquired by the Company since the date of the Interim Balance Sheet
(except for personal property acquired and sold since the date of the Interim
Balance Sheet in the Ordinary Course of Business). The properties and assets
purchased or otherwise acquired by the Company since the date of the Interim
Balance Sheet (other than inventory purchased in the Ordinary Course of
Business) are listed in Schedule 3.7. The properties and assets (a) owned by
the Company which are reflected in the Interim Balance Sheet and Schedule 3.7
and (b) leased by the Company pursuant to a Contract listed in Schedules 3.6
and 3.18(b) comprise all of the assets and properties used by the Company in
the operation of its business as it is currently being conducted.
3.8 CONDITION AND SUFFICIENCY OF ASSETS. Other than a Chevrolet
Van with VIN 1GCCM15Z6JB161800 and license NUP38X (the "Chevrolet Van"), the
equipment of the Company is in good operating condition and repair, and is
adequate for the uses to which they are being put, and none of such equipment
is in need of maintenance or repairs except for ordinary, routine maintenance
and repairs that are not material in nature or cost. The equipment of the
Company is sufficient for the continued conduct of the Company's business after
the Closing in substantially the same manner as conducted prior to the Closing.
Schedule 3.8 contains a complete and accurate list of the telephone lines owned
by the Company for sales and marketing,
16
<PAGE> 21
technical service, administration and monitoring (including digital dialer
telephone lines that transmit signals from customer locations to the Company's
central station and "ring-down" lines).
3.9 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
that are reflected on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date (collectively, the
"Accounts Receivable" or "A/R") represent or will represent valid obligations
arising from sales actually made or services actually performed in the Ordinary
Course of Business. Sellers shall not themselves nor shall Sellers permit any
of the Company's Employees or agents to pay any of the Accounts Receivable
outstanding on the date of this Agreement or generated between the date of this
Agreement and the Closing Date. Except as set forth on Schedule 3.9, there is
no contest, claim, or right of set-off, other than returns in the Ordinary
Course of Business, under any Contract with any maker of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable. Schedule 3.9
contains a complete and accurate list of all Accounts Receivable which relate
to services provided on or prior to the Closing Date which list sets forth the
aging of such Accounts Receivable in the following categories ("Current" and
for Alarm Accounts that have A/R balances that are delinquent: "0-30 days past
due from the oldest applicable invoice due date"; "31-60 days past due from the
oldest applicable invoice due date"; "61-90 days past due from the oldest
applicable due date"; "Over 90 days past due from the oldest applicable invoice
due date").
3.10 INVENTORY. All inventory of the Company, whether or not
reflected in the Balance Sheet or the Interim Balance Sheet, consists of
equipment which is of a quality usable and saleable in the Ordinary Course of
Business, except for obsolete items and items of below-standard quality, all of
which have been written off or written down to net realizable value in the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date, as the case may be. The quantities of each
item of inventory are not excessive, but are reasonable in the present
circumstances of the Company. The inventory of the Company as of May 30, 1996
is listed on Schedule 3.10. Sellers shall update Schedule 3.10 to reflect all
inventory of the Company as of the day before Closing.
3.11 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule
3.11, the Company has no liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent, or otherwise)
except for liabilities or obligations reflected or reserved against in the
Balance Sheet or the Interim Balance Sheet and current liabilities incurred in
the Ordinary Course of Business since the respective date thereof.
3.12 TAXES.
(a) The Company has filed or caused to be filed all tax returns
that are or were required to be filed by or with respect to it, pursuant to
applicable Legal Requirements. Sellers have delivered or made available to
Buyer copies of, and Schedule 3.12 contains a complete and accurate list of,
all such tax returns relating to income or franchise taxes filed since December
31, 1994. The Company has paid, or made provision for the payment of, all
Taxes that have or may
17
<PAGE> 22
have become due pursuant to those tax returns or otherwise, or pursuant to any
assessment received by Sellers or any Company, except such Taxes, if any, as
are listed in Schedule 3.12 and are being contested in good faith and as to
which adequate reserves have been provided in the Balance Sheet and the Interim
Balance Sheet.
(b) Schedule 3.12 contains a complete and accurate list of all
audits of all tax returns of the Company, including a reasonably detailed
description of the nature and outcome of each audit. All deficiencies proposed
as a result of such audits have been paid, reserved against, settled, or as
described in Schedule 3.12 are being contested in good faith by appropriate
proceedings. Except as described in Schedule 3.12, neither the Sellers nor the
Company has given or been requested to give waivers or extensions (or is or
would be subject to a waiver or extension given by any other Person) of any
statute of limitations relating to the payment of Taxes of the Company or for
which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on
the respective books of the Company are adequate and are at least equal to the
Company's liability for Taxes. There exists no proposed tax assessment against
the Company except as disclosed in the Balance Sheet or in Schedule 3.12. All
Taxes that the Company is or was required by Legal Requirements to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Body or other Person.
(d) All tax returns filed by the Company are true, correct, and
complete. The Company will be a "C" corporation on or before the Closing.
(e) Prior to May 27, 1996, the Company has not previously elected
to have Code Section 341(f)(2) apply to the disposition of any of its assets.
3.13 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance
Sheet, there has not been any material adverse change (which for the purposes
of this Section 3.13 shall be defined as greater a than 5% change in RMR) in
the business, operations, properties, prospects, assets, or condition of the
Company, and, to Seller's Knowledge, no event has occurred or circumstance
exists that may result in such a material adverse change.
3.14 EMPLOYEE BENEFITS. Except as set forth in Schedule 3.14
attached hereto, the Company does not maintain, contribute to, sponsor or
participate in, and no past or present Employee of the Company participates in
or is benefited by any employee pension benefit or welfare plan as defined in
the Employee Retirement Income Security Act of 1974 ("ERISA"), or any other
plan, arrangement or commitment, whether oral or written, formal or informal,
relating to severance, sick pay, vacation, bonus, retirement, pension, profit
sharing, option, deferred compensation, life, medical or dental insurance or
other benefits (collectively "Employee Plan") covering any Employee or former
Employee of the Company, nor has the Company taken any action to institute any
such Employee Plan. Sellers have provided Buyer with (i) a copy of the
18
<PAGE> 23
current handbook given to each Employee which handbook describes the Employee
Plans and (ii) any other information given to any of the Employees which
describes the Employee Plans.
3.15 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in Schedule 3.15:
(i) the Company is, and at all times since its inception
has been , except for such noncompliance which does not have a
material adverse effect on the Company, in full compliance with each
Legal Requirement including, without limitation all truth-in-lending
requirements, that is or was applicable to it or to the conduct or
operation of its business or the ownership or use of any of its
assets;
(ii) to Company's or Sellers' Knowledge, no event has
occurred or circumstance exists that (with or without notice or lapse
of time) (A) may constitute or result in a violation by the Company
of, or a failure on the part of the Company to comply with, any Legal
Requirement, or (B) may give rise to any obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature; and
(iii) to Company's or Seller's Knowledge, the Company has
not received, at any time any notice or other communication (whether
oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation
of, or failure to comply with, any Legal Requirement, or (B) any
actual, alleged, possible, or potential obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature.
(b) Schedule 3.15 contains a complete and accurate list of each
Governmental Authorization that is held by the Company or that otherwise
relates to the business of, or to any of the assets owned or used by the
Company. Each Governmental Authorization listed or required to be listed in
Schedule 3.15 is valid and in full force and effect. Except as set forth in
Schedule 3.15:
(i) the Company is, and at all times has been, except for
such noncompliance which does not have a material adverse effect on
the Company, in full compliance with all of the terms and requirements
of each Governmental Authorization identified or required to be
identified in Schedule 3.15;
(ii) to Company's or Sellers' Knowledge, no event has
occurred or circumstance exists that may (with or without notice or
lapse of time) (A) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of
any Governmental Authorization listed or required to be listed in
Schedule 3.15 or (B) result directly or indirectly in the revocation,
withdrawal, suspension,
19
<PAGE> 24
cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed in Schedule
3.15;
(iii) to the Company's or Seller's Knowledge, the Company
has not received, at any time any notice or other communication
(whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible, or
potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be
listed in Schedule 3.15 have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to
have been made with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate Governmental
Bodies.
The Governmental Authorizations listed in Schedule 3.15 collectively constitute
all of the Governmental Authorizations necessary to permit the Company to
lawfully conduct and operate its business in the manner it currently conducts
and operates such business and to permit the Company to own and use its assets
in the manner in which it currently owns and uses such assets.
3.16 LEGAL PROCEEDINGS, ORDERS.
(a) Except as set forth in Schedule 3.16, there is no pending
Proceeding:
(i) that has been commenced by or against the Company or
that otherwise relates to or may affect the business of, or any of the
assets owned or used by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions.
To the Knowledge of Sellers and the Company, (1) no such Proceeding has been
threatened, and (2) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding.
Sellers have delivered to Buyer copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in Schedule 3.16;
The Proceedings listed in Schedule 3.16 will not have a material
adverse effect on the business, operations, assets, condition, or prospects of
the Company.
(b) Except as set forth in Schedule 3.16;
20
<PAGE> 25
(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject;
(ii) no Seller is subject to any Order that relates to the
business of, or any of the assets owned or used by, the Company; and
(iii) no officer, director, agent, or employee of the
Company is subject to any Order that prohibits such officer, director,
agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of the Company.
(c) Except as set forth in Schedule 3.16:
(i) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Order to
which it, or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any
Order to which the Company, or any of the assets owned or used by the
Company, is subject; and
(iii) the Company has not received, at any time since any
notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged,
possible, or potential violation of, or failure to comply with, any
term or requirement of any Order to which the Company, or any of the
assets owned or used by the Company, is or has been subject.
3.17 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 3.17, since the date of the Interim Balance Sheet, the Company has
conducted its businesses only in the Ordinary Course of Business and there has
not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase
shares of capital stock of the Company; issuance of
any security convertible into such capital stock;
grant of any registration rights; purchase,
redemption, retirement, or other acquisition by the
Company of any shares of any such capital stock; or
declaration or payment of any dividend or other
distribution or payment in respect of shares of
capital stock;
(b) amendment to the Organizational Documents of the
Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any stockholder,
director, officer, or (except in the
21
<PAGE> 26
Ordinary Course of Business) employee or entry
into any employment, severance, or similar Contract
with any director, officer, or employee;
(d) adoption of, or increase in the payments to or
benefits under, any Employee Plan;
(e) increase in the price and/or rate of any product or
service relating to the Alarm Accounts or any credits
given against any Accounts Receivable except in the
Ordinary Course of Business;
(f) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by
insurance, materially and adversely affecting the
properties, assets, business, financial condition, or
prospects of the Company, taken as a whole other than
the Chevrolet Van;
(g) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship,
dealer, sales representative, joint venture, credit,
or similar agreement, or (ii) any Contract or
transaction involving a total remaining commitment by
the Company of greater than $2,000.00;
(h) sale (other than sales of inventory in the Ordinary
Course of Business), lease, or other disposition of
any asset or property of the Company or mortgage,
pledge, or imposition of any lien or other
encumbrance on any material asset or property of the
Company, including the sale, lease, or other
disposition of any of the Intellectual Property
Assets;
(i) material change in the accounting methods used by the
Company;
(j) capital investment in, any loan to, or any
acquisition of the securities or assets of, any other
Person (or series of related capital investments,
loans and acquisitions) either involving more than
$5,000 or outside the Ordinary Course of Business;
(k) delay or postponement in the payment of accounts
payable and other liabilities of the Company outside
the Ordinary Course of Business; or
(l) agreement, whether oral or written, by the Company to
do any of the foregoing.
3.18 CONTRACTS; NO DEFAULTS.
(a) Schedule 3.18(a) contains a complete and accurate list of each
Contract for the rendering of security monitoring services to existing
customers (the "Alarm Accounts") which list
22
<PAGE> 27
is broken down according to those Contracts which meet the definition of RMR,
those that meet the definition of Over 90 RMR and those Contracts that do not
meet the definition of RMR or Over 90 RMR and such list indicates the Contracts
which are oral agreements. Schedule 3.18(a) also includes the sum of the RMR
used in the calculation of the RMR Purchase Price and the Over 90 RMR used in
the calculation of the Over 90 RMR Purchase Price. Sellers have provided
access to Buyer to true and complete copies of all such written Contracts.
(b) Schedule 3.18(b) contains a complete and accurate list, and
Sellers have delivered to Buyer true and complete copies of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials to the
Company of an amount or value in excess of $1,000.00;
(ii) each Applicable Contract that was not entered into in
the Ordinary Course of Business;
(iii) each lease, rental agreement, license, installment
and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest
in, any personal property;
(iv) each collective bargaining agreement and other
Applicable Contract to or with any labor union or
other employee representative of a group of employees
relating to wages, hours, and other conditions of
employment;
(c) Except as set forth in Schedule 3.18(c):
(i) each Contract identified or required to be identified
in Schedules 3.18(a) and 3.18(b) is in full force and effect and is
valid and enforceable in accordance with its terms; and
(ii) to the Knowledge of Sellers, no Contract identified
or required to be identified in Schedules 3.18(a) and 3.18(b) contains
any term or requirement that is not in the Ordinary Course of
Business.
(d) To the Knowledge of Sellers, there are no renegotiations of,
attempts to renegotiate, or outstanding rights to renegotiate any material
amounts paid or payable to the Company under current or completed Contracts
with any Person having the contractual or statutory right to demand or require
such renegotiation and no such Person has made written demand for such
renegotiation.
23
<PAGE> 28
3.19 INSURANCE.
(a) Sellers have delivered to Buyer: true and complete copies of
all policies of insurance to which the Company is a party or under which the
Company is or has been covered at any time within the three (3) years
preceding the date of this Agreement.
(b) Schedule 3.19 sets forth, by year, for the current policy year
and each of the two (2) preceding policy years;
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $500.00, which sets
forth;
(A) the name of the claimant;
(B) a description of the policy by insurer, type
of insurance, and period of coverage; and
(C) the amount and a brief description of the
claim; and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number
and aggregate cost of such claims.
(c) Except as set forth in Schedule 3.19:
(i) All policies to which the Company is a party or that
provide coverage to the Company;
(A) are valid, outstanding, and enforceable;
(B) are issued by Illinois Insurance Exchange;
(C) taken together, provide "occurrence-based"
general liability insurance coverage of at
least $1,000,000 per single occurrence. For
purposes of this Agreement, "occurrence-
based" means if a claim arose after the
Closing Date for an event which occurred
prior to the Closing Date, the Company's
applicable insurance policy in existence on
the date such event occurred would cover such
claim;
24
<PAGE> 29
(D) are sufficient for compliance with
all Legal Requirements and Contracts
to which the Company is a party or
by which it is bound; and
(E) will continue in full force and
effect for one week following the
consummation of the Contemplated
Transactions.
(ii) The Sellers and the Company has not received (A) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or
effect or that the issuer of any policy is not willing or able to
perform its obligations thereunder.
(iii) The Company has paid all premiums due, and has
otherwise performed all of its respective obligations, under each
policy to which the Company is a party or that provides coverage to
the Company.
(iv) To Seller's Knowledge, the Company has given notice
to the insurer of all claims that may be insured thereby.
3.20 ENVIRONMENTAL MATTERS. The Company has at all times been in
full compliance with all Environmental Requirements. Sellers and the Company
have not at any time placed, located, disposed of, buried, stored or
accumulated any Hazardous Materials in, on or under the Facilities or any part
thereof. To the Knowledge of Sellers, no Person has at any time placed,
located, disposed of, buried, stored or accumulated any Hazardous Material in,
on or under the Facilities. To the Knowledge of Sellers, no portion of the
Facilities has been designated, listed or identified in any manner by any
Government Body or under or pursuant to Environmental Requirements as a
Hazardous Materials disposal or removal site, superfund or clean-up site or
candidate for removal or closure pursuant to any Environmental Requirement. No
lien arising under or in connection with any Environmental Requirements as
attached to any revenues or to the Facilities. Neither the Sellers nor the
Company has received a summons, citation, notice, directive, letter or other
communication, written or oral, from any Governmental Body pursuant to any
Environmental Requirement concerning any act or omission by the Company
resulting in a Release of Hazardous Materials. Neither Sellers nor the Company
has received notice of any nonconforming condition of the Facilities. If such
notice or citation is received or any such condition is found to exist which
existed prior to Closing, Sellers shall be obligated to correct such conditions
even if such conditions are discovered after the Closing Date.
3.21 EMPLOYEES.
(a) Schedule 3.21 contains a complete and accurate list of the
following information for each employee or director of the Company, including
each employee on leave of absence or layoff status; name; job title; employment
date; current compensation paid or payable and any
25
<PAGE> 30
change in compensation since January 1, 1995; most recent and next anticipated
salary review date; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under the Employee Plans.
(b) To the Knowledge of Sellers, no former or current employee or
current or former director of the Company is a party to, or is otherwise bound
by, any agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement, between such employee or
director and any other entity or person that in any way adversely affected,
affects, or will affect (i) the performance of his or her duties as an employee
or director of the Company, or (ii) the ability of the Company to conduct its
business. Sellers intend to cause other Persons to offer employment to some of
the individuals listed on Schedule 3.21 (including some of the Sellers) and
Schedule 3.21 includes a complete and accurate list of these individuals.
Otherwise, to Sellers' Knowledge, no employee of the Company intends to
terminate his or her employment with the Company.
(c) Schedule 3.21 also contains a complete and accurate list of
the following information for each retired employee or director of the Company,
or their dependents, receiving benefits or scheduled to receive benefits in the
future, name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.
(d) No employee of the Company has a written or oral employment
agreement with the Company.
3.22 LABOR DISPUTES; COMPLIANCE. To the Seller's Knowledge, the
Company has not been or is not a party to any collective bargaining or other
labor Contract. The Company has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. To the Seller's Knowledge, the Company is not
liable for the payment of any taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements.
3.23 INTELLECTUAL PROPERTY.
(a) The term "Intellectual Property Assets" includes:
(i) the Company's name, all fictional business names,
trading names, registered and unregistered
trademarks, service marks, and applications
(collectively, "Marks");
(ii) all patents and patent applications (collectively,
"Patents");
26
<PAGE> 31
(iii) all copyrights in both published works and unpublished
works that are material to the Company' businesses
(collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential
information, software, technical information, process
technology, plans, drawings, and blue prints
(collectively, "Trade Secrets");
(b) Schedule 3.23 contains a complete and accurate list and
summary description, of all of the Company's Intellectual Property Assets.
(c) Sellers and the Company have taken all reasonable precautions
to protect the secrecy, confidentiality, and value of their Trade Secrets. The
Trade Secrets are not part of the public knowledge or literature, and, to
Sellers' Knowledge, have not been used, divulged, or appropriated either for
the benefit of any Person or to the detriment of the Company. To Sellers'
Knowledge, no Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
(d) Each of the Intellectual Property Assets will be owned or
available for use by the Company after the Closing on terms and conditions
identical to the terms and conditions of the Company's use immediately
subsequent to the Closing.
(e) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any intellectual property
rights of third parties and none of the Sellers and the directors, officers and
employees of the Company has ever received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation or violation. To Sellers' Knowledge, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any of the Intellectual Property Assets.
3.24 PRODUCT WARRANTIES AND MEDICAL INFORMATION. Except for the
standard warranties on installations detailed in Schedule 3.24, there are no
written warranties or oral warranties given by the Company applicable to any of
the Alarm Accounts. The Company has not entered into any Contract with any of
its customers which would require Buyer to provide any medical or health
information on its customers to any third party and the Company is not
obligated to keep or obtain medical or health information on any or all of its
customers.
3.25 BUSINESS POSITION.
The business position of the Company is as follows:
(a) the RMR of the Alarm Accounts is approximately $128,500.00;
(b) the Company monitors approximately 5,400 Alarm Account
customers;
27
<PAGE> 32
(c) the Company does not have more than 325 customers that have
Contracts which require "long range radio" monitoring;
(d) to the Knowledge of Sellers, except for the "long range radio"
and "derived channel accounts" as set forth on Schedule 3.25(d), as of the
Closing Date there is no Legal Requirement or technical limitation that would
preclude monitoring of the Alarm Accounts outside of the State of Florida;
(e) as of the Closing Date, with the exception of customers listed
on Schedule 3.25(e), all of the Alarm Account customers can be remote call
forwarded to Buyer's central monitoring station without the requirement of
either a site visit for alarm panel dialer number reprogramming or remote
reprogramming of the alarm panel dialer; and
(f) Within the six month period immediately preceding the Closing
Date, the Sellers and the Company have not (i) increased or decreased the
recurring monitoring or service rates and (ii) issued credits to outstanding
accounts receivable outside of the Ordinary Course of Business.
3.26 CERTAIN PAYMENTS. Neither the Company or any director,
officer, agent, or employee of the Company, or to Sellers' Knowledge any other
Person associated with or acting for or on behalf of the Company, has directly
or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, or (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company, or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
3.27 DISCLOSURE.
(a) No representation or warranty of Sellers in this Agreement or
attachments thereto omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
(b) No notice given pursuant to Section 5.4 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
(c) There is no fact known to any of the Sellers that has specific
application to either the Sellers or the Company (other than general economic
or industry conditions) and that materially adversely affects or, as far as any
of the Sellers can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of operations of the
Company that has not been set forth in this Agreement or the attachments
thereto.
28
<PAGE> 33
3.28 BROKERS OR FINDERS. With the exception of fees payable to
Littrell & Associates, Inc. in an amount equal to 3 1/2% of the RMR Purchase
Price, the Sellers and their agents have not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Delaware.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Escrow Agreement, (the "Buyer's
Closing Documents"), the Buyer's Closing Documents will constitute the legal,
valid, and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms. Buyer has the absolute and
unrestricted right, power, and authority to execute and deliver this Agreement
and the Buyer's Closing Documents and to perform its obligations under this
Agreement and the Buyer's Closing Documents.
(b) Neither the execution and delivery of this Agreement by Buyer
nor the consummation or performance of any of the Contemplated Transactions by
Buyer will give any Person the right to prevent, delay, or otherwise interfere
with any of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which Buyer is a party or by which
Buyer may be bound.
Buyer is not and will not be required to obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
4.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act. Buyer is also acquiring the Shares for investment
purposes only and has substantial knowledge and experience in business and
financial matters which enables it to evaluate the merits and risks of
purchasing the Shares.
29
<PAGE> 34
4.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that has
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.5 BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement
and the Closing Date, Sellers after 24 hours advance written notice will, and
will cause the Company and its Representatives to, (a) afford Buyer and its
Representatives full and free access to the Company's personnel, properties,
contracts, books and records, and other documents and data, (b) furnish Buyer
and its Representatives with copies of all such contracts, books and records,
and other existing documents and data as Buyer may reasonably request, and (c)
furnish Buyer and its Representatives with such additional financial,
operating, and other data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY. Between the date
of this Agreement and the Closing Date, Sellers will, and will cause the
Company to:
(a) conduct the business of the Company only in the Ordinary
Course of Business except that Sellers may cause the Company
to distribute or otherwise transfer the Excluded Assets to
Sellers or any other Person designated by Sellers;
(b) use their Best Efforts to preserve intact the current business
organization of the Company, keep available the services of
the current officers, employees, and agents of the Company,
and maintain the relations and good will with suppliers,
customers, landlords, creditors, employees, agents, and others
having business relationships with the Company;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the status
of the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date,
Sellers will not, and will cause the Company not to, without the prior consent
of Buyer, take any affirmative action, or fail to take
30
<PAGE> 35
any reasonable action within their or its control, as a result of which any of
the changes or events listed in Section 3.17 is likely to occur.
5.4 NOTIFICATION. Between the date of this Agreement and the
Closing Date, each Seller will promptly notify Buyer in writing if such Seller
or the Company becomes aware of any fact or condition that causes or
constitutes a Breach as of the date of this Agreement, or if such Seller or the
Company becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any representation or warranty had
such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in any schedule to this Agreement, if such schedule were dated the
date of the occurrence or discovery of any such fact or condition, Sellers will
promptly deliver to Buyer a supplement to the appropriate schedule specifying
such change. During the same period, each Seller will promptly notify Buyer of
any event that may make the satisfaction of the conditions in Section 7
impossible or unlikely.
5.5 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Sellers will not, and will cause the Company
and its Representatives not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of the Company, or any of the capital stock of the
Company, or any merger, consolidation, business combination, or similar
transaction involving the Company.
5.6 BEST EFFORTS. Between the date of this Agreement and the
Closing Date, Sellers will use their Best Efforts to cause the conditions in
Sections 7 and 8 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 BEST EFFORTS. Between the date of this Agreement and the
Closing Date, Buyer will use its Best Efforts to cause the conditions in
Sections 7 and 8 to be satisfied.
6.2 NOTIFICATION. Between the date of this Agreement and the
Closing Date, Buyer will promptly notify Sellers in writing if Buyer becomes
aware of any fact or condition that causes or constitutes a Breach as of the
date of this Agreement, or if Buyer becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. During the same
period Buyer will promptly notify Sellers of any event that may make the
satisfaction of the conditions in Section 8 impossible or unlikely.
31
<PAGE> 36
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other
actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Sellers' representations
and warranties in this Agreement must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, without giving
effect to any supplement to the Schedules.
7.2 SELLERS' PERFORMANCE.
(a) All of the covenants and obligations that Sellers are required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing must have been duly performed and complied with in all material
respects.
(b) Each Seller must have delivered each of the documents required
to be delivered by such Seller pursuant to Section 2.5, and each of the other
covenants and obligations in this Agreement must have been performed and
complied with in all respects.
7.3 CONSENTS. Each of the Consents identified on Schedule 3.2
must have been obtained and must be in full force and effect.
7.4 ADDITIONAL INSURANCE. In the event that the Company has not
maintained general liability insurance coverage of at least $1,000,000.00 per
single occurrence and workers compensation insurance equal to or greater than
that required by any Legal Requirement, in addition to and separate and apart
from the Holdback, Sellers shall purchase a $1,000,000.00 "tail end" liability
insurance policy reasonably satisfactory to Buyer (the "Tail End Insurance
Policy"). The Tail End Insurance Policy will name Buyer as beneficiary and
coverage will be prepaid for a period ending 42 months after the Closing Date.
The Tail End Insurance Policy will provide one source, but not the only source,
for the payment of any claims that Buyer may have.
7.5 MONITORING AGREEMENT. The Company shall enter into an
agreement with Central Alarms Controls, Inc., an entity under the control of
the Sellers, which provides for the monitoring of the Alarm Accounts at rates
and subject to terms reasonably acceptable to Buyer, the form of which
agreement is attached hereto as Exhibit 7.5 . The Alarm Accounts listed on
Schedule 3.25(e) will be monitored at no charge to the Company for a period
terminating upon the earlier of six months after Closing or immediately after a
reprogramming of such Alarm Accounts to Buyer's central monitoring station.
7.6 LEGAL OPINION. Sellers must have caused an opinion of
Sellers' counsel, dated the Closing Date, in a form acceptable to Buyer to be
delivered to Buyer.
32
<PAGE> 37
7.7 PAYOFF OF BANK LOAN. Sellers will cause any outstanding
indebtedness of the Company to Universal National Bank or its successors (the
"Lender") to be paid off at the Closing. Additionally, Sellers must have
forwarded to Buyer the firm commitment of the Lender to terminate any security
interests it may have in any of the Company's assets.
7.8 PAYOFF OF SETTLEMENT. Sellers must have caused any
outstanding indebtedness of the Company to Marvin Miller Industries, Inc.,
d/b/a F.I.T.S. Electronics to be paid off prior to Closing. Additionally,
Sellers will forward to Buyer proof that Marvin Miller Industries, Inc., d/b/a
F.I.T.S. Electronics has executed a full and complete release of all claims
against the Company (including without limitation execution of a UCC-3) which
release must be reasonably satisfactory to the Buyer's counsel.
7.9 NO PROCEEDINGS. Since the date of this Agreement, there must
not have been commenced or threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.10 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There
must not have been made or threatened by any Person any claim asserting that
such Person (c) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, the Company, or (d) is entitled to
all or any portion of the Purchase Price payable for the Shares.
7.11 NO PROHIBITION. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse or time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person affiliated with
Buyer to suffer any material adverse consequence under, (a) any applicable
Legal Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental
Body.
7.12 RESIGNATIONS. Sellers must have delivered the resignations,
effective as of the Closing, of each director and officer of the Company.
7.13 MERGER WITH SECURE AMERICA. The Company must have merged with
Secure America, Inc., a Florida corporation, and the Company must be the
surviving corporation. A copy of the filed Certificate of Merger is attached
hereto as Exhibit 7.13.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
33
<PAGE> 38
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part).
8.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations
and warrants in this Agreement, must have been accurate in all material
respects as of the date of this Agreement and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE.
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing, must have been performed and complied with in all material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.5 and must have made the cash payments
required to be made by Buyer pursuant to Sections 2.5(b)(i) and 2.5(b)(ii).
8.3 CONSENTS. Each of the Consents identified on Schedule 3.2
must have been obtained and must be in full force and effect.
8.4 NO INJUNCTION. There must not be in effect any Legal
Requirement or any injunction or other Order that (a) prohibits the sale of the
Shares by Sellers to Buyer, and (b) has been adopted or issued, or has
otherwise become effective, since the date of this Agreement.
9. TERMINATION
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior
to or at the Closing, be terminated:
(a) by either Buyer or a majority of Sellers if a material Breach
of any provision of this Agreement has been committed by the
other party and such Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has
not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes
impossible (other than through the failure of Buyer
to comply with its obligations under this Agreement)
and Buyer has not waived such condition on or before
the Closing Date; or
(ii) by a majority of Sellers, if any of the conditions in
Section 8 has not been satisfied as of the Closing
Date or if satisfaction of such a condition is or
34
<PAGE> 39
becomes impossible (other than through the failure
of Sellers to comply with their obligations under
this Agreement) and Sellers have not waived such
condition on or before the Closing Date;
(c) by mutual consent of Buyer and a majority of Sellers; or
(d) by either Buyer or a majority of Sellers if the Closing has
not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before June 30, 1996,
or such later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION. Each party's right of termination
under Section 9.1 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Section
9.1, all further obligations of the parties under this Agreement will
terminate, except that the obligations in Sections 13.1 and 13.3, will survive;
provided, however, that if this Agreement is terminated by a party because of
the Breach of this Agreement by the other party, or because one or more of the
conditions to the terminating party's obligations under this Agreement is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL. Except as provided in Section 12.4, all
representations, warranties, covenants, and obligations in this Agreement, the
attachments thereto, and any other document delivered pursuant to this
Agreement will survive the Closing for a period ending one year after the
Closing Date; the right to indemnification, reimbursement, or other remedy
based on such representations, warranties, covenants, and obligations will not
be affected by any investigation conducted with respect to, or any Knowledge
acquired (or capable of being acquired) about the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation.
The waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, reimbursement, or
other remedy based on such representations, warranties, covenants, and
obligations.
10.2 INDEMNIFICATION AND REIMBURSEMENT BY SELLERS.
(a) To the extent that Buyer has not previously been paid or a
reserve established in the Holdback, Sellers, jointly and
severally, will indemnify and hold harmless Buyer, the
Company, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the
"Indemnified Persons"), and
35
<PAGE> 40
will reimburse the Indemnified Persons, for any loss,
liability, claim, damage, expense (including costs of
reasonable investigation and defense and reasonable attorneys'
fees) or diminution of value, whether or not involving a
third-party claim (collectively, "Damages"), arising from or
in connection with:
(i) any Breach of any representation or warranty made by
Sellers in this Agreement and attachments thereto, or
any other document delivered by Sellers pursuant to
this Agreement;
(ii) any Breach by any of the Sellers of any covenant or
obligation of the Sellers in this Agreement;
(iii) any service provided by or any omission in a service
which was required to be provided by the Company
prior to the Closing Date; provided, however any
service required to be provided by the Company
related to a warranty (that is listed on Schedule
3.24) on an installation of security monitoring
equipment which arises after the Closing Date shall
be the responsibility of the Buyer; or
(iv) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon
any agreement or understanding alleged to have been
made by any such Person with either Seller or the
Company (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions.
(b) With respect to any indemnification obligations of Sellers
arising under Section 10.2(a), the amount of such
indemnification obligation shall not exceed the sum of the
Holdback which has not been distributed to Sellers plus ten
percent (10%) of the Purchase Price and the claim for such
Damages must be made within two years of the Closing;
provided, however, there shall be no limitation (amount of
Damages or time period for bringing a claim) on Sellers'
indemnification obligations hereunder in the event of the
fraud on behalf of any or all of the Sellers or arising in
connection with title to the Shares or the payment of any Tax.
10.3 INDEMNIFICATIONS AND REIMBURSEMENT BY SELLERS - ENVIRONMENTAL
MATTERS. In addition to the provisions of Section 10.2, Sellers, jointly and
severally, will indemnify and hold harmless Buyer, the Company, and the other
Indemnified Persons, and will reimburse Buyer, the Company, and any other
Indemnified Person, for any Damages related to an Environmental Requirement
(including costs of cleanup, containment, or other remediation) arising from or
in connection with:
(a) any liability or claim arising out of or relating to: (i)(A)
the ownership, operation, or condition at any time on or prior
to the Closing Date of any properties and
36
<PAGE> 41
assets (whether real, personal, or mixed and whether tangible
or intangible) in which Sellers or the Company has or had an
interest, or (B) any Hazardous Materials or other contaminants
that were present on the properties and assets at any time on
or prior to the Closing Date; or (ii) any Hazardous Materials
or other contaminants, wherever located, that were, or were
allegedly, generated, transported, stored, treated, Released,
or otherwise handled by Sellers or the Company or by any other
Person for whose conduct they are or may be held responsible
at any time on or prior to the Closing Date.
(b) any bodily injury (including illness, disability, and death,
and regardless of when any such bodily injury occurred, was
incurred, or manifested itself), personal injury, property
damage (including trespass, nuisance, wrongful eviction, and
deprivation of the use of real property), or other damage of
or to any Person, including any employee or former employee of
Sellers or the Company or any other Person for whose conduct
they are or may be held responsible, in any way arising from
or allegedly arising from any Hazardous Material that was
Released or allegedly Released by Sellers or the Company or
any other Person for whose conduct they are or may be held
responsible, at any time on or prior to the Closing Date.
Buyer will be entitled to control any cleanup, any related Proceeding, and,
except as provided in the following sentence, any other Proceeding with respect
to which indemnity may be sought under this Section 10.3. The procedure
described in Section 10.5 will apply to any claim solely for monetary damages
relating to a matter covered by this Section 10.3.
10.4 INDEMNIFICATION AND REIMBURSEMENT BY BUYER. Buyer will
indemnify and hold harmless Sellers, and will reimburse Sellers, for any
Damages arising from or in connection with (a) any Breach of any representation
or warranty made by Buyer in this Agreement or in any document delivered by
Buyer pursuant to this Agreement, (b) any Breach by Buyer of any covenant or
obligation of Buyer in this Agreement, (c) any claim by any Person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such Person with Buyer
(or any Person acting on its behalf) in connection with any of the Contemplated
Transactions, or (d) any service provided by or any omission in a service which
was initially required to be provided by the Company or the Buyer after the
Closing Date.
10.5 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
(a) Within 10 days after receipt by an indemnified party of notice
of the commencement of any Proceeding against it, such indemnified party will,
if a claim is to be made against an indemnifying party under this Section 10,
give notice to the indemnifying party of the commencement of such claim, but
the failure to notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party, except to the
extent
37
<PAGE> 42
that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any Proceeding is brought against an indemnified party and
it gives notice to the indemnifying party of the commencement of such
Proceedings, the indemnifying party will, be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the
indemnifying party fails to provide reasonable assurance to the indemnified
party of its financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), assume the defense of such
Proceeding with counsel satisfactory to the indemnified party and, after notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the
defense of a Proceeding, (i) it will be conclusively established for purposes
of this Agreement that the claims made in the Proceeding are within the scope
and/or subject to indemnification; (ii) no compromise or settlement of such
claims may be effected by the indemnifying party without the indemnified
party's consent (which consent may not be unreasonably withheld) unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that
may be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (iii) the
indemnifying party will have no liability with respect to any compromise or
settlement of such claims effected without its consent (which consent may not
be unreasonably withheld). If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding
or any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is reasonable probability that a Proceeding
may adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the indemnified party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle such Proceeding, but the
indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which
may be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of
any court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters
38
<PAGE> 43
alleged therein, and agree that process may be served on Sellers with respect
to such a claim anywhere in the world.
11. ARBITRATION.
11.1 REMEDIES. To the extent permitted by applicable law, and
except for equitable relief which Buyer is entitled to seek under the
Nonsolicitation Agreement, in the event any dispute arises between the parties
under this Agreement, the parties hereto agree that arbitration shall
constitute the exclusive remedy for the resolution of any such dispute or
controversy. The arbitration proceedings shall be accomplished in accordance
with the provisions of this Section 11.
11.2 AMERICAN ARBITRATION ASSOCIATION. Except as expressly
provided herein to the contrary, the arbitration proceeding shall be conducted
under the Commercial Arbitration Rules of the American Arbitration Association
in effect at the time a demand for arbitration is made. To the extent that
there is any conflict between the rules of the American Arbitration Association
and this Section 11, this Section shall govern and determine the rights of the
parties hereto.
11.3 SELECTION OF ARBITRATOR. The arbitration will take place in
Miami, Florida before a single arbitrator selected as described in this Section
11.3 either party may request the American Arbitration Association to provide a
list of proposed arbitrators. Purchaser, on the one hand and Seller on the
other hand, shall then take turns crossing off one name at a time from such
list with the last remaining individual being appointed the arbitrator.
Purchaser and Seller shall select by lot which of them strikes the first name
from the list of proposed arbitrators. If the person selected in this method
to be the arbitrator declines or is otherwise unavailable to serve as the
arbitrator of the dispute, the arbitrator shall be selected from the same list
of proposed arbitrators selected in the reverse order to which those proposed
arbitrators' names were struck from the list until one of such individuals
selected to be the arbitrator accepts the appointment and is able to serve as
the arbitrator.
11.4 DECISION OF ARBITRATOR. The arbitrator selected in the manner
set forth in Section 11.3 hereof (the "Arbitrator") shall be requested to honor
the intention of the parties hereto to resolve the disputes quickly and
inexpensively. All decisions shall be made with this intention in mind.
Except as otherwise provided by applicable law, the decision of the Arbitrator,
shall be exclusive, final and binding of all parties, their successors and
assigns as applicable.
11.5 PROCEDURES. Except as expressly set forth in this Agreement,
the Arbitrator shall determine the manner in which the arbitration proceeding
is conducted, including the time and place of all hearings, the order of
presentation of evidence and all of the questions that arise with respect to
the arbitration proceeding.
39
<PAGE> 44
11.6 APPLICABLE LAW. The Arbitrator shall be required to determine
all issues in accordance with Florida law. The rules of evidence applicable to
proceedings at law in the State of Florida will be applicable to the
arbitration proceedings.
11.7 JUDGMENT. The Arbitrator shall issue a single judgment at the
close of the arbitration proceeding which shall dispose of all of the disputes
of the parties that are the subject of the arbitration. Any party to the
arbitration may seek a judgment from a court of competent jurisdiction to
enforce the award of the Arbitrator.
11.8 COSTS. The cost of arbitration, including administrative
fees, fees for a record and a transcript, and the Arbitrator's fees shall be
borne equally by the parties to the arbitration. Each party shall bear the
costs of the fees charged such party by its own counsel; provided, however, the
Arbitrator shall have the right to award reasonable attorneys' fees to the
party determined by the arbitrator to be the prevailing party.
12. POST CLOSING COVENANTS
12.1 COLLECTION OF ACCOUNTS RECEIVABLE. Buyer agrees to forward to
Sellers or their designees ninety percent (90%) of the payments associated with
any Accounts Receivable listed on Schedule 3.9 which the Company receives after
the Closing within twenty (20) days after the end of the calendar month in
which such payments were received. The Company shall be entitled to retain ten
percent (10%) of such payments associated with the accounts receivable as a
collection fee. Sellers agree not to directly or indirectly contact any of the
customers associated with the Accounts Receivable listed on Schedule 3.9.
Sellers acknowledge that Buyer and its designees shall have the exclusive
ability to contact such customers after the Closing unless Seller obtains
Buyer's prior written consent to contact such customers. All payments received
by Buyer or the Company associated with an Accounts Receivable listed on
Schedule 3.9 shall be applied by Buyer or the Company to the oldest amount past
due.
12.2 TAX ELECTION. Pursuant to Code Section 341(f) and Treasury
Regulation Section 1.341-7, the Company consents to have the provisions of
Code Section 341(f)(2) apply to any disposition by the Company of its
subsection (f) assets as defined therein. In addition, the Company agrees to
file the Code Section 341(f) consent, as attached hereto as Exhibit 12, with
the IRS prior to the Closing Date.
12.3 ALARM ACCOUNTS INCLUDED IN LOST RMR. If an Alarm Account is
included in Lost RMR or is included among the Non Qualifying Over 90 RMR, then
upon written request of at least three of the Sellers, Buyer shall transfer
ownership of such Alarm Account to Sellers or their designees and shall take
other action reasonably requested by at least three of the Sellers to
facilitate such transfer. Upon such transfer to the Sellers, Sellers agree to
indemnify and hold harmless Indemnified Persons for any Damages arising after
the date of such transfer other than with respect to any liabilities relating
solely to
40
<PAGE> 45
unpaid services rendered by Buyer or the Company. Sellers agree that there is
no limitation on their indemnification obligation, pursuant to this Section
12.3.
12.4 BUSINESS AND TAX RECORDS. Buyer and the Company shall
maintain the business and tax records provided to Buyer by Sellers at the
Closing Date for a period of seven years and shall allow Sellers the right to
access and copy such records from time to time during normal business hours
upon prior written notice by the Sellers to Buyer.
13. GENERAL PROVISIONS
13.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a Breach of this Agreement by
another party.
13.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity by Sellers with respect to this Agreement or the Contemplated
Transactions will be issued, if at all, at such time and in such manner as
shall be approved by Buyer in advance of any such announcement or similar
publicity. Unless consented to by the other party in advance prior to the
Closing, Buyer and Seller shall, and shall cause the Company to, keep the terms
of this Agreement strictly confidential and may not make any disclosure of the
terms of this Agreement to any Person. Sellers and Buyer will consult with
each other concerning the means by which the Company' employees, customers, and
suppliers and others having dealings with the Company will be informed of the
Contemplated Transactions, and Buyer will have the right to be present for
and/or approve of any such communication.
13.3 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer and Seller will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company
to maintain in confidence, any written, oral or other information obtained in
confidence from another party or the Company in connection with this Agreement
or the Contemplated Transactions, unless (a) such information is already known
to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is
required by legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
41
<PAGE> 46
13.4 NOTICES. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
IF TO MASADA AT:
Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attention: Mr. Terry W. Johnson
FACSIMILE: 1-800-531-3293
TELEPHONE: (205) 323-7233
WITH COPY TO:
Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attention: W. Lee Thuston, Esq.
FACSIMILE: (205) 458-5100
TELEPHONE: (205) 251-3000
IF TO SELLERS AT:
Russell B. Jones
13973 Southwest 140th Street
Miami, Florida 33186
Attention: Russell B. Jones
FACSIMILE: (305) 235-5005
42
<PAGE> 47
TELEPHONE: (305) 238-0800
WITH COPY TO:
Zack, Sparber, Kosnitzky, Spratt & Brooks, P.A.
One International Place
100 Southeast 2nd Street, Suite 2800
Miami, Florida 33131
Attention: Michael Kosnitzky, Esq.
FACSIMILE: (305) 539-1307
TELEPHONE: (305) 539-8400
or at such address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
13.5 FURTHER ASSURANCES. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such documents, and (c) to do such other acts and things, all as the
other party may reasonably request for the purpose of carrying out the intent
of this Agreement and the documents referred to in this Agreement.
13.6 WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power, or privilege under this
Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power, privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power,
or privilege. To the maximum extent permitted by applicable law, (a) no claim
or right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
13.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the
43
<PAGE> 48
agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the
party to be charged with the amendment.
13.8 SCHEDULES.
(a) The disclosures in the Schedules to this Agreement, and those
in any supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in
the body of this Agreement and those in the Schedules, the statements in the
body of this Agreement will control.
13.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties except that Buyer may assign any of its rights
under this Agreement, the Nonsolicitation and Nonaccptance Agreement, the
Escrow Agreement and any other related agreement (i) to any Subsidiary or
affiliate of Buyer and/or (ii) to its lenders. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give
any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
13.10 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.
13.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Sections" refer to the
corresponding Sections of this Agreement. All words used in this Agreement
will be construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit the
preceding words or terms.
13.12 GOVERNING LAW. This Agreement will be governed by and
construed under the laws of the State of Florida without regard to conflicts of
laws principles.
13.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
44
<PAGE> 49
13.14 DIRECTION OF SELLERS. Any consent or request provided herein
by the Sellers shall be deemed to have been given only if at least three of the
four Sellers make such request or give such consent in writing to Buyer.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
<TABLE>
<CAPTION>
Buyer: Sellers:
<S> <C>
MASADA SECURITY, INC.
By: Charles F. Armstrong /s/ Russell B. Jones
--------------------------------- ----------------------------
Its: Vice President Russell B. Jones
--------------------------
/s/ Robert S. Moses
----------------------------
Robert S. Moses
/s/ Ronald G. Walters
---------------------------
Ronald G. Walters
/s/ David R. Donnelly
---------------------------
David R. Donnelly
</TABLE>
45
<PAGE> 50
<TABLE>
<CAPTION>
LIST OF EXHIBITS
<S> <C> <C>
Exhibit 1 Form of Contract
Exhibit 2.5(a)(iii) Nonsolicitation Agreement
Exhibit 2.5(c) Escrow Agreement
Exhibit 2.5(d) Disbursement Letter
Exhibit 2.7(a) Over 90 RMR Calculation
Exhibit 2.7(b) Holdback Period I Calculation
Exhibit 2.7(c) Holdback Period II Calculation
Exhibit 7.5 Monitoring Agreement
Exhibit 7.6 Seller's Legal Opinion
Exhibit 7.13 Certificate of Merger
Exhibit 12 Tax Consent
LIST OF SCHEDULES
Schedule 1 Loans Receivable
Schedule 2.3 Assumed Liabilities
Schedule 2.6 Alarm Accounts included in Reprogramming
Allowance
Schedule 3.2 Required Consents
Schedule 3.6 Real Property Leases
Schedule 3.7 Title to Property
Schedule 3.8 Telephone Lines
Schedule 3.9 Accounts Receivable
Schedule 3.10 Inventory
Schedule 3.11 Undisclosed Liabilities
Schedule 3.12(a) Tax Returns Relating to income or franchise
taxes filed since December 31, 1994
Schedule 3.12(b) All Audits of tax return
Schedule 3.12(c) Proposed Assessments
Schedule 3.14 Employee Benefits
Schedule 3.15(a) Compliance with Legal Requirements
Schedule 3.15(b) Governmental Authorizations
Schedule 3.16 Legal Proceedings
Schedule 3.17 Absence of Changes
Schedule 3.18(a) Contracts (Alarm Accounts)
Schedule 3.18(b) Applicable Contracts
Schedule 3.18(c) Contracts - Miscellaneous Issues
Schedule 3.19 Insurance
Schedule 3.21 Employees
Schedule 3.23 Intellectual Property
Schedule 3.24 Product Warranties
Schedule 3.25 "Chip Change" Alarm Accounts
</TABLE>
46
<PAGE> 1
AMENDMENT TO STOCK PURCHASE AGREEMENT
This Amendment to Stock Purchase Agreement ("Amendment") is made as of
June 4, 1996 by and between MASADA SECURITY, INC., a Delaware corporation
("Buyer"); RUSSELL B. JONES, an individual residing in Miami, Florida
("Jones"); ROBERT S. MOSES, an individual residing in Miami Beach, Florida
("Moses"), DAVID R. DONNELLY, an individual residing in Miami, Florida
("Donnelly"), and RONALD G. WALTERS, an individual residing in Ft. Lauderdale,
Florida ("Walters") (Jones, Moses, Donnelly and, Walters are collectively
referred to as the "Sellers").
RECITALS
WHEREAS, Buyer and Sellers have previously entered into a Stock
Purchase Agreement dated May 31, 1996 ("Stock Purchase Agreement"); and
WHEREAS, Buyer and Sellers desire to amend certain portions of the
Stock Purchase Agreement.
AGREEMENT
1. Schedule 3.18(a) of the Stock Purchase Agreement is amended to
include the Alarm Accounts listed on Schedule 1 attached hereto and
incorporated herein by this reference.
2. Except for Section 3.21 of the Stock Purchase Agreement, Buyer
and Sellers confirm that all the representations and warranties contained in
the Stock Purchase Agreement are as stated therein on the date hereof.
3. All other terms and provisions of the Stock Purchase Agreement
shall remain unchanged as of the date hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
<TABLE>
<CAPTION>
Buyer: Sellers:
<S> <C>
MASADA SECURITY, INC.
By: /s/ Charles F. Armstrong /s/ Russell B. Jones
------------------------------ ---------------------------
Its: Vice President Russell B. Jones
-----------------------
/s/ Robert S. Moses
---------------------------
Robert S. Moses
/s/ David R. Donnelly
---------------------------
David R. Donnelly
/s/ Ronald G. Walters
---------------------------
Ronald G. Walters
</TABLE>
<PAGE> 1
ESCROW AGREEMENT
This Agreement is made as of the 3rd day of June, 1996 by and among
MASADA SECURITY, INC., a Delaware corporation ("Masada"), RUSSELL B. JONES, an
individual residing in Miami, Florida ("Jones"), ROBERT S. MOSES, an individual
residing in Miami Beach, Florida ("Moses"), DAVID R. DONNELLY, an individual
residing in Miami, Florida ("Donnelly") and RONALD G. WALTERS, an individual
residing in Ft. Lauderdale, Florida ("Walters") (Jones, Moses, Donnelly and
Walters being referred to herein collectively as the "Sellers") and SUNTRUST
BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION (the "Escrow Agent").
WHEREAS, Masada and the Sellers are parties to a Stock Purchase
Agreement dated as of the 31st day of May, 1996 (the "Stock Purchase
Agreement") which provides for the sale by the Sellers to Masada of all of the
outstanding common stock (the "Stock") of Alarms by HRD, Inc., a Florida
corporation (the "Company"); and
WHEREAS, pursuant to Section 2.5(b)(ii) of the Stock Purchase
Agreement a portion of the purchase price for the Stock is to be held in escrow
for three separate time periods following the closing of the transactions
contemplated by the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the payment to the Escrow Agent
more particularly described on Schedule A and mutual promises set forth in this
Agreement, the parties agree as follows:
1. Appointment of Escrow Agent. Masada and the Sellers hereby
designate SunTrust Bank, Central Florida, National Association to act as Escrow
Agent hereunder and Escrow Agent hereby accepts such appointment.
2. Deposit of Escrow. Upon the execution of this Agreement,
Masada will deliver to the Escrow Agent, and the Escrow Agent will receive an
amount specified on Schedule 2 attached hereto to be held for a period of at
least three months (the "Three Months Deposit"), an amount specified on
Schedule 2 attached hereto to be held for a period of at least nine months
(the "Nine Months Deposit"), an amount specified on Schedule 2 attached hereto
to be held for a period of at least one year (the "One Year Deposit") (the
"Three Months Deposit", the "Nine Months Deposit" and the "One Year Deposit"
shall collectively be referred to as the "Deposit"). The Deposit shall be
deposited by the Escrow Agent into an interest bearing account at SunTrust
Bank, Central Florida, National Association, with interest to be added to the
Deposit.
3. Earnings on Deposit; Investment of Deposit. All income paid
or earned on the Deposit shall be deemed to have been paid or earned by the
Sellers, for income tax purposes, but shall be received and held by the Escrow
Agent and constitute part of the Deposit. The Deposit may only be invested in
obligations purchased in accordance with the Corporate Cash Management Master
Repurchase Agreement. All income received in cash from investment of Deposit,
less all
<PAGE> 2
disbursement provided hereunder, shall be immediately reinvested by the Escrow
Agent in accordance with the terms of this Section 3.
4. Taxes and Charges on Escrow Property. The Sellers shall
disclose on the signature page hereof to the Escrow Agent each of their social
security numbers, and the Escrow Agent shall annually issue a Form 1099 to each
Seller reflecting the amount of income earned on the Deposit for such
applicable period by such Seller.
5. Disposition of Escrow.
(a) On or after September 1, 1996, Masada and the Sellers
shall jointly give signed written notice ("Payment Notice") to Escrow Agent
which Payment Notice shall list the parties entitled to the Three Months
Deposit and a breakdown of the amounts each party is entitled to. Upon receipt
of the Payment Notice, the Escrow Agent shall pay to the appropriate parties
the Three Months Deposit within two days after the receipt of such Payment
Notice. The Payment Notice shall set forth a brief description of the basis
entitling such parties to be paid the Three Months Deposit.
(b) On or after March 3, 1997, Masada and the Sellers
shall jointly give a Payment Notice to Escrow Agent which Payment Notice shall
list the parties entitled to the Nine Months Deposit and a breakdown of the
amounts each party is entitled to. Upon receipt of the Payment Notice, the
Escrow Agent shall pay to the appropriate parties the Nine Months Deposit
within two days after the receipt of such Payment Notice. The Payment Notice
shall set forth a brief description of the basis entitling such parties to be
paid the Additional Deposit.
(c) On or after June 3, 1997, Masada and the Sellers
shall jointly give a Payment Notice to Escrow Agent which Payment Notice shall
list the parties entitled to the One Year Deposit and a breakdown of the
amounts each party is entitled to. Upon receipt of the Payment Notice, the
Escrow Agent shall pay to the appropriate parties the One Year Deposit within
two days after the receipt of such Payment Notice. The Payment Notice shall
set forth a brief description of the basis entitling such parties to be paid
the One Year Deposit.
(d) If the Escrow Agent receives a Payment Notice
pursuant to Section 3(a), 3(b) or 3(c) which is (i) signed by Masada but not by
at least three out of four of the Sellers, or (ii) signed by at least three out
of four of the Sellers but not by Masada, the Escrow Agent shall give notice,
along with a copy of such Payment Notice, to the other party (the "Non-Signing
Party"). If the Non-Signing Party gives written notice to the Escrow Agent of
its agreement with the Payment Notice, or fails to respond to the notice from
the Escrow Agent, within seven days after the date of such notice, then the
Escrow Agent shall pay to Seller (or its designee) the Escrowed Funds, within
two days after the expiration of such seven day period. If the Non-Signing
Party gives written notice to the Escrow Agent of its disagreement with the
Payment Notice within such seven day period, then the Escrow Agent shall pay
the undisputed portion, if any, of the Deposit, but shall not pay any portion
of the Deposit subject to dispute, which disputed
2
<PAGE> 3
funds shall continue to be held by the Escrow Agent pending resolution of such
dispute and further direction from Masada and the Sellers.
(e) If a Non-Signing Party shall be determined by (i) a
court of competent jurisdiction, or (ii) a written release between the parties,
to have acted in a frivolous manner and in bad faith, the other party(ies)
shall be entitled to reimbursement of all its reasonable costs incurred in
connection with the Payment Notice (including, without limitation, reasonable
attorney's fees).
6. Provisions Relating to Escrow Agent.
(a) The Escrow Agent shall be protected in acting upon
any written notice, statement, certificate, waiver, consent or other instrument
or document which the Escrow Agent believes to be genuine.
(b) It is understood and agreed that the duties of the
Escrow Agent hereunder are purely ministerial in nature and that the Escrow
Agent shall not be liable for any error or judgment, or for any act done or
step taken or omitted in good faith, or for anything which the Escrow Agent may
do or refrain from doing in connection with this Agreement, except that the
Escrow Agent shall be liable for its own gross negligence or willful
misconduct. In no event shall the Escrow Agent be required to account for any
application of funds subsequent to disposition thereof in accordance with this
Agreement by the Escrow Agent. The Escrow Agent shall not be liable for any
consequential or incidental damages arising from its actions hereunder.
(c) The Escrow Agent may consult with and obtain advice
from legal counsel in the event of any dispute or question as to the
construction of any of the provisions hereof or the Escrow Agent's duties
hereunder, the Escrow Agent shall incur no liability and shall be fully
protected in acting in accordance with the opinion of its legal counsel. The
Escrow Agent shall not be responsible in any manner whatsoever for any failure
or inability of any of the other parties hereto, or anyone else, to perform or
comply with any provisions of this Agreement or any other agreement or
undertaking.
(d) If at any time the Escrow Agent shall be in doubt as
to any of its duties under this Agreement, the Escrow Agent may apply to the
Court for a determination of such duties, and the Escrow Agent shall incur no
liability therefor.
(e) If at any time the Escrow Agent shall receive
conflicting notices, claims, demands or instructions with respect to the
Deposit and the interest earned thereon, or if for any other reason it shall be
unable in good faith to determine the party or parties to whom the Deposit and
the interest earned thereon are to be distributed, the Escrow Agent may refuse
to make such disbursement until the Escrow Agent shall have received
instructions in writing signed by all of the other parties hereto, or until
directed by a final order of the Court (in an action brought by the
3
<PAGE> 4
Escrow Agent hereunder or by any other person), whereupon the Escrow Agent
shall make such disbursement in accordance with such instructions or order.
(f) The Escrow Agent may resign and be discharged from
its duties or obligations hereunder by giving 10 days notice in writing of such
resignation. The Escrow Agent may be removed and a successor escrow agent
appointed by agreement of the other parties to this Agreement. The Escrow
Agent shall comply with the joint instructions of the other parties to this
Agreement with respect to the disposition of the Deposit and the interest earned
thereon upon its resignation or removal, provided that if the other parties to
this Agreement have not designated a successor escrow agent to which Deposit and
the interest earned thereon are to be delivered, the Escrow Agent may either
continue to hold the Deposit and such interest hereunder or place the Deposit
and such interest into the custody of the Court. If the Escrow Agent gives
notice of resignation, the other parties will use their best efforts to agree
upon and designate a successor escrow agent prior to the date on which the
Escrow Agent's resignation becomes effective.
(g) The Escrow Agent shall not be required to take any
action hereunder involving incurrence of expense to third parties unless
payment shall be provided for in a manner satisfactory to the Escrow Agent.
7. Termination. The Escrow Agent will be deemed to be terminated
as escrow agent and released from its obligations hereunder on the earlier to
occur of its resignation pursuant to Section 6(f) above or the time at which
the Escrow Agent delivers the Deposit and the interest thereon in accordance
with the terms of this Agreement.
8. Notices. All notices provided for in this Agreement shall be
in writing and shall be addressed to the parties as follows:
<TABLE>
<S> <C>
IF TO THE ESCROW AGENT: SunTrust Bank, Central Florida, National Association
225 East Robinson Street, Suite 250
Orlando, Florida 32801
Attn: Corporate Trust Division
Telecopy: (407) 237-5299
IF TO MASADA: Masada Security, Inc.
950 22nd Street North, Suite 800
Birmingham, Alabama 35203
Attn: Mr. Terry W. Johnson
Telecopy: (800) 531-3293
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
WITH A COPY TO: Burr & Forman
3100 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama 35203
Attn: W. Lee Thuston, Esq.
Telecopy: (205) 458-5100
IF TO THE SELLERS:
------------------------------------------
------------------------------------------
Attn:
------------------------------------------
Telecopy:
------------------------------------------
WITH A COPY TO: Zack, Sparber, Kosnitzky, Spratt & Brooks, P.A.
One International Place
100 Southeast 2nd Street, Suite 2800
Miami, Florida 33131
Attn: Michael Kosnitzky, Esq.
Telecopy: (305) 539-1307
</TABLE>
or to such other address as may be designated by notice. Notices delivered by
(i) United States mail shall be deemed received by the addressee on the third
business day after deposit if sent by postage prepaid certified or registered
mail, return receipt requested, or (ii) telecopier transmission shall be deemed
delivered on the date of transmission if followed by a copy sent by certified
mail, postage prepaid, or private overnight delivery service on the date of
transmission; provided, that any party may act on notice delivered by
telecopier transmission regardless of whether confirmation is delivered.
9. General. The waiver or failure of either party to exercise in
any respect any right provided for in this Agreement shall not be deemed a
waiver of any further or future right under it. This Agreement shall be
governed by, subject to and construed according to the laws of the State of
Florida and venue for any action relating to this Agreement shall be in any
court of competent jurisdiction in Dade County in the State of Florida. Rights
and obligations under this Agreement shall be binding upon, and inure to the
benefit of, successors and assigns of the parties. This Agreement may be
amended only be written agreement signed by the Escrow Agent, Masada and the
Sellers. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Confirmation of execution by telefacsimile of a
facsimile signature page shall be binding upon that party so confirming.
5
<PAGE> 6
10. Matters to be Arbitrated. Any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
binding arbitration in accordance with Section 11 of the Stock Purchase
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date and year first above written.
MASADA SECURITY, INC.
By: /s/ ???
------------------------------------------
Title: Vice President
---------------------------------------
/s/ Russell B. Jones
---------------------------------------------
RUSSELL B. JONES
Social Security No. ###-##-####
--------------------------
/s/ Robert S. Moses
---------------------------------------------
ROBERT S. MOSES
Social Security No.
--------------------------
/s/ David R. Donnelly
---------------------------------------------
DAVID R. DONNELLY
Social Security No. ###-##-####
--------------------------
/s/ Ronald G. Walters
---------------------------------------------
RONALD G. WALTERS
Social Security No. ###-##-####
--------------------------
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
Escrow Agent
By: /s/ ???
------------------------------------------
Title: Senior Vice President
---------------------------------------
6
<PAGE> 1
AGREEMENT
THIS AGREEMENT made as of the 10th day of June, 1994, by and between
MASADA SECURITY, INC., a Delaware corporation (Masada) and CENTENNIAL SECURITY,
INC., a Delaware corporation (Centennial).
W I T N E S S E T H:
WHEREAS, Masada is engaged in the business of operating and
maintaining a central emergency monitoring station for the receipt of
electronic signals from burglar, fire or other alarm systems, and the dispatch
and/or notice to police, fire or other authorities;
WHEREAS, Centennial desires to engage in the business of acquiring and
generating security monitoring accounts, both residential and commercial;
WHEREAS, Centennial desires to enter into an arrangement with Masada
whereby Masada shall provide the exclusive monitoring, billing, remittance
processing and business management support services for Centennial; and
WHEREAS, Masada desires to provide the exclusive monitoring, billing,
remittance processing and business management support services to Centennial,
all pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which is
<PAGE> 2
hereby acknowledged, and intending to be legally bound, agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires: (a) the terms defined in this Section 1 shall have the
meanings assigned to them below, such meanings to be applicable to singular and
plural nouns and verbs of any tense; (b) all references in this Agreement to
designated Sections and other subdivisions are to the designated Sections and
other subdivisions of this Agreement as originally executed and as amended from
time to time; and (c) the words herein, hereof, hereunder and other words of
similar import refer to this Agreement as a whole.
"Alarm Systems" shall mean burglar, fire or other alarm systems
installed or acquired by Centennial.
"Average Billing and Lock Box Cost Per Subscriber" shall have the
meaning set forth in Section 8(b)(ii).
"Average Monitoring Cost Per Subscriber" shall have the meaning set
forth in Section 8(a)(ii).
"Business Day" shall mean any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in Birmingham, Alabama are
authorized or obligated by law or executive order to be closed.
"Centennial" shall have the meaning given such term in the Recitals.
2
<PAGE> 3
"Centennial Billing and Lock Box Charge" shall have the meaning set
forth in Section 8(b)(iii).
"Centennial Monitoring Charge" shall have the meaning set forth in
Section 8(a)(iii).
"Centennial Subscribers" shall mean the residential or commercial
customers of Centennial utilizing the central station monitoring services of
Masada.
"Masada" shall have the meaning given such term in the Recitals.
"Masada Support Center" shall mean the administrative and business
offices of Masada located at 2741 West Broward Boulevard, Ft. Lauderdale,
Florida, or at such other location Masada designates during the Term as its
support center.
"Monthly Centennial Subscribers" shall mean the total number of
Centennial Subscribers utilizing the monitoring services of Masada on the last
day of each applicable calendar month during the Term hereof.
"Monthly Subscribers" shall mean the total number of Subscribers
utilizing the monitoring services of Masada on the last day of each applicable
calendar month during the Term hereof.
"Negotiating Period" shall have the meaning set forth in Section 7(b).
"Offer" shall have the meaning set forth in Section 7(b).
3
<PAGE> 4
"Other Subscribers" shall mean all residential or commercial customers
utilizing the central station monitoring services of Masada other than the
Centennial Subscribers.
"Person" shall mean any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust,
bank, trust company or estate (including any beneficiaries thereof),
unincorporated organization or government or any agency or political
subdivision thereof.
"Premises" shall mean the location of Subscriber.
"Re-Offer" shall have the meaning set forth in Section 7(b).
"Subscribers" shall mean collectively, the Centennial Subscribers and
the Other Subscribers.
"Term" shall have the meaning set forth in Section 7(a).
SECTION 2. MONITORING SERVICES.
(a) Masada agrees to perform central station monitoring services for
Centennial Subscribers with at least the same quality of central station
monitoring service as Masada provides the Other Subscribers. In connection
therewith, and without limiting the foregoing, Masada shall (i) provide all
equipment, signal processing software, hardware, receivers, communication
lines, and personnel required to monitor and respond to incoming alarm signals
generated by the Alarm Systems of Centennial's Subscribers; (ii) provide all
the inbound data communications associated with receiving signals
4
<PAGE> 5
and all outbound telecommunications associated with monitoring operator
response; (iii) upon receipt of signals from Alarm Systems, call the applicable
telephone numbers furnished to Masada by Centennial for the benefit of the
Centennial Subscribers and make every reasonable effort to alert the parties
designated in the applicable Centennial Subscriber contract or otherwise of the
nature, type or location of the signals; and (iv) generate appropriate reports
to meet the requirements of the Centennial Subscribers. Centennial agrees that
Masada is in no way obligated to install, maintain, repair, service, replace,
operate or assure the operation of the Alarm Systems pursuant to this
Agreement; provided that Masada agrees to notify Centennial as promptly as
possible of Alarm Systems of which it is aware that are not operating properly
or otherwise require service.
(b) It is the sole responsibility of Centennial to (i) confirm
that the telephone equipment of each Centennial Subscriber is compatible with
the central station monitoring equipment of Masada, especially when there are
changes to the telephone equipment or services rendered to a Centennial
Subscriber by the telephone company, e.g., call waiting, answering service,
etc., and (ii) test the telephone equipment as reasonably appropriate and
whenever changes are made to telephone service at a Centennial Subscriber's
Premises. Any claimed inadequacy or failure resulting from any such testing of
such telephone equipment shall be immediately reported to
5
<PAGE> 6
Masada. Masada agrees to provide Centennial during the Term with the
compatibility requirements of the central station monitoring equipment so as to
allow Centennial to comply with the provisions of Section 2(b)(i).
(c) Unless Masada agrees otherwise in writing, Centennial shall
pay all charges made by any telephone company or other utility for
installation, leasing and service charges for equipment necessary to connect
the Alarm System to the appropriate telephone network or Masada's central
station. Centennial shall pay any and all (i) federal, state and local taxes
and charges imposed upon Masada (except taxes on net income) by any federal,
state or local government agency relating to the monitoring services provided
under this Agreement and (ii) utility charges including, without limitation,
telephone lines charges, which may hereafter be imposed by any telephone
company or other utility on Masada relating to the monitoring services provided
under this Agreement. Centennial agrees to hold Masada harmless from and to
indemnify Masada against any claim for the foregoing.
(d) Centennial agrees that during the Term hereof Masada shall be
the exclusive provider of the services provided herein to Centennial.
(e) Centennial agrees that during the Term hereof all forms of
agreement between Centennial and Centennial Subscribers pertaining to the
provision of monitoring services shall be submitted by Centennial to Masada for
Masada's
6
<PAGE> 7
approval. If disapproval is not received by Centennial within ten (10) days
after receipt of any such form of agreement by Masada, such right of approval
shall be deemed waived and such form of agreement shall be considered approved.
Such approvals by Masada shall not be unreasonably withheld.
(f) Centennial agrees that Masada shall be an intended third party
beneficiary of any warranty disclaimers contained in any agreement between
Centennial and Centennial Subscribers pertaining to the provision of monitoring
services.
SECTION 3. BILLING SERVICE. During the Term, Masada
shall perform all billing services for Centennial Subscribers. Such billing
services shall include, without limitation, bill formatting, printing,
bursting, stuffing and mailing for up to three (3) pages in any one Centennial
Subscriber bill. Each Centennial Subscriber bill shall include scan-line
encoding on the remittance page. Centennial shall be allowed one (1) insert
per Centennial Subscriber bill at no charge to Centennial. Masada shall make
available to Centennial additional billing inserts at cost to Masada plus
fifteen percent (15%). Masada shall provide all supplies for billing and the
actual postage cost per Centennial Subscriber bill. Centennial shall be
responsible for providing all inserts to be included in the Centennial
Subscriber bills and any customized forms it desires to be used for billing.
All inserts to be included in any Centennial Subscriber bills shall be provided
by Centennial to Masada at least thirty (30)
7
<PAGE> 8
days prior to the date such Centennial Subscriber bills are to be mailed or
delivered by Masada to Centennial Subscribers.
SECTION 4. REMITTANCE PROCESSING. Masada shall perform
the remittance processing function for Centennial's Subscribers. The
remittance processing function shall include, without limitation, automated
lockbox processing and weekly lockbox reporting. Masada shall also provide
accounts receivable trial balances for each Centennial branch office.
Centennial shall receive monthly reports from Masada which shall include
accounts receivable balances as well as aging. In no event, however, shall
Masada be required under this Agreement to perform any collection function for
delinquent accounts of Centennial such as calling Centennial Subscribers who
are delinquent in payment or engaging collection agencies or attorneys.
SECTION 5. SOFTWARE PACKAGE. During the Term, Masada
shall make available to Centennial a computer software application program that
shall be the same as utilized by Masada with respect to the Other Subscribers
that shall enable Centennial to (i) enter service tickets for the repair of
Alarm Systems, (ii) retrieve/modify service tickets entered by Centennial,
(iii) schedule service tickets by technician and/or area, (iv) print service
tickets by branch, area and/or technician, (v) monitor technicians throughout a
workday, (vi) clear service tickets, and (vii) run statistical reports on
problem types, resolution types and technician reports.
8
<PAGE> 9
Masada shall provide Centennial all updates of such computer software
application programs.
SECTION 6. COMMUNICATION LINKS. Masada shall connect
the Centennial branch offices to the Masada central station via a dedicated
computer network which shall be identical to the computer network by which each
Masada branch office is connected to the Masada central station. Masada will
negotiate with network equipment suppliers so that Centennial may purchase
pre-configured equipment packages necessary to implement this network at prices
more favorable to Centennial than otherwise obtainable. Masada has also
arranged for Centennial to purchase the required 56K DDS data circuits from
Sprint Corp. and receive the same rates as Masada due to Masada's large volume
of telephone traffic. Centennial also has the option of allowing Sprint to
carry long-distance voice traffic to and from Centennial branches under the
same offer. Sprint will bill Centennial directly for data and voice services.
All direct costs incurred by Masada in the process of making the initial
connection to Centennial branches or adding users, workstations, or voice
circuits at Centennial branches will be reimbursed by Centennial at Masada's
documented cost.
SECTION 7. TERM.
(a) This Agreement shall commence on the date hereof and shall
terminate, except as to the provisions of Section 7(b), on the earliest to
occur of (i) eighteen (18) months after the
9
<PAGE> 10
date Masada commences monitoring services pursuant to Section 2 hereof, or (ii)
termination of this Agreement pursuant to the provisions of Section 7(c). The
period during which this Agreement shall be in effect shall be referred to
herein as the Term.
(b) Centennial will, at Masada's election, negotiate exclusively
with Masada in good faith for a period of sixty (60) days prior to one hundred
eighty (180) days prior to the termination date of this Agreement as set forth
in Section 7(a)(i) hereof unless this Agreement has been sooner terminated
pursuant to the provisions of Section 7(c) (such sixty (60) day period shall
herein be referred to as the Negotiating Period) with respect to an extension
of this Agreement. If at the end of the Negotiating Period, Masada and
Centennial have not reached agreement with respect to an extension of this
Agreement, Centennial shall promptly notify Masada in writing of the terms and
conditions upon which it is then willing to extend the Term hereof. Such
notice shall contain an offer (the Offer) to contract with Masada on such terms
and conditions, and Masada shall have a period of fourteen (14) days from its
receipt of the Offer in which to accept the Offer. If the Offer is not
accepted by Masada, then Centennial may enter into an agreement on terms and
conditions substantially similar to or more favorable to Centennial than that
described in the Offer with any third party. Centennial may not enter into an
agreement pertaining
10
<PAGE> 11
to the services provided herein that is not on terms and conditions
substantially similar to or more favorable to Centennial than that described in
the Offer with any third party without notifying Masada of such terms and
conditions. Each such notice shall contain an offer (hereinafter referred to
as a Re-Offer) to contract with Masada on such terms. Masada shall have a
period of ten (10) days from Masada's receipt of the Re-Offer in which to
accept any Re-Offer. This Section 7(b) shall survive the expiration of the
remaining provisions of this Agreement.
(c) This Agreement may be cancelled and terminated immediately by
either party hereto upon the occurrence of an Event of Default, as set forth in
Section 11, which is not cured to the satisfaction of the non-defaulting party
within ten (10) days after the receipt by such defaulting party of notice of
such Event of Default.
SECTION 8. CONSIDERATION. The total monthly
consideration to be paid by Centennial to Masada for the services provided
herein shall be the sum of the totals computed in accordance with (a), (b) and
(c) below:
(a) During the Term of this Agreement:
(i) Masada shall determine from its books and records the
following Masada central station monitoring costs (rent, telephone line and
usage charges, salaries, payroll taxes, employee benefits, supplies, license
fees, property taxes, depreciation plus all other recurring expenses properly
11
<PAGE> 12
directly allocable to Masada's central station monitoring operations under
generally accepted accounting principles provided, however, that in no event
shall any start-up, relocation or other costs related to any relocation of the
Masada central station be included in such computation) for the first (1st)
calendar quarter of 1994, multiply such sum by four (4) and divide the
resulting product by twelve (12);
(ii) The amount determined in (i) above shall be divided by
the Monthly Subscribers for the immediately preceding calendar month with the
result being hereinafter referred to as the Average Monitoring Cost Per
Subscriber;
(iii) The Average Monitoring Cost Per Subscriber determined in
(ii) above shall be multiplied by 1.15 with the product being hereinafter
referred to as the Centennial Monitoring Charge; and
(iv) The Centennial Monitoring Charge shall then be multiplied
by the Monthly Centennial Subscribers for the immediately preceding calendar
month.
(b) During the Term of this Agreement:
(i) Masada shall determine from its books and records the
total lock box and postage expense, plus salaries and benefits related thereto,
incurred by the Masada Support Center during the immediately preceding calendar
month provided, however, that in no event shall any start-up, relocation or
other costs related to any relocation of the Masada central station be included
in such computation;
12
<PAGE> 13
(ii) The amount determined in (i) above shall be divided by
the Monthly Subscribers for the immediately preceding calendar month with the
result being hereinafter referred to as the Average Billing and Lock Box Cost
Per Subscriber;
(iii) The Average Billing and Lock Box Cost Per Subscriber
determined in (ii) above shall be multiplied by 1.15 with the product being
hereinafter referred to as the Centennial Billing and Lock Box Charge; and
(iv) The Centennial Billing and Lock Box Charge shall then be
multiplied by the Monthly Centennial Subscribers for the immediately preceding
calendar month.
(c) Centennial shall pay to Masada (i) twenty cents ($.20) for
each signal in excess of ten (10) per calendar month transmitted from a
residential Centennial Subscriber's Alarm System to Masada's central station
and (ii) twenty cents ($.20) for each signal in excess of seventy (70) per
calendar month transmitted from a commercial Centennial Subscriber's Alarm
System to Masada's central station.
(d) During the second (2nd) year of the Term of this Agreement,
the total Masada central station costs for the first (1st) calendar quarter of
1995 shall be utilized in computing (a)(i) above.
SECTION 9. PAYMENTS. On or before the tenth (10th) day
of the second (2nd) calendar month following the calendar month in which the
services provided for herein are performed
13
<PAGE> 14
by Masada, Masada shall submit to Centennial on the form attached hereto as
Schedule 9, a report reflecting (i) the total amount owed by Centennial to
Masada for such calendar month as computed pursuant to the terms of Sections
8(a) - (c) and certified by the President or Chief Financial Officer of Masada.
Such amount shall be paid by Centennial to Masada on or before the thirtieth
(30th) day after Masada delivers to Centennial the report described in this
Section 9.
SECTION 10. ASSIGNABILITY AND BINDING EFFECT. No party
hereto may assign its rights nor delegate its obligations under this Agreement
to any other Person without the prior written consent of the other party
hereto, which consent may be granted, conditioned or withheld in the other
party's sole discretion. This Agreement shall be binding upon and enforceable
by and shall inure to the benefit of the successors and permitted assigns of
the parties hereto. This Agreement shall not create nor shall it be construed
as creating any rights enforceable by any Person not a party to this Agreement
or any Person not the successor or permitted assign of a party hereto.
SECTION 11. EVENTS OF DEFAULT.
(a) The occurrence of any of the following events shall
constitute an Event of Default by Masada and shall entitle Centennial to
terminate this Agreement if such Event of Default is not cured to the
reasonable satisfaction of Centennial within ten (10) days after the receipt by
Masada of
14
<PAGE> 15
notice of such Event of Default and to pursue against Masada any and all
remedies provided by law or equity:
(i) if Masada should discontinue for any reason
the monitoring of the Alarm Systems;
(ii) if Masada should become insolvent, make any
assignment for the benefit of creditors, file a petition for relief under the
Bankruptcy Code or other state or federal law providing relief to debtors, or
have filed against it an involuntary petition for relief under the Bankruptcy
Code which is not dismissed within sixty (60) days of filing or have appointed
a receiver or trustee for its assets; or
(iii) if Masada should continue to fail to comply
with any other term, covenant, obligation or duty required of Masada pursuant
to this Agreement after thirty (30) days following written notice by Centennial
to Masada of such failure to comply.
(b) The occurrence of any of the following events shall
constitute an Event of Default by Centennial and shall entitle Masada to
terminate this Agreement if such Event of Default is not cured to the
reasonable satisfaction of Masada within ten (10) days after the receipt by
Centennial of notice of such Event of Default and to pursue against Centennial
any and all remedies provided by law or equity:
(i) the failure of Centennial to pay any and all
monetary obligations pursuant to this Agreement as and when due;
15
<PAGE> 16
(ii) if Centennial should become insolvent, make
any assignment for the benefit of creditors, file a petition for relief under
the Bankruptcy Code or other state or federal law providing relief to debtors,
or have filed against it an involuntary petition for relief under the
Bankruptcy Code which is not dismissed within sixty (60) days of filing or have
appointed a receiver or trustee for its assets; or
(iii) if Centennial should continue to fail to comply
with any other term, covenant, obligation or duty required of Centennial
pursuant to this Agreement after thirty (30) days following written notice by
Masada to Centennial of such failure to comply.
SECTION 12. THIRD PARTY INDEMNIFICATION. In the event
any Person, not a party to this Agreement, including but not limited to, any
Centennial Subscriber, shall make a claim or file any lawsuit against Masada
for any reason related to Masada's obligations pursuant to this Agreement,
including but not limited to, the performance or non- performance of security
monitoring services, Centennial agrees to indemnify, defend and hold Masada
harmless, except as set forth in Section 15, from any and all claims and
lawsuits, including the payment of all damages, expenses, costs, and attorneys'
fees, unless any liabilities or damages result due to the negligence, gross
negligence or intentional misconduct of Masada, its agents, assigns, servants
or employees.
16
<PAGE> 17
SECTION 13. INSURANCE. Centennial shall at all times during the
term of this Agreement, at its own cost and expense, use its best efforts to
obtain and keep in effect insurance to cover possible liability to Centennial
Subscribers or any other Person arising out of design, installation, selection
or manufacture of the Alarm Systems or Centennial's failure properly to repair
and maintain the Alarm Systems. All insurance obtained hereunder shall name
Masada, its employees and agents as additional insureds. Not less than ten
(10) days prior to the expiration of any such policy or policies, evidence of
the renewal of such policy or policies, or a new certificate, together with
evidence of the payment of premiums for the renewal period or new policy, as
the case may be, shall be delivered to Masada. All such insurance shall
contain an agreement by the insurance company that the policy or policies will
not be cancelled, or the coverage changed, without ten (10) days' prior written
notice to Masada. The insurance policy required hereunder shall provide that
it shall not be invalidated as to Masada by reason of any act or omission by
Centennial or if Centennial has made any misrepresentations or omissions in its
application for insurance.
SECTION 14. MASADA IS NOT AN INSURER; DISCLAIMER OF WARRANTIES.
It is understood and agreed by the parties hereto: that Masada is not an
insurer, that if insurance is desired to protect Centennial or the Centennial
Subscriber
17
<PAGE> 18
from loss of property or from personal injury or death, such insurance shall be
obtained by Centennial or the Centennial Subscriber; that the payments provided
for herein are based solely on the value of the services provided by Masada for
Centennial as set forth herein and are unrelated to the value of Centennial's
or the Centennial Subscriber's property; THAT MASADA MAKES NO GUARANTY OR
WARRANTY, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE THAT THE CENTRAL STATION MONITORING SERVICES PERFORMED WILL
AVERT OR PREVENT OCCURRENCES OR THE CONSEQUENCES THEREFROM WHICH THE CENTRAL
STATION MONITORING SERVICES ARE DESIGNED TO DETECT OR AVERT. Centennial
acknowledges that it is impractical and extremely difficult to fix the actual
damages, if any, which may proximately result from a failure to perform any of
the obligations herein, or the failure of the central station monitoring
services to be properly rendered with resulting loss to Centennial and/or the
Centennial Subscriber because of among other things:
(a) The uncertain amount or value of Subscriber's property
which may be lost, stolen, destroyed, damaged or otherwise affected by
occurrences which the central station monitoring services are designed to
detect or avert;
(b) The uncertainty of the response time of any police or
fire department or private security service, should the police or fire
department or private security service be dispatched as a result of a signal
being received;
18
<PAGE> 19
(c) The inability to ascertain what portion, if any, of the
loss which would be proximately caused by Masada's failure to perform or by
central station equipment failure; and
(d) The nature of the central station monitoring services to
be performed by Masada.
SECTION 15. LIMITATION OF LIABILITY. Centennial
understands and agrees that if Masada should be found liable for loss or damage
due to failure of the central station monitoring services or central station
equipment in any respect whatsoever, Masada's liability shall be limited to Two
Hundred Fifty Dollars ($250.00) per account, unless any liabilities or damages
result due to the negligence, gross negligence or intentional misconduct of
Masada, its agents, assigns, servants or employees, and this liability shall be
exclusive; and that the provisions of this Section shall apply if loss or
damage, irrespective of cause or origin, results directly or indirectly to
persons or property, from performance or non-performance of the obligations
imposed by this Agreement, unless any liabilities or damages result due to the
negligence, gross negligence or intentional misconduct of Masada, its agents,
assigns, servants or employees.
SECTION 16. FORCE MAJEURE. No party to this Agreement shall be
deemed to be in breach or in violation of this Agreement if such party is
prevented from performing any of its obligations hereunder for any reason
beyond its control,
19
<PAGE> 20
including without limitation, acts of God, fire, flood, earthquake, unusually
severe weather conditions, explosion, accident, riot, war, sabotage,
requirements or actions or failure to act on the part of governmental
authorities preventing performance, damage to or break down of necessary
facilities resulting from any of the foregoing, or unavailability of fuel,
supplies or inventories (a force majeure event). Lack of financial resources
shall not under any circumstances constitute a force majeure event. Upon the
occurrence of any one or more such events, the party subject to such force
majeure event shall promptly notify the other party of such event. If such
party is rendered unable, wholly or in part, by the force majeure event to
carry out its obligations under this Agreement, the obligations of such party
so far as they are affected by such force majeure event, shall be suspended
during, but no longer than the continuance of, such force majeure event. The
party affected by such force majeure event shall use all reasonable diligence
to remedy the effect upon its ability to perform its obligations hereunder
caused by such force majeure event as promptly as possible.
SECTION 17. RELATIONSHIP OF PARTIES. Masada's relationship to
Centennial is that of an independent contractor. Nothing in this Agreement
shall create between the parties the relationship of principal and agent, joint
venturers, partners, or any other similar or representative
20
<PAGE> 21
relationship, and neither party shall hold itself out as an agent,
representative, partner or joint venturer of the other party. Neither party
shall make for or on behalf of the other party, or subject the other party to,
any contract, agreement, warranty, guarantee, representation, assurance or
other obligation.
SECTION 18. NOTICES. All notices and other official
communications between the parties shall be in writing and shall be given by
hand delivery or by a recognized overnight courier who maintains verification
of delivery (deemed to be duly received on a date delivered), or by registered
mail, postage prepaid, return receipt requested (deemed to be duly received
seven (7) days after such mailing) or by telecopy (deemed to be received on the
date sent providing that the facsimile was properly addressed and disclosed the
number of pages transmitted on its front sheet and that the transmission report
produced indicates that each of the pages of the facsimile was received at the
correct facsimile number) to each of the respective parties as follows:
If to Centennial, then:
Centennial Security, Inc.
1999 Broadway, Suite 2100
Denver, CO 80202
Attn: Catharine Merigold
Telecopier: (303) 292-3512
21
<PAGE> 22
With a copy to:
Kirkland & Ellis
1999 Broadway, Suite 4000
Denver, CO 80202
Attn: Steven E. Segal
Telecopier: (303) 291-3300
If to Masada, then:
3900 Montclair Road, Suite 301
Birmingham, AL 35213
Attn: Terry W. Johnson
Telecopier: (205) 871-3574
With a copy to:
Christopher R. Murvin, Esq.
Tingle, Murvin, Watson & Bates, P.C.
900 Park Place Tower
Birmingham, AL 35203
Telecopier: (205) 322-1163
or to such other address for any of the parties hereto as from time to time
shall be designated by notice given by such party to the other party in the
manner hereinabove provided.
SECTION 19. ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This
Agreement, including the schedule hereto, constitutes and contains the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes any prior oral or written understanding or
agreement of the parties with respect to the transactions contemplated hereby.
The parties may, by mutual agreement in writing, amend this Agreement in any
respect, and any party, as to such party, may (a) extend the time for the
performance of any obligations of the other party; (b) waive any inaccuracies
and representations and warranties by the other party; and (c)
22
<PAGE> 23
waive performance of any obligations by any other party. Any such amendment or
waiver must be in writing and signed by an authorized representative of the
parties or party to such amendment or waiver. No such waiver shall be deemed
to constitute the waiver of any other breach of the same or of any other term
or condition of this Agreement.
SECTION 20. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Alabama,
without regard to principles of conflicts of law.
SECTION 21. PARTIAL INVALIDITY. If any provision of this
Agreement is found by any competent authority to be void or unenforceable, such
provision shall be deemed to be deleted from this Agreement and the remaining
provisions of this Agreement shall continue in full force and effect.
SECTION 22. FURTHER ASSURANCES. Each of the parties shall
execute such other instruments, documents and other papers and shall take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and to consummate the transactions contemplated hereby.
SECTION 23. TIME OF ESSENCE. With regard to the performance of
obligations imposed by this Agreement and the establishment of time periods for
which action is to be taken or notice is to be given, time shall be of the
essence.
SECTION 24. HEADINGS. The section headings contained in this
Agreement are inserted as a matter of convenience and
23
<PAGE> 24
shall not affect in any way the construction of the terms of this Agreement.
SECTION 25. COUNTERPARTS. This Agreement may be executed in one
or more counterparts and by the different parties hereto under separate
counterparts, any one of which need not contain the signatures of more than one
party, but all of which when taken together shall constitute one and the same
instrument notwithstanding that all parties have not signed the same
counterpart hereof.
SECTION 26. DRAFTING PRESUMPTION. Each of the parties hereto has
participated in the negotiation and drafting of this Agreement and agree that
no one party has prepared this document to the exclusion of the other party and
that in construing this Agreement there shall be no presumption based upon
which party drafted the Agreement.
SECTION 27. NO THIRD PARTY BENEFICIARY. This Agreement is
intended for the sole benefit of the parties hereto and their assigns. The
parties acknowledge and agree that there are no intended third party
beneficiaries of this Agreement and that no third party may enforce any terms
or conditions of this Agreement or claim any rights hereunder.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement by authorized representative on the day and year first set forth
above.
24
<PAGE> 25
CENTENNIAL SECURITY, INC.
BY: /s/ Catharine M. Merigold
---------------------------------
CATHARINE M. MERIGOLD
ITS: PRESIDENT
MASADA SECURITY, INC.
BY: /s/ Terry W. Johnson
---------------------------------
TERRY W. JOHNSON
ITS: PRESIDENT
25
<PAGE> 1
PURCHASE AGREEMENT
DATED JUNE 10, 1994
BY AND AMONG CENTENNIAL SECURITY, INC.,
MASADA SECURITY, INC.,
AND, FOR THE LIMITED PURPOSE SET FORTH HEREIN,
CERTAIN STOCKHOLDERS OF CENTENNIAL SECURITY, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
1. Authorization and Closing . . . . . . . . . . . . . . . . . . . . . . . 1
1A. Authorization of the Common Stock . . . . . . . . . . . . . . 1
1B. Purchase and Sale of the Class B Common Stock . . . . . . . . 1
1C. The Closing . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Conditions of the Purchaser's Obligation at the Closing . . . . . . . . 1
2A. Representations and Warranties; Covenants . . . . . . . . . . 1
2B. Amendment to Charter . . . . . . . . . . . . . . . . . . . . . 2
2C. Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2D. Blue Sky Clearance . . . . . . . . . . . . . . . . . . . . . . 2
2E. Closing Documents . . . . . . . . . . . . . . . . . . . . . . 2
2F. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 2
2G. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3A. Financial Statements and Other Information . . . . . . . . . . 3
3B. Compliance with Agreements . . . . . . . . . . . . . . . . . . 4
3C. Current Public Information . . . . . . . . . . . . . . . . . . 4
3D. First Refusal Rights . . . . . . . . . . . . . . . . . . . . . 4
3E. Board of Director Representation . . . . . . . . . . . . . . . 5
3F. Additional Issuances of Class B Common . . . . . . . . . . . . 6
3G. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 6
3H. Sale of the Company . . . . . . . . . . . . . . . . . . . . . 7
4. Transfer of Restricted Securities . . . . . . . . . . . . . . . . . . . 8
5. Representations and Warranties of the Company . . . . . . . . . . . . . 9
5A. Organization and Corporate Power . . . . . . . . . . . . . . . 9
5B. Capital Stock and Related Matters . . . . . . . . . . . . . . 9
5C. Authorization; No Breach . . . . . . . . . . . . . . . . . . . 10
5D. No Operating History . . . . . . . . . . . . . . . . . . . . . 10
5E. Governmental Consent, etc . . . . . . . . . . . . . . . . . . 10
5F. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . 10
6. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7A. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7B. Purchaser's Representations and Warranties . . . . . . . . . . 12
7C. Consent to Amendments . . . . . . . . . . . . . . . . . . . . 13
7D. Survival of Representations and Warranties . . . . . . . . . . 13
7E. Successors and Assigns . . . . . . . . . . . . . . . . . . . . 14
7F. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 14
7G. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 14
7H. Descriptive Headings; Interpretation . . . . . . . . . . . . . 14
7I. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 14
7J. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
LIST OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
- ii -
<PAGE> 4
PURCHASE AGREEMENT
THIS AGREEMENT is made as of June 10, 1994, by and among Centennial
Security, Inc., a Delaware corporation (the "Company"), Masada Security, Inc.,
a Delaware corporation (the "Purchaser"), and, with respect to Section 3E(i) of
this Agreement only, the persons named as Stockholders (the "Stockholders") on
the signature page hereto. Except as otherwise indicated herein, capitalized
terms used herein are defined in Section 6 hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing.
1A. Authorization of the Common Stock. The Company shall authorize
the issuance and sale to the Purchaser of 4,750 shares of its class B common
stock, par value $.001 per share (the "Class B Common Stock").
1B. Purchase and Sale of the Class B Common Stock. At the Closing,
the Company shall issue and sell to the Purchaser and, subject to the terms
and conditions set forth herein, the Purchaser shall purchase and acquire from
the Company, 4,750 shares of Class B Common Stock. In consideration therefore,
the Purchaser agrees to enter into with the Company and fully perform its
obligations under a Trademark and Intellectual Property Agreement substantially
in the form set forth as Exhibit A attached hereto (the "Trademark Agreement").
1C. The Closing. The closing of the purchase and sale of the Class B
Common Stock and execution of the Trademark Agreement (the "Closing") shall
take place at the offices of Kirkland & Ellis, 1999 Broadway, Suite 4000,
Denver, Colorado at 10:00 a.m. on June 10, 1994, or at such other place or on
such other date as may be mutually agreeable to the Company and the Purchaser.
At the Closing, the Company shall deliver to the Purchaser stock certificates
evidencing the Class B Common Stock to be purchased by the Purchaser,
registered in the Purchaser's or its nominee's name, upon the Purchaser's
execution of the Trademark Agreement.
Section 2. Conditions of the Purchaser's Obligation at the Closing.
The obligation of the Purchaser to purchase and pay for the Class B Common
Stock and enter into the Trademark Agreement at the Closing is subject to the
satisfaction as of the Closing of the following conditions:
2A. Representations and Warranties; Covenants. The representations
and warranties contained in Section 5 hereof shall be true and correct in all
material respects at and as of the Closing as though then made, except to the
extent of changes caused by
<PAGE> 5
the transactions expressly contemplated herein, and the Company shall have
performed in all material respects all of the covenants required to be
performed by it hereunder prior to the Closing.
2B. Amendment to Charter. At or prior to the Closing, the Company
shall have amended its Certificate of Incorporation to create the Class B
Common Stock and class A common stock, $0.001 par value per share ("Class A
Common"), each with the rights and privileges, and subject to the
qualifications, limitations and restrictions substantially as set forth in
Exhibit B attached hereto (the "Charter Amendment").
2C. Bylaws. The Company's bylaws as previously provided to the
Purchaser shall be in full force and effect as of the Closing and shall not
have been amended or modified.
2D. Blue Sky Clearance. The Company shall have made all filings under
applicable state securities laws necessary to consummate the issuance of the
Class B Common Stock pursuant to this Agreement in compliance with such laws.
2E. Closing Documents. The Company shall have delivered to the
Purchaser all of the following documents:
(i) copies of the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and
performance of this Agreement and the Trademark Agreement and each of
the other agreements contemplated hereby, the filing of the Charter
Amendment with the Delaware Secretary of State, the issuance and sale
of the Class B Common Stock, and the consummation of all other
transactions contemplated by this Agreement;
(ii) copies of the Certificate of Incorporation and the
Company's bylaws, each as in effect at the Closing; and
(iii) copies of any governmental consents, approvals and
filings required in connection with the consummation of the
transactions hereunder (including, without limitation, all blue sky
law filings).
2F. Proceedings. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser and its counsel.
2G. Waiver. Any condition specified in this Section 2 may be waived
by the Purchaser if such waiver is set forth in a writing executed by the
Purchaser.
- 2 -
<PAGE> 6
Section 3. Covenants.
3A. Financial Statements and Other information. The Company shall
deliver to the Purchaser so long as the Purchaser holds all of the Class B
Common Stock purchased by the Purchaser pursuant to this Agreement or all of
the shares of Class A Common into which such shares of Class B Common Stock
shall have been converted:
(i) as soon as available but in any event within 45 days
after the end of each monthly accounting period in each fiscal year,
unaudited consolidating and consolidated statements of income and
cash flows of the Company and its Subsidiaries for such monthly
period and for the period from the beginning of the fiscal year to
the end of such month, and consolidating and consolidated balance
sheets of the Company and its Subsidiaries as of the end of such
monthly period, setting forth in each case comparisons to the
corresponding period in the preceding fiscal year, and all such
statements shall be prepared in accordance with generally accepted
accounting principles, consistently applied, subject to the absence
of footnote disclosures and to normal year-end adjustments;
(ii) within 120 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of
the Company and its Subsidiaries for such fiscal year, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth in each
case comparisons to the preceding fiscal year, all prepared in
accordance with generally accepted accounting principles,
consistently applied, and accompanied by, with respect to the
consolidated portions of such statements, an opinion of an
independent accounting firm of recognized national standing;
(iii) promptly upon receipt thereof, any additional
reports, management letters or other detailed information concerning
significant aspects of the Company's operations or financial affairs
given to the Company by its independent accountants (and not
otherwise contained in other materials provided hereunder); and
(iv) within ten business days after transmission thereof,
copies of all financial statements, proxy statements, reports and any
other general written communications which the Company sends to its
stockholders and copies of all registration statements and all
regular, special or periodic reports which it files, or (to its
knowledge) any of its officers or directors file with respect to the
Company, with the Securities and Exchange Commission or with any
securities exchange on which any of its securities are then listed,
and copies of all press releases and other statements made available
generally by the Company to the public concerning material
developments in the Company's businesses.
Each of the financial statements referred to in subparagraph (i) and (ii) shall
be true and correct in all material respects as of the dates and for the
periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal
-3-
<PAGE> 7
year-end audit adjustments (none of which would, alone or in the aggregate, be
materially adverse to the financial condition or business prospects of the
Company and its Subsidiaries taken as a whole).
3B. Compliance with Agreements. The Company shall perform and
observe all of its obligations to each holder of the Class B Common Stock set
forth in the Certificate of Incorporation and the Company's bylaws.
3C. Current Public Information. At all times after the Company
has filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder and
shall take such further action as any holder or holders of Restricted
Securities may reasonably request, all to the extent required to enable such
holders to sell Restricted Securities pursuant to (i) Rule 144 adopted by the
Securities and Exchange Commission under the Securities Act (as such rule may
be amended from time to time) or any similar rule or regulation hereafter
adopted by the Securities and Exchange Commission or (ii) a registration
statement on Form S-2 or S-3 or any similar registration form hereafter adopted
by the Securities and Exchange Commission. Upon request, the Company shall
deliver to any holder of Restricted Securities a written statement as to
whether it has complied with such requirements.
3D. First Refusal Rights.
(i) Except for the issuance of Class A Common Stock (a) to the
Company's employees, (b) in connection with the acquisition of another
business, or (c) pursuant to a public offering registered under the Securities
Act, if, at any time at and after the Class B Common Stock purchased hereunder
is converted into Class A Common pursuant to the terms of the Charter
Amendment, the Company authorizes the issuance or sale of any shares of Class A
Common or any securities containing options or rights to acquire any shares of
Class A Common (other than as a dividend on the outstanding Class A Common),
the Purchaser shall be entitled to purchase in such issuance or sale a portion
of such stock or securities equal to the result obtained by multiplying the
number of shares of such stock or other securities proposed to be issued and
sold by the quotient determined by dividing (1) the aggregate number of shares
of Class A Common held by the Purchaser (on a fully diluted basis) by (2) the
total number of shares of Class A Common outstanding (on a fully diluted
basis), including such shares held by the Purchaser. The Purchaser shall be
entitled to purchase such stock or securities at the most favorable price and
on the most favorable terms as such stock or securities are offered and sold to
any other Persons. The purchase price for all stock and securities offered to
the Purchaser shall be payable in accordance with the terms of said offer in
cash or, to the extent otherwise provided thereunder, notes issued by such
holders.
- 4 -
<PAGE> 8
(ii) In order to exercise its purchase rights hereunder, the Purchaser must
within 15 days after receipt of written notice from the Company describing in
reasonable detail the stock or securities being offered, the purchase price
thereof, the payment and other material terms, and such holder's percentage
allotment, deliver a written notice to the Company describing its election
hereunder. If all of the stock and securities offered to the Purchaser is not
fully subscribed by the Purchaser, the remaining stock and securities may be
purchased by Principals and other stockholders of the Purchaser if the Company
is notified in writing, within the 15-day time period referred to in the
previous sentence, as to the identity of such Principals and other stockholders
and the amount of stock or other securities to be purchased by each such
Principal and other stockholder; provided, however, that, unless the Company
otherwise consents in writing in its sole discretion, no such Principal or
other stockholder shall be entitled to purchase any stock or securities from
the Company unless such Principal or other stockholder is an "accredited
investor" within the meaning of Regulation D under the Securities Act; and
provided further, however, that the Company has been provided with
documentation satisfactory to it (which shall, upon the Company's request,
include an opinion of counsel reasonably satisfactory to the Company) that in
purchasing such stock or other securities, such Principal or other stockholder
would not be usurping a corporate opportunity of the Purchaser in contravention
of applicable law.
(iii) Upon the expiration of the offering period described above, the
Company shall be entitled to sell such stock or securities which the Purchaser
(including the Principals and other stockholders of the Purchasers) has not
elected to purchase during the 90 days following such expiration on terms and
conditions no more favorable to the purchasers thereof than those offered to
such holders. Any stock or securities offered or sold by the Company after such
90-day period must be reoffered to the Purchaser pursuant to the terms of this
paragraph.
(iv) The rights under this paragraph 3D shall terminate upon the
closing of an underwritten public offering of any class of the Company's common
stock pursuant to a registration statement filed by the Company with the
Securities and Exchange Commission under the Securities Act, and such rights
shall not apply to such offering.
3E. Board of Director Representation.
(i) At or any time after the Conversion time (as defined in the
Charter Amendment), as a result of which the Purchaser, as the holder of Class
B Common Stock, shall no longer be entitled to elect a member of the Company's
Board of Directors pursuant to the Charter Amendment, and upon the Company's
request, the Purchaser shall take all necessary and desirable actions within
its control to cause the director elected by the holders of Class B Common
Stock pursuant to the Charter Amendment to resign immediately from the
Company's Board of Directors. Subject to the preceding sentence and the
Charter Amendment, from and after the Conversion Time and notwithstanding the
conversion of all Class B Common Stock into Class A Common at such time
pursuant to the Charter Amendment, if and as long as (i) the Trademark
Agreement is in full force and
- 5
<PAGE> 9
effect and the Purchaser is not in default thereunder, and (ii) the Purchaser
has not transferred or otherwise disposed of any of the Class B Common Stock
purchased hereunder (including any shares of Class A Common received upon
conversion of such Class B Common Stock), each Stockholder shall vote all of
his shares of Class A Common and any other voting securities of the Company
over which such Stockholder has voting control and shall take all other
necessary or desirable actions within his control (whether in his capacity as a
stockholder, member of the Board of Directors (the "Board"), member of a Board
committee or officer of the Company or otherwise, and including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings)
consistent with applicable fiduciary duties, and the Company shall take all
necessary and desirable actions within its control (including, without
limitation, calling special Board and stockholder meetings), consistent with
applicable fiduciary duties, so that one of the Principals (or another person
acceptable to the Company), as designated by the Purchaser from time to time,
shall be elected and be entitled to serve on the Company's Board of Directors.
(ii) If the Purchaser fails to designate a representative to fill
the directorship pursuant to the terms of this paragraph 3E or to fill any
subsequent vacancy therein within ten business days after receiving a written
request from the Company to designate such representative, the election of a
person to such directorship shall be accomplished in accordance with the
Company's bylaws and applicable law.
(iii) The Company will require as a precondition to any person acquiring
equity securities of the Company after the date hereof to agree to be bound by
and comply with the provisions of Section 3(E)(i) as applicable to Stockholders
until such time as the Purchaser is no longer entitled to designate a person to
serve on the Company's Board of Directors pursuant thereto.
3F. Additional Issuances of Class B Common.
Until the Conversion Time, the Company shall not issue any shares of
Class B Common Stock to any Person other than the Purchaser without the
Purchaser's prior written consent.
3G. Affirmative Covenants. So long as (a) the Trademark Agreement
is in full force and effect and the Purchaser is not in default thereunder, and
(b) the Purchaser holds all of the Class B Common Stock purchased hereunder
(including shares of Class A Common received upon conversion of such Class B
Common Stock) the Company shall use its best efforts, and shall cause each
Subsidiary to use its best efforts, to:
(i) cause to be done all things necessary to maintain, preserve
and renew its corporate existence and all material licenses, authorizations and
permits necessary to the conduct of its business;
- 6 -
<PAGE> 10
(ii) maintain and keep its properties in good repair, working order
and condition, and from time to time make all necessary repairs, renewals and
replacements, so that its businesses may be properly conducted at all times;
(iii) pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or profits
therefrom (in each case before the same becomes delinquent and before penalties
accrue thereon) and all claims for labor, materials or supplies to the extent
to which the failure to pay or discharge such obligations would reasonably be
expected to have a material adverse effect upon the financial condition of the
Company and its Subsidiaries taken as a whole, unless and to the extent that
the same are being contested in good faith and by appropriate proceedings and
adequate reserves (as determined in accordance with generally accepted
accounting principles, consistently applied) have been established on its books
with respect thereto;
(iv) comply with all other material obligations which it incurs
pursuant to any contract or agreement as such obligations become due to the
extent to which the failure to so comply would reasonably be expected to have a
material adverse effect upon the financial condition of the Company and its
Subsidiaries taken as a whole, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings and adequate reserves
(as determined in accordance with generally accepted accounting principles,
consistently applied) have been established on its books with respect thereto;
(v) comply with all applicable laws, rules and regulations of all
governmental authorities, the violation of which would reasonably be expected
to have a material adverse effect upon the financial condition of the Company
and its Subsidiaries taken as a whole; and
(vi) maintain proper books of record and account which fairly
present its financial condition and results of operations and make provisions
on its financial statements for all such proper reserves as in each case are
required in accordance with generally accepted accounting principles,
consistently applied.
3H. Sale of the Company.
(i) If, at any time prior to closing a public offering of any of
the Company's securities registered under the Securities Act, the Company
determines to seek a sale of all or substantially all of the Company's assets
or any transaction of the type specified in Section C.4(ii)(b) or (d) of the
Charter Amendment (each, a "Sale of the Company"), the Company will, at the
Purchaser's election, negotiate exclusively with the Purchaser in good faith
for a period of thirty (30) days (such thirty (30) day period shall herein be
referred to as the "Negotiating Period") with respect to entering into a Sale
of the Company with the Purchaser.
- 7 -
<PAGE> 11
(ii) If, at the end of the Negotiating Period, the Company and the
Purchaser have not reached agreement with respect to a Sale of the Company or
to extend, by mutual agreement, the Negotiating Period, the Company shall
promptly notify the Purchaser in writing of the principal terms and conditions
upon which it is then willing to enter into an agreement relating to a Sale of
the Company. Such notice shall contain an offer (the "Offer") to contract with
the Purchaser on such terms and conditions, and the Purchaser shall have a
period of ten (10) business days from its receipt of the Offer in which to
accept the Offer. If the Offer is not accepted by the Purchaser, then the
Company may enter into an agreement on terms and conditions substantially
similar or more favorable to Centennial than those described in the Offer with
any other party. The Company may not enter into an agreement relating to a
Sale of the Company that is not on terms and conditions substantially similar
or more favorable to Centennial than those described in the Offer without again
complying with the provisions of this Section 3H(ii).
Section 4. Transfer of Restricted Securities.
(i) Restricted Securities are transferable only pursuant to (a)
public offerings registered under the Securities Act, (b) Rule 144 or Rule 144A
of the Securities and Exchange Commission (or any similar rule or rules then in
force) if either of such rules is available and (c) subject to the conditions
specified in subparagraph (ii) below, any other legally available means of
transfer.
(ii) In connection with the transfer of any Restricted Securities
(other than a transfer described in subparagraph 4(i)(a) or (b) above), the
holder thereof shall deliver written notice to the Company describing in
reasonable detail the transfer or proposed transfer, together with an opinion
of counsel which (to the Company's reasonable satisfaction) is knowledgeable in
securities law matters to the effect that such transfer of Restricted
Securities may be effected without registration of such Restricted Securities
under the Securities Act. In addition, if the holder of the Restricted
Securities delivers to the Company an opinion of counsel reasonably acceptable
to the Company that no subsequent transfer of such Restricted Securities shall
require registration under the Securities Act, the Company shall promptly upon
such contemplated transfer deliver new certificates for such Restricted
Securities which do not bear the Securities Act legend set forth in paragraph
7B(i). If the Company is not required to deliver new certificates for such
Restricted Securities not bearing such legend, the holder thereof shall not
transfer the same until the prospective transferee has confirmed to the Company
in writing its agreement to be bound by the conditions contained in this
paragraph and paragraph 7B (i).
(iii) Upon the request of the Purchaser, the Company shall promptly
supply to the Purchaser or its prospective transferees all information
regarding the Company required to be delivered in connection with a transfer
pursuant to Rule 144A of the Securities and Exchange Commission; provided,
however, that any prospective transferees enter into confidentiality agreements
reasonably requested by the Company.
- 8 -
<PAGE> 12
(iv) Upon the request of any holder of Restricted Securities, the
Company shall remove the foregoing legend from the certificates for such
holder's Restricted Securities; provided that such Restricted Securities are
eligible for sale pursuant to Rule 144(k).
Section 5. Representations and Warranties of the Company. As a
material inducement to the Purchaser to enter into this Agreement and purchase
the Class B Common Stock, the Company hereby represents and warrants that:
5A. Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
is qualified to do business in every jurisdiction in which the failure to so
qualify would reasonably be expected to have a material adverse effect on the
financial condition or business prospects of the Company and its Subsidiaries
taken as a whole. The Company has all requisite corporate power and authority
and all material licenses, permits and authorizations necessary to own and
operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement. The copies of the Company's charter documents
and bylaws which have been furnished to the Purchaser's counsel reflect all
amendments made thereto at any time prior to the date of this Agreement and are
correct and complete.
5B. Capital Stock and Related Matters.
(i) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of 5,000 shares of Class B Common
Stock, of which 4,750 shares shall be issued and outstanding, 50,000 shares of
Class A Common, of which 27,000 shares shall be issued and outstanding and
10,000 shares of preferred stock, none of which shall be issued and
outstanding. As of the Closing, neither the Company nor any Subsidiary shall
have outstanding any stock or securities convertible or exchangeable for any
shares of its capital stock or containing any profit participation features,
nor shall it have outstanding any rights or options to subscribe for or to
purchase its capital stock or any stock or securities convertible into or
exchangeable for its capital stock or any stock appreciation rights or phantom
stock plans, except as set forth in this Agreement. As of the Closing, the
Company shall not be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or
any warrants, options or other rights to acquire its capital stock. As of the
Closing, all of the outstanding shares of the Company's capital stock shall be
validly issued, fully paid and nonassessable.
(ii) There are no statutory or, to the best of the Company's
knowledge, except as contemplated by this Agreement, contractual stockholders
preemptive rights or rights of refusal with respect to the issuance of the
Class B Common Stock hereunder. To the best of the Company's knowledge, the
Company has not violated any applicable federal or state securities laws in
connection with the offer, sale or issuance of any of its capital stock, and
the offer, sale and issuance of the Class B Common Stock hereunder do not
require registration under the Securities Act or any applicable state
securities laws. To the
- 9 -
<PAGE> 13
best of the Company's knowledge, there are no agreements between the Company's
stockholders with respect to the voting or transfer of the Company's capital
stock or with respect to any other aspect of the Company's affairs, except as
contemplated by this Agreement.
5C. Authorization; No Breach. The execution, delivery and
performance of this Agreement, the Trademark Agreement and all other agreements
contemplated hereby and thereby to which the Company is a party, have been duly
authorized by the Company. This Agreement, the Trademark Agreement and all
other agreements contemplated hereby and thereby each constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
subject to applicable laws of bankruptcy, insolvency and similar laws affecting
creditors' rights and the application of general rules of equity. The
execution and delivery by the Company of this Agreement, the Trademark
Agreement and all other agreements contemplated hereby and thereby to which the
Company is a party, the offering, sale and issuance of the Class B Common Stock
hereunder, and the fulfillment of and compliance with the respective terms
hereof and thereof by the Company, do not and shall not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in the creation of any lien, security interest,
charge or encumbrance upon the Company's capital stock or assets pursuant to,
(iv) give any third party the right to modify, terminate or accelerate any
obligation under, (v) result in a violation of, or (vi) require any
authorization, consent, approval, exemption or other action by or notice to any
court or administrative or governmental body pursuant to, the charter or bylaws
of the Company, or, to the Company's knowledge, any material law, statute, rule
or regulation to which the Company is subject, or any material agreement,
instrument, order, judgment or decree to which the Company is subject.
5D. No Operating History. The Company was formed in November 1993
and has conducted no material business operations to date other than those
incident to its formation and entering into this Agreement, the Trademark
Agreement and the transactions contemplated hereby and thereby.
5E. Governmental Consent, etc. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby, except as expressly contemplated herein or in the exhibits hereto.
5F. Closing Date. The representations and warranties of the
Company contained in this Section 5 and elsewhere in this Agreement and all
information contained in any exhibit, schedule or attachment hereto or in any
writing delivered by, or on behalf of, the Company to the Purchaser shall be
true and correct in all material respects on the date of the Closing as though
then made, except as affected by the transactions expressly contemplated by
this Agreement.
- 10 -
<PAGE> 14
Section 6. Definitions. For the purposes of this Agreement, the
following terms have the meanings set forth below:
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Principal" means each of Terry W. Johnson and Daryl E. Harms.
"Restricted Securities" means (i) the Class B Common Stock issued
hereunder, and (ii) any securities issued with respect to or upon conversion of
the Class B Common Stock referred to in (i) above by way of a stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, or in connection with the
conversion of such Class B Common Stock. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have (a) been effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering them, (b) become
eligible for sale pursuant to Rule 144(k) (or any similar provision then in
force) under the Securities Act or (c) been otherwise transferred and new
certificates for them not bearing the Securities Act legend set forth in
paragraph 7B have been delivered by the Company in accordance with paragraph
4(ii). Whenever any particular securities cease to be Restricted Securities,
the holder thereof shall be entitled to receive from the Company, without
expense, new securities of like tenor not bearing a Securities Act legend of
the character set forth in paragraph 7B.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
"Subsidiary" means any corporation of which the securities having a
majority of the ordinary voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through one or more Subsidiaries.
Section 7. Miscellaneous.
7A. Remedies. The Company and the Purchaser shall be entitled to
enforce any rights under any provision of this Agreement specifically (without
posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law.
- 11 -
<PAGE> 15
7B. Purchaser's Representations and Warranties. The Purchaser hereby
represents and warrants that:
(i) The Purchaser is acquiring the Class B Common Stock purchased
hereunder or acquired pursuant hereto for its own account with the present
intention of holding such securities for purposes of investment, and that it
has no intention of selling such securities in a public distribution in
violation of the federal securities laws or any applicable state securities
laws; provided that nothing contained herein shall prevent the Purchaser and
subsequent holders of Class B Common Stock from transferring such securities in
compliance with the provisions of paragraph 4 hereof. The Purchaser
understands that the Class B Common Stock has not been registered under the
Securities Act by reason of its issuance by the Company in a transaction exempt
from the registration requirements of the Act. Each certificate for Class B
Common Stock shall be imprinted with a legend in substantially the following
form:
"The securities represented by this certificate were originally issued
on June 10, 1994, and have not been registered under the Securities
Act of 1933, as amended. The transfer of the securities represented
by this certificate is subject to the conditions specified in the
Purchase Agreement, dated as of June 10, 1994, between the issuer (the
"Company") and a certain investor, and the Company reserves the right
to refuse the transfer of such securities until such conditions have
been fulfilled with respect to such transfer. The securities
represented by this certificate are also subject to certain
restrictions on transfer and other matters set forth in the Company's
Certificate of Incorporation. A copy of all such conditions and other
matters shall be furnished by the Company to the holder hereof upon
written request and without charge."
(ii) The Purchaser recognizes that investing in the Class B Common
Stock involves a high degree of risk, and is in a financial position to hold
the Class B Common Stock indefinitely and is able to bear the economic risk and
withstand a complete loss of its investment in the Class B Common Stock; the
Purchaser understands that it may incur a complete loss of its investment in
the Class B Common Stock.
(iii) The Purchaser is a sophisticated investor and is capable of
evaluating the merits and risks of investing in the Company given its stage of
development.
(iv) The Purchaser has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management, has
been given full and complete access to information concerning the Company, and
has utilized such access to its satisfaction for the purpose of obtaining
information or verifying information and has had the opportunity to inspect the
Company's facilities.
(v) The Purchaser has had the opportunity to ask questions of, and
receive answers from, the management of the Company (and any person acting on
its
- 12 -
<PAGE> 16
behalf) concerning the Class B Common Stock and the terms and conditions of
this Agreement and the agreements and transactions contemplated hereby, and to
obtain any additional information as the Purchaser may have requested in making
its investment decision.
(vi) The Purchaser is an "accredited investor," as defined by
Regulation D promulgated under the Securities Act.
(vii) The Purchaser has the power (corporate or otherwise) and
requisite authority, and has taken all action (corporate or otherwise)
necessary, to execute, deliver and perform this Agreement, the Trademark
Agreement and all other agreements contemplated hereby and thereby to which the
Purchaser is a party and to subscribe for and purchase the Class B Common Stock.
(viii) Each of this Agreement, the Trademark Agreement and all other
agreements contemplated hereby and thereby to which the Purchaser is a party,
upon execution by the Purchaser, will be duly authorized, executed and delivered
by the Purchaser, and will be the legal and binding obligation of the Purchaser,
enforceable in accordance with its terms, subject to applicable laws of
bankruptcy, insolvency and similar laws affecting creditors' rights and the
application of general rules of equity.
(ix) The execution and delivery by the Purchaser of this Agreement, the
Trademark Agreement and all other agreements contemplated hereby and thereby
and the fulfillment of and compliance with the respective terms hereof and
thereof, do not and shall not (i) violate any constitution, statute,
regulation, rule, injunction, judgement, order, decree, ruling, or other
restriction of any government, governmental agency, or court to which the
Purchaser is subject, or any provision of the Purchaser's charter or bylaws or
other internal governing documents or (ii) conflict with, result in a breach
of, or constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under, any agreement, contract, lease, permit, license, instrument, or
any other arrangement to which the Purchaser is a party or by which it is bound
or to which its assets are subject. No notice, consent, filing, authorization
or approval of any government or governmental agency is required for the
Purchaser to consummate the transactions contemplated hereby.
7C. Consent to Amendments. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended and the Company or the
Purchaser may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company or the Purchaser, as
the case may be, has obtained the written consent of the other party.
7D. Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the
- 13 -
<PAGE> 17
transactions contemplated hereby, regardless of any investigation made by the
Purchaser or the Company or on either parties' behalf.
7E. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
7F. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
7G. Counterparts. This Agreement may be executed simultaneously in two
counterparts, either one of which need not contain the signatures of more than
one party, but both such counterparts taken together shall constitute one and
the same Agreement.
7H. Descriptive Headings; Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a
Section of this Agreement. The use of the word "including" in this Agreement
shall be by way of example rather than by limitation.
7I. Governing Law. The corporate law of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity and interpretation of
this Agreement and the exhibits and schedule hereto shall be governed by the
internal law, and not the law of conflicts, of Colorado.
7J. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable express courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the Company at:
Centennial Security, Inc.
1999 Broadway
Suite 2100
Denver, Colorado 80202
Attention: Catharine M. Merigold
- 14 -
<PAGE> 18
with a copy to:
Kirkland & Ellis
1999 Broadway
Suite 4000
Denver, Colorado 80202
Attention: Steven E. Segal
and to the Purchaser at:
Masada Security, Inc.
3900 Montclair Road
Suite 380
Birmingham, Alabama 35213
Attention: Terry W. Johnson
with a copy to:
Tingle, Murvin, Watson & Bates, P.C.
Suite 900
Park Place Tower
2001 Park Place
Birmingham, AL 35203
Attention: Christopher R. Murvin
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
- 15 -
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first written above.
THE COMPANY CENTENNIAL SECURITY, INC.
/s/ Catharine M. Merigold
----------------------------------
By: Catharine M. Merigold
Its: President
THE PURCHASER MASADA INC.
/s/ Terry W. Johnson
-------------------------------------
By: Terry W. Johnson
Its: President
THE STOCKHOLDERS CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L-P.
Its: General Partner
Only with Respect to Section 3E(i) of
this Agreement
/s/ Laura Beller
------------------------------------
By: Laura Beller
Its: General Partner
LARIMER & CO
Only with Respect to Section 3E(i) of
this Agreement
/s/ Laura Beller
-------------------------------------
By: Laura Heller
Its: Senior Vice President
- 16 -
<PAGE> 20
LIST OF EXHIBITS
Exhibit A - Trademark and Intellectual Property Agreement
Exhibit B - Charter Amendment
- 17 -
<PAGE> 1
- -------------------------------------------------------------------------------
TRADEMARK AND INTELLECTUAL PROPERTY AGREEMENT
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Masada Confidential Information . . . . . . . . . . 1
1.2 Centennial Confidential Information . . . . . . . . 1
1.3 Intellectual Property . . . . . . . . . . . . . . . 2
1.4 Marketing-Related Materials . . . . . . . . . . . . 2
1.5 Services . . . . . . . . . . . . . . . . . . . . . 2
1.6 Trademarks. . . . . . . . . . . . . . . . . . . . . 2
1.7 Territory . . . . . . . . . . . . . . . . . . . . . 2
2. LICENSES . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Trademarks and Trade Name . . . . . . . . . . . . . 3
2.2 Intellectual Property . . . . . . . . . . . . . . . 3
2.3 Transfers or Assignments. . . . . . . . . . . . . . 3
2.4 Joint Purchasing . . . . . . . . . . . . . . . . . 3
3. QUALITY CONTROL. . . . . . . . . . . . . . . . . . . . . . 3
3.1 Conformance With Standards. . . . . . . . . . . . . 3
3.2 Provision of Services . . . . . . . . . . . . . . . 4
3.3 Service Standards . . . . . . . . . . . . . . . . . 4
3.4 Quality Control . . . . . . . . . . . . . . . . . . 4
3.5 Labeling . . . . . . . . . . . . . . . . . . . . . 4
4. TRADEMARK LICENSE LIMITATIONS. . . . . . . . . . . . . . . 4
4.1 Use of Trademarks . . . . . . . . . . . . . . . . . 4
4.2 Registration. . . . . . . . . . . . . . . . . . . . 5
4.3 Enforcement . . . . . . . . . . . . . . . . . . . . 5
5. MARKETING. . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Marketing Efforts . . . . . . . . . . . . . . . . . 6
5.2 Use of Other Trademarks . . . . . . . . . . . . . . 6
6. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . 6
6.1 Masada Confidential Information . . . . . . . . . . 6
6.2 Centennial Acknowledgement. . . . . . . . . . . . . 6
6.3 Centennial Confidential Information . . . . . . . . 6
6.4 Masada Acknowledgement. . . . . . . . . . . . . . . 7
7. WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . 7
7.1 Authority . . . . . . . . . . . . . . . . . . . . . 7
7.2 Rights to Trademarks and Intellectual Property. . . 7
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C>
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 8
8.1 Centennial Indemnification . . . . . . . . . . . . . 8
8.2 Masada Indemnification . . . . . . . . . . . . . . . 8
9. TERM; TERMINATION . . . . . . . . . . . . . . . . . . . . . 9
9.1 Term . . . . . . . . . . . . . . . . . . . . . . . . 9
9.2 Termination For Insolvency . . . . . . . . . . . . . 9
9.3 Termination for Breach . . . . . . . . . . . . . . . 10
9.4 Rights on Termination . . . . . . . . . . . . . . . 11
9.5 Actions Upon Termination . . . . . . . . . . . . . . 11
10. GOVERNMENT APPROVALS. . . . . . . . . . . . . . . . . . . . 11
10.1 Required Approvals . . . . . . . . . . . . . . . . . 11
10.2 Compliance with Laws . . . . . . . . . . . . . . . . 11
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 11
11.1 Notices . . . . . . . . . . . . . . . . . . . . . . 11
11.2 Entire Agreement . . . . . . . . . . . . . . . . . . 12
11.3 No Waiver . . . . . . . . . . . . . . . . . . . . . 12
11.4 No Strict Construction . . . . . . . . . . . . . . . 13
11.5 Severability . . . . . . . . . . . . . . . . . . . . 13
11.6 Governing Law and Jurisdiction . . . . . . . . . . . 13
11.7 Relationship of the Parties . . . . . . . . . . . . 13
11.8 No Third Party Beneficiaries . . . . . . . . . . . . 13
11.9 Counterparts . . . . . . . . . . . . . . . . . . . . 13
EXHIBIT 1.3 - Intellectual Property . . . . . . . . . . . . 15
EXHIBIT 1.6 - Trademarks . . . . . . . . . . . . . . . . . 16
EXHIBIT 2.2 - Training Schedule . . . . . . . . . . . . . . 17
EXHIBIT 2.4 - Joint Purchasing. . . . . . . . . . . . . . . 18
</TABLE>
- ii -
<PAGE> 4
TRADEMARK AND INTELLECTUAL PROPERTY AGREEMENT
THIS TRADEMARK AND INTELLECTUAL PROPERTY AGREEMENT is made and entered
into this 10th day of June, 1994 (the "Effective Date"), by and between Masada
Security, Inc., a Delaware corporation with its principal place of business in
Birmingham, Alabama ("Masada"), and Centennial Security, Inc., a Delaware
corporation with its principal place of business in Denver, Colorado
("Centennial").
RECITALS
WHEREAS, Masada and Centennial have entered into that certain Purchase
Agreement dated as of the date hereof (the "Purchase Agreement"); and
WHEREAS, pursuant to the Purchase Agreement and as consideration for
shares of Centennial's Class B Common Stock, Masada agreed to grant to
Centennial certain licenses to the Trademarks (as hereinafter defined), to
provide the Intellectual Property (as hereinafter defined), and to perform
other services and obligations, all as set forth herein.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein and in the Purchase Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows.
1. DEFINITIONS. The following terms, when used herein with
initial capital letters, shall have the meanings ascribed to them in this
Article 1. All terms used herein with initial capital letters but not otherwise
defined shall have the meanings ascribed to them in the Purchase Agreement.
1.1 MASADA CONFIDENTIAL INFORMATION. The term "Masada Confidential
Information" shall mean the elements of the Intellectual Property and all
technical information, technology, formulae, information, system designs,
prototypes, ideas, inventions, improvements, data, files, supplier and customer
identities and lists, accounting records, forecasts, project management plans,
marketing plans and business plans relating to this Agreement to which Masada,
or one of its suppliers or customers has rights, that are not generally known
to the public, and all copies and tangible embodiments thereof (in whatever
form or medium); provided, however, that any of the foregoing shall not be
considered Masada Confidential Information if it: (a) has become publicly known
through no wrongful act or breach of any obligation or confidentiality by
Centennial; (b) was rightfully received by Centennial from a person or entity
without a breach of any agreement by such person or entity; (c) was approved
for release by written authorization from the party having rights therein; or
(d) was developed independently of the party having rights in same.
1.2 CENTENNIAL CONFIDENTIAL INFORMATION. The term "Centennial
Confidential Information" shall mean the formulae, processes, procedures,
technology, methods and
<PAGE> 5
directions (whether or not in written form) proprietary to Centennial
and useful to (i) provide the Services and (ii) acquire and integrate
businesses that provide the Services or services similar to the Services, other
than Intellectual Property and all technical information, technology, formulae,
information, system designs, prototypes, ideas, inventions, improvements, data,
files, supplier and customer identities and lists, accounting records,
forecasts, project management plans, marketing plans and business plans to
which Centennial or its suppliers or customers has rights, and all copies and
tangible embodiments thereof (in whatever form or medium), that are not
generally known to the public; provided, however, that any of the foregoing
shall not be considered Centennial Confidential Information if it: (a) was
first Masada Confidential Information; (b) has become publicly known through no
wrongful act or breach of any obligation or confidentiality on the receiving
person or entity's or any person or entity's part; (c) was rightfully received
from a person or entity without a breach of any agreement by such person or
entity; (d) was approved for release by written authorization from the party
having rights therein; or (e) was developed independently of the party having
rights in same.
1.3 INTELLECTUAL PROPERTY. The term "Intellectual Property" shall
mean the formulae, processes, procedures, technology, techniques, know-how,
trade secrets, patents, licenses, copyrights, methods and directions (whether
or not in written form) and any other rights proprietary to Masada and useful
to (i) provide the Services and (ii) to acquire and integrate entities or
assets, that provide or are used to provide the Services or services similar to
the Services as further described in Exhibit 1.3, attached hereto and
incorporated herein.
1.4 MARKETING-RELATED MATERIALS. The term "Marketing-Related
Materials" shall mean all communications, whether or not in written form,
including, without limitation, promotional materials and newspaper, radio or
television advertising which display one or more of the Trademarks or are
intended to promote the awareness, sale, or image of the Services.
1.5 SERVICES. The term "Services" shall mean the provision of
security-related services, including, without limitation, monitoring security
systems and installation of equipment related thereto.
1.6 TRADEMARKS. The term "Trademarks" shall mean the trademarks,
trade names, service marks, trade dress, trade designations and logos
identified in Exhibit 1.6, attached hereto and incorporated herein, as may be
amended in writing by the parties hereto from time to time during the term of
this Agreement, which Masada shall license to Centennial pursuant to this
Agreement.
1.7 TERRITORY. The term "Territory" shall mean the states of
California north of Sacramento, Colorado, Connecticut, Delaware, Idaho,
Illinois, Indiana, Iowa, Kansas, Maine, Maryland (excluding the territory
consisting of suburban Washington, D.C., through and including the Baltimore
metropolitan area,) Massachusetts, Michigan, Minnesota, Missouri, Montana,
Nebraska, Nevada, New Hampshire, New Jersey, New York, North Dakota, Ohio,
- 2 -
<PAGE> 6
Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont,
Washington, Wisconsin and Wyoming in the United States and the country of
Canada, or such other or different states, countries or other territories as to
which Centennial and Masada may from time to time agree in writing.
2. LICENSES.
2.1 TRADEMARKS AND TRADE NAME. Subject to the terms and conditions
contained herein, Masada hereby grants to Centennial an exclusive license in
the Territory to use the Trademarks and the trade name "Masada" in connection
with marketing, promoting, advertising, selling and rendering the Services.
During the term of this Agreement, each of Masada and Centennial shall provide
Services only under the Masada trade name unless otherwise agreed by the
parties.
2.2 INTELLECTUAL PROPERTY. Masada hereby grants to Centennial an
exclusive license in the Territory to use the Intellectual Property. Masada
shall provide the Intellectual Property to Centennial commencing on a date
reasonably requested by Centennial at any time after the date of this Agreement
and shall educate and train Centennial and persons designated by Centennial in
the use of the Intellectual Property, on the terms described in Exhibit 2.2
attached hereto and incorporated herein.
2.3 TRANSFERS OR ASSIGNMENTS. Centennial shall not grant
sublicenses, sell or otherwise transfer any rights under this Agreement to any
person or entity without the prior written approval from Masada (a) of such
person or entity and (b) of the form and substance of a written agreement
pursuant to which Centennial desires to grant such sublicense, sell or
otherwise transfer any such rights, which such approval will not be
unreasonably withheld; provided, however, that Centennial may grant any
sublicenses, sell or otherwise transfer any rights under this Agreement to any
entity wholly-owned by Centennial without Masada's consent.
2.4 JOINT PURCHASING. Masada shall coordinate with and assist
Centennial in any manner reasonably requested by Centennial in purchasing items
to be used in Centennial's business, including, without limitation, the items
set forth in Exhibit 2.4 attached hereto and incorporated herein (including,
without limitation, allowing Centennial to use, if permissible, any vendor
discounts available to Masada), such that Centennial may purchase such items on
price and other material terms more favorable to Centennial than Centennial
could otherwise obtain.
3. QUALITY CONTROL
3.1 CONFORMANCE WITH STANDARDS. Centennial and Masada shall each
use their respective best efforts to ensure, for themselves, that all their
respective Services and Marketing-Related Materials meet the quality standards
that Masada shall establish from time to time in its best professional
judgement and to which it and its subsidiaries comply in providing Services and
in Marketing-Related Materials.
- 3 -
<PAGE> 7
3.2 PROVISION OF SERVICES. Centennial shall not materially
alter, modify or vary the Services or Trademarks without the prior written
consent of Masada, which consent will not be unreasonably withheld. As soon as
practicable, Centennial shall advise Masada of any material proposed
alterations, modifications, or variations in the Services or Trademarks which
Centennial has developed, acquired, or otherwise has knowledge of and which it
lawfully desires to use. Centennial shall have the right to use such
alterations, modifications and variations only after Masada provides such
consent. Masada shall as promptly as practicable, but in any event within ten
days after receipt of notice thereof, provide written notice to Centennial
either granting its consent or denying its consent; provided, however, that if
Masada denies its consent it shall specify in reasonable detail the reasons for
such denial, and the same shall be certified by an authorized officer of
Masada; and provided further, however, that if Masada fails to provide written
notice to Centennial within such ten-day time period, Masada shall be deemed to
have consented to Centennial's use of any such alterations, modifications or
variations.
3.3 SERVICE STANDARDS. Centennial hereby agrees to maintain the
quality and integrity of the Services sold and provided under the Trademarks,
and otherwise to provide the Services and employ Marketing-Related Materials in
accordance with the applicable Intellectual Property and accepted good business
practices, and to ensure that the Services provided hereunder are of a quality
reasonably satisfactory to Masada.
3.4 QUALITY CONTROL. Except as otherwise provided herein, each
of Masada and Centennial shall be responsible for and shall bear all their
respective costs for ensuring that the Services and the marketing and sale
thereof (including, without limitation, Marketing-Related Materials) meet the
applicable quality specifications set forth in the Intellectual Property. Each
party shall, at its own expense, and upon reasonable written notice from the
other party, supply the other party with finished samples of Marketing-Related
Materials. Masada hereby agrees to maintain the quality and integrity of the
Services it sells and provides under the Trademarks, and otherwise to provide
such Services and employ Marketing-Related Materials in accordance with the
applicable Intellectual Property and accepted good business practices, and to
ensure that the Services it provides meet the applicable quality specifications
set forth in the Intellectual Property.
3.5 LABELING. Each of Masada and Centennial shall label, or
cause to be labeled, all Services, products relating thereto, and
Marketing-Related Materials in compliance with all applicable laws therefor.
4. TRADEMARK LICENSE LIMITATIONS.
4.1 USE OF TRADEMARKS. Centennial shall seek the advice of
Masada on all material matters relating to the use of the Trademarks prior to
the first use thereof in connection with any Services or Marketing-Related
Materials, or any advertising or promotional item, and thereafter prior to each
new type of use thereof. Centennial shall make such changes as Masada, in its
best professional judgement, shall advise, including any
- 4 -
<PAGE> 8
description used in connection with any Trademark. At the request of
Masada, Centennial shall provide Masada with copies, photographs or samples of
advertising copy, marketing and promotional materials, documentation and
technical materials and other materials used in connection with the Services or
Marketing-Related Materials and any other materials bearing the Trademarks.
4.2 REGISTRATION. Masada shall use its best efforts to
federally register with all due expedience and maintain the "Masada Security"
Trademark in the United States at its expense. Centennial will comply with all
applicable registrations requirements, and Masada will assist Centennial in
such compliance, in those jurisdictions in the Territory in which Centennial
intends to provide the Services where registration of a user of trademarks or
registration of trademark licenses is required, and otherwise comply with the
applicable laws of the relevant jurisdiction, all at Centennial's expense.
Each of Centennial and Masada shall furnish the other party with all reasonably
requested information (including specimens and samples illustrative of the
manner of use of the Trademarks) and documentation (including the execution and
delivery of any and all affidavits, declarations, oaths and other
documentation) to assist such party in maintaining trademark protection and
registrations pursuant to this Section 4.2.
4.3 ENFORCEMENT. Each of Centennial and Masada shall keep diligent
watch: (a) to detect any trademarks, trade names, service marks, trade
dress, trade designations and logos that may infringe the Trademarks; and (b)
to detect any goods or services that may misappropriate the Intellectual
Property. Centennial shall promptly notify Masada (a) of any actual or
suspected infringement or misuse of the Trademarks, or (b) of any information
which may adversely affect the Trademarks, the Intellectual Property, Masada or
Centennial. Such notification shall include all available information
regarding such activity and shall identify all persons having knowledge
thereof. Centennial may take any action it deems reasonably necessary with
respect to any person or entity in order to enforce any rights regarding the
Trademarks or Intellectual Property in the Territory at its own expense, and
shall be entitled to retain for itself any monetary recovery in connection
therewith, whether pursuant to a judgement entered in connection with
litigation or arbitration, in settlement thereof, or otherwise; provided,
however, that Masada shall be entitled to its reasonable out-of-pocket expenses
(including reasonable legal fees) incurred in connection with assisting
Centennial in such action. Masada agrees to be joined in any such action
and/or otherwise to assist Centennial in such action. Should Centennial advise
Masada in writing that it does not intend to pursue any action to enforce any
rights regarding the Trademarks or Intellectual Property in the Territory,
Masada may pursue such action in the Territory at its own expense, and shall be
entitled to retain for itself any monetary recovery in connection therewith,
whether pursuant to a judgement entered in connection with litigation or
arbitration, in settlement thereof, or otherwise; provided, however, that
Centennial shall be entitled to its reasonable out-of-pocket expenses
(including reasonable legal fees) incurred in connection with assisting Masada
in such action. Centennial agrees to be joined in any such action and/or
otherwise to assist Masada in such action.
- 5 -
<PAGE> 9
5. MARKETING.
5.1 MARKETING EFFORTS. Centennial shall use its best efforts to
use the Trademarks, as applicable, in connection with marketing, promoting,
advertising, distributing and selling the Services and otherwise in Marketing-
Related Materials.
5.2 USE OF OTHER TRADEMARKS. Centennial shall market, promote,
advertise, and sell the Services under the Trademarks as appropriately
designated and displayed in the light of good trademark practice and usage,
applicable trademark laws and customs. Centennial shall not market, promote,
advertise or sell the Services, including through the use of Marketing-Related
Products in connection with any trademark, trade name, service mark, trade
dress, trade designation or logo other than the Trademarks, unless previously
approved in writing by Masada, which approval will not be unreasonably
withheld.
6. CONFIDENTIALITY.
6.1 MASADA CONFIDENTIAL INFORMATION. During the term of this
Agreement and at all times thereafter, Centennial shall keep and maintain
Masada Confidential Information in confidence and, except as otherwise provided
herein, Centennial (a) shall not use any Masada Confidential Information, and
(b) shall not provide or otherwise make available, whether directly or
indirectly, any Masada Confidential Information to any person or entity other
than (i) to Centennial's employees or agents for the purpose performing their
duties for Centennial, or (ii) as required by law or court order. Centennial
shall treat Masada Confidential Information with the same degree of care with
which it treats its own confidential information.
6.2 CENTENNIAL ACKNOWLEDGEMENT. Centennial acknowledges that use
by it outside the rights granted herein or communication of Masada Confidential
Information to third parties other than as contemplated herein would cause
immediate and irreparable harm to Masada for which money damages are
inadequate. Therefore, Centennial agrees that Masada will be entitled to
injunctive relief for breach of Section 6.1 hereof without proof of actual
damages or the posting of bond or other security. Such remedy shall not be
deemed to be the exclusive remedy for breach of Section 6.1 hereof but shall be
in addition to all other remedies available at law or in equity.
6.3 CENTENNIAL CONFIDENTIAL INFORMATION. During the term of this
Agreement and at all times thereafter, Masada shall keep and maintain
Centennial Confidential Information in confidence and, except as otherwise
provided herein, Masada (a) shall not use any Centennial Confidential
Information, and (b) shall not provide or otherwise make available, whether
directly or indirectly, any Centennial Confidential Information to any person
or entity other than (i) to Masada's employees or agents for the purpose
performing their duties for Masada under this Agreement, or (ii) as required by
law or court order. Masada shall treat Centennial Confidential Information
with the same degree of care with which it treats its own confidential
information.
- 6 -
<PAGE> 10
6.4 MASADA ACKNOWLEDGEMENT. Masada acknowledges that use by it
outside the rights granted herein or communication of Centennial Confidential
Information to third parties other than as contemplated herein would cause
immediate and irreparable harm to Centennial for which money damages are
inadequate. Therefore, Masada agrees that Centennial will be entitled to
injunctive relief for breach of Section 6.3 hereof without proof of actual
damages or the posting of bond or other security. Such remedy shall not be
deemed to be the exclusive remedy for breach of Section 6.3 hereof but shall be
in addition to all other remedies available at law or in equity.
7. WARRANTIES
7.1 AUTHORITY. Masada and Centennial represent and warrant that
they have full power and authority to enter into and to perform this Agreement.
7.2 RIGHTS TO TRADEMARKS AND INTELLECTUAL PROPERTY.
(a) To the best of its knowledge, Masada, together with its
subsidiaries, owns and possesses all right, title and interest in and to, or
has a valid and enforceable license from third parties to use, all the
Trademarks, Intellectual Property, and other Masada Confidential Information
which could be contemplated by this Agreement free and clear of all liens,
licenses, security interests, encumbrances and other restrictions other than a
general intangibles security interest held by State Street Bank and Trust
Company (the "Bank") for itself and as agent for Citizens Savings Bank of Rhode
Island pursuant to that certain Revolving Credit and Term Loan Agreement dated
February 11, 1994 (the "Credit Agreement"). Masada agrees to comply with the
provisions of the Credit Agreement, to not default under the Credit Agreement
and to otherwise prevent the occurrence of any event that would allow the Bank
to exercise any remedies under such security interest or that otherwise may
adversely affect Centennial's rights to use the Trademarks, Intellectual
Property or Masada Confidential Information as contemplated under this
Agreement.
(b) Neither Masada nor any of its subsidiaries has received
any notice of infringement, misappropriation or conflict from any third party
as to such Trademarks, Intellectual Property, Masada Confidential Information
or otherwise contesting the validity, enforceability, use or ownership of any
of such Trademarks, Intellectual Property and Masada Confidential Information
which has not been resolved or disposed of and there are no grounds for the
same, and neither Masada nor any of its subsidiaries has infringed,
misappropriated or otherwise conflicted with rights of third parties similar to
the Trademarks, Intellectual Property and Masada Confidential Information.
(c) Masada has taken or will take with all due expedience
after the date of this Agreement all necessary and prudent action to maintain
and protect any Intellectual Property and Trademarks and will continue to take
all necessary and prudent actions to maintain and protect any Intellectual
Property and Trademarks so as to not materially adversely affect the validity
or enforceability of any Intellectual Property or Trademarks. To Masada's best
knowledge, the owners of any Intellectual Property or Trademarks licensed
-7-
<PAGE> 11
to Masada have taken all necessary and desirable action to maintain and
protect the Intellectual Property or Trademarks subject to such licenses.
Neither Masada nor any subsidiary has disclosed any material confidential
information developed or utilized by Masada or any such subsidiary to any third
party except on a confidential basis and with no intention to entitle such
third party to use such information other than for the purposes indicated by
Masada in its communications with such third party nor, to Masada's best
knowledge, has any third party disclosed confidential information developed or
utilized by Masada or any such subsidiary to any person not an employee of
Masada, of any such subsidiary or of the third party.
8. INDEMNIFICATTON.
8.1 CENTENNIAL INDEMNIFICATION. (a) Centennial shall defend,
indemnify and hold Masada and its affiliates, and its and their officers,
directors, stockholders, employees and agents harmless and shall pay all
losses, damages, fees, expenses or costs (including reasonable attorney's fees)
incurred by them based upon or relating to any claim made by any person or
entity relating to Centennial's provision of the Services or use of
Marketing-Related Materials in connection with which any of the Trademarks is
used, or based upon any claim: (i) arising from any act or omission of
Centennial or its stockholders (other than Masada or any of its officers or
directors), officers, directors, employees or agents related to this Agreement;
(ii) arising from the misuse, disclosure, or misappropriation by any person or
entity of any Masada Confidential Information obtained from Centennial by such
person or entity; (iii) arising from any failure by Centennial to obtain any
necessary license, permit or approval; (iv) alleging or arising from any breach
by Centennial of any of its obligations, representations or warranties herein;
(v) arising out of any claim relating to Centennial's actions or omissions in
connection with this Agreement by any person or entity seeking remedies beyond
the remedies set forth in Section 6.2 hereof; or (vi) alleging any breach by
Centennial of any agreement related to the Services or the Marketing-Related
Materials between Centennial and any person or entity, except for any of the
foregoing contained in clauses (i) through (vi) which arise from Masada's or
its affiliates or their officers, directors, stockholders (other than
Centennial or any of its directors or officers), employees or agents gross
negligence, reckless or intentional misconduct or fraud.
(b) Masada shall notify Centennial of claim under Section
8.1(a) hereof in a timely fashion after receiving knowledge thereof.
Centennial shall assume control of the defense or settlement of such claim from
Masada; provided, however, Masada shall be entitled to be represented by its own
counsel (at its own expense) and to participate fully in the defense of any
claim. Notwithstanding the foregoing, Centennial shall not, without the prior
written consent of Masada, effect any settlement of any pending or threatened
proceeding in respect of which Masada is or could have been a party and
indemnity could have been sought hereunder by Masada, unless such settlement
includes an unconditional release of Masada from all liability arising out of
such proceeding.
8.2 MASADA INDEMNIFICATION. (a) Masada shall defend, indemnify and
hold Centennial and its affiliates, and its and their officers, directors,
stockholders (other than
-8-
<PAGE> 12
Masada or any of its officers and directors), employees and agents
harmless and shall pay all losses, damages, fees, expenses or costs
(including reasonable attorney's fees) incurred by them based upon or relating
to any claim made by any person or entity relating to Masada's provision of the
Services or use of Marketing-Related Materials in connection with which any of
the Trademarks is used, or based upon any claim: (i) arising from any act or
omission of Masada or its stockholders, officers, directors, employees or
agents related to this Agreement; (ii) arising from the misuse, disclosure, or
misappropriation by any person or entity of any Centennial Confidential
Information obtained from Masada by such person or entity; (iii) arising from
any failure by Masada to obtain any necessary license, permit or approval; (iv)
alleging or arising from any breach by Masada of any of its obligations,
representations or warranties herein; (v) arising out of any claim relating to
Masada's actions or omissions in connection with this Agreement by any person
or entity seeking remedies beyond the remedies set forth in Section 6.4 hereof;
or (vi) alleging any breach by Masada of any agreement related to the Services
or the Marketing-Related Materials between Masada and any person or entity,
except for any of the foregoing contained in clauses (i) through (vi) which
arise from Centennial's or its affiliates or their officers, directors,
stockholders (other than Masada or any of its directors or officers), employees
or agents gross negligence, reckless or intentional misconduct or fraud.
(b) Centennial shall notify Masada of claim under Section 8.2(a)
hereof in a timely fashion after receiving knowledge thereof. Masada shall
assume control of the defense or settlement of such claim from Centennial;
provided, however, that Centennial shall be entitled to be represented by its
own counsel (at its own expense) and to participate fully in the defense of any
claim. Notwithstanding the foregoing, Masada shall not, without the prior
written consent of Centennial, effect any settlement of any pending or
threatened proceeding in respect of which Centennial is or could have been a
party and indemnity could have been sought hereunder by Centennial, unless such
settlement includes an unconditional release of Centennial from all liability
arising out of such proceeding.
9. TERM; TERMINATION.
9.1 TERM. Unless earlier terminated in accordance with this
Section 9, this Agreement shall commence on the date first set forth above and
shall continue in full force and effect until the tenth anniversary of the date
hereof (the "Initial Term"); provided, however, that this Agreement shall be
extended by successive three year periods thereafter (each, a Renewal Term)
unless either Masada or Centennial shall have given written notice to the other
party no later than 180 days prior to the commencement of any Renewal Term of
its desire that this Agreement terminate at the end of the Initial Term or then
current Renewal Term, as the case may be.
9.2 TERMINATION FOR INSOLVENCY. Notwithstanding anything else
contained in this Agreement, this Agreement may be terminated by either party
giving written notice to the other upon the happening of any of the following
events:
-9-
<PAGE> 13
(a) The expiration of 21 days after the other party having a
receiver validly appointed for the whole or any substantial part of its assets
or immediately where a court order is validly made or a resolution of such
party's stockholders passed for the winding up of such party other than for the
purpose of reorganization or reconstruction.
(b) In the event that the other party files a petition in
bankruptcy or similar proceedings or is adjudicated bankrupt or if a petition
for bankruptcy or similar proceedings is filed against such party and is not
stayed or discharged within 45 days of such filing or if such party becomes
insolvent or makes an assignment for the benefit of creditors or any agreement
pursuant to bankruptcy law or otherwise acknowledges insolvency or is adjudged
bankrupt or if such party discontinues business.
9.3 TERMINATION FOR BREACH. In the event of any material
breach of this Agreement, the non-breaching party shall give the breaching
party written notice describing such material breach. Without limiting the
foregoing, Masada's failure to obtain or maintain registration for any
Trademark pursuant to Section 4.2 hereof or a determination that Masada does
not have the rights to the Trademarks, Intellectual Property or Confidential
Information as contemplated by Section 7.2(a) hereof shall be deemed to be a
material breach by Masada hereunder. If the breaching party fails to cure such
material breach or demonstrate to the non-breaching party's reasonable
satisfaction that no breach exists within sixty (60) days of its receipt of
written notice of same, such breach shall be deemed a material breach and an
Event of Default hereunder and the non-breaching party shall have the following
remedies and rights:
(a) The non-breaching party may, subject to paragraphs (ii)
and (iii) below, terminate this Agreement upon 60 days' written notice to the
breaching party.
(b) If Centennial is the non-breaching party, it may,
subject to any rights of third parties, continue to use the Trademarks,
Intellectual Property and Masada Confidential Information in the Territory
until the later of the end of the Initial Term and three years following the
occurrence of the Event of Default. If Centennial determines not to continue
using any of the Trademarks, Intellectual Property or Masada Confidential
Information or upon termination of its rights to use any of the Trademarks,
Intellectual Property or Masada Confidential Information pursuant to the
preceding sentence, Centennial shall, upon Masada's request and at Masada's
expense, remove an related Masada trade dress from Centennial's facilities,
equipment and customer locations and return the same to Masada.
(c) If Masada is the non-breaching party, it may request
that, upon six months' prior written notice, Centennial cease using all
Trademarks, Intellectual Property and Masada Confidential Information and
thereupon Centennial shall, at Centennial's expense, remove all related Masada
trade dress from Centennial's facilities, equipment and customer locations and
return the same to Masada.
-10-
<PAGE> 14
The remedies set forth above in this Section 9.3 and elsewhere
in this Section 9 shall be cumulative and not exclusive of each other, and are
in addition to any other remedies at law or equity that the non-breaching party
may have under this Agreement or otherwise.
9.4 RIGHTS ON TERMINATION. Notwithstanding anything to the
contrary that may be contained herein, in the event of any termination or
expiration of this Agreement, the confidentiality and indemnification
provisions and any other provisions which by their terms are to be performed or
complied with subsequent to the expiration or other termination of this
Agreement in whole or in party shall survive and continue in full force and
effect. The termination of this Agreement in whole or in part for any reason
shall be without prejudice to, and shall not affect, the right of either party
to recover from the other any and all damages to which either may be entitled
therefor, or any other rights of either in connection therewith, and all such
rights of both shall survive such termination. Notwithstanding anything in
this Agreement to the contrary, upon termination of this Agreement for any
reason, other than for a Centennial breach hereof, Masada shall not provide or
offer to provide any Services in the Territory for a period of three years
after the date of such termination.
9.5 ACTIONS UPON TERMINATION. Except as otherwise provided in
Section 9.3, upon termination or expiration of this Agreement, all rights
hereunder shall terminate and Centennial shall remove all related Masada trade
dress from Centennial's facilities, equipment and customer locations and return
the same to Masada. Centennial and Masada shall equally share the costs and
expenses of such removal and return unless (a) this Agreement is terminated
pursuant to Section 9.2, in which case the non-terminating party shall pay all
such costs and expenses or (b) this Agreement is terminated in connection with
Centennial merging with or into another entity or Centennial selling all or
substantially all of its assets to another entity, in which case Centennial
shall pay all such costs and expenses.
10. GOVERNMENT APPROVALS.
10.1 REQUIRED APPROVALS. Subject to Section 4.2, Centennial shall
obtain all necessary licenses, permits and approvals to market, promote,
advertise, distribute and sell the Services in the Territory and to use the
Trademarks as contemplated herein at Centennial's sole cost and expense.
10.2 COMPLIANCE WITH LAWS. At all times during the term of this
Agreement the parties shall comply fully with all laws, rules and regulations
relating to the subject matter hereof and all amendments thereto.
11. MISCELLANEOUS.
11.1 NOTICES. Any notices, consents or approvals required or
permitted to be given hereunder shall be deemed to be given and sufficient
when delivered in writing, first class United States certified or registered
letter, return receipt requested, by reputable overnight
- 11 -
<PAGE> 15
courier, personally or by telecopy with written confirmation as provided above
to the other party:
to Masada: Masada Security, Inc.
3900 Montclair Road, Suite 300
Birmingham, AL 35213
Attention: Terry W. Johnson
with a copy to: Tingle, Murvin, Watson & Bates, P.C.
Suite 900
Park Place Tower
2001 Park Place
Birmingham, AL 35203
Attention: Christopher R. Murvin
to Centennial: Centennial Security, Inc.
1999 Broadway, Suite 4000
Denver, CO 80202
Attention: Catharine Merigold
with a copy to: Kirkland & Ellis
1999 Broadway, Suite 4000
Denver, CO 80202
Attention: Steven E. Segal
and at such other place or to such other person as a party may specify in
writing and give notice thereof to the other party as provided in this
Section 11.1, such notice to be effective four (4) days after receipt of same.
11.2 ENTIRE AGREEMENT. This Agreement, together with its Exhibits,
contains the entire agreement between the parties relating to the subject
matter hereof, and supersedes any and all prior understandings, agreements,
representations and warranties by and between the parties, written or oral,
which may be related to the subject matter hereof in any way. This Agreement
may be amended only by written agreement embodying the full terms of the
amendment and signed by the authorized representatives of both parties. This
Agreement and the rights hereunder may be assigned, transferred, pledged or
otherwise encumbered by Centennial or Masada only with the written consent of
the other party, which consent will not be unreasonably withheld. This
Agreement shall inure to the benefit of the parties' respective successors and
assigns but shall not inure to the benefit of any trustee in bankruptcy,
receiver or successor of Centennial, whether by operation of law or otherwise.
11.3 NO WAIVER. None of the terms of this Agreement shall be deemed
to be waived or amended by either party unless such waiver or amendment
specifically references this Agreement and is in writing signed by the party to
be bound.
- 12 -
<PAGE> 16
11.4 NO STRICT CONSTRUCTION. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express
their mutual intent and no rule of strict construction against either party
shall apply to any term or condition of this Agreement.
11.5 SEVERABILITY. Should any provision of this Agreement be held
by a court of competent jurisdiction to be illegal, invalid or unenforceable,
such provision may be modified by such court in compliance with the law and, as
modified, enforced. All other terms and conditions of this Agreement shall
remain in full force and effect and shall be construed in accordance with the
modified provision, as if such illegal, invalid or unenforceable provision had
not been contained herein.
11.6 GOVERNING LAW AND JURISDICTION. Either party may bring legal
proceedings relating to this Agreement only upon seven days' advance notice to
the other party unless injunctive or other equitable relief is sought. Each of
Masada and Centennial hereby agree that any legal proceedings based hereon, or
arising out of, under, or in connection with, this Agreement, or any course of
conduct, course of dealing, statements (whether verbal or written) or actions
of Masada or Centennial or any of their respective affiliates shall be
submitted, at the election of the party initiating the proceeding with respect
to such dispute, either to arbitration or to judicial determination. Any
arbitration shall be conducted in Denver, Colorado, if Masada is the party
initiating the proceeding, or in Birmingham, Alabama, if Centennial is the
party initiating the proceeding, in accordance with the then existing rules of
the American Arbitration Association ("AAA"). In any arbitration pursuant to
this Agreement, the award or decision shall be rendered by a majority of the
members of an arbitration panel consisting of three members chosen in
accordance with the then existing rules of the AAA. The award or decision of
the arbitration panel pursuant to this Section 11.6 shall be binding and
conclusive on the parties, provided that enforcement of such award or decision
may be obtained in any court having jurisdiction over the party against whom
such enforcement is sought.
11.7 RELATIONSHIP OF THE PARTIES. The parties do not intend to
create by this Agreement, and nothing in this Agreement shall be interpreted to
create, a joint venture, partnership, or principal and agent relationship.
11.8 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for
the sole benefit of the parties thereto and their assigns. The parties
acknowledge and agree that there are no intended third party beneficiaries of
this Agreement and that no third party may enforce any terms or conditions of
this Agreement or claim any rights thereunder.
11.9 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which will be deemed an original, but all of which
together constitute one and the same instrument.
* * * *
- 13 -
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto, by their duly authorized
representatives, have executed this Agreement as of the Effective Date first
above written.
MASADA CENTENNIAL
By: /s/ Terry W. Johnson By:/s/ Catharine M. Merigold
------------------------------- -----------------------------
Name: Terry W. Johnson Name: Catharine M. Merigold
Title: President Title: President
- 14 -
<PAGE> 1
AMENDMENT AGREEMENT
This Amendment Agreement is made as of the 23 day of June,
1995 by and between Masada Security, Inc., a Delaware corporation ("Masada")
and Centennial Security, Inc., a Delaware corporation ("Centennial").
RECITALS
Whereas, Masada and Centennial are parties to (1) a certain
Purchase Agreement dated as of June 10, 1994 regarding the sale by Centennial
and the purchase by Masada of Centennial's Class B Common Stock (the "Purchase
Agreement"), (2) a certain Trademark and Intellectual Property Agreement dated
as of June 10, 1994 regarding the licensing by Masada of certain of its
intellectual property and trademarks to Centennial (the "Trademark Agreement"),
and (3) an Agreement dated as of June 10, 1994 regarding the provision by
Masada of certain monitoring, billing, remittance processing and business
management support service to Centennial (the "Monitoring Agreement"); and
Whereas, Masada and Centennial desire to amend certain of the
provisions of the Purchase Agreement, the Trademark Agreement and the
Monitoring Agreement (collectively, the "Agreements").
NOW, THEREFORE, the parties hereto, in consideration of the
mutual covenants, agreements and specific considerations set forth below, the
sufficiency and adequacy of which is hereby acknowledged, and intending to be
legally bound, agree as follows:
1. Certain Definitions. All terms used but not defined
herein with respect to the amendment of each of the Agreements, shall have the
meaning ascribed thereto in such Agreement, unless the context clearly
otherwise requires.
2. Amendment to Purchase Agreement. Section 3H, Sale of
the Company, of the Purchase Agreement is amended and restated in its entirety
to read as follows:
" (i) If, at any time prior to closing a public
offering of any of the Company's securities registered under
the Securities Act, the Company determines to seek a sale of
all or substantially all of the Company's assets or any
transaction of the type specified in Section C.4(ii)(b) or (d)
of the Charter Amendment (each, a "Sale of the Company"),
prior to soliciting any Person or entering into any written or
oral agreement or understanding (including any nonbinding
letter of intent) with any Person regarding a Sale of the
Company transaction, whether directly or indirectly, the
Company will notify the Purchaser of the desire to effect a
Sale of the Company (the "Sale of Company Notice") and
materially comply with the procedures set forth in subsections
(ii) through (v) below, as applicable.
<PAGE> 2
(ii) The Purchaser shall have until the expiration
of the 30th day following receipt of the Sale of Company
Notice, the right to offer to purchase the Company. If the
Purchaser desires to exercise this right, the Purchaser on or
before the expiration of the 30th day following receipt of the
Sale of Company Notice shall notify the Company of the terms
of the Purchaser's offer to purchase the Company including the
Cash Price (a "Purchaser's Offer to Purchase"). If the
Purchaser fails to deliver to the Company a Purchaser's Offer
to Purchase on or before the expiration of the 30th day
following the Purchaser's receipt of the Sale of Company
Notice, the Company shall thereafter be free, subject to
subsection (vii) below, to solicit or otherwise enter into
discussions or negotiations with Persons other than the
Purchaser regarding a Sale of the Company transaction and to
close a Sale of the Company transaction in such form and for
such consideration as the Company may negotiate.
(iii) If the Purchaser delivers to the Company a
Purchaser's Offer to Purchase on or before the expiration of
the 30th day following the Purchaser's receipt of the Sale of
Company Notice, the Company shall have until the expiration of
the 30th day following receipt of the Purchaser's Offer to
Purchase the right to accept or reject it. If the Company
accepts the Purchaser's Offer to Purchase, the Company and the
Purchaser shall in good faith negotiate definitive agreements
to effectuate the transaction within 90 days of the Company's
acceptance. If the transaction does not close within such 90
days and unless the Company has withheld from or failed to
disclose to the Purchaser material information and/or material
information requested by the Purchaser, made any material
misrepresentations to the Purchaser, failed to negotiate in
good faith with the Purchaser, unilaterally failed or refused
to execute definitive agreements to effect the transaction
with the Purchaser, or breached such definitive agreements,
the Company shall thereafter be free, subject to subsection
(vii) below, to solicit or otherwise enter into discussions or
negotiations with Persons other than the Purchaser regarding a
Sale of the Company transaction and to close a Sale of the
Company transaction in such form and for such consideration as
the Company may negotiate. In the event the Company accepts
the Purchaser's Offer to Purchase, but the Sale of the Company
transaction with the Purchaser does not close due to any of
the reasons described in the immediately preceding sentence,
the Company shall again be required to comply with all
requirements of this Section 3H prior to soliciting or
otherwise entering into any negotiations or discussions with
any Person regarding a Sale of the Company transaction,
whether directly or indirectly.
(iv) If the Company receives a Purchaser's Offer
to Purchase, but determines to reject it, the Company on or
before the 30th day following its receipt of the Purchaser's
Offer to Purchase, shall deliver to the Purchaser a notice of
rejection together with the Cash Price at which the board of
directors of the Company would recommend a sale of the Company
to the Purchaser (the "Counteroffer"). The Purchaser shall
have 10 days following receipt of a Counteroffer to accept it
by delivering written notice thereof to the Company prior to
the expiration of such 10th day. If the Purchaser accepts the
Company's
-2-
<PAGE> 3
Counteroffer, the Company and the Purchaser shall in good
faith negotiate definitive agreements to effectuate the
transaction within 90 days of the Purchaser's acceptance. If
the transaction does not close within 90 days and unless the
Company has withheld from or failed to disclose to the
Purchaser material information and/or material information
requested by the Purchaser, made any material
misrepresentations to the Purchaser, failed to negotiate in
good faith with the Purchaser, unilaterally failed or refused
to execute definitive agreements to effect the transaction
with the Purchaser, or breached such definitive agreements,
the Company shall thereafter be free, subject to subsection
(vii) below, to solicit or otherwise enter into discussions or
negotiations with Persons other than the Purchaser regarding a
Sale of the Company transaction and to close a Sale of the
Company transaction in such form and for such consideration as
the Company may negotiate. In the event the Purchaser accepts
the Company's Counteroffer, but the Sale of the Company
transaction with the Purchaser does not close due to any of
the reasons described in the immediately preceding sentence,
the Company shall again be required to comply with all
requirements of this Section 3H prior to soliciting any Person
or entering into any written or oral agreement or
understanding (including any non-binding letter of intent)
with any Person regarding a Sale of the Company transaction,
whether directly or indirectly. If the Company receives a
Purchaser's Offer to Purchase, but fails on or before the 30th
day following its receipt of the Purchaser's Offer to Purchase
to deliver either an acceptance or rejection of it, the
Company shall again be required to comply with all
requirements of this Section 3H prior to soliciting or
otherwise entering into any negotiations or discussions with
any Person regarding a Sale of the Company transaction,
whether directly or indirectly.
(v) If the Company delivers a Counteroffer to the
Purchaser and the Purchaser does not deliver to the Company
written notice of acceptance of the Counteroffer within 10
days of the Purchaser's receipt of the Counteroffer, the
Company shall thereafter be free, subject to subsection (vii)
below, to solicit or otherwise enter into discussions or
negotiations with Persons other than the Purchaser regarding a
Sale of the Company transaction and to close a Sale of the
Company transaction upon such terms and for such consideration
as may be agreed upon, provided, however, that the Cash Price
for such Sale of the Company transaction to a Person other
than the Purchaser must exceed the Minimum Cash Price. The
term "Minimum Cash Price" shall mean an amount equal to (1)
the Cash Price contained in the Purchaser's Offer to Purchase,
plus (2) fifty percent (50%) of the amount by which the Cash
Price contained in the Counteroffer exceeds the Cash Price
contained in the Purchaser's Offer to Purchase.
(vi) The term "Cash Price" shall mean, whether the
proposed acquire (the "Acquirer") is the Purchaser or a Person
other than the Purchaser, the sum of (a) the cash to be paid
to the Company and/or its shareholders by the Acquirer, (b) the
book value of the liabilities of the Company to be assumed by
the Acquirer, (c) the aggregate value as determined at the time
of the Purchaser's
-3-
<PAGE> 4
Offer to Purchase, the Counteroffer or the letter of intent of
a Person(s) other than the Purchaser, as the case may be, by
the Company's board of directors in good faith of any
securities to be paid to the Company and/or its shareholders
by the Acquirer which are or upon consummation of the
transaction would be freely transferable (except for
shareholders who are affiliates of the Company and whose
resale would be limited as provided in Rule 145(d) promulgated
under the Securities Act, or any successor rule) and readily
marketable on a national securities exchange or in the
National Market System of the National Association of
Securities Dealers, and (d) the aggregate value as determined
at the time of the Purchaser's Offer to Purchase, the
Counteroffer or the letter of intent of a Person other than
the Purchaser, as the case may be, by the Company's board of
directors in good faith based upon advice from its investment
banker or by such other Person as the Company and the
Purchaser mutually select of any securities to be paid to the
Company and/or its shareholders by the Acquirer which do not
meet the transferability and marketability requirements set
forth in the preceding clause (c) of this subsection (vi).
(vii) If pursuant to the provisions of subsections
(ii), (iii), (iv) or (v) above the Company is free to solicit
and to close a Sale of the Company transaction, the Company
shall have, until the date which is 180 days following the
first date on which it was free to solicit or otherwise enter
into negotiations or discussions with Persons other than the
Purchaser, the right to enter into a written letter of intent
with such Person(s) to engage in a Sale of the Company
transaction, and, until the date which is 300 days following
the first date on which it was free to solicit or otherwise
enter into negotiations or discussions with Persons other than
the Purchaser, the right to close with such Person(s) a Sale
of the Company transaction. If the Company fails to enter
into a written letter of intent on or before the
above-referenced 180th day or to close on or before the
above-referenced 300th day, with such Person(s), the Company
shall again be required to comply with all requirements of
this Section 3H prior to soliciting any Person or entering
into any written or oral agreement or understanding (including
any non-binding letter of intent) with any Person regarding a
Sale of the Company transaction, whether directly or
indirectly.
(viii) In the event the Company intends to engage in
a Sale of the Company transaction with a Person(s) other than
the Purchaser in accordance with subsection (v) above, the
Company shall deliver to the Purchaser at least 15 days prior
to any closing of a Sale of the Company transaction with
Person(s) other than the Purchaser a written statement setting
forth the valuation made by the Company's board of directors
in good faith of all securities, if any, that were to be paid
to the Company and/or its shareholders pursuant to the terms
of the Purchaser's Offer to Purchase and/or the Counteroffer
and/or a Sale of the Company transaction with a Person(s)
other than the Purchaser. In addition, upon request of the
Purchaser made after the Purchaser's Offer to Purchase and/or
the Counteroffer, the Company will promptly provide a written
statement setting forth the valuation that was made by the
Company's board of directors in good faith of all securities,
if any, that were to be paid to the Company and/or its
-4-
<PAGE> 5
shareholders pursuant to the terms of the Purchaser's Offer to
Purchaser and/or the Counteroffer. If the Company fails to
deliver such written statement(s) on a timely basis or if such
statement(s) do not comply with this subsection (viii), the
Company shall again be required to comply with all
requirements of this Section 3H prior to soliciting or
otherwise entering into any negotiations or discussions with
any Person regarding a Sale of the Company transaction,
whether directly or indirectly.
3. Amendments to Trademark Agreement.
a. Section 2.1, Trademarks and Trade Name, of the
Trademark Agreement is amended by the addition of the phrase "in the Territory"
in the second sentence thereof after the word "Services" and by the addition at
the end thereof of the following new third sentence:
"Nothing contained herein shall restrict Masada from offering
Services in the Territory provided that Masada does not use
inside the Territory the trade name "Masada" or the Trademarks
or shall restrict Centennial from offering Services outside
of the Territory provided that Centennial does not use outside
the Territory the trade name "Masada" or the Trademarks."
b. Section 2.3, Transfers or Assignments, of the
Trademark Agreement is amended by restating it in its entirety to read as
follows:
"Centennial may sell, sublicense or otherwise transfer all of
its rights under this Agreement to any third person which is
acquiring all or substantially all of Centennial's assets,
whether by purchase of assets, purchase of Centennial's
capital stock, by merger or otherwise, but, only if, such
person assumes all of Centennial's obligations hereunder in a
written instrument reasonably satisfactory in form to Masada."
c. Section 5.2, Use of Other Trademarks, of the
Trademark Agreement is amended by the addition of the phrase "in the Territory"
to the first and second sentences thereof after the word "Services" in such
sentences.
d. Section 6.1, Masada Confidential Information, of the
Trademark Agreement is amended by the addition of new subclause (iii) at the
end of clause (b) thereof which reads as follows:
"or (iii) to potential purchasers of the capital stock or
assets of Centennial, Provided that such potential purchasers
enter into confidentiality agreements in form reasonably
acceptable to Masada to hold confidential the Masada
Confidential Information."
-5-
<PAGE> 6
e. Section 9.3, Termination for Breach, of the Trademark
Agreement is amended by replacing the terms "sixty (60) days" with the term
"ninety (90) days" in the last sentence of the introductory paragraph which
precedes subsection (a) thereof.
f. Section 9.4, Rights on Termination, of the Trademark
Agreement is amended by the deletion of the period at the end of the last
sentence thereof and the addition of the following at the end of such sentence:
"using the tradename "Masada" or the Trademarks and Masada
shall not grant a sublicense to any third party to use any of
the Trademarks or the trade name "Masada" in the Territory on
or before the expiration of three years after the date of such
termination. Notwithstanding anything in this Agreement to
the contrary, upon termination of this Agreement due to a
breach by Centennial, Masada shall not provide or offer to
provide any Services in the Territory using the tradename
"Masada" or the Trademarks for a period of six months after
the date of such termination and Masada shall not grant a
sublicense to any third party to use any of the Trademarks or
the trade name "Masada" in the Territory on or before the
expiration of six months after the date of such termination."
g. Section 9.5, Actions Upon Termination, of the
Trademark Agreement is amended by restating in its entirety subsection (b) in
the second sentence thereof to read as follows:
"(b) this Agreement is terminated in connection with
Centennial merging with or into another entity or Centennial
selling all or substantially all of its assets or capital
stock to another entity due to either the surviving entity in
the case of a merger or the purchasing entity in the case of a
sale of assets failure to assume Centennial's obligations
hereunder, in which case Centennial shall pay all such costs
and expenses or cause the entity purchasing Centennial's
assets to pay all."
h. The Trademark Agreement is further amended by the
additional of new Section 11.10 which reads in its entirety as follows:
"11.10 Subsidiaries of Centennial. Centennial shall
cause each corporation or other entity over which Centennial
has voting control during the term of this Agreement, whether
directly or indirectly, including, without limitation,
majority-owned or wholly-owned subsidiary corporations
(collectively, "Subsidiaries"), to comply with each and every
material representation, warranty, covenant or obligation of
Centennial set forth in this Agreement. Any breach or failure
to comply by any of the Subsidiaries of or with any material
representation, warranty, covenant, or obligation of
Centennial set forth in this Agreement shall constitute a
breach or failure to comply by Centennial. Each and every
reference to Centennial in this Agreement shall be deemed to
include Centennial and all Subsidiaries."
-6-
<PAGE> 7
-7-
<PAGE> 8
4. Amendment to Monitoring Agreement.
a. Section 2, Monitoring Services, of the Monitoring
Agreement is amended by the deletion of the first sentence of subsection (a)
thereof and the substitution therefor of the following sentence:
"Masada agrees to perform central station monitoring services
for Centennial Subscribers."
b. Section 2, Monitoring Services, of the Monitoring
Agreement is further amended by the addition of new subsection (g) thereto
which reads in its entirety as follows:
"(g) Masada warrants and covenants as follows with respect to
its central station monitoring services (1) that the central
monitoring service to Centennial Subscribers shall comply at
all times with the standards set forth by Underwriters
Laboratories in UL 827-Central Stations for Watchman,
Fire-Alarm and Supervisory Services, (2) that, under optimum
conditions, the central monitoring station for all such
subscribers will respond to an alarm signal by an Alarm System
at a Centennial Subscriber within 1 minute or less of receipt
of such signal; (3) that the quality of central station
monitoring services supplied to Centennial Subscribers shall
be at least the same as Masada provides to Other Subscribers;
(4) that the quality of central station monitoring services
supplied to Centennial Subscribers shall at least equal
monitoring industry standard; and (5) no more than that number
of Centennial Subscribers in any 3 consecutive month period
which when annualized would exceed two percent (2%) per year,
will cancel their agreements with Centennial due to
dissatisfaction with the central station monitoring services
provided by Masada."
c. Section 2. Monitoring Services, of the Monitoring
Agreement is amended by the addition of new subsection (h)
thereto, which reads in its entirety as follows:
"(h) As Centennial acquires new Centennial
Subscribers, Masada shall provide services, to the
extent requested by Centennial, for the integration
of such new Centennial Subscribers into Masada's
information systems, including, without limitation,
data entry and data conversion. Masada agrees to make
such services available to Centennial at Masada's
cost."
d. Section 7, Term of the Monitoring Agreement is
amended by the restatement in their entirety of subsections (a) and (b) to read
as follows:
"(a) This Agreement shall commence on the date hereof and
shall terminate, except as to the provisions of Section 7(b),
on the earliest to occur of (i) any anniversary after the date
Masada commences monitoring services pursuant to Section 2
hereof, provided, that Centennial provides written notice of
termination
-8-
<PAGE> 9
to Masada at least 60 days prior to such anniversary and,
provided further, that Centennial shall not deliver any notice
of termination which would terminate this Agreement prior to
the second anniversary from the date on which Masada commences
monitoring services pursuant to Section 2 hereof, or (ii)
termination of this Agreement pursuant to the provisions of
Section 7(b) or (c). The period during which this Agreement
shall be in effect shall be referred to herein as the "Term".
(b) Centennial shall not enter into a central station
monitoring agreement with a third party to replace Masada as
the provider of central station monitoring and billing
services unless Centennial shall deliver to Masada a written
proposal from a third party to provide central station
monitoring and billing services to Centennial (the
"Alternative Proposal"). Centennial shall deliver the
Alternative Proposal to Masada at least 30 days before the
Alternative Proposal would take effect between Centennial and
the third party. If, within 20 days of receipt of the
Alternative Proposal, Masada delivers to Centennial a written
statement in which Masada agrees to provide services to
Centennial upon the principal terms set forth in the
Alternative Proposal, this Agreement shall not terminate and
shall be deemed to be amended consistent with the principal
terms set forth in the Alternative Proposal. If Masada fails
to deliver to Centennial within 20 days of receipt of the
Alternative Proposal, a written statement agreeing to provide
services to Centennial in accordance with the principal terms
set forth in the Alternative Proposal, Centennial shall be
free to enter into the Alternative Proposal with the third
party. Centennial shall not enter into an agreement with a
third party to provide central station monitoring and billing
services to Centennial on terms materially different than those
set forth in the Alternative Proposal without again complying
with the provisions of this subsection (b). This subsection
(b) shall not be applicable in the event of termination of
this Agreement pursuant to Section 7(c) hereof."
e. Section 7, Term, of the Monitoring Agreement is
amended by the addition of new subsection (d) thereto, which reads in its
entirety as follows:
"(d) Notwithstanding the provisions of subsection (b) above,
Centennial need not comply with subsection (b) hereof
following the end of the Term or any extensions of the Term so
long as Centennial or a wholly-owned subsidiary of Centennial
begins providing such central station monitoring and billing
services to all Centennial Subscribers upon the end of the
Term or any extensions of the Term."
5. Miscellaneous. Copies of any notices to Masada under
any of the Agreements shall be sent, not to Christopher R. Murvin, Esq., but to
W. Lee Thuston, Esq., Burr & Forman, 3100 South Trust Tower, Birmingham, Alabama
35203, telecopier: (205)458-5100. All terms of the Agreements not specifically
amended by this Amendment Agreement shall remain in full force and effect.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement
as of the date first written above.
MASADA SECURITY, INC.
By: /s/ Terry W. Jonhson
-----------------------------
Title: President
--------------------------
CENTENNIAL SECURITY, INC.
By: /s/ Robert J. Shiver
-----------------------------
Title: President
--------------------------
-10-
<PAGE> 1
SERIES B PREFERRED STOCK
PURCHASE AGREEMENT
DATED JULY 11, 1995
BY AND AMONG CENTENNIAL SECURITY, INC.
and
CENTENNIAL FUND IV, L.P.
CHEMICAL VENTURE CAPITAL ASSOCIATES
HANCOCK VENTURE PARTNERS IV--DIRECT FUND, L.P.
LARIMER & CO.
and
MASADA SECURITY, INC.
<PAGE> 2
TABLE OF CONTENTS
Page
----
1. Authorization and Closing . . . . . . . . . . . . . . . . . . . . . . . . 1
1A. Authorization of the Series B Preferred Stock . . . . . . . 1
1B. Purchase and Sale of the Series B Preferred Stock . . . . . 1
1C. The Closing . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Conditions of the Purchasers' Obligation at the Closing . . . . . . . . . 2
2A. Representations and Warranties; Covenants . . . . . . . . . 2
2B. Amendment to Certificate of Incorporation . . . . . . . . . 2
2C. Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2D. Blue Sky Clearance . . . . . . . . . . . . . . . . . . . . . 2
2E. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2F. Registration Agreement . . . . . . . . . . . . . . . . . . . 2
2G. Stockholders Agreement . . . . . . . . . . . . . . . . . . . 2
2H. Conversion of Class B Common Stock . . . . . . . . . . . . . 2
2I. Collateral Assignment and Pledge Agreement . . . . . . . . . 3
2J. Due Diligence . . . . . . . . . . . . . . . . . . . . . . . 3
2K. Opinion of the Company's Counsel . . . . . . . . . . . . . . 3
2L. Closing Documents . . . . . . . . . . . . . . . . . . . . . 3
2M. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 4
2N. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3A. Financial Statements and Other Information . . . . . . . . . 4
3B. Inspection of Property . . . . . . . . . . . . . . . . . . . 8
3C. Attendance at Board Meetings . . . . . . . . . . . . . . . . 8
3D. Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 8
3E. Compliance with Agreements . . . . . . . . . . . . . . . . 11
3F. Current Public Information . . . . . . . . . . . . . . . . 11
3G. Affirmative Covenants . . . . . . . . . . . . . . . . . . 12
3H. Termination of Covenants . . . . . . . . . . . . . . . . . 13
4. Transfer of Restricted Securities . . . . . . . . . . . . . . . . . . . 13
4A. General Provisions . . . . . . . . . . . . . . . . . . . . 13
4B. Opinion Delivery . . . . . . . . . . . . . . . . . . . . . 13
4C. Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . 13
- ii -
<PAGE> 3
4D. Legend Removal . . . . . . . . . . . . . . . . . . . . . . 13
5. Representations and Warranties of the Company . . . . . . . . . . . . . 14
5A. Organization and Corporate Power . . . . . . . . . . . . . 14
5B. Capital Stock and Related Matters . . . . . . . . . . . . 14
5C. Subsidiaries; Investments . . . . . . . . . . . . . . . . 15
5D. Authorization; No Breach . . . . . . . . . . . . . . . . . 15
5E. Financial Statements . . . . . . . . . . . . . . . . . . . 16
5F. Absence of Undisclosed Liabilities . . . . . . . . . . . . 16
5G. No Material Adverse Change . . . . . . . . . . . . . . . . 16
5H. Governmental Consent, etc . . . . . . . . . . . . . . . . 16
5I. Absence of Certain Developments . . . . . . . . . . . . . 17
5J. Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5K. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 18
5L. Contracts and Commitments . . . . . . . . . . . . . . . . 19
5M. Customers and Suppliers . . . . . . . . . . . . . . . . . 21
5N. Intellectual Property Rights . . . . . . . . . . . . . . . 21
5O. Litigation, etc. . . . . . . . . . . . . . . . . . . . . . 22
5P. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . 22
5Q. Insurance . . . . . . . . . . . . . . . . . . . . . . . . 23
5R. Employees . . . . . . . . . . . . . . . . . . . . . . . . 23
5S. Compliance with Laws . . . . . . . . . . . . . . . . . . . 24
5T. Small Business Matters . . . . . . . . . . . . . . . . . . 24
5U. Affiliated Transactions . . . . . . . . . . . . . . . . . 24
5V. Investment in United States Real Property Interests . . . 25
5W. Unrelated Business Taxable Income . . . . . . . . . . . . 25
5X. Qualified Small Business . . . . . . . . . . . . . . . . . 25
5Y. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 25
5Z. Closing Date . . . . . . . . . . . . . . . . . . . . . . . 26
6. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7A. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 30
7B. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 31
7C. Purchasers' Representations and Warranties . . . . . . . . 31
7D. Preferred Stock Redemption . . . . . . . . . . . . . . . . 33
7E. Common Stock Put . . . . . . . . . . . . . . . . . . . . . 34
7F. SBIC Regulatory Provisions . . . . . . . . . . . . . . . . 36
- iii -
<PAGE> 4
7G. Regulatory Compliance Cooperation . . . . . . . . . . . . 38
7H. Amendment of the 1994 Purchase Agreement and
the Masada Purchase Agreement . . . . . . . . . . . . . . 39
7I. Consent to Amendments . . . . . . . . . . . . . . . . . . 39
7J. Survival of Representations and Warranties . . . . . . . . 39
7K. Successors and Assigns . . . . . . . . . . . . . . . . . . 39
7L. Severability . . . . . . . . . . . . . . . . . . . . . . . 39
7M. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 40
7N. Descriptive Headings; Interpretation . . . . . . . . . . . 40
7O. Governing Law . . . . . . . . . . . . . . . . . . . . . . 40
7P. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 40
7Q. Understanding Among the Purchasers . . . . . . . . . . . . 40
7R. No Strict Construction . . . . . . . . . . . . . . . . . . 40
7S. Indemnification . . . . . . . . . . . . . . . . . . . . . 40
- iv -
<PAGE> 5
SERIES B PREFERRED STOCK
PURCHASE AGREEMENT
THIS AGREEMENT is made as of July 11, 1995, by and among
Centennial Security, Inc., a Delaware corporation (the "Company"), Centennial
Fund IV, L.P., a Delaware limited partnership ("Centennial"), Chemical Venture
Capital Associates, a California limited partnership ("Chemical"), Hancock
Venture Partners IV--Direct Fund, L.P., a Delaware limited partnership
("Hancock"), Larimer & Co., a Delaware corporation ("Larimer"), and Masada
Security, Inc., a Delaware corporation ("Masada") (Hancock and Chemical being
referred to herein as the "New Investors" and Hancock, Chemical, Centennial,
Larimer and Masada being referred to herein collectively as the "Purchasers").
Capitalized terms used herein and not defined elsewhere herein are defined in
Section 6 hereof.
Section 1. Authorization and Closing.
1A. Authorization of the Series B Preferred Stock. The
Company shall authorize the issuance and sale to the Purchasers of 438,049
shares of its Series B Convertible Preferred Stock, par value $.001 per share
(the "Series B Preferred Stock"), having the rights and preferences set forth
in Exhibit A hereto. The Series B Preferred Stock is convertible into shares
of the Company's Common Stock, par value $.001 per share (the "Common Stock").
1B. Purchase and Sale of the Series B Preferred Stock.
Subject to the terms and conditions set forth herein, at the Closing, the
Company shall issue and sell to each Purchaser, and each Purchaser shall
purchase and acquire from the Company, the number of shares of Series B
Preferred Stock set forth opposite such Purchaser's name on the Purchasers
Schedule attached hereto at a price of $27.50 per share. The sale of Series B
Preferred Stock to each Purchaser shall constitute a separate sale hereunder.
1C. The Closing. The closing of the purchase and sale of
the Series B Preferred Stock (the "Closing") shall take place at the offices of
Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois 60601, at 10:00
a.m. on July 11, 1995, or at such other place or on such other date as may be
mutually agreeable to the Company and the Purchasers. At the Closing, the
Company shall deliver to the Purchasers stock certificates evidencing the
Series B Preferred Stock to be purchased by the Purchasers, registered in each
Purchaser's or its nominee's name, upon payment of the purchase price thereof
by wire transfer of immediately available funds to an account designated by the
Company, in the amount set forth opposite such Purchaser's name on the
Purchasers Schedule attached hereto.
- 1 -
<PAGE> 6
Section 2. Conditions of the Purchasers' Obligation at the
Closing. The obligation of each Purchaser to purchase and pay for the Series B
Preferred Stock at the Closing is subject to the satisfaction as of the Closing
of the following conditions:
2A. Representations and Warranties; Covenants. The
representations and warranties contained in Section 5 hereof shall be true and
correct in all material respects at and as of the Closing as though then made,
except to the extent of changes caused by the transactions expressly
contemplated herein, and the Company shall have performed in all material
respects all of the covenants required to be performed by it hereunder prior to
the Closing.
2B. Amendment to Certificate of Incorporation. The
Company's Certificate of Incorporation (the "Certificate of Incorporation")
shall have been amended to include the provisions set forth in Exhibit A hereto
(the "Charter Amendment"), shall be in full force and effect under the laws of
the State of Delaware as of the Closing as so amended and shall not have been
further amended or modified.
2C. Bylaws. The Company's bylaws as in effect on the
date hereof shall be in full force and effect as of the Closing and shall not
have been amended or modified.
2D. Blue Sky Clearance. The Company shall have made all
filings under applicable state securities laws, if any, necessary to consummate
the issuance of the Series B Preferred Stock pursuant to this Agreement in
compliance with such laws.
2E. Expenses. At the Closing, the Company shall have
reimbursed the Purchasers for the Purchasers' Expenses (to the extent then
known) as provided in paragraph 7A hereof.
2F. Registration Agreement. The Company and the
Purchasers shall have entered into a Registration Agreement (the "Registration
Agreement") substantially in the form of Exhibit B attached hereto, and the
Registration Agreement shall be in full force and effect as of the Closing.
2G. Stockholders Agreement. The Company and the
Purchasers shall have entered into a Stockholders Agreement (the "Stockholders
Agreement") substantially in the form of Exhibit C attached hereto, and the
Stockholders Agreement shall be in full force and effect as of the Closing.
2H. Conversion of Class B Common Stock. All of the Class
B Common Stock of the Company, par value $.001 per share, shall be converted
into shares of Common Stock at or prior to the Closing.
- 2 -
<PAGE> 7
2I. Collateral Assignment and Pledge Agreement. At or
prior to the Closing, Robert J. Shiver and the Company shall have entered into
the Collateral Assignment and Pledge Agreement contemplated by the Promissory
Note dated as of May 31, 1995 issued by Robert J. Shiver to the Company.
2J. Due Diligence. Each of the Purchasers shall be
satisfied with the results of its and its representatives' due diligence
investigation and evaluation of the Company.
2K. Opinion of the Company's Counsel. Each Purchaser
shall have received from Buchanan Ingersoll, P.C., counsel for the Company, an
opinion with respect to the matters set forth in Exhibit D attached hereto,
which shall be addressed to each Purchaser, dated the date of the Closing and
in form and substance reasonably satisfactory to each Purchaser.
2L. Closing Documents. The Company shall have delivered
the following documents to the Purchasers:
(i) an Officer's Certificate, dated the date of the
Closing, stating that the conditions specified in paragraphs 2A
through 2I, inclusive, and this paragraph 2L have been fully
satisfied;
(ii) copies certified by an officer of the Company of the
resolutions duly adopted by the Company's board of directors
authorizing and approving the execution, delivery and performance of
this Agreement and each of the other agreements contemplated hereby,
the Charter Amendment and the filing of the Charter Amendment with the
Delaware Secretary of State, the reservation for issuance upon
conversion of the Preferred Stock of an aggregate of 529,049 shares of
Common Stock, the issuance and sale of the Series B Preferred Stock,
and the consummation of all other transactions contemplated by this
Agreement;
(iii) copies certified by an officer of the Company of the
resolutions of the Company's stockholders authorizing and approving
the Charter Amendment and the filing of the Charter Amendment with the
Delaware Secretary of State;
(iv) copies of the Certificate of Incorporation, the
Charter Amendment (as filed with the Delaware Secretary of State) and
the Company's bylaws, each as in effect at the Closing;
(v) copies certified by an officer of the Company of any
governmental consents, approvals and filings (if any) required in
connection with the consummation of the transactions hereunder
(including, without limitation, all blue sky law filings);
- 3 -
<PAGE> 8
(vi) for the Purchasers which are SBICs, duly completed
and executed SBA Forms 480, 652 and 1031 (Part A) together with a
five-year business plan showing the Company's financial projections
(including balance sheets and income and cash flows statements) for
such five-year period, a written statement from the Company regarding
its intended use of proceeds from the financing and a list after
giving effect to the transactions contemplated by this Agreement of
(a) the name of each of the Company's directors, (b) the name and
title of each of the Company's officers and (c) the name of each of
the Company's stockholders setting forth the number and class of
shares held; and
(vii) such other documents relating to the transactions
contemplated by this Agreement as any Purchaser or its special counsel
may reasonably request.
2M. Proceedings. All corporate and other proceedings
taken or required to be taken by the Company in connection with the
transactions contemplated hereby to be consummated at or prior to the Closing
and all documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser and its counsel.
2N. Waiver. Any condition specified in this Section 2
may be waived by the Purchasers; provided that no such waiver shall be
effective against any Purchaser unless it is set forth in a writing executed by
such Purchaser.
Section 3. Covenants.
2A. Financial Statements and Other Information. The
Company shall deliver to each Purchaser and each Series A Purchaser (other than
Robert J. Shiver) (so long as such Person holds any Underlying Common Stock),
to each other holder of at least 10% of the Underlying Common Stock then in
existence and to Robert J. Shiver (so long as he holds at least 10,000 shares
of Series A Underlying Common Stock) (such Purchaser or other holder or Robert
J. Shiver (so long as he holds at least 10,000 shares of Series A Underlying
Common Stock) being referred to herein as a "Qualified Holder"):
(i) as soon as available but in any event within 30 days
after the end of each monthly accounting period in each fiscal year
(except for the last month of the Company's fiscal year), unaudited
consolidating and consolidated statements of income and cash flows of
the Company and its Subsidiaries for such monthly period and for the
period from the beginning of the fiscal year to the end of such
monthly period, and unaudited consolidating and consolidated balance
sheets of the Company and its Subsidiaries as of the end of such
monthly period, setting forth in each case comparisons to the
Company's annual budget and to the corresponding period in the
preceding fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles (absent note
disclosures), consistently applied and shall be certified by the
Company's Chief Financial Officer (or, if the Company has
- 4 -
<PAGE> 9
no Chief Financial Officer or another person performing the functions
of the Chief Financial Officer, then certified by the Company's
President);
(ii) as soon as available but in any event within 30 days
after the end of each fiscal quarter of the Company (except the last
quarter of the Company's fiscal year), quarterly unaudited
consolidating and consolidated statements of income and cash flows of
the Company and its Subsidiaries, and quarterly unaudited
consolidating and consolidated balance sheets of the Company and its
Subsidiaries, setting forth in each case comparisons to the Company's
annual budget and to the corresponding period in the preceding fiscal
year, and all such statements shall be prepared in accordance with
generally accepted accounting principles (absent note disclosures),
consistently applied and shall be certified by the Company's Chief
Financial Officer (or, if the Company has no Chief Financial Officer
or another person performing the functions of the Chief Financial
Officer, then certified by the Company's President);
(iii) accompanying the financial statements referred to in
subparagraphs (i) and (ii), an Officer's Certificate stating that
there is no Event of Noncompliance in existence and that neither the
Company nor any of its Subsidiaries is in default under any of its
other material agreements or, if any Event of Noncompliance or any
such default exists, specifying the nature and period of existence
thereof and what actions the Company and its Subsidiaries have taken
and propose to take with respect thereto;
(iv) within 90 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of
the Company and its Subsidiaries for such fiscal year, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth in each
case comparisons to the Company's annual budget and to the preceding
fiscal year, all prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by (a)
with respect to the consolidated portions of such statements, an
opinion containing no exceptions or qualifications (except for
qualifications regarding specified contingent liabilities or any
"going concern" qualifications related solely to the possible
accounting treatment of the Series A Preferred Stock or the Series B
Preferred Stock as debt rather than equity) of an independent
accounting firm of recognized national standing acceptable to the
holders of a majority of the Underlying Common Stock then in
existence, (b) a certificate from such accounting firm, addressed to
the Company's board of directors, stating that in the course of its
examination nothing came to its attention that caused it to believe
that there was an Event of Noncompliance in existence or that there
was any other default by the Company or any Subsidiary in the
fulfillment of or compliance with any of the terms, covenants,
provisions or conditions of any other material agreement to which the
Company or any Subsidiary is a party or, if such accountants have
reason to believe any Event of Noncompliance or other default by the
Company or any Subsidiary exists, a
- 5 -
<PAGE> 10
certificate specifying the nature and period of existence thereof, and
(c) a copy of such firm's annual management letter to the board of
directors;
(v) promptly upon receipt thereof, any additional
reports, management letters or other detailed information concerning
significant aspects of the Company's operations or financial affairs
given to the Company by its independent accountants (and not otherwise
contained in other materials provided hereunder);
(vi) as soon as practicable and in any event no later than
30 days after the close of each fiscal year of the Company, a monthly
operating and capital expenditure budget for the Company and its
Subsidiaries for the next immediate fiscal year, a five-year strategic
business plan for the subsequent five fiscal years of the Company and
promptly upon preparation thereof any other significant budgets and
plans prepared by the Company and any revisions of such budgets and
plans, and within 30 days after any monthly period in which there is a
material adverse deviation from the monthly operating and capital
expenditure budget, a statement explaining the deviation and what
actions the Company has taken and proposes to take with respect
thereto;
(vii) promptly (but in any event within five business days)
after the discovery or receipt of notice of any Event of
Noncompliance, any default under any material agreement to which it or
any of its Subsidiaries is a party or any other material adverse
change, event or circumstance affecting the Company or any Subsidiary
(including, without limitation, the filing of any material litigation
against the Company or any Subsidiary or the existence of any dispute
with any Person which involves a reasonable likelihood of such
litigation being commenced), an Officer's Certificate specifying the
nature and period of existence thereof and what actions the Company
and its Subsidiaries have taken and propose to take with respect
thereto;
(viii) within ten days after transmission thereof, copies of
all financial statements, proxy statements, material reports and any
other material general written communications which the Company sends
to its stockholders and copies of all registration statements and all
regular, special or periodic reports which it files, or any of its
officers or directors file with respect to the Company, with the
Securities and Exchange Commission or with any securities exchange on
which any of its securities are then listed, and copies of all press
releases and other statements made available generally by the Company
to the public concerning material developments in the Company's and
its Subsidiaries' businesses; and
(ix) with reasonable promptness, such other information
and financial data concerning the Company and its Subsidiaries as any
Person entitled to receive information under this paragraph 3A may
reasonably request.
- 6 -
<PAGE> 11
Each of the financial statements referred to in subparagraphs (i), (ii) and (iv)
shall be true and correct in all material respects as of the dates and for the
periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end adjustments.
Notwithstanding the foregoing, the provisions of this
paragraph 3A shall cease to be effective so long as the Company (a) is subject
to the periodic reporting requirements of the Securities Exchange Act and
continues to comply with such requirements and (b) promptly provides to each
Person otherwise entitled to receive information pursuant to this paragraph 3A
all reports and other materials filed by the Company with the Securities and
Exchange Commission pursuant to the periodic reporting requirements of the
Securities Exchange Act; provided that so long as any shares of Preferred Stock
remain outstanding, within 30 days after the end of each of the Company's
fiscal quarters, the Company shall continue to deliver to each Qualified Holder
the information specified in subparagraph 3A(iii); and provided further that so
long as any shares of Underlying Common Stock remain in existence, the Company
shall continue to deliver to each Qualified Holder, the information specified
in subparagraphs 3A(iv)(b), 3A(vii) and 3A(ix).
Except as otherwise required by law or judicial order or
decree or by any governmental agency or authority, each Person entitled to
receive information regarding the Company and its Subsidiaries under paragraph
3A, 3B or 3C shall use its best efforts to maintain the confidentiality of all
nonpublic information obtained by it hereunder which the Company has reasonably
designated as proprietary or confidential in nature; provided that each such
Person may disclose such information (a) in connection with the proposed sale
or transfer of any Underlying Common Stock if the proposed transferee agrees in
writing to be bound by the confidentiality provisions hereof and (b) to the
extent such Person which is a partnership or other venture capital fund
desires, according to its policies as in effect from time to time, to disclose
summary or financial information about the Company to investors in and other
partners of such Person as part of such Person's regular communication process
with its investors and partners.
For purposes of paragraphs 3A and 3C hereof, the terms
"Purchaser" and "Series A Purchaser" shall include any partner of a Purchaser
or Series A Purchaser who received shares of Underlying Common Stock pursuant
to a distribution from or a liquidation of such Purchaser.
For purposes of this Agreement and the Registration Agreement,
all holdings of Underlying Common Stock by Persons who are Affiliates of each
other shall be aggregated for purposes of meeting any threshold tests under
this Agreement and Registration Agreement. "Affiliate" means any Person which
controls, is controlled by or is under common control with another Person and
Persons which have received distributions of securities from a partnership
holding such securities.
- 7 -
<PAGE> 12
3B. Inspection of Property. The Company shall permit any
representatives designated by any Qualified Holder, upon reasonable notice and
during normal business hours, to (i) visit and inspect any of the properties of
the Company and its Subsidiaries, (ii) examine the corporate and financial
records of the Company and its Subsidiaries and make copies thereof or extracts
therefrom and (iii) discuss the affairs, finances and accounts of any such
corporations with the directors, officers, key employees and independent
accountants of the Company and its Subsidiaries. The presentation of an
executed copy of this Agreement by any Purchaser or any such holder of Series B
Preferred Stock or Series B Underlying Common Stock, or an executed copy of the
1994 Purchase Agreement by any holder of Series A Underlying Common Stock, to
the Company's independent accountants shall constitute the Company's permission
to its independent accountants to participate in discussions with such Persons.
3C. Attendance at Board Meetings. The Company shall give
each Purchaser and Series A Purchaser (so long as such Person holds at least
10% of the Underlying Common Stock then in existence) and Robert J. Shiver (so
long as he holds at least 10,000 shares of Series A Underlying Common Stock)
written notice of each meeting of its board of directors and each committee
thereof at the same time and in the same manner as notice is given to the
directors (which notice shall be confirmed in writing to each such Person), and
the Company shall permit a representative of each such Person to attend as an
observer all meetings of its board of directors and all committees thereof.
Each representative shall be entitled to receive all written materials and
other information (including, without limitation, copies of meeting minutes)
given to directors in connection with such meetings at the same time such
materials and information are given to the directors. If the Company proposes
to take any action by written consent in lieu of a meeting of its board of
directors or of any committee thereof, the Company shall use reasonable efforts
to give written notice thereof to each such Person prior to the effective date
of such consent describing the nature and substance of such action and in any
event shall give prompt written notice thereof after the effective date of such
consent. All the rights of the Purchasers and Series A Purchasers under this
paragraph 3C shall be given to any transferee of such Purchasers and Series A
Purchasers who receives Underlying Common Stock if such transferee provides to
the Company a written opinion of counsel that such transferee is required to
have such rights under ERISA (as defined in paragraph 5R(a) below).
3D. Restrictions. Subject to paragraph 3H below and
except as set forth on the attached Restrictions Schedule, so long as any of
the Underlying Common Stock remains in existence, the Company shall not,
without the prior written consent of the Required Holders:
(i) directly or indirectly declare or pay any
dividends or make any distributions upon or with respect to any of its
capital stock or other equity securities other than the Series B
Preferred Stock and the Series A Preferred Stock pursuant to
- 8 -
<PAGE> 13
the terms of the Charter Amendment, except for dividends payable in
shares of Common Stock issued upon the outstanding shares of Common
Stock;
(ii) directly or indirectly redeem, purchase or
otherwise acquire, or permit any Subsidiary to redeem, purchase or
otherwise acquire, any of the Company's or any Subsidiary's capital
stock or other equity securities (including, without limitation,
warrants, options and other rights to acquire such capital stock or
other equity securities) other than the Series B Preferred Stock or
the Series A Preferred Stock pursuant to the terms of the Charter
Amendment;
(iii) except as expressly contemplated by this
Agreement, authorize, issue or enter into any agreement providing for
the issuance (contingent or otherwise) of, (a) any notes or debt
securities containing equity features (including, without limitation,
any notes or debt securities convertible into or exchangeable for
capital stock or other equity securities, issued in connection with
the issuance of capital stock or other equity securities or containing
profit participation features, but excluding any senior or
subordinated debt on market terms with equity rights attached that are
the equivalent for all such debt in the aggregate of not more than 5%
of the outstanding Common Stock of the Company) or (b) any capital
stock or other equity securities (or any securities convertible into
or exchangeable for any capital stock or other equity securities)
which are senior to or on a parity with the Series B Preferred Stock
or the Series A Preferred Stock with respect to the payment of
dividends, redemptions or distributions upon liquidation or otherwise;
(iv) make, or permit any Subsidiary to make, any
loans or advances to, guarantees for the benefit of, or, except as
permitted under clause (viii) of this paragraph 3D, Investments in,
any Person (other than the Company or a Wholly-Owned Subsidiary
established under the laws of a jurisdiction of the United States or
any of its territorial possessions), except for (a) reasonable
advances to employees in the ordinary course of business, (b)
acquisitions permitted pursuant to subparagraph (viii) below and (c)
Investments having a stated maturity no greater than one year from the
date the Company makes such Investment in (1) obligations of the
United States government or any agency thereof or obligations
guaranteed by the United States government, (2) certificates of
deposit of commercial banks having combined capital and surplus of at
least $50 million or (3) commercial paper with a rating of at least
"Prime-1" by Moody's Investors Service, Inc.;
(v) merge or consolidate with any Person or,
except as permitted by subparagraph (viii) below, permit any
Subsidiary to merge or consolidate with any Person (other than a
Wholly-Owned Subsidiary) (it being understood that this subparagraph
(v) shall not apply to a purchase of stock by the Company of any other
Person which is not followed or accompanied by a merger or
consolidation of such person into or with the Company);
- 9 -
<PAGE> 14
(vi) sell, lease or otherwise dispose of, or
permit any Subsidiary to sell, lease or otherwise dispose of, more
than 10% of the consolidated assets of the Company and its
Subsidiaries (computed on the basis of book value, determined in
accordance with generally accepted accounting principles consistently
applied, or fair market value, determined by the Company's board of
directors in its reasonable good faith judgment) in any transaction or
series of related transactions (other than sales of inventory in the
ordinary course of business) or sell or permanently dispose of any of
its or any Subsidiary's Intellectual Property Rights (other than any
sale to a Wholly-Owned Subsidiary);
(vii) liquidate, dissolve or effect a
recapitalization or reorganization in any form of transaction
(including, without limitation, any reorganization into a limited
liability company, a partnership or any other non-corporate entity
which is treated as a partnership for federal income tax purposes);
(viii) acquire, or permit any Subsidiary to acquire,
any interest in any company or business (whether by a purchase of
assets, purchase of stock, merger or otherwise), or enter into any
joint venture, involving an aggregate consideration (including,
without limitation, the assumption of liabilities whether direct or
indirect) exceeding $5,000,000 in any one transaction or series of
related transactions;
(ix) enter into, or permit any Subsidiary to enter
into, the ownership, active management or operation of any business
other than the commercial and residential security monitoring business
and related businesses;
(x) become subject to or permit any of its
Subsidiaries to become subject to (including, without limitation, by
way of amendment to or modification of) any agreement or instrument
which by its terms would (under any circumstances) restrict (a) the
right of any Subsidiary to make loans or advances or pay dividends to,
transfer property to, or repay any Indebtedness owed to, the Company
or another Subsidiary or (b) the Company's right to perform the
provisions of this Agreement, the Registration Agreement, the
Certificate of Incorporation, the Charter Amendment or the Company's
bylaws (including, without limitation, provisions relating to the
declaration and payment of dividends on, the making of redemptions of
and conversions of the Series B Preferred Stock and the Series A
Preferred Stock);
(xi) except as expressly contemplated by this
Agreement, make any amendment to the Certificate of Incorporation, the
Charter Amendment or the Company's bylaws, or file any resolution of
the board of directors with the Delaware Secretary of State containing
any provisions, which would increase the number of authorized shares
of the Series B Preferred Stock or the Series A Preferred Stock or
adversely affect or otherwise impair the rights or the relative
preferences and priorities of the holders of the Series B Preferred
Stock, the Series A Preferred Stock or the
- 10 -
<PAGE> 15
Underlying Common Stock under this Agreement, the Certificate of
Incorporation, the Charter Amendment, the Company's bylaws or the
Registration Agreement;
(xii) enter into, amend, modify or supplement, or
permit any Subsidiary to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with any of its or
any Subsidiary's officers, directors or employees or with any
individual related by blood, marriage or adoption to any such
individual or with any entity in which any such Person or individual
owns a beneficial interest, except for customary employment
arrangements and benefit programs on reasonable terms and except as
otherwise expressly contemplated by this Agreement;
(xiii) establish or acquire (a) any Subsidiaries
other than Wholly-Owned Subsidiaries or (b) any Subsidiaries organized
outside of the United States and its territorial possessions;
(xiv) change its fiscal year;
(xv) increase the authorized size of its board of
directors above 9 members or decrease the authorized size of its board
of directors below 9 members; or
(xvi) issue or sell any shares of the capital
stock, or rights to acquire shares of the capital stock, of any
Subsidiary to any Person other than the Company or a Wholly-Owned
Subsidiary.
3E. Compliance with Agreements. The Company shall
perform and observe all of its obligations to each holder of the Series B
Preferred Stock and the Series A Preferred Stock and all of its obligations to
each holder of the Underlying Common Stock set forth in the Certificate of
Incorporation, the Charter Amendment and the Company's bylaws and all of its
obligations to each holder of Registrable Securities set forth in the
Registration Agreement.
3F. Current Public Information. At all times after the
Company has filed a registration statement with the Securities and Exchange
Commission pursuant to the requirements of either the Securities Act or the
Securities Exchange Act, the Company shall file all reports required to be
filed by it under the Securities Act and the Securities Exchange Act and the
rules and regulations adopted by the Securities and Exchange Commission
thereunder and shall take such further action as any holder or holders of
Restricted Securities may reasonably request, all to the extent required to
enable such holders to sell Restricted Securities pursuant to (i) Rule 144
adopted by the Securities and Exchange Commission under the Securities Act (as
such rule may be amended from time to time) or any similar rule or regulation
hereafter adopted by the Securities and Exchange Commission or (ii) a
registration statement on Form S-2 or S-3 or any similar registration form
hereafter adopted by the
- 11 -
<PAGE> 16
Securities and Exchange Commission. Upon request, the Company shall
deliver to any holder of Restricted Securities a written statement as
to whether it has complied with such requirements.
3G. Affirmative Covenants. So long as any of the
Underlying Common Stock remains in existence the Company shall, and shall cause
each Subsidiary to use its best efforts, to:
(i) cause to be done all things necessary to maintain,
preserve and renew its corporate existence and all material licenses,
authorizations and permits necessary to the conduct of its business;
(ii) maintain and keep its properties in good repair,
working order and condition, and from time to time make all necessary
repairs, renewals and replacements, so that its businesses may be
properly conducted at all times;
(iii) pay and discharge when payable all taxes, assessments
and governmental charges imposed upon its properties or upon the
income or profits therefrom (in each case before the same becomes
delinquent and before penalties accrue thereon) and all claims for
labor, materials or supplies to the extent to which the failure to pay
or discharge such obligations would reasonably be expected to have a
material adverse effect upon the financial condition of the Company
and its Subsidiaries taken as a whole, unless and to the extent that
the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with
generally accepted accounting principles, consistently applied) have
been established on its books with respect thereto;
(iv) comply with all other material obligations which it
incurs pursuant to any contract or agreement as such obligations
become due to the extent to which the failure to so comply would
reasonably be expected to have a material adverse effect upon the
financial condition of the Company and its Subsidiaries taken as a
whole, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with generally accepted accounting
principles, consistently applied) have been established on its books
with respect thereto;
(v) comply with all applicable laws, rules and
regulations of all governmental authorities, the violation of which
would reasonably be expected to have a material adverse effect upon
the financial condition of the Company and its Subsidiaries taken as a
whole; and
(vi) maintain proper books of record and account which
fairly present its financial condition and results of operations and
make provisions on its financial
- 12 -
<PAGE> 17
statements for all such proper reserves as in each case are required
in accordance with generally accepted accounting principles,
consistently applied.
3H. Termination of Covenants. Notwithstanding any other
provisions in this Section 3, the provisions of paragraphs 3D (other than
clause 3D(x)(b)) and 3G (other than clauses 3G(v) and 3G (vi)) shall terminate
upon the last to occur of (i) the conversion of at least 90% of the shares of
the Series B Preferred Stock issued hereunder, (ii) the conversion of at least
90% of the shares of the Series A Preferred Stock issued under the 1994
Purchase Agreement or (iii) the consummation of a Qualified Public Offering.
Section 4. Transfer of Restricted Securities.
4A. General Provisions. Restricted Securities are
transferable only pursuant to (i) public offerings registered under the
Securities Act, (ii) Rule 144 or Rule 144A of the Securities and Exchange
Commission (or any similar rule or rules then in force) if such rule is
available and (iii) subject to the conditions specified in paragraph 4B below,
any other legally available means of transfer.
4B. Opinion Delivery. In connection with the transfer of
any Restricted Securities (other than a transfer described in paragraph 4A(i)
or (ii) above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together
with an opinion of Kirkland & Ellis or other counsel which (to the Company's
reasonable satisfaction) is knowledgeable in securities law matters to the
effect that such transfer of Restricted Securities may be effected without
registration of such Restricted Securities under the Securities Act. In
addition, if the holder of the Restricted Securities deliver to the Company an
opinion of Kirkland & Ellis or such other counsel that no subsequent transfer
of such Restricted Securities shall require registration under the Securities
Act, the Company shall promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the Securities
Act legend set forth in paragraph 7C. If the Company is not required to
deliver new certificates for such Restricted Securities not bearing such
legend, the holder thereof shall not transfer the same until the prospective
transferee has confirmed to the Company in writing its agreement to be bound by
the conditions contained in this paragraph and paragraph 7C.
4C. Rule 144A. Upon the request of any Purchaser, the
Company shall promptly supply to such Purchaser or its prospective transferees
all information regarding the Company required to be delivered in connection
with a transfer pursuant to Rule 144A of the Securities and Exchange
Commission.
4D. Legend Removal. If any Restricted Securities become
eligible for sale pursuant to Rule 144(k), the Company shall, upon the request
of the holder of such Restricted Securities, remove the legend set forth in
paragraph 7C from the certificates for such Restricted Securities.
- 13 -
<PAGE> 18
Section 5. Representations and Warranties of the Company. As
a material inducement to the Purchasers to enter into this Agreement and
purchase the Series B Preferred Stock, the Company hereby represents and
warrants that:
5A. Organization and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware and, except as set forth on the attached Organization
Schedule, is qualified to do business in every jurisdiction in which the
character of the Company's properties or the nature of the Company's activities
requires it to be so qualified. The Company has all requisite corporate power
and authority and all licenses, permits and authorizations necessary to own and
operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement. The copies of the Company's charter documents
and bylaws which have been furnished to the Purchasers' counsel reflect all
amendments made thereto at any time prior to the date of this Agreement and are
correct and complete. The Company is not in default under or in violation of
any provision of its charter documents or bylaws.
5B. Capital Stock and Related Matters.
(i) As of the Closing and immediately thereafter, the
authorized capital stock of the Company shall consist of those shares
of capital stock of the Company set forth on the attached Capital
Stock Schedule. Except as set forth on the attached Capital Stock
Schedule, as of the Closing, the Company shall not have outstanding
any stock or securities convertible or exchangeable for any shares of
its capital stock or containing any profit participation features, nor
shall it have outstanding any rights or options to subscribe for or to
purchase its capital stock or any stock or securities convertible into
or exchangeable for its capital stock or any stock appreciation rights
or phantom stock plans, except as set forth in this Agreement and as
disclosed to the Purchasers prior to the date of this Agreement.
Except as set forth on the attached Capital Stock Schedule, as of the
Closing, the Company shall not be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire
any shares of its capital stock or any warrants, options or other
rights to acquire its capital stock. As of the Closing, all of the
outstanding shares of the Company's capital stock shall be validly
issued, fully paid and nonassessable.
(ii) Except as set forth on the attached Capital Stock
Schedule, there are no statutory or contractual stockholders
preemptive rights or rights of refusal with respect to (a) the
issuance of the Series B Preferred Stock hereunder or the issuance of
the Common Stock upon conversion of the Series B Preferred Stock,
except those as have been waived by the Persons possessing such rights
and (b) except as set forth in the Stockholders Agreement, the
issuance of any other equity securities by the Company or any
Subsidiary. The Company has not violated any applicable federal or
state securities laws in connection with the offer, sale or issuance
of any of its capital stock,
- 14 -
<PAGE> 19
and the offer, sale and issuance of the Series B Preferred Stock
hereunder do not require registration under the Securities Act or any
applicable state securities laws. Except as set forth on the attached
Capital Stock Schedule, to the best of the Company's knowledge, there
are no agreements between the Company's stockholders with respect to
the voting or transfer of the Company's capital stock or with respect
to any other aspect of the Company's affairs, except as contemplated
by this Agreement and the Stockholders Agreement.
5C. Subsidiaries; Investments. The attached Subsidiary
Schedule correctly sets forth the name of each Subsidiary, the jurisdiction of
its incorporation and the Persons owning the outstanding capital stock of such
Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, possesses all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its Business and
is qualified to do business in every jurisdiction in which its ownership of
property or the conduct of business requires it to qualify. All of the
outstanding shares of capital stock of each Subsidiary are validly issued, full
paid and nonassessable, and all such shares are owned by the Company or another
Subsidiary free and clear of any Lien and not subject to any option or right to
purchase any such shares. Except as set forth on the Subsidiary Schedule,
neither the Company nor any Subsidiary owns or holds the right to acquire any
shares of stock or any other security or interest in any other Person. Each
representation and warranty with respect to the "Company" contained in this
Section 5 (other than the representations and warranties contained in
paragraphs 5A, 5B(i) and 5E) is also true and correct with respect to each
Subsidiary listed on the attached Subsidiary Schedule.
5D. Authorization; No Breach. The execution, delivery
and performance of this Agreement, the Registration Agreement and all other
agreements contemplated hereby and thereby to which the Company is a party,
have been duly authorized by the Company. This Agreement, the Registration
Agreement and all other agreements contemplated hereby and thereby each
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to applicable laws of bankruptcy, insolvency
and similar laws affecting creditors' rights and the application of general
rules of equity. The execution and delivery by the Company of this Agreement,
the Registration Agreement and all other agreements contemplated hereby and
thereby to which the Company is a party, the offering, sale and issuance of the
Series B Preferred Stock hereunder, and the fulfillment of and compliance with
the respective terms hereof and thereof by the Company, do not and shall not
(i) conflict with or result in a breach of the terms, conditions or provisions
of, (ii) constitute a default under, (iii) result in the creation of any lien,
security interest, charge or encumbrance upon the Company's capital stock or
assets pursuant to, (iv) give any third party the right to modify, terminate or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice to
any court or administrative or governmental body pursuant to, the charter or
bylaws of the Company, or, any law, statute, rule or regulation to which the
Company is subject, or
- 15 -
<PAGE> 20
any commitment, understanding, agreement, instrument, order, judgment or decree
to which the Company is subject.
5E. Financial Statements. Attached hereto as the
Financial Statements Schedule are the following financial statements:
(i) the unaudited consolidated balance sheets of
the Company as of December 31, 1994, and the related statements of
income and cash flows (or the equivalent) for the period from the
inception of the Company until December 31, 1994; and
(ii) the unaudited consolidated balance sheet of
the Company as of May 31, 1995 (the "Latest Balance Sheet"), and the
related statements of income and cash flows (or the equivalent) for
the 5-month period then ended.
Each of the foregoing financial statements is accurate and complete in all
material respects, is consistent with the books and records of the Company
(which, in turn, are accurate and complete in all material respects) and has
been prepared in accordance with generally accepted accounting principles
(absent note disclosures), consistently applied.
5F. Absence of Undisclosed Liabilities. Except as set
forth on the attached Liabilities Schedule, the Company does not have any
obligation or liability (whether accrued, absolute, contingent, unliquidated or
otherwise, whether or not known to the Company, whether due or to become due
and regardless of when asserted) arising out of transactions entered into at or
prior to the Closing, or any action or inaction at or prior to the Closing, or
any state of facts existing at or prior to the Closing other than: (i)
liabilities set forth on the Latest Balance Sheet (including any notes
thereto), (ii) liabilities and obligations which have arisen after the date of
the Latest Balance Sheet in the ordinary course of business (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit) and (iii) other liabilities and obligations
expressly disclosed in the other Schedules to this Agreement.
5G. No Material Adverse Change. Since the date of the
Latest Balance Sheet, there has been no material adverse change in the
financial condition, operating results, assets, operations, business prospects,
employee relations or customer or supplier relations of the Company.
5H. Governmental Consent, etc. No permit, consent,
approval or authorization of, or declaration to or filing with, any
governmental authority is required in connection with the execution, delivery
and performance by the Company of this Agreement or the other agreements
contemplated hereby, or the consummation by the Company of any other
transactions contemplated hereby or thereby, except as expressly contemplated
herein or in the exhibits hereto.
- 16 -
<PAGE> 21
5I. Absence of Certain Developments. Except as expressly
contemplated by this Agreement or as set forth on the attached Developments
Schedule, since the date of the Latest Balance Sheet, the Company has not:
(i) issued any notes, bonds or other debt securities or
any capital stock or other equity securities or any securities
convertible, exchangeable or exercisable into any capital stock or
other equity securities;
(ii) borrowed any amount or incurred or become subject to
any liabilities, except current liabilities incurred in the ordinary
course of business and liabilities under contracts entered into in the
ordinary course of business;
(iii) discharged or satisfied any Lien or paid any
obligation or liability, other than current liabilities paid in the
ordinary course of business;
(iv) declared or made any payment or distribution of cash
or other property to its stockholders with respect to its capital
stock or other equity securities or purchased or redeemed any shares
of its capital stock or other equity securities (including, without
limitation, any warrants, options or other rights to acquire its
capital stock or other equity securities);
(v) mortgaged or pledged any of its properties or assets
or subjected them to any Lien, except Liens for current property taxes
not yet due and payable;
(vi) sold, assigned or transferred any of its tangible
assets, except in the ordinary course of business, or canceled any
debts or claims;
(vii) sold, assigned or transferred any patents or patent
applications, trademarks, service marks, trade names, corporate names,
copyrights or copyright registrations, trade secrets or other
intangible assets, or disclosed any proprietary confidential
information to any Person;
(viii) suffered any extraordinary losses or waived any
material rights, whether or not in the ordinary course of business or
consistent with past practice;
(ix) made capital expenditures or commitments therefor
that aggregate in excess of $10,000;
(x) made any loans or advances to, guarantees for the
benefit of, or any Investments in, any Persons in excess of $5,000 in
the aggregate;
(xi) made any charitable contributions or pledges in
excess of $1,000 in the aggregate;
- 17 -
<PAGE> 22
(xii) suffered any damage, destruction or casualty loss
exceeding in the aggregate $5,000, whether or not covered by
insurance;
(xiii) made any Investment in or taken steps to incorporate
any Subsidiary; or
(xiv) entered into any other transaction other than in the
ordinary course of business or entered into any other material
transaction, whether or not in the ordinary course of business.
5J. Assets. Except as set forth on the attached Assets
Schedule, the Company has good and marketable title to, or a valid leasehold
interest in, the material properties and assets used by it, located on its
premises or shown on the Latest Balance Sheet or acquired thereafter, free and
clear of all Liens, except for properties and assets disposed of in the
ordinary course of business since the date of the Latest Balance Sheet and
except for Liens disclosed on the Latest Balance Sheet (including any notes
thereto) and Liens for current property taxes not yet due and payable. Except
as described on the Assets Schedule, the Company's buildings, equipment and
other tangible assets are in good operating condition in all material respects
and are fit for use in the ordinary course of business. The Company owns or
has a valid leasehold interest in, all assets necessary for the conduct of its
business as presently conducted and as presently proposed to be conducted.
5K. Tax Matters. Except as set forth on the attached
Taxes Schedule: the Company has filed all Tax Returns which it is required to
file under applicable laws and regulations; all such Tax Returns are complete
and correct in all material respects and have been prepared in compliance with
all applicable laws and regulations in all material respects; the Company in
all material respects has paid all Taxes due and owing by it (whether or not
such Taxes are required to be shown on a Tax Return) and has withheld and paid
over to the appropriate taxing authority all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder, creditor or
other third party; the Company has not waived any statute of limitations with
respect to any Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency; the accrual for Taxes on the Latest Balance Sheet
would be adequate to pay all Tax liabilities of the Company if its current tax
year were treated as ending on the date of the Latest Balance Sheet (excluding
any amount recorded which is attributable solely to timing differences between
book and Tax income); since the date of the Latest Balance Sheet, the Company
has not incurred any liability for Taxes other than in the ordinary course of
business; the assessment of any additional Taxes for periods for which Tax
Returns have been filed by the Company shall not exceed the recorded liability
therefor on the Latest Balance Sheet (excluding any amount recorded which is
attributable solely to timing differences between book and Tax income); the
federal income Tax Returns of the Company have been audited and closed for all
tax years through 1995; no foreign, federal, state or local tax audits or
administrative or judicial proceedings are pending or being conducted with
respect to the Company, no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority and no
written notice
- 18 -
<PAGE> 23
indicating an intent to open an audit or other review has been received by the
Company from any foreign, federal, state or local taxing authority; and there
are no material unresolved questions or claims concerning the Company's Tax
liability.
5L. Contracts and Commitments.
(i) Except as expressly contemplated by this Agreement or
as set forth on the attached Contracts Schedule, as of the Closing, the Company
is not a party to any written or oral:
(a) pension, profit sharing, stock option,
employee stock purchase or other plan or arrangement
(excluding, for purposes of this subparagraph (a) only, any
employment compensation arrangements of the type described in
subparagraph (b) below, whether or not providing annual
compensation in excess of $100,000) providing for deferred or
other compensation to employees or any other employee benefit
plan or arrangement, or any contract with any labor union, or
any severance agreements;
(b) contract for the employment of any officer,
individual employee or other Person on a full-time, part-time,
consulting or other basis providing annual compensation in
excess of $100,000 or contract relating to loans to officers,
directors or affiliates;
(c) contract under which the Company has advanced
or loaned any other Person amounts in the aggregate exceeding
$5,000;
(d) agreement or indenture relating to the
borrowing of money or the mortgaging, pledging or otherwise
placing a lien on any material asset or material group of
assets of the Company;
(e) guarantee of any obligation in excess of
$10,000;
(f) lease or agreement under which the Company is
lessee of or holds or operates any property, real or personal,
owned by any other party, except for any lease of real or
personal property under which the aggregate annual rental
payments do not exceed $50,000;
(g) lease or agreement under which the Company is
lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by the Company
(other than any leases of security alarm monitoring equipment
to customers of the Company pursuant to written agreements or
contracts);
- 19 -
<PAGE> 24
(h) assignment, license, indemnification or
agreement with respect to any intangible property (including,
without limitation, any patent, trademark, trade name,
copyright, know-how, trade secret or confidential
information);
(i) warranty agreement with respect to its
services rendered or its products sold or leased (other than
any installation warranty agreements entered into in
connection with the installation of security alarm monitoring
systems);
(j) agreement under which it has granted any
Person any registration rights (including piggyback rights);
(k) sales, distribution or franchise agreement;
(l) material agreement with a term of more than
six months which is not terminable by the Company or any
Subsidiary upon less than 30 days notice without penalty;
(m) contract or agreement prohibiting it from
freely engaging in any business or competing anywhere in the
world; or
(n) contract, agreement or other arrangement with
any officer, director, employee or Affiliate, or any Affiliate
of any officer, director or employee (other than any
contracts, agreements or arrangements covered by clause (b)
above or entered into in the ordinary course of business
consistent with past practice);
(o) any other agreement which is material to its
operations and business prospects or involves a consideration
in excess of $100,000 annually.
(ii) Except as set forth on the attached Contracts
Schedule, all of the contracts, agreements and instruments set forth on the
attached Contracts Schedule are valid, binding and enforceable against the
Company in accordance with their respective terms. Except as set forth on the
attached Contracts Schedule, the Company has performed all obligations required
to be performed by it under the contracts, agreements and instruments listed on
the attached Contracts Schedule and is not in default under or in breach of nor
in receipt of any claim of default or breach under any contract, agreement or
instrument to which the Company is subject; no event has occurred which with
the passage of time or the giving of notice or both would result in a default,
breach or event of noncompliance under any contract, agreement or instrument to
which the Company is subject; and the Company has no present expectation or
intention of not fully performing all such obligations; the Company has no
knowledge of any breach or anticipated breach by the other parties to any
contract or commitment to which it is a party.
- 20 -
<PAGE> 25
(iii) The Purchasers have been supplied with a true
and correct copy of each of the written contracts and an accurate
description of the oral contracts which are referred to on the
Contracts Schedule, together with all amendments, waivers or other
changes thereto.
5M. Customers and Suppliers.
(i) The attached Customer Schedule lists the 10 largest
customers of the Company based on recurring monthly revenues and sets forth
opposite the name of each such customer the percentage of consolidated net
sales attributable to such customer. The Customer Schedule also lists any
additional current customers which the Company anticipates shall be among the
10 largest customers for the current fiscal year.
(ii) Since the date of the Latest Balance Sheet, no
material supplier of the Company has indicated that it shall stop, or
materially decrease the rate of, supplying materials, products or services to
the Company, and no customer listed on the Customer Schedule has indicated
that it shall stop, or materially decrease the rate of, buying materials,
products or services from the Company.
5N. Intellectual Property Rights.
(i) The attached Intellectual Property Schedule contains
a complete and accurate list of all (a) patented or registered Intellectual
Property Rights owned or used by the Company, (b) pending patent applications
and applications for registrations of other Intellectual Property Rights filed
by the Company, (c) unregistered trade names and corporate names owned or used
by the Company and (d) unregistered trademarks, service marks, copyrights, mask
works and computer software owned or used by the Company. The Intellectual
Property Schedule also contains a complete and accurate list of all licenses
and other rights granted by the Company to any third party with respect to any
Intellectual Property Rights and all licenses and other rights granted by any
third party to the Company with respect to any Intellectual Property Rights, in
each case identifying the subject Intellectual Property Rights. Except as set
forth on the Intellectual Property Schedule, the Company owns all right, title
and interest to, or has the right to use pursuant to a valid license, all
Intellectual Property Rights necessary for the operation of its business as
presently conducted and as presently proposed to be conducted, free and clear
of all Liens. Except as set forth on the Intellectual Property Schedule, the
loss or expiration of any Intellectual Property Right or related group of
Intellectual Property Rights owned or used by the Company has not had and would
not reasonably be expected to have a material adverse effect on the conduct of
the Company's business, and no such loss or expiration is threatened, pending
or reasonably foreseeable. The Company has taken all necessary and desirable
actions to maintain and protect the Intellectual Property Rights which it owns.
To the best of the Company's knowledge, the owners of any Intellectual Property
Rights licensed to the Company have taken all necessary and desirable actions
to maintain and protect the Intellectual Property Rights which are subject to
such licenses.
- 21 -
<PAGE> 26
(ii) Except as set forth on the Intellectual Property
Schedule, (a) the Company owns all right, title and interest in and to all of
the Intellectual Property Rights listed on such Schedule, free and clear of all
Liens, (b) there have been no claims made against the Company asserting the
invalidity, misuse or unenforceability of any of such Intellectual Property
Rights, and, to the best of the Company's knowledge, there are no grounds for
the same, (c) the Company has not received any notices of, and is not aware of
any facts which indicate a likelihood of, any infringement or misappropriation
by, or conflict with, any third party with respect to such Intellectual
Property Rights (including, without limitation, any demand or request that the
Company license any rights from a third party), (d) the conduct of the
Company's business has not infringed, misappropriated or conflicted with and
does not infringe, misappropriate or conflict with any Intellectual Property
Rights of other Persons, nor would any future conduct as presently contemplated
infringe, misappropriate or conflict with any Intellectual Property Rights of
other Persons and (e) to the best of the Company's knowledge, the Intellectual
Property Rights owned by or licensed to the Company have not been infringed,
misappropriated or conflicted by other Persons. The transactions contemplated
by this Agreement shall have no material adverse effect on the Company's
right, title and interest in and to the Intellectual Property Rights listed on
the Intellectual Property Schedule.
5O. Litigation, etc. There are no actions, suits,
proceedings, orders, investigations or claims pending or, to the best of the
Company's knowledge, threatened against or affecting the Company (or to the
best of the Company's knowledge, pending or threatened against or affecting any
of the officers, directors or employees of the Company with respect to its
business or proposed business activities) at law or in equity, or before or by
any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any actions, suit, proceedings
or investigations with respect to the transactions contemplated by this
Agreement); the Company is not subject to any arbitration proceedings under
collective bargaining agreements or otherwise or, to the best of the Company's
knowledge, any governmental investigations or inquiries (including inquiries as
to the qualification to hold or receive any license or permit); and, to the
best of the Company's knowledge, there is no basis for any of the foregoing.
The Company is not subject to any judgment, order or decree of any court or
other governmental agency. Except as set forth on the attached Litigation
Schedule, the Company has not received any opinion or memorandum or legal
advice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be material to, and has
arisen in connection with or from, its business, operations, assets or
properties.
5P. Brokerage. There are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement binding upon the Company. The Company shall pay, and hold each
Purchaser harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in
connection with any such claim.
- 22 -
<PAGE> 27
5Q. Insurance. The attached Insurance Schedule contains
a description of each insurance policy maintained by the Company with respect
to its properties, assets and businesses, and each such policy is in full force
and effect as of the Closing. The Company is not in default with respect to
its obligations under any insurance policy maintained by it. The insurance
coverage of the Company is customary for corporations of similar size engaged
in similar lines of business.
5R. Employees. The Company is not aware that any
executive or key employee of the Company or any group of employees of the
Company has any plans to terminate employment with the Company. The Company
has complied in all material respects with all laws relating to the employment
of labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
taxes, and the Company is not aware that it has any material labor relations
problems (including any union organization activities, threatened or actual
strikes or work stoppages or material grievances). Neither the Company, nor,
to the best of the Company's knowledge, any of their employees is subject to
any noncompete, nondisclosure, confidentiality, employment, consulting or
similar agreements relating to, affecting or in conflict with the present or
proposed business activities of the Company, except for agreements between the
Company and its present and former employees and consultants. Except as set
forth on the attached Employees Schedule:
(a) The Company does not have any obligation to
contribute to (or any other liability, including current or potential
withdrawal liability, with respect to) any "multiemployer plan" (as defined in
Section 3(37) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")).
(b) The Company does not maintain or have any obligation
to contribute to (or any other liability with respect to) any plan or
arrangement whether or not terminated, which provides medical, health, life
insurance or other welfare-type benefits for current or future retired or
terminated employees (except for limited continued medical benefit coverage
required to be provided under Section 4980B of the IRC or as required under
applicable state law).
(c) The Company does not maintain, contribute to or have
any liability under (or with respect to) any employee plan which is a
tax-qualified "defined benefit plan" (as defined in Section 3(35) of ERISA),
whether or not terminated.
(d) The Company does not maintain, contribute to or have
any liability under (or with respect to) any employee plan which is a
tax-qualified "defined contribution plan" (as defined in Section 3(34) of
ERISA), whether or not terminated.
(e) The Company does not maintain, contribute to or have
any liability under (or with respect to) any plan or arrangement providing
benefits to current or former
- 23 -
<PAGE> 28
employees, including any bonus plan, plan for deferred compensation, employee
health or other welfare benefit plan or other arrangement, whether or not
terminated. Such plans and other arrangements are referred to as the "Other
Plans."
(f) With respect to the Other Plans, all required or
recommended (in accordance with historical practices) payments, premiums,
contributions, reimbursements or accruals for all periods ending prior to or as
of the Closing shall have been made or properly accrued on the Latest Balance
Sheet. None of the Other Plans has any material unfunded liabilities which are
not reflected on the Latest Balance Sheet.
5S. Compliance with Laws. Except as set forth on the
attached Compliance Schedule, the Company has not violated any law or any
governmental regulation or requirement which violation would reasonably be
expected to have a material adverse effect upon the financial condition,
operating results, assets, operations, business prospects employee relations or
customer or supplier relations of the Company and the Company has not received
notice of any such violation. The Company is not subject to any clean up
liability, or has reason to believe it may become subject to any clean up
liability, under any federal, state or local environmental law, rule or
regulation.
5T. Small Business Matters. The Company, together with
its "affiliates" (as that term is defined in Title 13, Code of Federal
Regulations, Section 121.401), is a "small business concern" within the meaning
of the Small Business Investment Act of 1958 and the regulations thereunder,
including Title 13, Code of Federal Regulations, Section 121.802. The
information regarding the Company and its affiliates set forth in the Small
Business Administration Form 480, Form 652 and Part A of Form 1031 delivered at
the Closing is accurate and complete. Copies of such forms shall have been
completed and executed by the Company and delivered to each Purchaser at the
Closing together with a written statement of the Company regarding its planned
use of the proceeds from the sale of the Series B Preferred Stock. Neither the
Company nor any Subsidiary presently engages in, and it shall not hereafter
engage in, any activities, nor shall the Company or any Subsidiary use directly
or indirectly the proceeds from the sale of the Series B Preferred Stock
hereunder for any purpose, for which a Small Business Investment Company is
prohibited from providing funds by the Small Business Investment Act of 1958
and the regulations thereunder (including Title 13, Code of Federal
Regulations, Section 107.804 and Section 107.901).
5U. Affiliated Transactions. Except as set forth on the
attached Affiliated Transactions Schedule, no officer, director, employee,
stockholder or Affiliate of the Company or any Subsidiary or any individual
related by blood, marriage or adoption to any such individual or any entity in
which any such Person or individual owns any beneficial interest, is a party to
any material agreement, contract, commitment or transaction with the Company or
any Subsidiary or has any material interest in any material property used by
the Company or any Subsidiary.
- 24 -
<PAGE> 29
5V. Investment in United States Real Property Interests.
The Company represents and warrants that its capital stock does not constitute
a United States real property interest as that term is defined in Section
897(c)(1)(A)(ii) of the IRC. The preceding representation is based on a
determination by the Company that the Company is not and has not been a United
States real property holding corporation (as that term is defined in Section
897(c)(2) of the IRC and in Section 1.897-2(b) of the Treasury Regulations
issued thereunder) during the five (5)-year period preceding the date hereof.
The Company has no current plans or intentions which would cause the Company to
become a United States real property holding company, and the Company has filed
with the IRS all statements, if any, with its United States income tax returns
which are required under Section 1.897-2(h) of the Treasury Regulations. The
Company shall use its best efforts to ensure that it does not at any time in
the future become a United States real property holding corporation. If at any
time in the future the Company should become a United States real property
holding corporation, the Company shall, as promptly as possible, notify the
Purchasers of such change in status.
5W. Unrelated Business Taxable Income. The Company
represents and warrants that any gross income derived by the Purchasers from
the Company shall be in the form of dividends, interest, capital gains and
losses from the disposition of property, and rents and royalties, but only such
rents and royalties as are excluded pursuant to IRC Sections 512(b)(2) and
512(b)(3), respectively, in calculating unrelated business taxable income and
only such dividends, interest, capital gains and losses, and rents and
royalties that are not included under Section 512(b)(4) of the IRC in
calculating unrelated business taxable income.
5X. Qualified Small Business. The Company represents and
warrants that to the best of its knowledge it qualifies as a "Qualified Small
Business" as defined in Section 1202(d) of the IRC and covenants that so long
as its shares are held by the Purchasers (or a transferee in whose hands the
shares are eligible to qualify as Qualified Small Business Stock as defined in
Section 1202(c) or the IRC), it will use its reasonable best efforts to cause
the shares to qualify as Qualified Small Business Stock.
5Y. Disclosure. Neither this Agreement nor any of the
exhibits, schedules, attachments, written statements, documents, certificates
or other items prepared or supplied to any Purchaser by or on behalf of the
Company with respect to the transactions contemplated hereby contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading; provided that with
respect to the financial projections furnished to the Purchasers by the
Company, the Company represents and warrants only that such projections were
based upon assumptions reasonably believed by the Company to be reasonable and
fair as of the date the projections were prepared in the context of the
Company's history and current and reasonably foreseeable business conditions.
There is no fact which the Company has not disclosed to the Purchasers in
writing and of which any of its officers, directors or executive employees is
aware (other than general economic conditions) and which has had or would
reasonably be expected to have a material adverse effect upon the existing or
expected financial condition, operating
- 25 -
<PAGE> 30
results, assets, customer or supplier relations, employee relations or business
prospects of the Company and its Subsidiaries taken as a whole.
5Z. Closing Date. The representations and warranties of
the Company contained in this Section 5 and elsewhere in this Agreement and all
information contained in any exhibit, schedule or attachment hereto or in any
writing delivered by, or on behalf of, the Company to the Purchasers shall be
true and correct in all material respects on the date of the Closing as though
then made, except as affected by the transactions expressly contemplated by
this Agreement.
Section 6. Definitions. For the purposes of this Agreement,
the following terms have the meanings set forth below:
"1994 Purchase Agreement" means the Series A Preferred Stock
Purchase Agreement dated December 30, 1994, and amended as of March 1, 1995, by
and among the Company, Centennial, Larimer and Robert J. Shiver, as in effect
on the date hereof.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise, and any such Person's general or
limited partner.
"Centennial Stock" means the Series B Underlying Common Stock
initially purchased by Centennial and Larimer pursuant to this Agreement.
"Chemical Stock" means the Series B Underlying Common Stock
initially purchased by Chemical pursuant to this Agreement.
"Hancock Stock" means the Series B Underlying Common Stock
initially purchased by Hancock pursuant to this Agreement.
"Indebtedness" means all indebtedness for borrowed money
(including purchase money obligations) maturing one year or more from the date
of creation or incurrence thereof or renewable or extendible at the option of
the debtor to a date one year or more from the date of creation or incurrence
thereof, all indebtedness under revolving credit arrangements extending over a
year or more, all capitalized lease obligations and all guarantees of any of
the foregoing.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service
marks, trade dress, trade names, logos and corporate names and registrations
and applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
- 26 -
<PAGE> 31
copyrightable works and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data, data bases and documentation thereof,
(vi) trade secrets and other confidential information (including, without
limitation, ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial and marketing plans and customer and supplier
lists and information), (vii) other intellectual property rights and (viii)
copies and tangible embodiments thereof (in whatever form or medium).
"Investment" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes,
obligations, instruments, stock, securities or ownership interest (including
partnership interests and joint venture interests) of any other Person and (ii)
any capital contribution by such Person to any other Person.
"IRC" means the Internal Revenue Code of 1986, as amended,
and any reference to any particular IRC section shall be interpreted to include
any revision of or successor to that section regardless of how numbered or
classified.
"IRS" means the United States Internal Revenue Service.
"Liens" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against the Company, any
Subsidiary or any Affiliate, any filing or agreement to file a financing
statement as debtor under the Uniform Commercial Code or any similar statute
other than to reflect ownership by a third party of property leased to the
Company or any Subsidiaries under a lease which is not in the nature of a
conditional sale or title retention agreement, or any subordination arrangement
in favor of another Person (other than any subordination arising in the
ordinary course of business).
"Masada Purchase Agreement" means the Stock Purchase
Agreement, dated June 10, 1994 and amended as of June 23, 1995, among the
Company and Masada, as in effect on the date hereof.
"Masada Stock" means the Series B Underlying Common Stock
initially purchased by Masada pursuant to this Agreement.
"Officer's Certificate" means a certificate signed by the
Company's president or other executive officer, stating that (i) the officer
signing such certificate has made or has caused to be made such investigations
as are necessary in order to permit him to verify the accuracy of the
information set forth in such certificate and (ii) to the best of such
officer's
- 27 -
<PAGE> 32
knowledge, such certificate does not misstate any material fact and does not
omit to state any fact necessary to make the certificate not misleading.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Preferred Stock" means the Series A Preferred Stock and the
Series B Preferred Stock.
"Qualified Public Offering" means the sale in an underwritten
public offering registered under the Securities Act of 1933, as amended, of
shares of the Company's Common Stock having an aggregate offering value of at
least $15 million and a price per share paid by the public for such Common
Stock of at least 300% of the Conversion Price (as defined in the Charter
Amendment) of the Series B Preferred Stock in effect immediately prior to the
closing of the sale of such shares pursuant to such public offering.
"Required Holders" means at least three out of the following
four persons or groups of persons: (a) the holders of a majority of the
Centennial Stock, (b) the holders of a majority of the Chemical Stock, (c) the
holders of a majority of the Hancock Stock, and (d) the holders of a majority
of the Masada Stock.
"Restricted Securities" means (i) the Series B Preferred Stock
issued hereunder, and (ii) any securities issued with respect to or upon
conversion of the Series B Preferred Stock referred to in (i) above by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, or in
connection with the conversion of such Series B Preferred Stock. As to any
particular Restricted Securities, such securities shall cease to be Restricted
Securities when they have (a) been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering
them, (b) become eligible for sale pursuant to Rule 144(k) (or any similar
provision then in force) under the Securities Act or (c) been otherwise
transferred and new certificates for them not bearing the Securities Act legend
set forth in paragraph 7B have been delivered by the Company in accordance with
paragraph 4(ii). Whenever any particular securities cease to be Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing a Securities Act
legend of the character set forth in paragraph 7B.
"SBA" means the United States Small Business Administration,
and any successor agency performing the functions thereof.
"SBIC" means a small business investment company licensed
under the SBIC Act.
- 28 -
<PAGE> 33
"SBIC Act" means the Small Business Investment Act of 1958, as
amended.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes any governmental
body or agency succeeding to the functions thereof.
"Series A Preferred Stock" means the Company's Series A
Convertible Preferred Stock, par value $.001 per share.
"Series A Purchaser" means any original purchaser under the
1994 Purchase Agreement.
"Series A Underlying Common Stock" means (i) the Common Stock
issued or issuable upon conversion of the Series A Preferred Stock issued
pursuant to the 1994 Purchase Agreement, (ii) any Common Stock issued or
issuable upon the exercise of a Contingent Warrant (as defined in paragraph
7F(vi) below) and (iii) any Common Stock issued or issuable with respect to the
securities referred to in clauses (i) and (ii) above by way of stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. For purposes of this Agreement,
any Person who holds Series A Preferred Stock shall be deemed to be the holder
of the Series A Underlying Common Stock obtainable upon conversion of the
Series A Preferred Stock in connection with the transfer thereof or otherwise
regardless of any restriction or limitation on the conversion of the Series A
Preferred Stock. As to any particular shares of Series A Underlying Common
Stock, such shares shall cease to be Series A Underlying Common Stock when they
have been (a) effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering them or (b) distributed
to the public through a broker, dealer or market maker pursuant to Rule 144
under the Securities Act (or any similar provision then in force).
"Series B Underlying Common Stock" means (i) the Common Stock
issued or issuable upon conversion of the Series B Preferred Stock issued
pursuant hereto, (ii) any Common Stock issued or issuable upon exercise of a
Contingent Warrant (as defined in paragraph 7F(vi) below) and (iii) any Common
Stock issued or issuable with respect to the securities referred to in clauses
(i) and (ii) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization. For purposes of this Agreement, any Person who holds Series B
Preferred Stock shall be deemed to be the holder of the Series B Underlying
Common Stock obtainable upon conversion of the Series B Preferred Stock in
connection with the transfer thereof or
- 29 -
<PAGE> 34
otherwise regardless of any restriction or limitation on the conversion of the
Series B Preferred Stock. As to any particular shares of Series B Underlying
Common Stock, such shares shall cease to be Series B Underlying Common Stock
when they have been (a) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them or (b)
distributed to the public through a broker, dealer or market maker pursuant to
Rule 144 under the Securities Act (or any similar provision then in force).
"Subsidiary" means any corporation of which the securities
having a majority of the ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned
by the Company either directly or through one or more Subsidiaries.
"Tax" or "Taxes" means federal, state, county, local, foreign
or other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or
add-on minimum, estimated and other taxes of any kind whatsoever (including,
without limitation, deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing
with respect to Taxes, including any schedules attached thereto and including
any amendment thereof.
"Treasury Regulations" means the United States Treasury
Regulations promulgated under the IRC, and any reference to any particular
Treasury Regulation section shall be interpreted to include any final or
temporary revision of or successor to that section regardless of how numbered
or classified.
"Underlying Common Stock" means the Series A Underlying
Common Stock and the Series B Underlying Common Stock.
"Wholly-Owned Subsidiary" means, with respect to any Person,
a Subsidiary of which all of the outstanding capital stock or other ownership
interests are owned by such Person or another Wholly-Owned Subsidiary of such
Person.
Section 7. Miscellaneous.
7A. Expenses. The Company shall pay, and hold each
Purchaser and all holders of Series B Preferred Stock and Series B Underlying
Common Stock harmless against liability for the payment of, (i) the fees and
expenses incurred (including the reasonable fees and expenses of one special
counsel for the Purchasers) in connection with the negotiation and execution of
this Agreement and the consummation of the transactions contemplated by this
Agreement which shall be payable at the Closing or, if the Closing does not
occur, payable
- 30 -
<PAGE> 35
upon demand, (ii) the reasonable fees and expenses incurred with respect to any
amendments or waivers (whether or not the same become effective) under or in
respect of this Agreement, the agreements contemplated hereby, the Certificate
of Incorporation, the Charter Amendment and the Company's bylaws (iii) stamp
and other taxes which may be payable in respect of the execution and delivery
of this Agreement or the issuance, delivery or acquisition of any shares of
Series B Preferred Stock or any shares of Common Stock issuable upon conversion
of Series B Preferred Stock, (iv) the reasonable fees and expenses incurred
with respect to the enforcement of the rights granted under this Agreement, the
agreements contemplated hereby, the Certificate of Incorporation, the Charter
Amendment and the Company's bylaws, (v) the reasonable fees and expenses
incurred by each such Person in any filing with any governmental agency with
respect to its investment in the Company or in any other filing with any
governmental agency with respect to the Company which mentions such Person, and
(vi) the reasonable fees and expenses incurred by any such Person in connection
with any transaction, claim (other than a claim by such Person against the
Company) or event which such Person believes affects the Company and as to
which such Person seeks advice of counsel (collectively, the "Purchasers'
Expenses").
7B. Remedies. The Company and the Purchasers shall be
entitled to enforce any rights under any provision of this Agreement
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
7C. Purchasers' Representations and Warranties. Each
Purchaser severally represents and warrants that:
(i) Such Purchaser is acquiring the Series B
Preferred Stock purchased hereunder or acquired pursuant hereto for
its own account with the present intention of holding such securities
for purposes of investment, and that it has no intention of selling
such securities in a public distribution in violation of the federal
securities laws or any applicable state securities laws; provided that
nothing contained herein shall prevent the Purchaser and subsequent
holders of Series B Preferred Stock from transferring such securities
in compliance with the provisions of paragraph 4 hereof. The
Purchaser understands that the Series B Preferred Stock has not been
registered under the Securities Act by reason of its issuance by the
Company in a transaction exempt from the registration requirements of
the Act. Each certificate for Series B Preferred Stock shall be
imprinted with a legend in substantially the following form:
"The securities represented by this certificate were
originally issued on July 11, 1995, and have not been
registered under the Securities Act of 1933, as amended. The
transfer of the securities represented by this certificate is
subject to the conditions specified in the Purchase Agreement,
dated as of July 11, 1995, between the issuer (the "Company")
and certain investors, and the Company reserves the
- 31 -
<PAGE> 36
right to refuse the transfer of such securities until such
conditions have been fulfilled with respect to such transfer.
The securities represented by this certificate are also
subject to certain restrictions on transfer and other matters
set forth in the Company's Certificate of Incorporation. A
copy of all such conditions and other matters shall be
furnished by the Company to the holder hereof upon written
request and without charge."
(ii) Such Purchaser recognizes that investing in
the Series B Preferred Stock involves a high degree of risk, and is in
a financial position to hold the Series B Preferred Stock indefinitely
and is able to bear the economic risk and withstand a complete loss of
its investment in the Series B Preferred Stock; the Purchaser
understands that it may incur a complete loss of its investment in the
Series B Preferred Stock.
(iii) Such Purchaser is a sophisticated investor
and is capable of evaluating the merits and risks of investing in the
Company given its stage of development.
(iv) Such Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with
the Company's management, has been given full and complete access to
information concerning the Company, and has utilized such access to
its satisfaction for the purpose of obtaining information or verifying
information and has had the opportunity to inspect the Company's
facilities.
(v) Such Purchaser has had the opportunity to ask
questions of, and receive answers from, the management of the Company
(and any person acting on its behalf) concerning the Series B
Preferred Stock and the terms and conditions of this Agreement and the
agreements and transactions contemplated hereby, and to obtain any
additional information as the Purchaser may have requested in making
its investment decision.
(vi) Such Purchaser is an "accredited investor,"
as defined by Regulation D promulgated under the Securities Act.
(vii) Such Purchaser has the power (corporate or
otherwise) and requisite authority, and has taken all action
(corporate or otherwise) necessary, to execute, deliver and perform
this Agreement and all other agreements contemplated hereby and
thereby to which the Purchaser is a party and to subscribe for and
purchase the Series B Preferred Stock.
(viii) Such Purchaser has total assets of at least
$5,000,000 and net worth of at least $1,000,000; other than Masada,
such Purchaser is in the business of
- 32 -
<PAGE> 37
providing venture capital financing and its principal purpose is
investing in securities issued by other entities; and, other than
Masada, such Purchaser has one or more individual partners, managers,
and/or employees who regularly make investment decisions on behalf of
such Purchaser, and such individual(s), as a result of education
and/or experience, is highly sophisticated with respect to investments
in securities.
(ix) Each of this Agreement and all other
agreements contemplated hereby and thereby to which the Purchaser is a
party, upon execution by such Purchaser, will be duly authorized,
executed and delivered by the Purchaser, and will be the legal and
binding obligation of the Purchaser, enforceable in accordance with
its terms, subject to applicable laws of bankruptcy, insolvency and
similar laws affecting creditors' rights and the application of
general rules of equity.
(x) The execution and delivery by such Purchaser
of this Agreement and all other agreements contemplated hereby and
thereby and the fulfillment of and compliance with the respective
terms hereof and thereof, do not and shall not (i) violate any
constitution, statute, regulation, rule, injunction, judgement, order,
decree, ruling, or other restriction of any government, governmental
agency, or court to which the Purchaser is subject, or any provision
of the Purchaser's charter or bylaws or other internal governing
documents or (ii) conflict with, result in a breach of, or constitute
a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any
notice under, any agreement, contract, lease, permit, license,
instrument, or any other arrangement to which the Purchaser is a party
or by which it is bound or to which its assets are subject. No
notice, consent, filing, authorization or approval of any government
or governmental agency is required for the Purchaser to consummate the
transactions contemplated hereby.
7D. Preferred Stock Redemption.
(i) At any time after the sixth anniversary of
the date hereof, and prior to the consummation of a Qualified Public
Offering, each holder of Preferred Stock (for purposes of this Section
7D only, a "Redeeming Holder") shall have the right to require the
Company to repurchase all or any portion of the Preferred Stock then
held by such Redeeming Holder at $27.50 per share (the "Series B
Redemption Price"), if Series B Preferred Stock is to be repurchased,
or $20.00 per share (the "Series A Redemption Price"), if Series A
Preferred Stock is to be repurchased (the "Redemption"), by delivering
a written notice to the Company specifying the number of shares to be
purchased (the "Redemption Notice"); provided that the Redemption
shall not be authorized unless at such time at least two out of the
following three persons or groups of persons have agreed to require
the Company to repurchase all or any portion of their shares of
Preferred Stock as provided herein (or, pursuant to paragraph 7E
below, to repurchase all or any portion of their shares of Underlying
- 33 -
<PAGE> 38
Common Stock): (a) the holders of a majority of the Centennial Stock,
(b) the holders of a majority of the Chemical Stock and (c) the
holders of a majority of the Hancock Stock. Upon authorization by the
such persons or groups of persons, the Company shall notify in writing
all Redeeming Holders of the receipt of such authorization and shall
allow all such Redeeming Holders to submit a Redemption Notice within
15 days after the delivery by the Company of such written notice to
the Redeeming Holders.
(ii) Within thirty days after the delivery of
written notice by the Company to all Redeeming Holders, and subject to
the provisions hereof, the Company shall purchase and the Redeeming
Holders shall sell the number of such Redeeming Holders' shares of
Preferred Stock specified in the Redemption Notice at a mutually
agreeable time and place (the "Redemption Closing").
(iii) At the Redemption Closing, the Redeeming
Holders shall deliver to the Company certificates representing the
Redeeming Holders' shares of Preferred Stock to be repurchased by the
Company, and the Company shall deliver to such Redeeming Holders the
Series B Redemption Price or the Series A Redemption Price, as
provided hereunder, by cashier's or certified check payable to such
Redeeming Holders or by wire transfer of immediately available funds
to an account or accounts designated by such Redeeming Holders. If
the certificates delivered by any Redeeming Holder represent greater
than the number of shares of Preferred Stock to be repurchased, the
Company shall issue a new certificate to such Redeeming Holder
representing that number of shares of Preferred Stock not repurchased
by the Company.
(iv) If the Company in good faith is unable to
honor the Redemption because it cannot obtain sufficient financing or
because of restrictions contained in the Company's debt documents, the
Company shall use its best efforts to take all such actions as are
necessary to honor the Redemption, including the refinancing of the
Company's debt or the sale of the Company.
7E. Common Stock Put.
(i) At any time after the sixth anniversary of
the date hereof, if there has not been consummated a Qualified Public
Offering, each holder of Underlying Common Stock (for purposes of this
Section 7E only, a "Putting Holder") shall have the right to require
the Company to repurchase all or any portion of the Underlying Common
Stock then held by such Putting Holder at the Put Price (the "Put") by
delivering a written notice to the Company specifying the number of
shares to be purchased (the "Put Notice"); provided that the Put shall
not be authorized unless at such time at least two out of the
following three persons or groups of persons have agreed to put all or
any portion of their shares of Underlying Common Stock to the Company
as provided herein: (a) the holders of a majority of the Centennial
Stock,
- 34 -
<PAGE> 39
(b) the holders of a majority of the Chemical Stock and (c) the
holders of a majority of the Hancock Stock. Upon authorization by
such persons or groups of persons, the Company shall notify in writing
all Putting Holders of the receipt of such authorization and shall
allow all such Putting Holders to submit a Put Notice within 15 days
after the delivery by the Company of such written notice to the
Putting Holders.
(ii) After the expiration of such 15-day period,
the Company and the Putting Holders shall in good faith promptly
determine the Put Price, as provided hereunder, and subject to the
provisions hereof within ten days after the determination of the Put
Price, the Company shall purchase and the Putting Holders shall sell
the number of such Putting Holders' shares of Underlying Common Stock
specified in the Put Notice at a mutually agreeable time and place
(the "Put Closing"). Any Putting Holder may withdraw from any
exercise of the Put by delivering written notice to the Company within
five business days after the Put Price has been determined and the
Putting Holders have been notified of such determination.
(iii) At the Put Closing, the Putting Holders shall
deliver to the Company share certificates of Common Stock or Preferred
Stock representing the number of shares of Underlying Common Stock to
be repurchased by the Company, and the Company shall deliver to such
Putting Holders the Put Price, by cashier's or certified check payable
to such Putting Holders or by wire transfer of immediately available
funds to an account or accounts designated by such Putting Holders.
If the certificates delivered by any Putting Holder represent greater
than the number of shares of Underlying Common Stock to be
repurchased, the Company shall issue a new certificate to such Putting
Holder representing shares of the same class or series as those
represented by the surrendered certificates for the number of shares
of Underlying Common Stock not repurchased by the Company.
(iv) The "Put Price" shall mean the product of (A)
the Market Value of the Company, multiplied by (B) a fraction, the
numerator of which shall be the number of the Putting Holder's shares
of Underlying Common Stock and Common Stock to be repurchased and the
denominator of which shall be the total number of shares of Underlying
Common Stock then outstanding on a fully-diluted basis, excluding from
such denominator any warrants, convertible securities or other rights
to acquire equity securities of the Company where the exercise or
conversion price per share thereof exceeds the Put Price per share.
In calculating the Put Price, all accounting determinations shall be
made in accordance with generally accepted accounting principles
consistently applied.
(v) "Market Value" means the fair market value of
the Company's entire common equity determined on a going concern basis
as between a willing buyer and a willing seller and taking into
account all relevant factors determinative of value. Unless otherwise
agreed by the Company and the Putting Holders, Market Value shall
- 35 -
<PAGE> 40
be determined by an investment banking firm reasonably acceptable to
the Company and the Putting Holders, which firm shall submit to the
Company and the Putting Holders a written report setting forth such
determination. If the parties are unable to agree on an investment
banking firm within 15 days after delivery of a Put Notice, a firm
shall be selected by lot from the top-tier New York-based investment
banking firms, after the Company and the Putting Holders have each
eliminated one such firm. Such selected firm shall determine Market
Value within 30 days after such selection by lot and shall promptly
deliver written notice of Market Value to the Putting Holders and the
Company after its determination. The determination of such firm shall
be final and binding upon all parties, except that after the
determination of Market Value following the exercise of the Put, the
Putting Holders may rescind their exercise of such Put. The expenses
of the selected investment banking firm shall be borne by the Company;
provided that any SBIC Holder who has elected to put its shares of
Underlying Common Stock shall pay a portion of such expenses equal to
the product of (a) 50% of the total amount of such expenses and (b) a
fraction, the numerator of which shall be the number of such SBIC
Holder's shares of Underlying Common Stock being repurchased and the
denominator of which shall be the total number of shares of Underlying
Common Stock being repurchased.
(vi) If the Company in good faith is unable to
honor the Put because it cannot obtain sufficient financing or because
of restrictions contained in the Company's debt documents, the Company
shall use its best efforts to take all such actions as are necessary
to honor the Put, including the refinancing of the Company's debt or
the sale of the Company.
7F. SBIC Regulatory Provisions.
(i) The Company shall notify each holder of Underlying
Common Stock which is an SBIC (an "SBIC Holder") as soon as practicable (and,
in any event, not later than 15 days) prior to taking any action after which
the number of record holders of the Company's voting stock would be increased
from fewer than 50 to 50 or more, and the Company shall notify each SBIC Holder
of any other action or occurrence after which the number of record holders of
the Company's voting stock was increased (or would increase) from fewer than 50
to 50 or more, as soon as practicable after the Company becomes aware that such
other action or occurrence has occurred or is proposed to occur. Upon the
occurrence of any such event or transaction, the Company shall enter into a
Plan of Divestiture with each SBIC Holder as required by the SBIC Regulations.
(ii) Within 75 days after the Closing, 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 each
SBIC Holder and the United States Small Business Administration
- 36 -
<PAGE> 41
(the "SBA") access to the Company's records for the purpose of verifying the
use of such proceeds.
(iii) Upon the occurrence of a Regulatory Violation or in
the event that any SBIC Holder determines in its reasonable good faith judgment
that a Regulatory Violation has occurred, in addition to any other rights and
remedies to which it may be entitled as a holder of Series B Preferred Stock or
Underlying Common Stock (whether under this Agreement, the Certificate of
Incorporation or otherwise), each SBIC Holder shall have the right to demand
the immediate repurchase of all of the outstanding shares of Series B Preferred
Stock and Underlying Common Stock owned by such SBIC Holder at a price per
share equal to the purchase price paid for such stock hereunder, plus all
Accrued Dividends (as defined in the Charter Amendment) thereon, by delivering
written notice of such demand to the Company. The Company shall pay the
purchase price for such stock by a cashier's or certified check or by wire
transfer of immediately available funds to each SBIC Holder demanding
repurchase within 30 days after the Company's receipt of the demand notice, and
upon such payment, each such SBIC Holder shall deliver the certificates
evidencing the Series B Preferred Stock and Underlying Common Stock to be
repurchased duly endorsed for transfer or accompanied by duly executed forms of
assignment.
(iv) Promptly after the end of each fiscal year (but in
any event prior to February 28 of each year), the Company shall deliver to each
SBIC Holder a written assessment of the economic impact of each SBIC Holder's
investment in the Company, specifying the full-time equivalent jobs created or
retained in connection with the investment, the impact of the investment on the
businesses of the Company in terms of expanded revenue and taxes and other
economic benefits resulting from the investment (including, but not limited to,
technology development or commercialization, minority business development,
urban or rural business development and expansion of exports).
(v) For purposes of this paragraph, "Regulatory
Violation" means, with respect to any SBIC Holder providing Financing under
this Agreement, (a) a diversion of the proceeds of such Financing from the
reported use thereof on the use of proceeds statement delivered by the Company
at the Closing, if such diversion was effected without obtaining the prior
written consent of each SBIC Holder (which may be withheld in its sole
discretion) or (b) a change in the principal business activity of the Company
and its Subsidiaries to an ineligible business activity (within the meaning of
the SBIC Regulations) if such change occurs within one year after the date of
the initial Financing hereunder; "SBIC Regulations" means the Small Business
Investment Act of 1958 and the regulations issued thereunder as set forth in 13
CFR Section 107 and Section 121, as amended; and the term "Financing" shall
have the meaning set forth in the SBIC Regulations.
(vi) Notwithstanding anything to the contrary herein, at
any time after the Closing, the Company shall have the right to repurchase from
any SBIC Holder all but not less than all of the Preferred Stock then held by
such SBIC Holder at a price equal to 110% of the
- 37 -
<PAGE> 42
Series B Redemption Price or the Series A Redemption Price, as applicable,
provided that the Company issues to each such SBIC Holder on or before the time
of such repurchase a warrant (the "Contingent Warrant") exercisable for the
number of shares of Common Stock into which the Preferred Stock held by such
SBIC is then convertible, with an initial exercise price per share of Common
Stock equal to the then applicable Conversion Price (as defined in the Charter
Amendment), with anti-dilutive rights identical to those of the Preferred Stock
being repurchased and having such other terms and provisions as are reasonably
acceptable to such SBIC Holder.
(vii) Notwithstanding anything to the contrary above, the
Company shall not be able to exercise it rights to repurchase all of the
Preferred Stock held by any SBIC Holder unless it has obtained the prior
written consent of the holders of at least 80% of the Preferred Stock not held
by SBIC Holders.
7G. Regulatory Compliance Cooperation.
(i) In the event that any SBIC Holder determines that it
has a Regulatory Problem (as defined below), such SBIC Holder shall have the
right to transfer its Series B Preferred Stock without regard to any
restrictions on transfer set forth in this Agreement or the Stockholders
Agreement other than the securities law restrictions set forth in Section 5
hereof (provided that the transferee agrees to become a party to this
Agreement), and the Company shall take all such actions as are reasonably
requested by such SBIC Holder in order to (a) effectuate and facilitate any
transfer by such SBIC Holder of any securities of the Company then held by such
SBIC Holder to any Person designated by such SBIC Holder, (b) permit such SBIC
Holder (or any of its Affiliate) to exchange all or any portion of the Common
Stock then held by it on a share-for-share basis for shares of a class of
nonvoting common stock of the Company, which nonvoting common stock shall be
identical in all respects to such Common Stock, except that such common stock
shall be nonvoting and shall be convertible into Common Stock on such terms as
are requested by such SBIC Holder in light of regulatory considerations then
prevailing, (c) continue and preserve the respective allocation of the voting
interests with respect to the Company arising out of the SBIC's ownership of
voting securities and/or provided for in the Stockholders Agreement before the
transfers and amendments referred to above (including entering into such
additional agreements as are requested such SBIC Holder to permit any Person(s)
designated by such SBIC Holder to exercise any voting power which is
relinquished by such SBIC Holder and (d) amend this Agreement, the Certificate
of Incorporation, the Charter Amendment and other related agreements to
effectuate and reflect the foregoing. The parties to this Agreement agree to
vote their securities in favor of such amendments and actions.
(ii) For purposes of this Agreement, a "Regulatory
Problem" means any set of facts or circumstances wherein it has been asserted
by any governmental regulatory agency (or any SBIC Holder believes that there
is a substantial risk of such assertion) that such SBIC
- 38 -
<PAGE> 43
Holder and its Affiliates are not entitled to hold, or exercise any significant
right with respect to, the Series B Preferred Stock or the Underlying Common
Stock.
7H. Amendment of the 1994 Purchase Agreement and the
Masada Purchase Agreement. Effective as of the Closing hereunder, the 1994
Purchase Agreement shall be amended by deleting paragraph 3 thereof in its
entirety, and the Masada Purchase Agreement shall be amended by deleting
paragraphs 3A through 3F thereof in their entirety.
7I. Consent to Amendments. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if, but only if, the Company has
obtained the written consent of the Required Holders; provided that (a) each of
the definitions of the "Centennial Stock", the "Chemical Stock", the "Hancock
Stock" and the "Masada Stock", respectively, may only be amended upon the prior
written consent of the holders of a majority of the applicable class of stock
then in existence; (b) the definition of "Series A Underlying Common Stock" may
only be amended upon the prior written consent of at least 90% of the holders
of the Series A Preferred Stock then in existence; and (c) the definition of
"Series B Underlying Common Stock" may only be amended upon the prior written
consent of at least 90% of the holders of the Series B Preferred Stock then in
existence. No other course of dealing between the Company and the holder of
any Series B Preferred Stock, Series A Preferred Stock or Underlying Common
Stock or any delay in exercising any rights hereunder or under the Certificate
of Incorporation or the Charter Amendment shall operate as a waiver of any
rights of any such holders. For purposes of this Agreement, shares of Series B
Preferred Stock, Series A Preferred Stock or Underlying Common Stock held by
the Company or any Subsidiaries shall not be deemed to be outstanding.
7J. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby for
twelve months from the date hereof, regardless of any investigation made by the
Purchasers or the Company or on any parties' behalf.
7K. Successors and Assigns. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.
7L. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
- 39 -
<PAGE> 44
7M. Counterparts. This Agreement may be executed
simultaneously in separate counterparts, any one of which need not contain the
signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
7N. Descriptive Headings; Interpretation. The
descriptive captions and headings of this Agreement and the Schedules attached
hereto are inserted for convenience only and do not constitute a Section of
this Agreement. The use of the word "including" in this Agreement shall be by
way of example rather than by limitation.
7O. Governing Law. The corporate law of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits and schedule hereto shall be
governed by the internal law, and not the law of conflicts, of Delaware.
7P. Notices. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given when
delivered personally to the recipient, sent to the recipient by reputable
express courier service (charges prepaid) or mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid.
Such notices, demands and other communications shall be sent to the Company and
the Purchasers at the addresses set forth on the attached Notices Schedule or
to such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party.
7Q. Understanding Among the Purchasers. The
determination of each Purchaser to purchase the Series B Preferred Stock
pursuant to this Agreement has been made by such Purchaser independent of any
other Purchaser and independent of any statements or opinions as to the
advisability of such purchase or as to the properties, business, prospects or
condition (financial or otherwise) of the Company and its Subsidiaries which
may have been made or given by any other Purchaser or by any agent or employee
of any other Purchaser. In addition, it is acknowledged by each of the other
Purchasers that no other Purchaser has acted as an agent of such Purchaser in
connection with making its investment hereunder and that no other person shall
be acting as an agent of such Purchaser in connection with monitoring its
investment hereunder.
7R. No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and
no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any of the provisions of this Agreement.
7S. Indemnification. In consideration of each
Purchaser's execution and delivery of this Agreement and acquiring the Series B
Preferred Stock hereunder and in
- 40 -
<PAGE> 45
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 Series B 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 in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (a) 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 or (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 , except for any
such Indemnified Liabilities arising on account of the particular Indemnitee's
gross negligence or willful misconduct. 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.
* * * * * * *
- 41 -
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
THE COMPANY CENTENNIAL SECURITY, INC.
/s/ Robert J. Shiver
-------------------------------------------------
By: Robert J. Shiver
Its: President and Chief Operating Officer
THE PURCHASERS CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.,
its General Partner
By: /s/ David C. Hull, Jr.
------------------------------------------
David C. Hull, Jr.
General Partner
CHEMICAL VENTURE CAPITAL ASSOCIATES
By: Chemical Venture Partners
Its: General Partner
By: /s/ Stephen P. Murray
-----------------------------------
Its: General Partner
HANCOCK VENTURE PARTNERS IV--DIRECT FUND, L.P.
By: Back Bay Partners XII L.P.
By: Hancock Venture Partners, Inc.
By: /s/ William A. Johnston
------------------------------------------
authorized officer
LARIMER & CO.
By: /s/ David C. Hull, Jr.
------------------------------------------
Its: Executive Vice President
------------------------------------------
MASADA SECURITY, INC.
By: /s/ David P. Lomick
------------------------------------------
Its: Vice President
------------------------------------------
- 42 -
<PAGE> 47
Schedules
Purchasers Schedule
Restrictions Schedule
Organization Schedule
Capital Stock Schedule
Subsidiary Schedule
Financial Statements Schedule
Liabilities Schedule
Developments Schedule
Assets Schedule
Taxes Schedule
Contracts Schedule
Customer Schedule
Intellectual Property Schedule
Litigation Schedule
Insurance Schedule
Employees Schedule
Compliance Schedule
Affiliated Transactions Schedule
Notices Schedule
<PAGE> 1
CENTENNIAL SECURITY, INC.
REGISTRATION AGREEMENT
THIS AGREEMENT is made as of July 11, 1995 by and among
Centennial Security, Inc., a Delaware corporation ("the Company"), Centennial
Fund IV, L.P., a Delaware limited partnership ("Centennial"), Chemical Venture
Capital Associates, a California limited partnership ("Chemical"), Hancock
Venture Partners IV--Direct Fund, L.P., a Delaware limited partnership
("Hancock"), Larimer & Co., a Delaware corporation ("Larimer"), Masada
Security, Inc., a Delaware corporation ("Masada") and Robert J. Shiver
("Shiver"), an individual residing in Morris Township, New Jersey.
As of the date hereof, Centennial, Larimer and Shiver are
holders of all the issued and outstanding Series A Convertible Preferred Stock
(collectively, the "Existing Investors") and parties to a Registration
Agreement with the Company dated as of December 30, 1994 (the "1994
Registration Agreement"). In order to induce Centennial, Chemical, Hancock,
Larimer and Masada (collectively, the "New Investors") to enter into the
Purchase Agreement of even date herewith (the "Purchase Agreement"), pursuant
to which they will purchase the Series B Convertible Preferred Stock, the
Company has agreed to terminate the 1994 Registration Agreement and provide,
the New Investors with the registration rights set forth in this Agreement.
The execution and delivery of this Agreement is a condition to the Closing
under the Purchase Agreement. Unless otherwise provided in this Agreement,
capitalized terms used herein shall have the meanings set forth in paragraph 8
hereof.
The parties hereto agree as follows:
1. Demand Registrations.
(a) Requests for Registration.
(i) At any time, the holders of at least 50% of
the Series B Registrable Securities then in existence may request registration
under the Securities Act of all or any portion of their Series B Registrable
Securities on Form S-1 or any similar long-form registration ("Long-Form
Registrations"), and the holders of at least 10% of the Series B Registrable
Securities then in existence may request registration under the Securities Act
of all or any portion of their Series B Registrable Securities on Form S-2 or
S-3 or any similar short-form registration ("Short-Form Registrations") if
available.
(ii) At any time after the Company has completed
an initial public offering of its equity securities under the Securities Act,
the holders of at least 50% of the Series A Registrable Securities then in
existence may request registration under the Securities Act of all or any
portion of their Series A Registrable Securities on any Long-Form Registration,
and the holders
<PAGE> 2
of at least 25% of the Series A Registrable Securities then in existence may
request registration under the Securities Act of all or any portion of their
Series A Registrable Securities on any Short-Form Registration, if available.
(iii) All registrations requested pursuant to this
paragraph 1(a) are referred to herein as "Demand Registrations". Each request
for a Demand Registration shall specify the approximate number of Series A
Registrable Securities or Series B Registrable Securities requested to be
registered and the anticipated per share price range for such offering. Within
ten days after receipt of any such request, the Company shall give written
notice of such requested registration to all other holders of Registrable
Securities and shall include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within 15 days after the receipt of the Company's notice.
(b) Long-Form Registrations.
(i) The holders of Series B Registrable
Securities shall be entitled to request two Long-Form Registrations in which
the Company shall pay all Registration Expenses ("Company-paid Long-Form
Registrations"); provided that the aggregate offering value of the Series B
Registrable Securities requested to be registered in any Long-Form Registration
must equal at least $5,000,000 in net proceeds.
(ii) The holders of Series A Registrable
Securities shall be entitled to request (A) one Company-paid Long-Form
Registration and (B) one Long-Form Registration in which the holders of Series
A Registrable Securities shall pay their share of the Registration Expenses as
set forth in paragraph 5 hereof; provided that the aggregate offering value of
the Series A Registrable Securities requested to be registered in any Long-Form
Registration must equal at least $5,000,000 in net proceeds.
(iii) A registration shall not count as one of the
permitted Long-Form Registrations until it has become effective (unless such
Long-Form Registration has not become effective due solely to the fault of the
holders requesting such registration), and no Company-paid Long-Form
Registration or any Long-Form Registration pursuant to clause 1(b)(ii)(B) above
shall count as one of the permitted Long-Form Registrations unless the holders
of Registrable Securities are able to register and sell at least 90% of the
Registrable Securities requested to be included in such registration; provided
that in any event the Company shall pay all Registration Expenses in connection
with any registration initiated as a Company-paid Long-Form Registration
whether or not it has become effective and whether or not such registration has
counted as one of the permitted Company-paid Long-Form Registrations. All
Long-Form Registrations shall be underwritten registrations.
(c) Short-Form Registrations. In addition to the
Long-Form Registrations provided pursuant to paragraph 1(b), (i) the holders of
Series B Registrable Securities shall be entitled to request an unlimited
number of Short-Form Registrations in which the Company shall pay all
Registration Expenses, and (ii) the holders of Series A Registrable Securities
shall be entitled to
-2-
<PAGE> 3
request an unlimited number of Short-Form Registrations in five of which the
Company shall pay all Registration Expenses; provided that the aggregate
offering value of the Series B Registrable Securities or Series A Registrable
Securities, as applicable, requested to be registered in any Short-Form
Registration must equal at least $250,000. Demand Registrations shall be
Short-Form Registrations whenever the Company is permitted to use any
applicable short form. After the Company has become subject to the reporting
requirements of the Securities Exchange Act, the Company shall use its best
efforts to make Short-Form Registrations on Form S-3 available for the sale of
Registrable Securities.
(d) Priority on Demand Registrations.
(i) The Company shall not include in any Demand
Registration requested by the holders of Series B Registrable Securities any
securities which are not Registrable Securities without the prior written
consent of the holders of at least 50% of the Series B Registrable Securities
initially requesting such registration. If a Demand Registration is an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Series B Registrable Securities
and, if permitted hereunder, other securities requested to be included in such
offering exceeds the number of Series B Registrable Securities and other
securities, if any, which can be sold in an orderly manner in such offering
within a price range acceptable to the holders of a majority of the Series B
Registrable Securities initially requesting registration, the Company shall
include in such registration (i) first, the number of Series B Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold in an orderly manner within the price range of such offering, pro
rata among the respective holders thereof on the basis of the amount of Series
B Registrable Securities owned by each such holder, (ii) second, the number of
Series A Registrable Securities requested to be included which in the opinion
of such underwriters can be sold in an orderly manner within the price range of
such offering, pro rata among the respective holders thereof on the basis of
the amount of Series A Registrable Securities owned by each such holder, and
(iii) third, any other Registrable Securities, if any, requested to be included
which in the opinion of such underwriters can be sold in an orderly manner
within the price range of such offering, pro rata among the respective holders
thereof on the basis of the amount of such Registrable Securities owned by each
such holder.
(ii) The Company shall not include in any Demand
Registration requested by the holders of Series A Registrable Securities any
securities which are not Registrable Securities without the prior written
consent of the holders of at least 75% of the Series A Registrable Securities
initially requesting such registration. If a Demand Registration is an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Series A Registrable Securities
and, if permitted hereunder, other securities requested to be included in such
offering exceeds the number of Series A Registrable Securities and other
securities, if any, which can be sold in an orderly manner in such offering
within a price range acceptable to the holders of a majority of the Series A
Registrable Securities initially requesting registration, the Company shall
include in such registration (i) first, the number of Series A Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold in an orderly manner within the price range of such offering, pro
rata among the respective holders thereof on the basis of the amount of
-3-
<PAGE> 4
Series A Registrable Securities owned by each such holder, (ii) second, the
number of Series B Registrable Securities requested to be included which in the
opinion of such underwriters can be sold in an orderly manner within the price
range of such offering, pro rata among the respective holders thereof on the
basis of the amount of Series B Registrable Securities owned by each such
holder, and (iii) third, any other Registrable Securities, if any, requested to
be included which in the opinion of such underwriters can be sold in an orderly
manner within the price range of such offering, pro rata among the respective
holders thereof on the basis of the amount of such Registrable Securities owned
by each such holder.
(e) Restrictions on Demand Registrations. The Company
shall not be obligated to effect any Demand Registration within 180 days after
the effective date of a previous Demand Registration or a previous registration
in which the holders of Registrable Securities were given piggyback rights
pursuant to paragraph 2 and in which there was no reduction in the number of
Registrable Securities requested to be included. The Company may postpone once
for up to six months and once for up to nine months the filing or the
effectiveness of a registration statement for a Demand Registration if the
Company determines that such Demand Registration would reasonably be expected
to have an adverse effect on any proposal or plan by the Company or any of its
Subsidiaries to engage in any financing, acquisition of assets or any merger,
consolidation, tender offer or other similar transaction; provided that in such
event, the holders of Registrable Securities initially requesting such Demand
Registration shall be entitled to withdraw such request and, if such request is
withdrawn, such Demand Registration shall not count as one of the Demand
Registrations permitted to holders of Registrable Securities hereunder and the
Company shall pay all Registration Expenses in connection with such
registration; and provided further that the Company may exercise such right
only once in any 24-month period.
(f) Selection of Underwriters. The holders of a majority
of the Registrable Securities initially requesting registration hereunder shall
have the right to select the investment banker(s) and manager(s) to administer
the offering.
(g) Other Registration Rights. Except as provided in
this Agreement, the Company shall not grant to any Persons the right to request
the Company to register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, without
the prior written consent of the holders of at least 50% of the Registrable
Securities.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a Demand Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the
Company shall give prompt written notice (in any event within three business
days after its receipt of notice of any exercise of demand registration rights
other than under this Agreement) to all holders of Registrable Securities of
its intention to effect such a registration and shall include in such
registration all Registrable Securities with respect to which the Company has
-4-
<PAGE> 5
received written requests for inclusion therein within 20 days after the
receipt of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the
holders of Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the Company, the Company shall include in
such registration (i) first, the securities the Company proposes to sell, (ii)
second, the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares owned by such holder and (iii) third, other
securities requested to be included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in an orderly manner
in such offering within a price range acceptable to the holders initially
requesting such registration, the Company shall include in such registration
(i) first, the securities requested to be included therein by the holders
requesting such registration and the Registrable Securities requested to be
included in such registration, pro rata among the holders of such securities on
the basis of the number of shares so requested to be included therein owned by
each such holder and (ii) second, other securities requested to be included in
such registration.
(e) Selection of Underwriters. If any Piggyback
Registration is an underwritten offering, the selection of investment banker(s)
and manager(s) for the offering must be approved by the holders of a majority
of the Registrable Securities included in such Piggyback Registration. Such
approval shall not be unreasonably withheld.
(f) Other Registrations. If the Company has previously
filed a registration statement with respect to Registrable Securities pursuant
to paragraph 1 or pursuant to this paragraph 2, and if such previous
registration has not been withdrawn or abandoned, the Company shall not file or
cause to be effected any other registration of any of its equity securities or
securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-8 or any successor form),
whether on its own behalf or at the request of any holder or holders of such
securities, until a period of at least 180 days has elapsed from the effective
date of such previous registration.
3. Holdback Agreements. (a) Each holder of Registrable
Securities shall not effect any public sale or distribution (including sales
pursuant to Rule 144) of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities,
-5-
<PAGE> 6
during the seven days prior to and the 90-day period beginning on the effective
date of any underwritten Demand Registration or any underwritten Piggyback
Registration in which Registrable Securities are included (except as part of
such underwritten registration), unless the underwriters managing the
registered public offering otherwise agree.
(b) The Company (i) shall not effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-8 or any successor form), unless the underwriters managing the
registered public offering otherwise agree, and (ii) shall cause each holder of
at least 3% (on a fully-diluted basis) of its Common Stock, or any securities
convertible into or exchangeable or exercisable for Common Stock, purchased
from the Company at any time after the date of this Agreement (other than in a
registered public offering or a sale pursuant to Rule 144) to agree not to
effect any public sale or distribution (including sales pursuant to Rule 144)
of any such securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company shall use its best efforts
to effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof, and pursuant
thereto the Company shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable Securities
and use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus
or any amendments or supplements thereto, the Company shall furnish to the
counsel selected by the holders of a majority of the Registrable Securities
covered by such registration statement copies of all such documents proposed to
be filed, which documents shall be subject to the review and comment of such
counsel);
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than 180 days and comply with the provisions
of the Securities Act with respect to the disposition of all securities covered
by such registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such
-6-
<PAGE> 7
registration statement (including each preliminary prospectus) and such other
documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then listed and, if not so listed, to be listed on The Nasdaq Stock Market and,
if listed on The Nasdaq Stock Market, use its best efforts to secure
designation of all such Registrable Securities covered by such registration
statement as a NASDAQ "national market system security" within the meaning of
Rule 11Aa2-1 of the Securities and Exchange Commission or, failing that, to
secure The Nasdaq Stock Market authorization for such Registrable Securities
and, without limiting the generality of the foregoing, to arrange for at least
two market makers to register as such with respect to such Registrable
Securities with The Nasdaq Stock Market;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including effecting a stock split
or a combination of shares);
(i) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records,
-7-
<PAGE> 8
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors, employees and independent accountants to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and
(k) If any such registration or comparable statement
refers to any holder by name or otherwise as the holder of any securities of
the Company and if its sole and exclusive judgment, such holder is or might be
deemed to be an underwriter or a controlling person of the Company, such holder
shall have the right to require (i) the insertion therein of language, in form
and substance satisfactory to such holder and presented to the Company in
writing, to the effect that the holding by such holder of such securities is
not to be construed as a recommendation by such holder of the investment
quality of the Company's securities covered thereby and that such holding does
not imply that such holder shall assist in meeting any future financial
requirements of the Company, or (ii) in the event that such reference to such
holder by name or otherwise is not required by the Securities Act or any
similar federal statute then in force, the deletion of the reference to such
holder; provided that with respect to this clause (ii) such holder shall
furnish to the Company an opinion of counsel to such effect, which opinion and
counsel shall be reasonably satisfactory to the Company.
(l) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any common stock included in such registration statement for
sale in any jurisdiction, the Company shall use its best efforts promptly to
obtain the withdrawal of such order.
(m) use its best efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the sellers thereof to consummate the disposition of such Registrable
Securities;
(n) obtain a cold comfort letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by cold comfort letters as the holders of a
majority of the Registrable Securities being sold reasonably request (provided
that such Registrable Securities constitute at least 10% of the securities
covered by such registration statement);
5. Registration Expenses.
-8-
<PAGE> 9
(a) All expenses incident to the Company's performance of
or compliance with this Agreement, including without limitation all
registration and filing fees, fees and expenses of compliance with securities
or blue sky laws, printing expenses, messenger and delivery expenses, fees and
disbursements of custodians, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"), shall be borne
as provided in this Agreement, except that the Company shall, in any event, pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit or quarterly review, the expense of any liability
insurance and the expenses and fees for listing the securities to be registered
on each securities exchange on which similar securities issued by the Company
are then listed or on The Nasdaq Stock Market.
(b) In connection with each Demand Registration and each
Piggyback Registration, the Company shall reimburse the holders of Registrable
Securities included in such registration for the reasonable fees and
disbursements of one counsel chosen by the holders of a majority of the
Registrable Securities initially requesting such registration and for the
reasonable fees and disbursements of each additional counsel retained by any
holder of Registrable Securities solely for the purpose of rendering a legal
opinion on behalf of such holder in connection with such underwritten Demand
Registration or Piggyback Registration.
(c) To the extent Registration Expenses are not required
to be paid by the Company, each holder of securities included in any
registration hereunder shall pay those Registration Expenses allocable to the
registration of such holder's securities so included, and any Registration
Expenses not so allocable shall be borne by all sellers of securities included
in such registration in proportion to the aggregate selling price of the
securities to be so registered.
6. Indemnification.
(a) The Company agrees to indemnify, to the extent
permitted by law, each holder of Registrable Securities, its officers and
directors and each Person who controls such holder (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Company by such holder
expressly for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same. In connection with an underwritten offering, the Company shall
indemnify such underwriters, their officers and directors and each Person who
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the
holders of Registrable Securities.
-9-
<PAGE> 10
(b) In connection with any registration statement in
which a holder of Registrable Securities is participating, each such holder
shall furnish to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, shall indemnify
the Company, its directors and officers and each Person who controls the
Company (within the meaning of the Securities Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact contained in the registration statement, prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only to the
extent that such untrue statement or omission is contained in any information
or affidavit so furnished in writing by such holder; provided that the
obligation to indemnify shall be individual, not joint and several, for each
holder and shall be limited to the net amount of proceeds received by such
holder from the sale of Registrable Securities pursuant to such registration
statement.
(c) Any Person entitled to indemnification hereunder
shall (i) give prompt written notice to the indemnifying party of any claim
with respect to which it seeks indemnification (provided that the failure to
give prompt notice shall not impair any Person's right to indemnification
hereunder to the extent such failure has not prejudiced the indemnifying party)
and (ii) unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist with
respect to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party. If
such defense is assumed, the indemnifying party shall not be subject to any
liability for any settlement made by the indemnified party without its consent
(but such consent shall not be unreasonably withheld). An indemnifying party
who is not entitled to, or elects not to, assume the defense of a claim shall
not be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by
or on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall survive the transfer of securities.
The Company also agrees to make such provisions, as are reasonably requested by
any indemnified party, for contribution to such party in the event the
Company's indemnification is unavailable for any reason.
7. Participation in Underwritten Registrations. No
Person may participate in any registration hereunder which is underwritten
unless such Person (i) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting arrangements;
provided that no holder of Registrable Securities included in any underwritten
registration shall be required to make any representations or warranties to the
-10-
<PAGE> 11
Company or the underwriters (other than representations and warranties
regarding such holder and such holder's intended method of distribution) or to
undertake any indemnification obligations to the Company or the underwriters
with respect thereto, except as otherwise provided in paragraph 6 hereof.
8. Definitions.
(a) "1994 Purchase Agreement" means the Series A
Preferred Stock Purchase Agreement, dated as of December 30, 1994, by and among
the Company, Centennial, Larimer and Robert J. Shiver, as amended as of March
1, 1995, and not as subsequently amended.
(b) "Masada Purchase Agreement" means the Stock Purchase
Agreement, dated as of June 10, 1994, by and among the Company and Masada, as
amended as of June 23, 1995, and not as subsequently amended.
(c) "Registrable Securities" means Series A Registrable
Securities and Series B Registrable Securities. As to any particular
Registrable Securities, such securities shall cease to be Series A or Series B
Registrable Securities when they have been distributed to the public pursuant
to a offering registered under the Securities Act or sold to the public through
a broker, dealer or market maker in compliance with Rule 144 under the
Securities Act (or any similar rule then in force). For purposes of this
Agreement, a Person shall be deemed to be a holder of Registrable Securities
whenever such Person has the right to acquire such Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or
otherwise, but disregarding any restrictions or limitations upon the exercise
of such right), whether or not such acquisition has actually been effected.
(d) "Required Holders" has the meaning set forth in the
Purchase Agreement.
(e) "Series A Registrable Securities" means (i) any Class
A Common issued upon the conversion of any Series A Convertible Preferred Stock
issued pursuant to the 1994 Purchase Agreement and (ii) any Class A Common
issued or issuable with respect to the securities referred to in clause (i)
above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization.
(f) "Series B Registrable Securities" means (i) any Class
A Common issued upon the conversion of any Series B Convertible Preferred Stock
or the exercise of any Contingent Warrants issued pursuant to the Purchase
Agreement and (ii) any Class A Common issued or issuable with respect to the
securities referred to in clause (i) above by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
(g) Unless otherwise stated, other capitalized terms
contained herein have the meanings set forth in the Purchase Agreement.
-11-
<PAGE> 12
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
(b) Adjustments Affecting Registrable Securities. The
Company shall not take any action, or permit any change to occur, with respect
to its securities which would materially and adversely affect the ability of
the holders of Registrable Securities to include such Registrable Securities in
a registration undertaken pursuant to this Agreement or which would materially
and adversely affect the marketability of such Registrable Securities in any
such registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) Remedies. Any Person having rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically to recover damages caused by reason of any breach of any provision
of this Agreement and to exercise all other rights granted by law. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any party may in
its sole discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or other security) for specific
performance and for other injunctive relief in order to enforce or prevent
violation of the provisions of this Agreement.
(d) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived upon, but
only upon, the prior written consent of the Company and the Required Holders;
provided that (a) any amendment or waiver affecting the rights specifically
granted to the holders of Series A Registrable Securities as such or the
definition of "Series A Registrable Securities" hereunder shall require, in
addition, the prior written consent of the holders of at least 90% of the
Series A Registrable Securities then in existence; and (b) any amendment or
waiver affecting the rights specifically granted to the holders of Series B
Registrable Securities as such or the definition of "Series B Registrable
Securities" hereunder shall require, in addition, the prior written consent of
the holders of at least 75% of the Series B Registrable Securities then in
existence.
(e) Successors and Assigns. All covenants and agreements
in this Agreement by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not. In addition, whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of purchasers or holders of Registrable Securities are also for the
benefit of, and enforceable by, any subsequent holder of Registrable Securities.
(f) Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
-12-
<PAGE> 13
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
(g) Counterparts. This Agreement may be executed
simultaneously in separate counterparts, any one of which need not contain the
signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
(h) Descriptive Headings; Interpretations. The
descriptive captions and headings of this Agreement are inserted for
convenience only and do not constitute a section of this Agreement. The use of
the word "including" in this Agreement shall be by way of example rather than
by limitation.
(i) Governing Law. The corporate law of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other issues concerning the construction, validity,
interpretation and enforcement of this Agreement shall be governed by the
internal laws of the State of Delaware.
(j) Notices. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given when
delivered personally to the recipient, sent to the recipient by reputable
express courier service (charges prepaid) or mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid.
Such notices, demands and other communications shall be sent to each Investor
at the address set forth on the attached Notices Schedule and to the Company at
the address indicated below:
Centennial Security, Inc.
332 Main Street
Madison, New Jersey 07490
Attn: Robert J. Shiver
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(k) Termination of the Existing Registration Agreement.
By execution of this Agreement, the parties hereby agree that any and all
rights existing under any agreement providing any of the parties with
registration rights for any of the Company's securities, including, without
limitation, the 1994 Registration Agreement, are hereby terminated effective as
of the date hereof. The parties further acknowledge and agree that this
Agreement sets forth the only terms by which any of the parties hereto will
have any registration rights.
* * * * *
- 13 -
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CENTENNIAL SECURITY, INC.
By: /s/ Robert J. Shiver
---------------------------------------------
Its: President
---------------------------------------------
CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.
its General Partner
By: /s/ David C. Hull, Jr.
--------------------------------------------
David C. Hull, Jr.
General Partner
CHEMICAL VENTURE CAPITAL ASSOCIATES
By: Chemical Venture Partners
Its: General Partner
By: /s/ Stephen P. Murray
----------------------------------------
Its: General Partner
----------------------------------------
HANCOCK VENTURE PARTNERS IV -- DIRECT FUND, L.P.
By: Back Bay Partners XII L.P.
By: Hancock Venture Partners, Inc.
By: /s/ William A. Johnston
---------------------------------------------
authorized officer
[SIGNATURE PAGE CONTINUED]
-14-
<PAGE> 15
LARIMER & CO.
By: /s/ David C. Hull, Jr.
--------------------------------------------
Its: Executive Vice President
--------------------------------------------
MASADA SECURITY, INC.
By: /s/ David P. Lomick
--------------------------------------------
Its: Vice President
--------------------------------------------
/s/ Robert J. Shiver
-------------------------------------------------
Robert J. Shiver
-15-
<PAGE> 1
STOCKHOLDERS AGREEMENT
THIS AGREEMENT is made as of July 11, 1995, among Centennial
Security, Inc., a Delaware corporation (the "Company"), each of the "New
Investors" listed on the Schedule of Investors attached hereto, each of the
"Existing Investors" listed on the Schedule of Investors attached hereto and
each of the "Existing Stockholders" (including the "Executive") listed on the
Schedule of Existing Stockholders attached hereto. The New Investors, the
Existing Investors and the Existing Stockholders are collectively referred to
as the "Stockholders" and individually as a "Stockholder." Capitalized terms
used herein are defined in paragraph 10 hereof.
The Company and the Stockholders desire to enter into this
Agreement for the purposes, among others, of (i) establishing the composition
of the Company's Board of Directors (the "Board"), (ii) assuring continuity in
the management and ownership of the Company, (iii) limiting the manner and
terms by which the Stockholders' stock may be transferred, and (iv) certain
related matters. The execution and delivery of this Agreement is a condition
to the New Investors' and the Existing Investors' purchase of the Company's
Series B Preferred Stock pursuant to the Purchase Agreement.
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 to this Agreement
hereby agree as follows:
1. Board of Directors.
(a) From and after the Closing (as defined in the
Purchase Agreement) and until the provisions of this paragraph 1 cease to be
effective, each Stockholder shall vote all of his Stockholder Shares which are
voting shares and any other voting securities of the Company over which such
Stockholder has voting control and shall take all other necessary or desirable
actions within his control (whether in his capacity as a stockholder, director,
member of a board committee or officer of the Company or otherwise, and
including, without limitation, attendance at meetings in person or by proxy for
purposes of obtaining a quorum and execution of written consents in lieu of
meetings), and the Company shall take all necessary or desirable actions within
its control (including, without limitation, calling special board and
stockholder meetings), so that:
(i) subject to paragraph 1(d) below, the
authorized number of directors on the Board shall be established at 8
directors;
(ii) the following individuals shall be elected to
the Board:
<PAGE> 2
(A) 1 person designated by the holders
of a majority of the Series B Underlying Common Stock
initially issued to Chemical pursuant to the Purchase
Agreement;
(B) 1 person designated by the holders
of a majority of the Series B Underlying Common Stock
initially issued to Hancock pursuant to the Purchase
Agreement;
(C) 2 persons designated by the holders
of a majority of the Series A Underlying Common Stock
initially issued to the Existing Investors pursuant to the
1994 Purchase Agreement; provided that the holders of such
shares may at any time, in their sole discretion, waive in
writing the right to designate 2 directors, in which event
they will thereafter have the right hereunder to designate
only one director;
(D) the chief executive officer of the
Company or the chief operating officer of the Company, as
determined by a majority of the other directors;
(E) 1 person designated by the holders
of a majority of the Masada Stock;
(F) Stephen Schovee, as long as he
holds at least 1,000 shares of Common Stock; and
(G) an Unaffiliated Director (as
defined in paragraph 10 below) designated by a majority of the
other directors;
(iii) the removal from the Board (with or without cause)
of any person designated hereunder by an Electing Group (as defined
in paragraph 10 below) shall only be at such Electing Group's written
request or by a majority of the Board;
(iv) if an Electing Group fails to designate a
director as provided hereunder or if Steven Schovee ceases to
be a director, such director seat may be left vacant or, at the
election of a majority of the Board, may be filled with an individual
designated by a majority of the Board until, in the case of a vacancy
of a director to be designated pursuant to any of clauses (A) through
(C) above, such time as the applicable Electing Group designates a
director for such vacancy;
(v) in the event that any representative designated
hereunder by an Electing Group for any reason ceases to serve
as a member of the Board during his or her term of office, the
resulting vacancy on the Board shall be filled by a representative
designated by such Electing Group as provided hereunder; and
-2-
<PAGE> 3
(vi) subject to subparagraph (c) below, the
directors designated pursuant to clauses (A) and (B) above shall serve
as the Two Vote Directors.
(b) The Company shall pay the reasonable out-of-pocket
expenses incurred by each non-management director in connection with attending
the meetings of the Board and any committee thereof.
(c) In the event that the holders of a majority of the
Series A Underlying Common Stock initially issued to the Existing Investors
pursuant to the 1994 Purchase Agreement waive, pursuant to the proviso in
clause (C) above, their right to designate 2 directors, the Company and the
other parties hereto (and their successors and assigns) shall take all
necessary actions to amend Article Eight of the Certificate of Incorporation to
provide that all directors thereafter shall have only one vote each in any vote
of the Board.
(d) The provisions of this paragraph 1 shall terminate
automatically and be of no further force and effect upon the consummation of an
Qualified Public Offering.
2. Representations and Warranties. (a) Each Stockholder
represents and warrants for himself or itself, severally and not jointly, that:
(i) such Stockholder is the record owner of the
number of Stockholder Shares set forth opposite its name on the Schedule of
Investors or the Schedule of Existing Stockholders, as applicable, attached
hereto,
(ii) this Agreement has been duly authorized, executed
and delivered by such Stockholder and constitutes the valid and binding
obligation of such Stockholder, enforceable in accordance with its terms, and
(iii) such Stockholder has not granted and is not a party
to any proxy, voting trust or other agreement which is inconsistent with,
conflicts with or violates any provision of this Agreement.
(b) No holder of Stockholder Shares shall grant any proxy or
become party to any voting trust or other agreement which is inconsistent with,
conflicts with or violates any provision of this Agreement.
3. Restrictions on Transfer of Stockholder Shares.
(a) Transfer of Stockholder Shares. Except for Permitted
Transfers (as defined in paragraph 3(d) below), no holder of Stockholder Shares
shall sell, transfer, assign, pledge or otherwise dispose of (whether with or
without consideration and whether voluntarily or involuntarily or by operation
of law) any interest in his Stockholder Shares (a "Transfer"). No Stockholder
shall consummate any Transfer (other than a Permitted Transfer) until 30 days
after the delivery to the
-3-
<PAGE> 4
Company and the other Stockholders of such Stockholder's Offer Notice (as
defined in clause (b)(i) below), unless the parties to the Transfer have been
finally determined pursuant to this paragraph 3 prior to the expiration of such
30-day period (the "Election Period").
(b) First Offer Right.
(i) At
least 30 days prior to making any Transfer of any Stockholder Shares (other
than a Permitted Transfer), the transferring Stockholder (the "Transferring
Stockholder") shall deliver a written notice (an "Offer Notice") to the Company
and the other Stockholders (the "Other Stockholders"). The Offer Notice shall
disclose in reasonable detail the proposed number of Stockholder Shares to be
transferred (the "Offered Shares"), the proposed terms and conditions of the
Transfer and the identity of the prospective transferee(s) (if known).
(ii) First, the Company may elect to purchase all (but
not less than all) of the Offered Shares at the price and on the terms
specified therein by delivering written notice of such election to the
Transferring Stockholder and the Other Stockholders as soon as practicable but
in any event within 10 days after the delivery of the Offer Notice. If the
Company has not elected to purchase all of the Offered Shares within such
ten-day period, it will so notify all Stockholders in writing, and the Other
Stockholders may each elect to purchase their respective Pro Rata Share (as
defined below) of the Offered Shares at the price and on the terms specified in
the Offer Notice by delivering written notice of such election to the Company
and the Transferring Stockholder as soon as practicable but in any event within
10 days after delivery of the Company's notice. Each of the Other Stockholders
may elect to purchase more than his or its Pro Rata Share of the Offered
Shares, provided that if the offer is oversubscribed, the number of shares to
be purchased by each of such Other Stockholders who has elected to purchase
more than his or its Pro Rata Share shall be reduced on a pro rata basis to an
amount not less than his or its Pro Rata Share of the Offered Shares. Each
Stockholder's "Pro Rata Share" means a fraction, the numerator of which is the
number of Common Stock Equivalent Shares owned by such Stockholder and the
denominator of which is the total number of Common Stock Equivalent Shares
owned by all Stockholders participating in the round with respect to which the
determination is being made. "Common Stock Equivalent Shares" means all
Underlying Common Stock then in existence and any other Common Stock then
outstanding.
(iii) If the Company or Other Stockholders have elected
to purchase all of the Offered Shares from the Transferring Stockholder, the
transfer of such Offered Shares shall be consummated as soon as practicable
after the delivery of the election notice(s) to the Transferring Stockholder,
but in any event within 15 days after the expiration of the Election Period.
The purchase price specified in any Offer Notice shall be payable solely on the
terms specified therein (it being understood that the Other Stockholders shall
not be required to provide any consideration for such Offered Shares other than
in the form of cash or notes).
(iv) If the Company and the Other Stockholders have not
elected to purchase all of the Offered Shares, the Transferring Stockholder
may, within 180 days after the expiration of the Election Period and subject to
the provisions of subparagraph (c) below, transfer
-4-
<PAGE> 5
such Offered Shares to one or more third parties at a price no less than the
price per share specified in the Offer Notice and on other terms no more
favorable to the transferees thereof than offered to the Company and the Other
Stockholders in the Offer Notice. Any Offered Shares not transferred within
such 180-day period shall be reoffered to the Company and the Other
Stockholders under this paragraph 5(b) prior to any subsequent Transfer (other
than a Permitted Transfer).
(c) Participation Rights.
(i) In the event that the Stockholders, in the
aggregate, do not elect to purchase all Offered Shares specified in any Offer
Notice pursuant to Section 3(b) and the Transferring Stockholder agrees to
Transfer such Offered Shares as described in Section 3(b)(iv), then the
Transferring Stockholder will give each other Stockholder a written notice (the
"Sale Notice") specifying the material terms of the proposed Transfer. The
Other Stockholders may elect to participate in the proposed Transfer by
delivering written notice to the Transferring Stockholder within 10 business
days after delivery of the Sale Notice.
(ii) If any Other Stockholders elect to
participate in such Transfer, then such Other Stockholders will each be
entitled to sell in such proposed Transfer, at the same price and on the same
terms as the Transferring Stockholder, up to that number of Stockholder Shares
equal to their respective Pro Rata Share of the number of Stockholder Shares to
be sold in such Transfer. If any Other Stockholder holds securities of more
than one class or series, then, at the closing of such Transfer, such Other
Stockholder shall deliver securities of the same class or series as those being
transferred by the Transferring Stockholder. To the extent that such Other
Stockholder does not hold sufficient shares of such class or series, then such
Other Stockholder shall deliver at the closing of such Transfer other
securities representing a number of Common Stock Equivalent Shares equal to the
shortfall. Each Transferring Stockholder shall use best efforts to obtain the
agreement of the prospective transferee(s) to the participation of the Other
Stockholders in any contemplated Transfer, and no Transferring Stockholder
shall transfer any of its Stockholder Shares to any prospective transferee(s)
if such transferee(s) will not permit participation by the Other Stockholders
in accordance with this Section 3(c).
(d) Permitted Transfers. The restrictions set forth in
this paragraph 3 shall not apply with respect to any Transfer of Stockholder
Shares (a "Permitted Transfer") by any Stockholder (i) in the case of the
Executive, pursuant to applicable laws of descent and distribution or among the
Executive's Family Group or (ii) in the case of a New Investor, Existing
Investor or an Existing Stockholder (not including the Executive), among its
Affiliates (collectively referred to herein as "Permitted Transferees");
provided that the restrictions contained in this paragraph 3 shall continue to
be applicable to the Stockholder Shares after any such Transfer and provided
further that the transferees of such Stockholder Shares shall have agreed in
writing to be bound by the provisions of this Agreement affecting the
Stockholder Shares so transferred. A Transfer of Stockholder Shares by an SBIC
Holder (as defined in the Purchase Agreement) in the event of a Regulatory
Problem (as defined in the Purchase Agreement) pursuant to paragraph 7G of the
Purchase Agreement shall also constitute a "Permitted Transfer." For purposes
of this Agreement, "Family Group" means the
-5-
<PAGE> 6
Executive's spouse and descendants (whether natural or adopted) and any trust
solely for the benefit of the Executive and/or the Executive's spouse and/or
descendants, and "Affiliate" of an Investor means any other Person directly or
indirectly controlling, controlled by or under common control with such
Investor and any partner of an Investor which is a partnership.
(e) Termination of Restrictions. The restrictions set
forth in this paragraph 3 shall terminate upon, and shall not be applicable to
a Transfer made pursuant to, the consummation of an Initial Public Offering or
a Sale of the Company.
4. Legend. Each certificate evidencing Stockholder
Shares and each certificate issued in exchange for or upon the transfer of any
Stockholder Shares (if such shares remain Stockholder Shares after such
transfer) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The securities represented by this certificate are subject to
a Stockholders Agreement dated as of July 11, 1995, among the
issuer of such securities (the "Company") and certain of the
Company's stockholders, as amended and modified from time to
time. A copy of such Stockholders Agreement shall be
furnished without charge by the Company to the holder hereof
upon written request."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding as of the date hereof. The legend set forth above shall be
removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with paragraph 10 hereof.
5. Transfer. Prior to transferring any Stockholder
Shares (other than in a Public Sale or a Sale of the Company) to any Person,
the transferring Stockholder shall cause the prospective transferee to agree be
bound by this Agreement and to execute and deliver to the Company and the Other
Stockholders (i) an executed counterpart of this Agreement and (ii) an opinion
of counsel to the effect that such Transfer is exempt from registration under
the Securities Act and applicable state blue sky laws.
6. Transfers in Violation of Agreement. Any Transfer or
attempted Transfer of any Stockholder Shares in violation of any provision of
this Agreement shall be void, and the Company shall not record such Transfer on
its books or treat any purported transferee of such Stockholder Shares as the
owner of such shares for any purpose.
7. Preemptive Rights.
(a) Except for issuances of Common Stock (1) upon the
conversion of the Preferred Stock or the exercise of any Contingent Warrant (as
defined in paragraph 7F(vi) of the Purchase Agreement), (2) pursuant to the
Company's employee stock option plans and (3) pursuant to an Initial Public
Offering, if the Company authorizes the issuance or sale of any equity
securities
-6-
<PAGE> 7
or any securities containing options or rights to acquire any equity securities
(other than as a dividend on the outstanding Common Stock), the Company shall
first offer to sell to the holders of the Series B Preferred Stock, the holders
of the Series A Preferred Stock and Masada (collectively, the "Preemptive
Purchasers") by means of the written notice described below, 75% of the number
of securities of each class and series which the Company proposes to issue or
sell (the "Offer Amount"), with each Preemptive Purchaser entitled to purchase
his or its Pro Rata Share of the Offer Amount. In order to exercise its
purchase rights hereunder, a Preemptive Purchaser must within 20 days after
receipt of written notice from the Company describing in reasonable detail the
securities being offered, the purchase price thereof, the payment terms and
such holder's percentage allotment deliver a written notice to the Company
describing its election hereunder. If all of the securities offered to the
Preemptive Purchasers are not fully subscribed by such Preemptive Purchasers,
the remaining securities shall be reoffered by the Company to such Preemptive
Purchasers who have purchased their full Pro Rata Share upon the terms set
forth in this clause (a), except that such Preemptive Purchasers must exercise
their purchase rights as provided above within five days after receipt of such
reoffer.
(b) Each Preemptive Purchaser shall be entitled to
purchase such Preemptive Purchaser's portion of the Offer Amount at the most
favorable price and on the most favorable terms that such securities are to be
offered to any other Person. The purchase price for all securities offered to
the Preemptive Purchasers shall be payable in cash or, to the extent otherwise
required hereunder, notes issued by such Preemptive Purchasers.
(c) Upon the expiration of the offering period described
above, the Company shall be entitled to sell such securities which the
Preemptive Purchasers have not elected to purchase during the 90 days following
such expiration on terms and conditions no more favorable to the purchasers
thereof than those offered to such Preemptive Purchasers. Any securities
offered or sold by the Company after such 90-day period must be reoffered to
the Preemptive Purchasers pursuant to the terms of this paragraph.
8. Call Arrangements.
(a) In the event that Robert J. Shiver ("Shiver") ceases
to be employed by the Company, the Company shall have the right, within 60 days
after such cessation of employment, to request in writing that Shiver waive his
rights under Section 3C of the Purchase Agreement. If Shiver has not delivered
a written waiver of such rights within 15 days after the Company's delivery of
its written request, the Company shall be entitled within 90 days thereafter to
deliver to Shiver written notice that it will purchase all (but not less than
all) of the Stockholder Shares then held by Shiver at the Call Price (the
"Call") by delivering written notice to Shiver (the "Call Notice"). This
Agreement shall be deemed to constitute an offer by Shiver to the Company to
purchase his Stockholder Shares upon the terms of, and subject to the
conditions contained in, this paragraph 8.
(b) Within 15 days after the Call Price has been
determined, the Company shall purchase and Shiver shall sell the Stockholder
Shares as set forth in the Call Notice at a mutually
-7-
<PAGE> 8
agreeable time and place (the "Call Closing"). At the Call Closing, Shiver
shall deliver to the Company duly executed instruments transferring title to
the Stockholder Shares to the Company free and clear of all liens and
encumbrances, against payment of the appropriate Call Price by cashier's or
certified check payable to Shiver or by wire transfer of immediately available
funds to an account designated by Shiver.
(c) The "Call Price" of Stockholder Shares shall mean the
product of (a) the Company Valuation (as defined below) and (b) a fraction, the
numerator of which shall be the number of shares of Common Stock and Underlying
Common Stock held by Shiver as of the date of determination and the denominator
of which shall be the total number of shares of Common Stock then outstanding
on a fully-diluted basis, excluding from such denominator any warrants,
convertible securities or other rights to acquire equity securities of the
Company where the exercise or conversion price per share exceeds the Call Price
per share.
(d) "Company Valuation" shall mean the fair market value
of the Company's entire common equity determined on a going concern basis as
between a willing buyer and a willing seller and taking into account all
relevant factors determinative of value, as jointly determined in good faith by
Shiver and the Company. The "Company Valuation" shall be equal to the
valuation of the Company's Common Stock made in connection with the Company's
most recent equity offering consummated during the 12-month period preceding
the cessation of Shiver's employment. If there has not been such a consummated
equity offering in such 12-month period, then the "Company Valuation" shall be
jointly determined in good faith by Shiver and the Board. If, within 15 days
after commencing such determination, Shiver and the Board are unable to reach
an agreement on the Company Valuation, a firm shall be selected by lot within 5
business days thereafter by Shiver and the Company from the top-tier New
York-based investment banking firms, after Shiver and the Board have each
eliminated one such firm. Such selected firm shall determine the Company
Valuation within 30 days after such selection and shall promptly deliver
written notice of the Company Valuation to Shiver and the Company after its
determination. The expenses of such firm shall be borne 50% by the Company and
50% by Shiver, and the determination of such firm shall be final and binding on
Shiver and the Company.
(e) The Company's right to exercise the Call hereunder
shall terminate upon the consummation of an Initial Public Offering.
9. Sale of Company. If any holder or holders of 75% of
the Common Stock Equivalent Shares (the "Proposing Stockholders") approve a
Sale of the Company to an Independent Third Party or group of Independent Third
Parties (the "Approved Sale"), the other Stockholders (the "Other
Stockholders") shall consent to and raise no objections against the Approved
Sale, and if the Approved Sale is structured as a sale of stock, the Other
Stockholders shall agree to sell their Stockholder Shares on the same terms and
conditions as the Proposing Stockholders. The Other Stockholders shall take
all necessary and desirable actions in connection with the consummation of the
Approved Sale. The Proposing Stockholders shall notify the Company and the
Other
-8-
<PAGE> 9
Stockholders prior to commencing any actions in connection with any Approved
Sale. The provisions of this paragraph 9 shall terminate upon the consummation
of an Initial Public Offering.
10. Definitions.
"Approved Sale" has the meaning set forth in paragraph 9.
"Board" has the meaning set forth in the preamble.
"Call" has the meaning set forth in paragraph 8(a).
"Call Closing" has the meaning set forth in paragraph 8(b).
"Call Notice" has the meaning set forth in paragraph 8(a).
"Call Price" has the meaning set forth in paragraph 8(d).
"Chemical" means Chemical Venture Capital Associates, a
California limited partnership.
"Common Stock" means the Company's Common Stock, par value
$.001 per share.
"Common Stock Equivalent Shares" has the meaning set forth
in paragraph 3(b)(ii).
"Company" has the meaning set forth in the preamble.
"Company Valuation" has the meaning set forth in paragraph
8(d).
"Electing Group" means each person or group of persons
entitled to designate a director pursuant to paragraphs 1(a)(ii)(A) through
1(a)(ii)(E) and paragraph 1(a)(ii)(G).
"Election Period" has the meaning set forth in paragraph
3(a).
"Executive" has the meaning set forth in the preamble.
"Existing Investors" has the meaning set forth in the preamble.
"Existing Stockholders" has the meaning set forth in the
preamble.
"Hancock" means Hancock Venture Partners IV--Direct Fund,
L.P., a Delaware limited partnership.
-9-
<PAGE> 10
"Independent Third Party" means any Person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a fully-diluted basis (a "5% Owner)", who is not
controlling, controlled by or under common control with any such 5% Owner and
who is not the spouse or descendent (by birth or adoption) of any such 5% Owner
or a trust for the benefit of such 5% Owner and/or such other Persons.
"Initial Public Offering" means the sale in an underwritten
public offering of shares of the Company's Common Stock registered under the
Securities Act on Form S-1 or any other equivalent form.
"Masada" means Masada Security, Inc., a Delaware corporation.
"Masada Stock" means (i) the Class B Common Stock of the
Company, par value $.001, (ii) the Common Stock issued or issuable upon
conversion of the Class B Common Stock and (iii) any Common Stock issued or
issuable with respect to the securities referred to in clauses (i) and (ii)
above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares of Masada Stock, such shares shall
cease to be Masada Stock when they have been (a) effectively registered under
the Securities Act and disposed of in accordance with the registration
statement covering them, (b) distributed to the public through a broker, dealer
or market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force) or (c) repurchased by the Company or any Subsidiary.
"New Investors" has the meaning set forth in the preamble.
"Offer Amount" has the meaning set forth in paragraph 7(a).
"Offer Notice" has the meaning set forth in paragraph 3(b).
"Other Stockholders" has the meaning set forth in paragraph 9.
"Permitted Transferee" has the meaning set forth in paragraph
3(d).
"Permitted Transfer" has the meaning set forth in paragraph
3(d).
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Preemptive Purchasers" has the meaning set forth in paragraph
7(a).
"Preferred Stock" means the Company's Series A Preferred Stock
and Series B Preferred Stock, par value $.001 per Share.
-10-
<PAGE> 11
"Pro Rata Share" has the meaning set forth in paragraph
3(b)(ii).
"Public Sale" means any sale of Stockholder Shares to the
public pursuant to an offering registered under the Securities Act or to the
public through a broker, dealer or market maker pursuant to the provisions of
Rule 144 adopted under the Securities Act.
"Purchase Agreement" means the Series B Preferred Stock
Purchase Agreement dated July 11, 1995 among the Company, the New Investors and
the Existing Investors.
"Qualified Public Offering" has the meaning set forth in the
Purchase Agreement.
"Required Holders" has the meaning set forth in the Purchase
Agreement.
"Sale of the Company" means the sale of the Company pursuant
to which the acquiring party or parties acquire (i) capital stock of the
Company possessing the voting power under normal circumstances to elect a
majority of the Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Series A Preferred Stock" means the Company's Series A
Preferred Stock, par value $.001 per share.
"Series A Underlying Common Stock" has the meaning set forth
in Section 11 of the Purchase Agreement.
"Series B Preferred Stock" means the Company's Series B
Preferred Stock, par value $.001 per share.
"Series B Underlying Common Stock" has the meaning set forth
in Section 11 of the Purchase Agreement.
"Shiver" has the meaning set forth in paragraph 8(a).
"Stockholder Shares" means (i) any Common Stock, Preferred
Stock or other equity securities purchased or otherwise acquired by any
Stockholder, (ii) any options, warrants or other rights to acquire equity
securities, including any convertible debentures and (iii) any direct or
indirect interest in any of the above. As to any particular shares
constituting Stockholder Shares, such shares shall cease to be Stockholder
Shares when they have been (x) effectively registered under the Securities Act
and disposed of in accordance with the registration statement covering them or
(y) sold to the public through a broker, dealer or market maker pursuant to
Rule 144 (or any similar provision then in force) under the Securities Act.
-11-
<PAGE> 12
"Stockholders" has the meaning set forth in the preamble.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, 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 limited liability company, partnership, association or other
business entity, a majority of the limited liability company, 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 limited liability
company, partnership, association or other business entity if such Person or
Persons shall be allocated a majority of limited liability company,
partnership, association or other business entity gains or losses or shall be
or control the managing director or general partner of such limited liability
company, partnership, association or other business entity.
"Transfer" has the meaning set forth in paragraph 3(a).
"Two Vote Directors" means the directors holding the "Two Vote
Director" seats as defined in Article Eight of the Certificate of
Incorporation.
"Unaffiliated Director" means a person who is not (i) a
shareholder, officer, or employee of the Company or any of its subsidiaries,
(ii) a shareholder, director, officer or employee of Masada or any of its
subsidiaries, or (iii) a director, officer, employee, partner or other
affiliate of any investor in Masada, the Company or any of their respective
subsidiaries (other than a person who would not be deemed an Unaffiliated
Director solely because he or she holds less than 1% of the Company's Common
Stock on a fully-diluted basis).
"Underlying Common Stock" has the meaning set forth in the
Purchase Agreement.
11. Amendment and Waiver. Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this Agreement
will be effective against the Company or the Stockholders unless such
modification, amendment or waiver is approved in writing by the Company or the
Required Holders, respectively; provided that (a) no modification, amendment or
waiver of any provision contained in paragraph 1 hereof (or any definition used
or contained therein) disproportionately and adversely affecting the rights of
any Electing Group under such paragraph 1 shall be valid unless holders of a
majority of the Common Stock Equivalent Shares held by such Electing Group have
approved such modification, amendment or waiver in writing; (b) no
modification, amendment or waiver of any provision contained in paragraph 7
hereof (or any definition used or contained therein) disproportionately and
adversely affecting the rights of the holders of one class or series of the
Company's equity securities under such paragraph 7 shall be valid unless
holders of a majority of such class or series of securities have approved such
-12-
<PAGE> 13
modification, amendment or waiver in writing; and (c) no modification,
amendment or waiver of any provision contained in paragraph 8 hereof (or any
definition used or contained therein) disproportionately and adversely
affecting Shiver shall be valid unless Shiver has approved such modification,
amendment or waiver in writing. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
12. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect the validity, legality or enforceability of any other provision of
this Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
13. Entire Agreement. Except as otherwise expressly set
forth herein, this Agreement embodies the complete agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes and preempts any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way.
14. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be
enforceable by the Company and its successors and assigns and the Stockholders
and any subsequent holders of Stockholder Shares and the respective successors
and assigns of each of them, so long as they hold Stockholder Shares.
15. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be an original and all of which
taken together shall constitute one and the same agreement.
16. Remedies. The Company and the Stockholders shall be
entitled to enforce their rights under this Agreement specifically, to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in their favor. The parties hereto agree
and acknowledge that money damages would not be an adequate remedy for any
breach of the provisions of this Agreement and that the Company and the
Stockholders may in their sole discretion apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive relief
(without posting a bond or other security) in order to enforce or prevent any
violation of the provisions of this Agreement.
17. Notices. Any notice provided for in this Agreement
shall be in writing and shall be either personally delivered, or mailed first
class mail (postage prepaid) or sent by reputable
-13-
<PAGE> 14
overnight courier service (charges prepaid) to the Company at the address set
forth below and to any other recipient at the address indicated on the Notices
Schedule attached hereto and to any subsequent holder of Stockholder Shares
subject to this Agreement at such address as indicated by the Company's
records, or at such address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
Notices shall be deemed to have been given hereunder when delivered personally,
three days after deposit in the U.S. mail and one day after deposit with a
reputable overnight courier service. The Company's address is:
Centennial Security, Inc.
332 Main Street
Madison, New Jersey 07940
Attention: Shiver
18. Governing Law. The corporate law of the State of
Delaware shall govern all issues and questions concerning the relative rights
of the Company and its stockholders. All other questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to
any choice of law or conflict of law rules or provisions (whether of the State
of Delaware or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.
19. Descriptive Headings. The descriptive headings and
captions of this Agreement and the Schedules attached hereto are inserted for
convenience only and do not constitute a part of this Agreement.
* * * *
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
CENTENNIAL SECURITY, INC.
By /s/ Robert J. Shiver
------------------------------
Its President
-----------------------------
CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.,
its General Partner
By
/s/ David C. Hull, Jr.
-------------------------------
Its General Partner
-----------------------------
CHEMICAL VENTURE CAPITAL ASSOCIATES
By: Chemical Venture Partners
Its: General Partner
By: Stephen P. Murray
-------------------------
Its: G.P.
-----------------------
HANCOCK VENTURE PARTNERS IV--
DIRECT FUND, L.P.
By: Back Bay Partners XII L.P.
By: Hancock Venture Partners, Inc.
By: /s/ William A. Johnston
-------------------------------
authorized officer
LARIMER & CO.
By /s/ David C. Hull, Jr.
------------------------------
Its Exec. Vice President
-----------------------------
[SIGNATURE PAGE CONTINUED]
-15-
<PAGE> 16
MASADA SECURITY, INC.
By
/s/ David P. Tomick
-----------------------------
Its Vice President
----------------------------
/s/ Catherine M. Merigold
-------------------------------
Catherine M. Merigold
/s/ Stephen Schoree
-------------------------------
Stephen Schovee
/s/ Robert S. Shiver
-------------------------------
Robert J. Shiver
-16-
<PAGE> 1
Exhibit 10.26
MASADA SECURITY HOLDINGS, INC.
1997 STOCK OPTION PLAN
<PAGE> 2
MASADA SECURITY HOLDINGS, INC.
1997 STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "Board" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 "Committee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 "Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 "Eligible Participants" and "Eligible Participant" . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 "Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 "Exercise Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 "Fair Market Value" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.9 "Incentive Stock Options" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.10 "Non-Qualified Stock Options" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.11 "Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.12 "Optionee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.13 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 "Purchasable" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 "Qualified Domestic Relations Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 "Reload Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.17 "Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.18 "Stock Option Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.19 "Stock Purchase Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.20 "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 Duties and Powers of the Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Interpretation; Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.3 No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.4 Majority Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.5 Company Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5.1 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.2 Antidilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE VI
OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.1 Types of Options Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.2 Option Grant and Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.3 Optionee Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.4 $100,000 Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.5 Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.6 Exercise Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.7 Option Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.8 Reload Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.9 Nontransferability of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.10 Termination of Employment or Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.11 Employment Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.12 Certain Successor Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.13 Option Repricing/Cancellation and Regrant/Waiver of Restrictions . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VII
STOCK CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VIII
TERMINATION AND AMENDMENT OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IX
RELATIONSHIP TO OTHER COMPENSATION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.1 Forfeiture for Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.2 Plan Binding on Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.3 Singular, Plural; Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.4 Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.5 Contingent on Plan of Recapitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Exhibit A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
ii
<PAGE> 4
MASADA SECURITY HOLDINGS, INC.
1997 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings unless
the context clearly indicates to the contrary:
1.1 "Board" means the Board of Directors of the Company.
1.2 "Code" means the Internal Revenue Code of 1986, as amended,
including effective date and transition rules (whether or not codified). Any
reference herein to a specific section of the Code shall be deemed to include a
reference to any corresponding provision of future law.
1.3 "Committee" means the Compensation Committee of the Board,
consisting of at least two directors of the Company appointed from time to time
by the Board, having the duties and authority set forth herein in addition to
any other authority granted by the Board.
1.4 "Company" means Masada Security Holdings, Inc., a Delaware
corporation.
1.5 "Eligible Participants" and "Eligible Participant" means those
persons within the classes of persons identified in Article III of the Plan.
1.6 "Employee" means an employee of the Company or a Subsidiary of
the Company.
1.7 "Exercise Price" means the price at which an Optionee may
purchase a share of Stock under a Stock Option Agreement.
1.8 "Fair Market Value" on any date means the fair market value of
a share of the Stock as determined in good faith by the Committee based on such
relevant facts as may be available to the Committee, as applicable, which may
include, without limitation, the price at which shares of the Stock have been
reacquired, if applicable, by the Company, opinions of independent experts, the
price at which recent sales have been made, book value, restrictions to which
the Stock may be subject, the Company's current and future earnings, and the
existence of merger proposals or offers affecting the Company.
1.9 "Incentive Stock Options" means Options which comply with and
are subject to the terms, limitations and conditions of Section 422 of the Code
and any regulations promulgated with respect thereto.
1.10 "Non-Qualified Stock Options" means Options which do not
comply with the provisions of Section 422 of the Code.
1.11 "Option" means an option, whether or not an Incentive Stock
Option, to purchase Stock granted pursuant to the provisions of Article VI
hereof.
1.12 "Optionee" means a person to whom an Option has been granted
hereunder.
1
<PAGE> 5
1.13 "Plan means the Masada Security Holdings, Inc. 1997 Stock
Option Plan, the terms of which are set forth herein.
1.14 "Purchasable" refers to Stock which may be purchased by an
Optionee under the terms of this Plan on or after a certain date specified in
the applicable Stock Option Agreement.
1.15 "Qualified Domestic Relations Order" means an order with the
meaning set forth in the Code or in the Employee Retirement Income Security Act
of 1974, or the rules and regulations promulgated under the Code or such Act.
1.16 "Reload Option" shall have the meaning set forth in Section
6.8 hereof.
1.17 "Stock" means the common stock, par value $.01 per share, of
the Company, as adjusted pursuant to Section 5.2 hereof.
1.18 "Stock Option Agreement" means an agreement between the
Company and an Optionee under which the Optionee may purchase Stock hereunder,
a sample form of which is attached hereto as Exhibit "A" (which form, subject
to the provisions of the Plan, may be varied by the Committee in granting an
Option).
1.19 "Stock Purchase Agreement" means any agreement which the
Committee, in its own discretion, may require the Optionee to execute and
deliver to the Company before such Optionee exercises an Option.
1.20 "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the grant of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
ARTICLE II
THE PLAN
2.1 Purpose. The purpose of the Plan is to advance the interests
of the Company, its Subsidiaries, and the Company's stockholders by affording
certain employees of the Company and its Subsidiaries an opportunity to acquire
or increase their proprietary interests in the Company. The objective of the
issuance of the Options is to promote the growth and profitability of the
Company and its Subsidiaries because the Optionee will be provided with an
additional incentive to achieve the Company's objectives through participation
in its success and growth and by encouraging their continued association with
or service to the Company or its Subsidiaries.
2.2 Effective Date. Subject to the provisions of Section 10.5
hereof, the Plan shall become effective on January 1, 1997; provided, however,
that the Plan shall terminate, and all Options theretofore granted shall become
void and may not be exercised, if the stockholders of the Company shall not, by
September 15, 1997, have approved the Plan's adoption.
2
<PAGE> 6
ARTICLE III
PARTICIPANTS
The class of persons eligible to participate in the Plan shall consist
of those employees of the Company and its Subsidiaries whose participation in
the Plan the Committee determines to be in the best interests of the Company.
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be
administered by the Committee. The Committee shall select one of its members
as its Chairman and shall hold its meetings at such times and places as it may
determine. The Committee shall keep minutes of its meetings and actions by
unanimous written consent and shall make such rules and regulations for the
conduct of its business as it may deem necessary. The Committee shall have the
power to act by unanimous written consent in lieu of a meeting and to meet
telephonically. In administering the Plan, the Committee's actions and
determinations shall be binding on all interested parties. The Committee shall
have the power to grant Options in accordance with the provisions of the Plan
and may grant Options singly, in combination, or in tandem. Subject to the
provisions of the Plan, the Committee shall have the discretion and authority
to determine those individuals to whom Options will be granted, the number of
shares of Stock subject to each Option, such other matters as are specified
herein, and any other terms and conditions of a Stock Option Agreement. To the
extent not inconsistent with the provisions of the Plan, the Committee may give
an Optionee an election to surrender an Option in exchange for the grant of a
new Option, and shall have the authority to amend or modify an outstanding
Stock Option Agreement, or to waive any provision thereof, provided that the
Optionee consents to such action.
4.2 Interpretation; Rules. Subject to the express provisions of
the Plan, the Committee also shall have authority to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to it, to
determine the details and provisions of each Stock Option Agreement and to make
all other determinations necessary or advisable for the administration of the
Plan, including, without limitation, amending or altering the Plan and any
Options granted hereunder as may be required to comply with or to conform to
any federal, state, or local laws or regulations.
4.3 No Liability. Neither any member of the Board nor any member
of the Committee shall be liable to any person for any act or determination
made in good faith with respect to the Plan or any Option granted hereunder.
4.4 Majority Rule. A majority of the members of the Committee
shall constitute a quorum, and any action taken by a majority at a meeting at
which a quorum is present, or any action taken without a meeting evidenced by a
writing executed by all the members of the Committee, shall constitute the
action of the Committee.
4.5 Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to Eligible Participants,
their employment, death, retirement, disability, or other termination of
employment, and such other pertinent facts as the Committee may require. The
Company shall furnish the Committee with such clerical and other assistance as
is necessary in the performance of its duties.
3
<PAGE> 7
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to any antidilution adjustment pursuant
to the provisions of Section 5.2 hereof, the maximum number of shares of Stock
that may be issued in the aggregate pursuant to the Plan shall be Five Hundred
Thousand (500,000) ("Maximum Aggregate Shares"), 20% of which shall become
available for issuance as follows, on a cumulative basis, until 100% of the
Maximum Aggregate Shares shall become available for issuance:
<TABLE>
<CAPTION>
% of Maximum
Aggregate Shares
Date Available for Issuance
---- ----------------------
<S> <C>
January 1, 1997 20%
January 1, 1998 40%
January 1, 1999 60%
January 1, 2000 80%
January 1, 2001 100%
</TABLE>
Shares of Stock subject to an Option may be either authorized and unissued
shares or shares issued and later acquired by the Company. The shares covered
by any unexercised portion of an Option that has terminated for any reason
(except termination as set forth in Sections 5(b) and (c) below), may again be
optioned under the Plan, and such shares shall not be considered as having been
optioned or issued in computing the number of shares of Stock remaining
available for option hereunder.
5.2 Antidilution.
(a) In the event that the outstanding shares of Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of merger, consolidation, reorganization,
recapitalization, reclassification, combination or exchange of shares, stock
split or stock dividend, or in the event that any spin-off, split-up,
split-off, or other distribution of assets which materially affects the Fair
Market Value of the Stock:
(i) The aggregate number and kind of shares of
Stock for which Options may be granted hereunder shall be
adjusted proportionately by the Committee; and
(ii) The rights of Optionee (concerning the number
of shares subject to Options and the Exercise Price) under
outstanding Options shall be adjusted proportionately by the
Committee.
(b) If the Company shall be a party to any reorganization
in which it does not survive, involving merger, consolidation, or acquisition
of the stock or substantially all the assets of the Company, the Committee, in
its discretion, may:
(i) notwithstanding other provisions hereof,
declare that all Options granted under the Plan shall become
exercisable immediately notwithstanding the provisions of the
4
<PAGE> 8
respective Stock Option Agreements regarding exercisability
and that all such Options shall terminate 30 days after the
Committee gives written notice of the immediate right to
exercise all such Options and of the decision to terminate
all Options not exercised within such 30-day period; and/or
(ii) notify all Optionee that all Options granted
under the Plan shall be assumed by the successor corporation
or substituted on an equitable basis with options issued by
such successor corporation.
(c) If the Company is to be liquidated or dissolved in
connection with a reorganization described in Section 5.2(b), the provisions of
such section shall apply. In all other instances, the adoption of a plan of
dissolution or liquidation of the Company shall, notwithstanding other
provisions hereof, cause every Option outstanding under the Plan to terminate
to the extent not exercised prior to the adoption of the plan of dissolution or
liquidation by the stockholders; provided that, notwithstanding other
provisions hereof, the Committee may declare all Options granted under the Plan
to be exercisable at any time on or before the fifth business day following
such adoption notwithstanding the provisions of the respective Stock Option
Agreements regarding exercisability.
(d) The adjustments described in paragraphs (a) through
(c) of this section, and the manner of their application, shall be determined
by the Committee, and any such adjustment may provide for the elimination of
fractional share interests; provided, however, that any adjustment made by the
Committee shall be made in a manner that will not cause an Incentive Stock
Option to be other than an incentive stock option under applicable statutory
and regulatory provisions. The adjustments required under this Article shall
apply to any successors of the Company and shall be made regardless of the
number or type of successive events requiring such adjustments.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. The Committee may, under this Plan,
grant either Incentive Stock Options or Non-Qualified Stock Options. Within
the limitations provided in this Plan, both types of Options may be granted to
the same person at different times, under different terms and conditions, as
long as the terms and conditions of each Option are consistent with the
provisions of the Plan. Without limitation of the foregoing, Options may be
granted subject to conditions based on the financial performance of the Company
or any other factor the Committee deems relevant.
6.2 Option Grant and Agreement. Each Option granted hereunder
shall be evidenced by minutes of a meeting or the written consent of the
Committee and by a written Stock Option Agreement executed by the Company and
the Optionee. The terms of the Option, including the Option's duration, time
or times of exercise, exercise price, and whether the Option is intended to be
an Incentive Stock Option, shall be stated in the Stock Option Agreement. No
Incentive Stock Option may be granted more than ten years after the earlier to
occur of the effective date of the Plan or the date the Plan is approved by the
Company's stockholders. Separate Stock Option Agreements may be used for
Incentive Stock Options and Non-Qualified Stock Options, but any failure to use
such separate agreements shall not invalidate, or otherwise adversely affect
the Optionee's interest in, the Options evidenced thereby.
6.3 Optionee Limitations. The Committee shall not grant an
Incentive Stock Option to any person who, at the time the Incentive Stock
Option is granted:
5
<PAGE> 9
(a) is not an employee of the Company or its
Subsidiaries; or
(b) owns or is considered to own stock possessing at
least 10% of the total combined voting power of all classes of stock of the
Company or its Subsidiaries; provided, however, that this limitation shall not
apply if at the time an Incentive Stock Option is granted the Exercise Price is
at least 110% of the Fair Market Value of the Stock subject to such Option and
such Option by its terms would not be exercisable after five years from the
date on which the Option is granted. For the purpose of this subsection (b), a
person shall be considered to own (i) the stock owned, directly or indirectly,
by or for his or her brothers and sisters (whether by whole or half blood),
spouse, ancestors and lineal descendants; (ii) the stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust in
proportion to such person's stock interest, partnership interest or beneficial
interest therein; and (iii) the stock which such person may purchase under any
outstanding Options of the Company or of any Subsidiary of the Company.
6.4 $100,000 Limitation. Except as provided below, the Committee
shall not grant an Incentive Stock Option to, or modify the exercise provisions
of outstanding Incentive Stock Options held by, any person who, at the time the
Incentive Stock Option is granted (or modified), would thereby receive or hold
any Incentive Stock Options of the Company and any Subsidiary of the Company
such that the aggregate Fair Market Value (determined as of the respective
dates of grant or modification of each option) of the stock with respect to
which such Incentive Stock Options are exercisable for the first time during
any calendar year is in excess of $100,000 (or such other limit as may be
prescribed by the Code from time to time); provided that the foregoing
restriction on modification of outstanding Incentive Stock Options shall not
preclude the Committee from modifying an outstanding Incentive Stock Option if,
as a result of such modification and with the consent of the Optionee, such
Option no longer constitutes an Incentive Stock Option; and provided that, if
the $100,000 limitation (or such other limitation prescribed by the Code)
described in this Section is exceeded, the Incentive Stock Option the granting
or modification of which resulted in the exceeding of such limit shall be
treated as an Incentive Stock Option up to the limitation and the excess shall
be treated as a Non- Qualified Stock Option.
6.5 Exercise Price. The Exercise Price of the Stock subject to
each Option shall be determined by the Committee. Subject to the provisions of
Section 6.3(b) hereof, the Exercise Price of an Incentive Stock Option shall
not be less than the Fair Market Value of the Stock as of the date the Option
is granted (or in the case of an Incentive Stock Option that is subsequently
modified, on the date of such modification), as adjusted pursuant to Section
5.2 hereof. The exercise price of a Non-Qualified Stock Option shall not be
less than 85% of the Fair Market Value of the Stock as of the date the Option
is granted (or in the case of a Non-Qualified Stock Option that is subsequently
modified, on the date of such modification), as adjusted pursuant to Section
5.2 hereof.
6.6 Exercise Period. The period for the exercise of each Option
granted hereunder shall be determined by the Committee, but the Stock Option
Agreement with respect to each Option shall provide that such Option shall not
be exercisable after the expiration of ten (10) years from the date of grant
(or modification) of the Option, and no Option shall be exercisable prior to
stockholder approval of the Plan.
6.7 Option Exercise.
(a) Unless otherwise provided in the Stock Option
Agreement or Section 6.6 hereof, an Option may be exercised at any time or from
time to time during the term of the Option as to any or all full shares which
have become Purchasable under the provisions of the Option, but not at any time
as
6
<PAGE> 10
to less than 100 shares unless the remaining shares that have become so
Purchasable are less than 100 shares. The Committee shall have the authority
to prescribe in any Stock Option Agreement that the Option may be exercised
only in accordance with an accrual schedule during the term of the Option.
(b) An Option shall be exercised by (i) delivery to the
Company at its principal office of a written notice of exercise with respect to
a specified number of shares of Stock (the "Notice"), (ii) payment to the
Company at that office of the full amount of the Exercise Price for such number
of shares in accordance with Section 6.7(c) and (iii) execution and delivery to
the Company of a Stock Purchase Agreement and, if required by the Committee, an
escrow agreement and any other documents which the Committee may require as a
condition to the issuance of such shares.
(c) The aggregate amount of the Exercise Price (such
aggregate Exercise Price being the Exercise Price times the number of shares of
the Stock specified in the Notice) is to be paid in full in U.S. Dollars in
cash upon the exercise of the Option and the Company shall not be required to
deliver certificates for the shares purchased until such payment has been made;
provided, however, that in lieu of cash and in the sole discretion of the
Committee, all or any portion of such aggregate Exercise Price may be paid by
tendering to the Company shares of Stock duly endorsed for transfer and owned
by the Optionee to be credited against such aggregate Exercise Price at the
aggregate Fair Market Value of such shares on the date of exercise (however, no
fractional shares may be so transferred, and the Company shall not be obligated
to make any cash payments in consideration of any excess of the aggregate Fair
Market Value of Stock transferred over the aggregate Exercise Price); provided
further, that the Committee may provide in a Stock Option Agreement or may
otherwise determine in its sole discretion at the time of exercise that, in
lieu of cash or Stock, all or a portion of the aggregate Exercise Price may be
paid by delivery to the Company of such other consideration consisting of money
or property actually received by the Company as may be deemed in the sole
opinion of the Committee to have a value equal to the aggregate Exercise Price,
all subject to compliance with applicable state and federal laws, rules and
regulations.
(d) In addition to and at the time of payment of the
aggregate Exercise Price, the Optionee shall pay to the Company in U.S. Dollars
in cash the full amount of any federal, state, and local income, employment, or
other withholding taxes applicable to the taxable income of such Optionee
resulting from such exercise; provided, however, that in the discretion of the
Committee, any Stock Option Agreement may provide that all or any portion of
such tax obligations, together with additional taxes not exceeding the actual
additional taxes to be owed by the Optionee as a result of such exercise, may,
upon the irrevocable election of the Optionee, be paid by tendering to the
Company whole shares of Stock duly endorsed for transfer and owned by the
Optionee, or by authorization to the Company to withhold shares of Stock
otherwise issuable upon exercise of the Option, in either case in that number
of shares having an aggregate Fair Market Value on the date of exercise equal
to the amount of such taxes thereby being paid, and subject to such
restrictions as to the approval and timing of any such election as the
Committee may from time to time determine to be necessary or appropriate.
(e) The holder of an Option shall not have any of the
rights of a stockholder with respect to the shares of Stock subject to the
Option until such shares have been issued in the name of and transferred to the
Optionee upon the exercise of the Option.
6.8 Reload Options.
(a) The Committee may specify in a Stock Option Agreement
(or may otherwise determine in its sole discretion) that a Reload Option shall
be granted, without further action of the
7
<PAGE> 11
Committee, (i) to an Optionee who exercises an Option (including a Reload
Option) by surrendering shares of stock in payment of amounts specified in
Sections 6.7(c) or 6.7(d) hereof, (ii) for the same number of shares as are
surrendered to pay such amounts, (iii) as of the date such payment and at an
Exercise Price equal to the Fair Market Value of the Stock on such date, and
(iv) otherwise on the same terms and conditions as the Option whose exercise
has occasioned such payment, except as provided below and subject to such other
contingencies, conditions or other terms as the Committee shall specify at the
time such exercised Option is granted.
(b) Unless provided otherwise in the Stock Option
Agreement, a Reload Option may not be exercised by an Optionee (i) prior to the
end of a one-year period from the date that the Reload Option is granted, and
(ii) unless the Optionee retains beneficial ownership of the shares of Stock
issued to such Optionee upon exercise of the Option referred to above in
Section 6.8(a) for a period of one year from the date of such exercise.
6.9 Nontransferability of Option. No Incentive Stock Option shall
be transferable by an Optionee other than by will or the laws of descent and
distribution, and no Non-Qualified Stock Option shall be transferable by an
Optionee other than by will or the laws of descent and distribution or pursuant
to a Qualified Domestic Relations Order. During the lifetime of an Optionee,
Options shall be exercisable only to the extent specifically permitted under
the terms of the Stock Option Agreement. An Option may be exercised during the
Optionee's lifetime only by the Optionee (or by such Optionee's guardian or
legal representative, should one be appointed).
6.10 Termination of Employment or Service. The Committee shall
have the power to specify, with respect to the Options granted to a particular
Optionee, the effect upon such Optionee's right to exercise an Option upon
termination of such Optionee's employment or service under various
circumstances, which effect may include, without limitation, immediate or
deferred termination of such Optionee's rights under an Option, or acceleration
of the date at which an Option may be exercised in full; or, at the option of
the Company, purchase of the Option by the Company or its Subsidiaries upon
payment to the Optionee (against surrender by the Optionee of the Option) of
the aggregate Fair Market Value of the shares of Stock that would have been
Purchasable by the Optionee at the date of such termination of employment or
service (with such Fair Market Value to be determined as of the effective date
at any such termination of employment or service as near to that date as is
reasonably possible under the circumstances), less the aggregate Exercise Price
of said shares; provided, however, that in no event may an Incentive Stock
Option be exercised after the expiration of ten (10) years from the date of
grant thereof; nor more than three (3) months after termination of employment
for any reason other than Disability; nor more than one (1) year after
termination of employment by reason of Disability.
6.11 Employment Rights. Nothing in the Plan or in any Stock Option
Agreement shall confer on any person any right to continue in the employ or
other service of the Company or its Subsidiaries or shall interfere in any way
with the right of the Company or its Subsidiaries to terminate such person's
employment or service therewith.
6.12 Certain Successor Options. To the extent not inconsistent
with the terms, limitations and conditions of Code section 422 and any
regulations promulgated with respect thereto, an Option issued in respect of an
option held by an employee or officer to acquire stock of any entity acquired,
by merger or otherwise, by the Company (or its Subsidiaries) may contain terms
that differ from those stated in this Article VI, but solely to the extent
necessary to preserve for any such employee the rights and benefits contained
in such predecessor option, or to satisfy the requirements of Code section
424(a).
8
<PAGE> 12
6.13 Option Repricing/Cancellation and Regrant/Waiver of
Restrictions. Subject to the general limitations on Options contained
elsewhere in this Plan, the Committee, at its discretion, from time to time may
authorize, generally or in specific cases only, any adjustment in the exercise
or purchase price, the number of shares subject to, the restrictions upon or
the term of, an Option granted under this Plan by cancellation of an
outstanding Option and a subsequent regranting of an Option, by amendment, by
substitution of an outstanding Option, by waiver or by other legally valid
means. Such amendment or other action may result among other changes in an
exercise or purchase price which is higher or lower than the exercise or
purchase price of the original or prior Option, provide for a greater or lesser
number of shares subject to the Option, or provide for a longer or shorter
vesting or exercise period. Nothwithstanding the foregoing, no Option shall be
modified so as to adversely affect an Optionee's rights under a Stock Option
Agreement without the consent of the Optionee or his or her legal
representative.
ARTICLE VII
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate
for shares of Stock purchased upon the exercise of any Option granted hereunder
or any portion thereof, prior to fulfillment of all of the following
conditions:
(a) The completion of any registration or other
qualification of such shares which the Committee shall deem necessary or
advisable under any federal or state law or under the rulings or regulations of
the Securities and Exchange Commission of the United States or any other
governmental regulatory body;
(b) The obtaining of any approval or other clearance from
any federal or state governmental agency or body which the Committee shall
determine to be necessary or advisable; and
(c) The lapse of such reasonable period of time following
the exercise of the Option as the Committee from time to time may establish for
reasons of administrative convenience.
Stock certificates issued and delivered to Optionee shall bear
such restrictive legends as the Company shall deem necessary or advisable
pursuant to applicable federal and state securities and corporate laws.
ARTICLE VIII
TERMINATION AND AMENDMENT OF PLAN
The Board may at any time terminate the Plan, and may at any time and
from time to time and in any respect amend the Plan; provided, however, that
the Board (unless its actions are approved or ratified by the stockholders of
the Company) may not amend the Plan to:
(a) Increase the total number of shares of Stock issuable
pursuant to Incentive Stock Options under the Plan or materially increase the
number of shares of Stock subject to the Plan, in each case except as
contemplated in Section 5.2 hereof;
(b) Change the class of employees eligible to receive
Incentive Stock Options or materially change the class of persons that may
participate in the Plan; or
9
<PAGE> 13
(c) Otherwise materially increase the benefits accruing
to Eligible Participants under the Plan.
Except as provided herein, no termination, or amendment, or
modification of the Plan shall affect adversely an Optionee's rights under a
Stock Option Agreement without the consent of the Optionee or his or her legal
representative.
ARTICLE IX
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option,
incentive, or other compensation plans in effect for the Company or its
Subsidiaries; nor shall the adoption of the Plan preclude the Company or its
Subsidiaries from establishing any other form of incentive or other
compensation plan for employees or officers of the Company or employees and
officers of the Company's Subsidiaries.
ARTICLE X
MISCELLANEOUS
10.1 Forfeiture for Competition. If an Optionee provides services
to a competitor of the Company, or its Subsidiaries, whether as an employee,
officer, director, independent contractor, consultant, agent, or otherwise,
such services being of a nature that can reasonably be expected to involve the
knowledge, skills, and experience used or developed by the Optionee while an
employee or a director of the Company, then that Optionee's rights under any
Options outstanding hereunder shall be forfeited and terminated, subject to a
determination to the contrary by the Committee.
10.2 Plan Binding on Successors. The Plan shall be binding upon
the successors and assigns of the Company.
10.3 Singular, Plural; Gender. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender.
10.4 Headings, etc. Headings of Articles and Sections hereof are
inserted for convenience and reference; they do not constitute part of the
Plan.
10.5 Contingent on Plan of Recapitalization. This Masada Security
Holdings, Inc. 1997 Stock Option Plan shall not become effective unless and
until the Plan of Recapitalization adopted by the Company's Board of Directors
and Stockholders in September 1996 is implemented.
* * * * *
10
<PAGE> 14
Exhibit A to Masada Security
Holdings, Inc. 1997 Stock
Option Plan - Form of Stock
Option Agreement
MASADA SECURITY HOLDINGS, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered into as of
this ______ day of __________________________, 19__, by and between Masada
Security Holdings, Inc., a Delaware corporation (the "Company"), and
_____________________ (the "Optionee").
WHEREAS, on September ____, 1996, the Board of Directors of the
Company adopted a stock option plan known as the "Masada Security Holdings,
Inc. 1997 Stock Option Plan" (the "Plan"); and
WHEREAS, the Committee (as defined in the Plan) has granted the
Optionee a stock option to purchase the number of shares of the Company's
common stock as set forth below, and in consideration of the granting of that
stock option the Optionee intends to remain in the employ or other service of
the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written
agreement with respect to such option in accordance with the Plan;
NOW, THEREFORE, as a performance incentive and to encourage stock
ownership, and also in consideration of the mutual covenants contained herein,
the parties hereto agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the
provisions of the Plan and the terms and definitions of the Plan are
incorporated herein by reference and made a part hereof. A copy of the Plan
has been delivered to, and receipt is hereby acknowledged by, the Optionee.
2. Grant of Option. Subject to the terms, restrictions,
limitations and conditions stated herein, the Company hereby evidences its
grant to the Optionee, not in lieu of salary or other compensation, of the
right and option (the "Option") to purchase all or any part of the number of
shares of the Company's common stock, par value $.01 per share (the "Stock"),
set forth on Schedule A attached hereto and incorporated herein by reference.
The Option shall be exercisable in the amounts and at the times specified on
Schedule A. The Option shall expire and shall not be exercisable on the date
specified on Schedule A or on such earlier date as determined pursuant to
Section 8, 9 or 10 hereof. Schedule A states whether the Option is intended to
be an Incentive Stock Option or Non-Qualified Stock Option.
3. Purchase Price. The price per share to be paid by the
Optionee for the shares subject to this Option (the "Exercise Price") shall be
as specified on Schedule A, which price shall be an amount not less than (i)
the Fair Market Value of a share of Stock as of the Date of Grant (as defined
in Section 11 below) if the Option is an Incentive Stock Option, or (ii) 85% of
the Fair Market Value of a share of Stock as of the Date of Grant (as defined
in Section 11 below) if the Option is a Non-Qualified Stock Option.
4. Exercise Terms. The Optionee must exercise the Option for at
least the lesser of 100 shares or the number of shares of Purchasable Stock as
to which the Option remains unexercised. In the
A-1
<PAGE> 15
event this Option is not exercised with respect to all or any part of the
shares subject to this Option prior to its expiration, this Option shall be null
and void and the shares with respect to which this Option was not exercised
shall no longer be subject to this Option.
5. Restrictions on Transferability. No Incentive Stock Option
shall be transferable by an Optionee other than by will or the laws of descent
and distribution, and no Non-Qualified Stock Option shall be transferable by an
Optionee other than by will or the laws of descent and distribution or pursuant
to a Qualified Domestic Relations Order.
6. Notice of Exercise of Option. This Option may be exercised by
the Optionee, or by the Optionee's administrators, executors or personal
representatives, by a written notice (in substantially the form of the Notice
of Exercise attached hereto as Schedule B) signed by the Optionee, or by such
administrators, executors or personal representatives, and delivered or mailed
to the Company as specified in Section 14 hereof to the attention of the
President or such other officer as the Company may designate. Any such notice
shall (a) specify the number of shares of Stock which the Optionee or the
Optionee's administrators, executors or personal representatives, as the case
may be, then elects to purchase hereunder, (b) contain such information as may
be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by
(i) a certified or cashier's check payable to the Company in payment of the
total Exercise Price applicable to such shares as provided herein, (ii) a
certified or cashier's check and shares of Stock owned by the Optionee and duly
endorsed or accompanied by stock transfer powers, or authorization to the
Company to withhold a number of shares of Stock otherwise issuable upon the
exercise of the Option, whose Fair Market Value when added to the amount of the
check equals the total Exercise Price applicable to such shares purchased
hereunder, or (iii) such other consideration as may from time to time be
specified by the Committee (subject to the requirements of the Plan and
applicable law) as constituting valid and adequate consideration for
Purchasable Stock and having a fair market value equal to the total Exercise
Price applicable to such shares purchased hereunder. Upon receipt of any such
notice and accompanying payment, and upon execution and delivery by Optionee
and the Company of a Stock Purchase Agreement, as shall be specified by the
Committee, and if required by the Committee, an escrow agreement and any other
documents which the Committee may require as a condition to the issuance of
shares of the Stock to Optionee, and subject to the terms hereof, the Company
agrees to issue to the Optionee or the Optionee's administrators, executors or
personal representatives, as the case may be, stock certificates for the number
of shares specified in such notice registered in the name of the person
exercising this Option.
7. Adjustment in Option. The number of Shares subject to this
Option, the Exercise Price and other matters are subject to adjustment during
the term of this Option in accordance with Section 5.2 of the Plan.
8. Termination of Employment.
(a) Except as otherwise specified in Schedule A hereto,
in the event that the Optionee shall cease to be employed by, or otherwise
associated or affiliated with, the Company in any capacity involving the
rendition of services to the Company either directly, as an employee or member
of the Board of the Company, or indirectly, as an employee of its Subsidiaries,
other than a termination that is either (i) for cause, or (ii) voluntary on the
part of the Optionee and without written consent of the Company or its
Subsidiaries, or (iii) for reasons of disability as contemplated under Section
9 below, the Optionee may exercise this Option at any time within ninety (90)
days after such termination to the extent of the number of shares which were
Purchasable hereunder at the date of such termination.
A-2
<PAGE> 16
(b) Except as specified in Schedule A attached hereto, in
the event Optionee (i) terminates his employment voluntarily without the
written consent of the Company, or (ii) is terminated for cause, this Option,
to the extent not previously exercised, shall terminate immediately and shall
not thereafter be or become exercisable.
(c) This Option does not confer upon the Optionee any
right with respect to continuance of employment by the Company or its
Subsidiaries.
9. Disabled Optionee. In the event of termination of employment
because of the Optionee's becoming a Disabled Optionee, the Optionee (or his or
her personal representative) may exercise this Option at any time within one
year after such termination to the extent of the number of shares which were
Purchasable hereunder at the date of such termination.
10. Death of Optionee. Except as otherwise set forth in Schedule
A with respect to the rights of the Optionee upon termination of employment or
association or affiliation with the Company under Section 8(a) hereof, in the
event of the Optionee's death while employed by or associated or affiliated
with the Company or its Subsidiaries the appropriate persons described in
Section 6 hereof may exercise this Option at any time within a period ending on
the earlier of (a) the last day of the three (3) month period following the
Optionee's death or (b) the expiration date of this Option. This Option may be
so exercised to the extent of the number of shares that were Purchasable
hereunder at the date of death. If the Optionee's employment, association or
affiliation terminated prior to his or her death, this Option may be exercised
only to the extent of the number of shares covered by this Option which were
Purchasable hereunder at the date of such termination.
11. Date of Grant. This Option was granted by the Committee on
the date set forth in Schedule A (the "Date of Grant").
12. Compliance with Regulatory Matters. The Optionee acknowledges
that the issuance of capital stock of the Company is subject to limitations
imposed by federal and state law, and the Optionee hereby agrees that the
Company shall not be obligated to issue any shares of Stock upon exercise of
this Option that would cause the Company to violate law or any rule,
regulation, order or consent decree of any regulatory authority (including
without limitation the Securities and Exchange Commission) having jurisdiction
over the affairs of the Company. The Optionee agrees that he or she will
provide the Company with such information and representation as is reasonably
requested by the Company or its counsel to determine whether the issuance of
Stock complies with the provisions described by this Section, including,
without limitation, a representation that the Optionee shall not sell or
otherwise dispose of the Stock in the absence of registration of such shares
under applicable federal and state securities laws or an opinion of counsel,
satisfactory to the Company, that such registration is not required.
13. Restriction on Disposition of Shares. Unless further
restrictions are placed upon disposition by the provisions of the Stock
Purchase Agreement, the shares of Stock purchased pursuant to the exercise of
an Incentive Stock Option shall not be transferred by the Optionee except
pursuant to the Optionee's will or the laws of descent and distribution until
such date which is the later of two years after the grant of such Incentive
Option or one year after the transfer of the shares to the Optionee pursuant to
the exercise of such Incentive Stock Option. The shares of stock purchased
pursuant to the exercise of a Non-Qualified Stock Option shall not be
transferred by the Optionee except pursuant to the Optionee's will or the laws
of descent and distribution or pursuant to a Qualified Domestic Relations
Order. The transfer restrictions imposed by this Section 13 will expire and be
of no force and effect upon the completion by the Company of a public
A-3
<PAGE> 17
offering of the Stock registered with the Securities and Exchange Commission
under the Securities Act of 1933, as amended.
14. Miscellaneous.
(a) This Agreement shall be binding upon the parties
hereto and their representatives, successors and assigns.
(b) This Agreement is executed and delivered in, and
shall be governed by the laws of, the State of Alabama.
(c) Any requests or notices to be given hereunder shall
be deemed given, and any elections or exercises to be made or accomplished
shall be deemed made or accomplished, upon actual delivery thereof to the
designated recipient, or three days after deposit thereof in the United States
mail, certified or registered, return receipt requested and postage prepaid,
addressed, if to the Optionee, at the address set forth below and, if to the
Company, to the executive offices of the Company at 950 22nd Street North,
Suite 800, Birmingham, Alabama 35203.
(d) This Agreement may not be modified except in writing
executed by each of the parties hereto.
[Signatures on Next Page]
A-4
<PAGE> 18
IN WITNESS WHEREOF, the Compensation Committee of the Board of
Directors of the Company has caused this Stock Option Agreement to be executed
on behalf of the Company and the Company's seal to be affixed hereto and
attested by the Secretary of the Company, and the Optionee has executed this
Stock Option Agreement under seal, all as of the day and year first above
written.
COMPANY:
MASADA SECURITY HOLDINGS, INC.
Attest:
By:
- ----------------------------- ----------------------------------
Secretary Name:
Title: Chairman, Compensation Committee
[SEAL]
OPTIONEE:
-------------------------------------
Name:
Address:
-----------------------------
-----------------------------
-----------------------------
A-5
<PAGE> 19
SCHEDULE A
TO STOCK OPTION AGREEMENT BETWEEN
MASADA SECURITY HOLDINGS, INC. AND
[NAME]
Dated__________________
<TABLE>
<S> <C>
1. Number of Shares Subject to Option: ______________ Shares.
2. This Option (Check one) [ ] is [ ] is not an Incentive Stock Option.
3. Option Exercise Price: $______ per Share.
4. Date of Grant: ______________________________
5. Option Vesting Schedule: Options are exercisable with respect to the
number of shares indicated below on or after the date indicated next
to the number of shares:
No. of Shares Vesting Date
------------- ------------
6. Option Exercise Period:
Check One: ( ) All options expire and are void unless exercised
on or before _______________________.
( ) Options expire and are void unless exercised on
or before the date indicated next to the number
of shares:
No. of Shares Expiration Date
------------- ---------------
7. Effect of Termination of Employment or Other Association or
Affiliation with the Company of Optionee (if different from that
set forth in Sections 8 and 10 of the Stock Option Agreement):
</TABLE>
<PAGE> 20
SCHEDULE B
TO STOCK OPTION AGREEMENT BETWEEN
MASADA SECURITY HOLDINGS, INC. AND
[NAME]
Dated_________________
NOTICE OF EXERCISE
The undersigned hereby notifies Masada Security Holdings, Inc.
(the "Company") of this election to exercise the undersigned's stock option to
purchase ________________ shares of the Company's common stock, par value $.01
per share (the "Stock"), pursuant to the Stock Option Agreement (the
"Agreement") between the undersigned and the Company dated ________________.
Accompanying this Notice is (1) a certified or a cashier's check in the amount
of $________________ payable to the Company, and/or (2) _______________ shares
of Stock presently owned by the undersigned and duly endorsed or accompanied by
stock transfer powers, or an authorization to the Company to withhold the
number of shares of Stock otherwise issuable pursuant to the exercise of the
Option, in each case having an aggregate Fair Market Value (as defined in the
Masada Security Holdings, Inc. 1997 Stock Option Plan) as of the date hereof of
$__________________, such amounts being equal, in the aggregate, to the
purchase price per share set forth in Section 3 of the Agreement multiplied by
the number of shares being purchased hereby (in each instance subject to
appropriate adjustment pursuant to Section 7 of the Agreement).
IN WITNESS WHEREOF, the undersigned has set his hand and seal,
this ________ day of ________________, ______.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
-----------------------------------
Name:
Capacity (if other than Optionee):
<PAGE> 1
MASADA SECURITY HOLDINGS, INC.
SUBSIDIARIES
<TABLE>
<S> <C>
Masada Security, Inc. (Delaware corporation) 100% owned by Masada Security Holdings, Inc.
Kristynik Security Systems, Inc. (Texas Corporation) 100% owned by Masada Security, Inc.
Alarms by HRD, Inc. (Florida corporation) 100% owned by Masada Security, Inc.
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference of the firm under the caption "Experts" and to the
use of our report dated August 2, 1996, in the Registration Statement (Form S-1
No. xxx-xxxxx) and related Prospectus of Masada Security Holdings, Inc. for the
registration of 000,000 shares of its common stock.
/s/ Ernst & Young LLP
Birmingham, Alabama
October 2, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRIETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<EXCHANGE-RATE> 1 1
<CASH> 516 205
<SECURITIES> 0 0
<RECEIVABLES> 1,762 1,023
<ALLOWANCES> 399 250
<INVENTORY> 800 673
<CURRENT-ASSETS> 2,821 1,897
<PP&E> 6,947 6,697
<DEPRECIATION> 3,760 3,162
<TOTAL-ASSETS> 56,667 31,562
<CURRENT-LIABILITIES> 3,418 1,909
<BONDS> 0 0
7,570 7,570
8 8
<COMMON> 9 9
<OTHER-SE> 5,556 11,883
<TOTAL-LIABILITY-AND-EQUITY> 56,667 31,562
<SALES> 2,493 3,429
<TOTAL-REVENUES> 12,537 16,812
<CGS> 1,151 1,339
<TOTAL-COSTS> 4,200 5,519
<OTHER-EXPENSES> 12,443 17,501
<LOSS-PROVISION> 613 774
<INTEREST-EXPENSE> 1,140 844
<INCOME-PRETAX> (5,859) (7,826)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (5,859) (7,826)
<DISCONTINUED> 0 0
<EXTRAORDINARY> (567) 0
<CHANGES> 0 0
<NET-INCOME> (6,426) (7,826)
<EPS-PRIMARY> 3.64 (5.13)
<EPS-DILUTED> 3.64 (5.13)
</TABLE>
